##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549





FORM 20-F







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

or



|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2014

or



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

or



| ̈ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | -------------------------------------------------------------------------------------------

Commission file number: 001-35378





GAZIT-GLOBE
LTD.

(Exact name of registrant as specified in its charter)





Israel

(Jurisdiction of
incorporation or organization)

1 Hashalom Rd.

Tel-Aviv 67892, Israel

(972)(3) 694-8000

(Address of principal executive offices)

Gil Kotler,

Senior
Executive Vice President and Chief Financial Officer

Tel: (972)(3) 694-8000

Email: gkotler@gazitgroup.com

1 Hashalom Rd. Tel-Aviv 67892, Israel

(Name, telephone, email and/or facsimile number and address of company contact person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:



|                                              |  |                                          
|--------------------------------------------- |  | -----------------------------------------
|Title of each class                           |  | Name of each exchange on which registered
|Ordinary Shares, par value NIS 1.00 per share |  | New York Stock Exchange                  

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None





Indicate the number of outstanding shares of each of the issuers classes of capital or common stock as of the close of the period covered by the annual
report: 178,397,470 Ordinary Shares, par value NIS 1.00 per share (excluding Treasury Shares).

Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    x  Yes     ̈  No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934.     ̈  Yes    x  No

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes     ̈  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     ̈  Yes     ̈  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated
filer and large accelerated filer in Rule 12b-2 of the Exchange Act (check one).

Large Accelerated Filer  x                 Accelerated
Filer   ̈                Non-Accelerated Filer   ̈

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:



|             |  |                                                                                                          |  |         
|------------ |  | -------------------------------------------------------------------------------------------------------- |  | --------
|U.S. GAAP   ̈ |  | International Financial Reporting Standards as issued by the International Accounting Standards Board  x |  | Other   ̈

If Other has been checked in response to the previous question, indicate by check mark which financial statement
item the registrant has elected to follow:    Item 17   ̈    Item 18   ̈

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act):     ̈  Yes    x  No











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##### Table of Contents

GAZIT-GLOBE LTD.





FORM 20-F

ANNUAL REPORT FOR THE
FISCAL YEAR ENDED DECEMBER 31, 2014





TABLE OF CONTENTS



|                                      |  |                                                                              |   |  |     | 
|------------------------------------- |  | ---------------------------------------------------------------------------- | - |  | --- | 
|Introduction and Use of Certain Terms |  |                                                                              | 3 | 
|Forward-Looking Statements            |  |                                                                              | 5 | 
|Item 1.                               |  | Identity of Directors, Senior Management and Advisers                        |   |  | 5   | 
|Item 2.                               |  | Offer Statistics and Expected Timetable                                      |   |  | 5   | 
|Item 3.                               |  | Key Information                                                              |   |  | 5   | 
|Item 4.                               |  | Information on the Company                                                   |   |  | 28  | 
|Item 4A.                              |  | Unresolved Staff Comments                                                    |   |  | 39  | 
|Item 5.                               |  | Operating and Financial Review and Prospects                                 |   |  | 39  | 
|Item 6.                               |  | Directors, Senior Management and Employees                                   |   |  | 94  | 
|Item 7.                               |  | Major Shareholders and Related Party Transactions                            |   |  | 109 | 
|Item 8.                               |  | Financial Information                                                        |   |  | 111 | 
|Item 9.                               |  | The Offer and Listing.                                                       |   |  | 113 | 
|Item 10.                              |  | Additional Information.                                                      |   |  | 115 | 
|Item 11.                              |  | Quantitative and Qualitative Disclosures about Market Risk.                  |   |  | 129 | 
|Item 12.                              |  | Description of Securities other than Equity Securities                       |   |  | 132 | 
|PART II                               |  |                                                                              |   |  | 132 | 
|Item 13.                              |  | Defaults, Dividend Arrearages and Delinquencies                              |   |  | 132 | 
|Item 14.                              |  | Material Modifications to the Rights of Security Holders and Use of Proceeds |   |  | 132 | 
|Item 15.                              |  | Controls and Procedures.                                                     |   |  | 133 | 
|Item 16.                              |  | [Reserved]                                                                   |   |  | 134 | 
|Item 16A.                             |  | Audit Committee Financial Expert.                                            |   |  | 134 | 
|Item 16B.                             |  | Code of Ethics.                                                              |   |  | 134 | 
|Item 16C.                             |  | Principal Accountant Fees and Services.                                      |   |  | 134 | 
|Item 16D.                             |  | Exemptions from the Listing Standards for Audit Committees.                  |   |  | 135 | 
|Item 16E.                             |  | Purchases of Equity Securities by the Issuer and Affiliated Purchasers.      |   |  | 135 | 
|Item 16F.                             |  | Change In Registrants Certifying Accountant.                                |   |  | 135 | 
|Item 16G.                             |  | Corporate Governance.                                                        |   |  | 135 | 
|Item 16H.                             |  | Mine Safety Disclosure                                                       |   |  | 136 | 
|PART III                              |  |                                                                              |   |  | 136 | 
|Item 17.                              |  | Financial Statements                                                         |   |  | 136 | 
|Item 18.                              |  | Financial Statements                                                         |   |  | 136 | 
|Item 19.                              |  | Exhibits                                                                     |   |  | 137 | 
|Signatures                            |  |                                                                              |   |  | 138 | 





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Introduction and Use of Certain Terms

Unless otherwise indicated, all references to (i) we, us, or our, are to Gazit-Globe Ltd. and those companies that
are consolidated in its financial statements or that are jointly controlled entities, and (ii) Gazit-Globe or the Company are to Gazit-Globe Ltd., not including any of its subsidiaries or affiliates.

Except where the context otherwise requires, references in this annual report to:



| |  |  | adjusted EPRA FFO means EPRA FFO as adjusted for: CPI and exchange rate linkage differences; depreciation and amortization; and other adjustments, including adjustments to add back bonus expenses (through
2011) derived as a percentage of net income in respect of the adjustments above and adjustments to net income (loss) attributable to equity holders of the Company for the purposes of computing EPRA FFO; expenses arising from the termination of
engagements with senior Group officers; income from the waiver by our chairman of bonuses and of compensation with respect to the expiration of his employment agreement (through 2011); expenses and income from extraordinary legal proceeding not
related to the reporting periods; income and expenses from operations not related to income producing property (including the results of Dori Group); and internal leasing costs (mainly salary) incurred in the leasing of properties.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | average annualized base rent refers to the average minimum rent due under the terms of the applicable leases on an annualized basis.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  |  | community shopping center means a center that offers general merchandise or convenience-oriented offerings with gross leasable area, or GLA between 100,000 and 350,000 square feet, between 15 and 40 stores
and two or more anchors, typically discount stores, supermarkets, drugstores, and large-specialty discount stores, based on the definition published by the International Council of Shopping Centers.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | consolidated refers to the Company and entities that are consolidated in the Companys financial statements.
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | EPRA FFO means the net income (loss) attributable to the equity holders of a company with certain adjustments for non-operating items, which are affected by the fair value revaluation of assets and
liabilities, primarily adjustments to the fair value of investment property, investment property under development, land and other investments, and various capital gains and losses, gain (loss) from early redemption of liabilities and financial
derivatives, gains from bargain purchase and the impairment of goodwill, changes in the fair value recognized with respect to financial instruments including derivatives, deferred taxes and current taxes with respect to disposal of properties and
our share in equity-accounted investees, as well as non-controlling interests share with respect to the above items.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | GLA means gross leasable area.
| | - |  | --------------------------------



| |  |  | Group  the Company, its subsidiaries and its equity-accounted jointly controlled entities.
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | IFRS means International Financial Reporting Standards, as issued by the International Accounting Standards Board.
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | LEED® means Leadership in Energy and Environmental Design and refers to an internationally recognized green building certification system designed by
the U.S. Green Building Council.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | neighborhood shopping center means a center that is designed to provide convenience shopping for the day-to-day needs of consumers in the immediate neighborhood with GLA between 30,000 and 150,000 square
feet and between five and 20 stores and is typically anchored by one or more supermarkets, based on the definition published by the International Council of Shopping Centers.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | NOI means net operating income.
| | - |  | ---------------------------------



| |  |  | reporting date or balance sheet date means December 31, 2014.
| | - |  | -----------------------------------------------------------------



| |  |  | same property NOI means the change in net operating income for properties that were owned for the entirety of both the current and prior reporting periods (excluding expanded and redeveloped properties and
the impact of currency exchange rates).
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our principal subsidiaries and affiliates are:



| |  |  | Acad means Acad Building & Investments Ltd. through which Gazit Development currently holds 42.7% of the share capital and voting rights of U. Dori Group Ltd.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Atrium means Atrium European Real Estate Limited, an equity-accounted jointly-controlled affiliate through the period covered by this annual report, (VSE/EURONEXT:ATRS) which owns and operates shopping
centers in Central and Eastern Europe.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



3



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| |  |  | Citycon means Citycon Oyj. (NASDAQ OMX HELSINKI:CTY1S) which owns and operates shopping centers in Northern Europe.
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | Dori Construction means U. Dori Construction Ltd (TASE:DRCN) and its subsidiaries.
| | - |  | ------------------------------------------------------------------------------------



| |  |  | Dori Group means U. Dori Group Ltd. (TASE: DORI) and its subsidiaries, which as of December 31, 2014, held 59.7% of Dori Construction, which is also traded on the Tel Aviv Stock Exchange, and Dori
Constructions subsidiaries and related companies.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Equity One means Equity One, Inc. (NYSE:EQY) which owns and operates shopping centers in the United States.
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | First Capital means First Capital Realty Inc. (TSX:FCR) which owns and operates shopping centers in Canada.
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | Gazit America means Gazit America Inc., a wholly-owned subsidiary, which as of December 31, 2014, held 11.5% of Equity Ones share capital and which prior to August 8, 2012 was the owner of
ProMed Canada.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Gazit Brazil means Gazit Brazil Ltda. which owns and operates shopping centers in Brazil.
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | Gazit Development means Gazit-Globe Israel (Development) Ltd. which wholly-owns Gazit Development (Bulgaria) and indirectly holds 84.9% of Dori Group.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Gazit Germany means Gazit Germany Beteiligungs GmbH & Co. KG which owns and operates shopping centers in Germany.
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | Norstar means Norstar Holdings Inc. (TASE: NSTR), formerly known as Gazit Inc., which had voting power of 50.2% of our issued ordinary shares as of April 10, 2015.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | ProMed means ProMed Properties Inc. which owns and operates medical office buildings in the United States.
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | ProMed Canada means ProMed Properties (CA), Inc. which owned and operated medical office buildings in Canada prior to August 8, 2012 when such assets were sold to First Capital.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Ronson means Ronson Europe N.V., a company in which Dori Group, as of December 31, 2014, owns 39.8% of its share capital, that is incorporated in the Netherlands and whose securities are listed on the
Warsaw Stock Exchange in Poland.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Royal Senior Care or RSC means Royal Senior Care, LLC which owned and operated senior housing facilities in the United States, which were sold during 2012 and 2013.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Unless otherwise noted, all monetary amounts are in NIS and for the convenience of the reader certain NIS amounts have been translated into U.S. dollars at
the rate of NIS 3.889 = U.S.$ 1.00, based on the daily representative rate of exchange between the NIS and the U.S. dollar reported by the Bank of Israel on December 31, 2014. References herein to (i) New Israeli Shekel or
NIS mean the legal currency of Israel, (ii) U.S.$, $, U.S. dollar or dollar mean the legal currency of the United States, (iii) Euro, EUR or
 mean the currency of the participating member states in the third stage of the Economic and Monetary Union of the Treaty establishing the European community, (iv) Canadian dollar or C$ mean the legal
currency of Canada, and (v) BRL mean the legal currency of Brazil.



4



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Forward-Looking Statements

We make forward-looking statements in this annual report that are subject to risks and uncertainties. These forward-looking statements include information
about possible or assumed future results of our business, financial condition, results of operations, liquidity, plans and objectives. In some cases, you can identify forward-looking statements by terminology such as believe,
may, estimate, continue, anticipate, intend, should, plan, expect, predict, potential, or the negative of these terms or other
similar expressions. The statements we make regarding the following subject matters are forward-looking by their nature:



| |  |  | our ability to respond to new market developments;
| | - |  | --------------------------------------------------



| |  |  | our intent to penetrate further our existing markets and penetrate new markets;
| | - |  | -------------------------------------------------------------------------------



| |  |  | our belief that we will have sufficient access to capital;
| | - |  | ----------------------------------------------------------



| |  |  | our belief that we will have viable financing and refinancing alternatives that will not materially adversely impact our expected financial results;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our belief that continuing to develop high-profile properties will drive growth, increase cash flows and profitability;
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | our belief that repositioning of our properties and our active management will improve our occupancy rates and rental income, lower our costs and increase our cash flows;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our plans to invest in developing and redeveloping real estate, in investing in the acquisition of additional properties, portfolios or other real estate companies;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to use our successful business model, together with our global presence and corporate structure, to leverage our flexibility to invest in multiple regions in the same asset type to maximize shareholder
value;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to acquire additional properties or portfolios;
| | - |  | -----------------------------------------------------------



| |  |  | our plans to continue to expand our international presence;
| | - |  | -----------------------------------------------------------



| |  |  | our expectations that our business approach, combined with the geographic diversity of our current properties and our conservative approach to risk, characterized by the types of properties and markets in which we
invest, will provide accretive and/or sustainable long-term returns; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our expectations regarding our future tenant mix.
| | - |  | -------------------------------------------------

The forward-looking statements contained in this annual
report reflect our views as of the date of this annual report about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause events or our actual activities or results to differ significantly
from those expressed in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guaranty future events, results, actions, levels of activity, performance or
achievements. You are cautioned not to place undue reliance on these forward-looking statements. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements, including, but not
limited to, those factors described in Item 3Key InformationRisk Factors.

All of the forward-looking statements we have included
in this annual report are based on information available to us on the date of this annual report. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or
otherwise.



|ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
|------- | -----------------------------------------------------

Not applicable.



|ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE
|------- | ---------------------------------------

Not applicable.



|ITEM 3. | KEY INFORMATION
|------- | ---------------

A. Selected Financial Data

The selected consolidated statement of income data set forth below with respect to the years ended December 31 2010, 2011, 2012, 2013, and 2014 and the
selected consolidated balance sheet data set forth below as of December 31 2010, 2011, 2012, 2013, and 2014 have been derived from our consolidated financial statements which have been prepared in accordance with IFRS.



5



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The selected consolidated financial data set forth below should be read in conjunction with Item
5Operating and Financial Review and Prospects and our consolidated financial statements and notes to those statements for the years ended December 31, 2012, 2013 and 2014 included elsewhere in this annual report. Historical results
are not necessarily indicative of the results to be expected in the future.

The following tables also contain translations of NIS amounts into U.S.
dollars for amounts presented as of and for the year ended December 31, 2014. These translations are solely for the convenience of the reader and were calculated at the rate of NIS 3.889 = U.S.$ 1.00, the daily representative rate of exchange
between the NIS and the U.S. dollar reported by the Bank of Israel on December 31, 2014. You should not assume that, on that or on any other date, one could have converted these amounts of NIS into dollars at that or any other exchange rate.



|                                                                                          |  |                         |       |   |       |  |       |      |  |  |       |   |  |      |       |   |      |  |       |   |  |  |       |  
|----------------------------------------------------------------------------------------- |  | ----------------------- | ----- | - | ----- |  | ----- | ---- |  |  | ----- | - |  | ---- | ----- | - | ---- |  | ----- | - |  |  | ----- | -
|                                                                                          |  | Year Ended December 31, |      
|                                                                                          |  | 2010                    |       |   | 2011  |  |       | 2012 |  |  | 2013  |   |  | 2014 |       |   | 2014 | 
|(In millions except for per share data)                                                   |  | NIS                     |       |   | U.S.$ | 
|Statement of Income Data:                                                                 |  |                         |       |   |       |  |       |      |  |  |       |   |  |      |       |   |      |  |       |   |  |  |       |  
|Rental income                                                                             |  |                         | 4,147 |   |       |  | 4,718 |      |  |  | 5,249 |   |  |      | 5,146 |   |      |  | 4,913 |   |  |  | 1,263 |  
|Property operating expenses                                                               |  |                         | 1,341 |   |       |  | 1,522 |      |  |  | 1,705 |   |  |      | 1,689 |   |      |  | 1,584 |   |  |  | 407   |  
|                                                                                          |  |                         |       |   |       |  |       |      |  |  |       |   |  |      |       |   |      |  |       |   |  |  |       |  
|Net operating rental income                                                               |  |                         | 2,806 |   |       |  | 3,196 |      |  |  | 3,544 |   |  |      | 3,457 |   |      |  | 3,329 |   |  |  | 856   |  
|                                                                                          |  |                         |       |   |       |  |       |      |  |  |       |   |  |      |       |   |      |  |       |   |  |  |       |  
|Revenues from sale of buildings, land and construction work performed(1)                  |  |                         |      |   |       |  | 1,001 |      |  |  | 1,760 |   |  |      | 1,672 |   |      |  | 1,357 |   |  |  | 349   |  
|Cost of buildings sold, land and construction work performed (1)                          |  |                         |      |   |       |  | 967   |      |  |  | 1,720 |   |  |      | 1,688 |   |      |  | 1,660 |   |  |  | 427   |  
|                                                                                          |  |                         |       |   |       |  |       |      |  |  |       |   |  |      |       |   |      |  |       |   |  |  |       |  
|Gross profit (loss) from sale of buildings, land and construction work performed          |  |                         |      |   |       |  | 34    |      |  |  | 40    |   |  |      | (16   | ) |      |  | (303  | ) |  |  | (78   | )
|                                                                                          |  |                         |       |   |       |  |       |      |  |  |       |   |  |      |       |   |      |  |       |   |  |  |       |  
|Total gross profit                                                                        |  |                         | 2,806 |   |       |  | 3,230 |      |  |  | 3,584 |   |  |      | 3,441 |   |      |  | 3,026 |   |  |  | 778   |  
|Fair value gain on investment property and investment property under development, net
(2) |  |                         | 935   |   |       |  | 1,692 |      |  |  | 1,938 |   |  |      | 962   |   |      |  | 1,053 |   |  |  | 271   |  
|General and administrative expenses                                                       |  |                         | (569  | ) |       |  | (755  | )    |  |  | (673  | ) |  |      | (610  | ) |      |  | (619  | ) |  |  | (159  | )
|Other income                                                                              |  |                         | 21    |   |       |  | 115   |      |  |  | 164   |   |  |      | 218   |   |      |  | 55    |   |  |  | 14    |  
|Other expenses                                                                            |  |                         | (46   | ) |       |  | (110  | )    |  |  | (47   | ) |  |      | (74   | ) |      |  | (81   | ) |  |  | (21   | )
|Companys share in earnings of equity-accounted investees, net                            |  |                         | 171   |   |       |  | 334   |      |  |  | 299   |   |  |      | 149   |   |      |  | 12    |   |  |  | 3     |  
|                                                                                          |  |                         |       |   |       |  |       |      |  |  |       |   |  |      |       |   |      |  |       |   |  |  |       |  



|(1) | Revenues from sale of buildings, land and construction work performed primarily comprises revenue from construction work performed by Dori Group and starting in 2013, First Capital. Cost of buildings sold, land and
construction work performed primarily comprises costs of construction work performed by Dori Group and starting in 2013, First Capital. Through April 17, 2011, Dori Group was included in our financial statements as an equity-accounted investee.
Since April 17, 2011, Dori Group has been fully consolidated due to our acquisition of an additional 50% interest in Acad.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Pursuant to IAS 40 Investment Property, gains or losses arising from change in fair value of our investment property and our investment property under development where fair value can be reliably measured
are recognized in our income statement at the end of each period.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|                                        |  |                         |        |   |       |  |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |      |  
|--------------------------------------- |  | ----------------------- | ------ | - | ----- |  | ------ | ---- |  |  | ------ | - |  | ---- | ------ | - | ---- |  | ------ | - |  |  | ---- | -
|                                        |  | Year Ended December 31, |       
|                                        |  | 2010                    |        |   | 2011  |  |        | 2012 |  |  | 2013   |   |  | 2014 |        |   | 2014 | 
|(In millions except for per share data) |  | NIS                     |        |   | U.S.$ | 
|Operating income                        |  |                         | 3,318  |   |       |  | 4,506  |      |  |  | 5,265  |   |  |      | 4,086  |   |      |  | 3,446  |   |  |  | 886  |  
|Finance expenses                        |  |                         | (1,764 | ) |       |  | (2,197 | )    |  |  | (2,214 | ) |  |      | (2,185 | ) |      |  | (2,115 | ) |  |  | (544 | )
|Finance income                          |  |                         | 525    |   |       |  | 72     |      |  |  | 120    |   |  |      | 549    |   |      |  | 157    |   |  |  | 40   |  
|                                        |  |                         |        |   |       |  |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |      |  
|Income before taxes on income           |  |                         | 2,079  |   |       |  | 2,381  |      |  |  | 3,171  |   |  |      | 2,450  |   |      |  | 1,488  |   |  |  | 382  |  
|Taxes on income                         |  |                         | 390    |   |       |  | 352    |      |  |  | 758    |   |  |      | 265    |   |      |  | 405    |   |  |  | 104  |  
|                                        |  |                         |        |   |       |  |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |      |  
|Net income                              |  |                         | 1,689  |   |       |  | 2,029  |      |  |  | 2,413  |   |  |      | 2,185  |   |      |  | 1,083  |   |  |  | 278  |  
|                                        |  |                         |        |   |       |  |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |      |  
|Net income attributable to:             |  |                         |        |   |       |  |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |      |  
|Equity holders of the Company           |  |                         | 831    |   |       |  | 708    |      |  |  | 901    |   |  |      | 927    |   |      |  | 73     |   |  |  | 19   |  
|Non-controlling interests               |  |                         | 858    |   |       |  | 1,321  |      |  |  | 1,512  |   |  |      | 1,258  |   |      |  | 1,010  |   |  |  | 259  |  
|                                        |  |                         |        |   |       |  |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |      |  
|                                        |  |                         | 1,689  |   |       |  | 2,029  |      |  |  | 2,413  |   |  |      | 2,185  |   |      |  | 1,083  |   |  |  | 278  |  
|                                        |  |                         |        |   |       |  |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |      |  
|Basic net earnings per share            |  |                         | 5.89   |   |       |  | 4.57   |      |  |  | 5.46   |   |  |      | 5.41   |   |      |  | 0.41   |   |  |  | 0.11 |  
|                                        |  |                         |        |   |       |  |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |      |  
|Diluted net earnings per share          |  |                         | 5.87   |   |       |  | 4.23   |      |  |  | 5.25   |   |  |      | 5.35   |   |      |  | 0.39   |   |  |  | 0.10 |  
|                                        |  |                         |        |   |       |  |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |      |  



|                                                     |  |                         |         |  |      |  |         |      |  |  |         |  |  |      |         |  |  |  |         | 
|---------------------------------------------------- |  | ----------------------- | ------- |  | ---- |  | ------- | ---- |  |  | ------- |  |  | ---- | ------- |  |  |  | ------- | 
|                                                     |  | Year Ended December 31, |        
|(In thousands)                                       |  | 2010                    |         |  | 2011 |  |         | 2012 |  |  | 2013    |  |  | 2014 |        
|Weighted average number of shares used to calculate: |  |                         |         |  |      |  |         |      |  |  |         |  |  |      |         |  |  |  |         | 
|Basic earnings per share                             |  |                         | 141,150 |  |      |  | 154,456 |      |  |  | 164,912 |  |  |      | 171,103 |  |  |  | 176,459 | 
|Diluted earnings per share                           |  |                         | 141,387 |  |      |  | 154,783 |      |  |  | 165,016 |  |  |      | 171,413 |  |  |  | 176,546 | 



|                                                                                  |  |                         |        |  |       |  |        |      |  |  |        |  |  |      |        |  |      |  |        |  |  |  |        | 
|--------------------------------------------------------------------------------- |  | ----------------------- | ------ |  | ----- |  | ------ | ---- |  |  | ------ |  |  | ---- | ------ |  | ---- |  | ------ |  |  |  | ------ | 
|                                                                                  |  | Year Ended December 31, |       
|                                                                                  |  | 2010                    |        |  | 2011  |  |        | 2012 |  |  | 2013   |  |  | 2014 |        |  | 2014 | 
|(In millions)                                                                     |  | NIS                     |        |  | U.S.$ | 
|Selected Balance Sheet Data:                                                      |  |                         |        |  |       |  |        |      |  |  |        |  |  |      |        |  |      |  |        |  |  |  |        | 
|Equity-accounted investees                                                        |  |                         | 3,694  |  |       |  | 4,390  |      |  |  | 4,713  |  |  |      | 5,907  |  |      |  | 6,213  |  |  |  | 1,598  | 
|Investment property                                                               |  |                         | 41,242 |  |       |  | 51,014 |      |  |  | 55,465 |  |  |      | 53,309 |  |      |  | 56,646 |  |  |  | 14,565 | 
|Investment property under development                                             |  |                         | 2,266  |  |       |  | 2,198  |      |  |  | 2,806  |  |  |      | 2,479  |  |      |  | 1,642  |  |  |  | 422    | 
|Total assets                                                                      |  |                         | 50,408 |  |       |  | 64,599 |      |  |  | 71,034 |  |  |      | 67,927 |  |      |  | 69,984 |  |  |  | 17,995 | 
|Long term interest-bearing liabilities from financial institutions and
others (1) |  |                         | 14,644 |  |       |  | 18,973 |      |  |  | 19,433 |  |  |      | 12,692 |  |      |  | 8,552  |  |  |  | 2,199  | 
|Long term debentures (2)                                                          |  |                         | 13,768 |  |       |  | 15,379 |      |  |  | 18,500 |  |  |      | 22,231 |  |      |  | 24,433 |  |  |  | 6,283  | 
|Total liabilities                                                                 |  |                         | 35,217 |  |       |  | 45,203 |      |  |  | 48,737 |  |  |      | 45,574 |  |      |  | 44,114 |  |  |  | 11,343 | 
|Equity attributable to equity holders of the Company                              |  |                         | 5,986  |  |       |  | 7,199  |      |  |  | 7,681  |  |  |      | 7,802  |  |      |  | 8,023  |  |  |  | 2,063  | 
|Non-controlling interests                                                         |  |                         | 9,205  |  |       |  | 12,197 |      |  |  | 14,616 |  |  |      | 14,551 |  |      |  | 17,847 |  |  |  | 4,589  | 
|Total equity                                                                      |  |                         | 15,191 |  |       |  | 19,396 |      |  |  | 22,297 |  |  |      | 22,353 |  |      |  | 25,870 |  |  |  | 6,652  | 



|(1) | As of December 31, 2014, NIS 2.4 billion (U.S.$ 0.6 billion) of our interest-bearing liabilities from financial institutions and others (including current maturities) were unsecured and the remainder were secured.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | As of December 31, 2014, NIS 847 million (U.S.$ 218 million) aggregate principal amount of our debentures was secured and the remainder was unsecured.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------



|                                          |  |                    |        |  |      |  |        |      |  |  |        |  |  |      |        |  |  |  |        | 
|----------------------------------------- |  | ------------------ | ------ |  | ---- |  | ------ | ---- |  |  | ------ |  |  | ---- | ------ |  |  |  | ------ | 
|                                          |  | As of December 31, |       
|                                          |  | 2010               |        |  | 2011 |  |        | 2012 |  |  | 2013   |  |  | 2014 |       
|                                          |  | NIS                |       
|Other Operating Data (1):                 |  |                    |        |  |      |  |        |      |  |  |        |  |  |      |        |  |  |  |        | 
|Number of Group operating properties      |  |                    | 646    |  |      |  | 642    |      |  |  | 622    |  |  |      | 577    |  |  |  | 524    | 
|Total Group GLA (in thousands of sq. ft.) |  |                    | 70,006 |  |      |  | 72,903 |      |  |  | 73,292 |  |  |      | 71,431 |  |  |  | 68,336 | 
|Group occupancy (%)                       |  |                    | 93.9   |  |      |  | 94.3   |      |  |  | 95.0   |  |  |      | 95.0   |  |  |  | 95.9   | 



|(1) | Includes equity-accounted jointly controlled companies.
|--- | -------------------------------------------------------



7



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|                                        |  |                         |       |  |       |  |       |      |  |  |       |  |  |      |       |  |      |  |       |  |  |  |      | 
|--------------------------------------- |  | ----------------------- | ----- |  | ----- |  | ----- | ---- |  |  | ----- |  |  | ---- | ----- |  | ---- |  | ----- |  |  |  | ---- | 
|                                        |  | Year Ended December 31, |      
|                                        |  | 2010                    |       |  | 2011  |  |       | 2012 |  |  | 2013  |  |  | 2014 |       |  | 2014 | 
|(In millions except for per share data) |  | NIS                     |       |  | U.S.$ | 
|Other Financial Data:                   |  |                         |       |  |       |  |       |      |  |  |       |  |  |      |       |  |      |  |       |  |  |  |      | 
|NOI (1)                                 |  |                         | 2,806 |  |       |  | 3,196 |      |  |  | 3,544 |  |  |      | 3,457 |  |      |  | 3,329 |  |  |  | 856  | 
|Adjusted EBITDA (1)                     |  |                         | 2,548 |  |       |  | 2,864 |      |  |  | 3,257 |  |  |      | 3,192 |  |      |  | 2,817 |  |  |  | 724  | 
|Dividends                               |  |                         | 211   |  |       |  | 241   |      |  |  | 264   |  |  |      | 298   |  |      |  | 318   |  |  |  | 82   | 
|Dividends per share                     |  |                         | 1.48  |  |       |  | 1.56  |      |  |  | 1.60  |  |  |      | 1.72  |  |      |  | 1.80  |  |  |  | 0.46 | 
|EPRA FFO (1)(2)                         |  |                         | 141   |  |       |  | 80    |      |  |  | 327   |  |  |      | 269   |  |      |  | 345   |  |  |  | 89   | 
|Adjusted EPRA FFO (1)(2)                |  |                         | 359   |  |       |  | 405   |      |  |  | 533   |  |  |      | 585   |  |      |  | 598   |  |  |  | 154  | 



|               |  |                    |       |  |       |  |       |      |  |  |        |  |  |      |        |  |      |  |        |  |  |  |       | 
|-------------- |  | ------------------ | ----- |  | ----- |  | ----- | ---- |  |  | ------ |  |  | ---- | ------ |  | ---- |  | ------ |  |  |  | ----- | 
|               |  | As of December 31, |      
|               |  | 2010               |       |  | 2011  |  |       | 2012 |  |  | 2013   |  |  | 2014 |        |  | 2014 | 
|(In millions)  |  | NIS                |       |  | U.S.$ | 
|EPRA NAV(1)    |  |                    | 6,709 |  |       |  | 8,762 |      |  |  | 10,037 |  |  |      | 10,200 |  |      |  | 10,740 |  |  |  | 2,762 | 
|EPRA NNNAV (1) |  |                    | 5,195 |  |       |  | 6,781 |      |  |  | 7,157  |  |  |      | 7,361  |  |      |  | 7,209  |  |  |  | 1,854 | 



|(1) | For definitions and reconciliations of NOI, Adjusted EBITDA, EPRA FFO, Adjusted EPRA FFO, EPRA NAV and EPRA NNNAV and statements disclosing the reasons why our management believes that their presentation provides useful
information to investors and, to the extent material, any additional purposes for which our management uses them see Item 5Operating and Financial Review and Prospects.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | In countries using IFRS, it is customary for companies with income-producing property to publish their EPRA Earnings, which we refer to as EPRA FFO. EPRA FFO is a measure for presenting the operating results
of a company that are attributable to its equity holders. We believe that these measures are consistent with the position paper of EPRA, which states, EPRA Earnings is similar to NAREIT FFO. The measures are not exactly the same, as EPRA
Earnings has its basis in IFRS and FFO is based on US GAAP. We believe that EPRA FFO is similar in substance to funds from operations, or FFO, with adjustments primarily for the attribution of results under IFRS.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                  |  |                         |        |   |       |  |        |      |  |  |        |   |  |      |        |   |      |  |       |   |  |  |      |  
|--------------------------------- |  | ----------------------- | ------ | - | ----- |  | ------ | ---- |  |  | ------ | - |  | ---- | ------ | - | ---- |  | ----- | - |  |  | ---- | -
|                                  |  | Year Ended December 31, |       
|                                  |  | 2010                    |        |   | 2011  |  |        | 2012 |  |  | 2013   |   |  | 2014 |        |   | 2014 | 
|(In millions)                     |  | NIS                     |        |   | U.S.$ | 
|Cash flows provided by (used in): |  |                         |        |   |       |  |        |      |  |  |        |   |  |      |        |   |      |  |       |   |  |  |      |  
|Operating activities              |  |                         | 659    |   |       |  | 1,104  |      |  |  | 1,368  |   |  |      | 1,189  |   |      |  | 1,026 |   |  |  | 264  |  
|Investing activities              |  |                         | (2,548 | ) |       |  | (4,195 | )    |  |  | (4,621 | ) |  |      | (2,208 | ) |      |  | (768  | ) |  |  | (197 | )
|Financing activities              |  |                         | 1,589  |   |       |  | 4,017  |      |  |  | 3,490  |   |  |      | 428    |   |      |  | (701  | ) |  |  | (180 | )

Exchange Rate Information

The following table sets forth, for each period indicated, the low and high exchange rates for NIS expressed as NIS per U.S. dollar, the
exchange rate at the end of such period and the average of such exchange rates during such period, based on the daily representative rate of exchange as published by the Bank of Israel. The exchange rates set forth below demonstrate trends in
exchange rates, but the actual exchange rates used throughout this annual report may vary.



|             |  |                         |      |  |      |  |      |      |  |  |      |  |  |      |      |  |  |  |      | 
|------------ |  | ----------------------- | ---- |  | ---- |  | ---- | ---- |  |  | ---- |  |  | ---- | ---- |  |  |  | ---- | 
|             |  | Year Ended December 31, |     
|             |  | 2010                    |      |  | 2011 |  |      | 2012 |  |  | 2013 |  |  | 2014 |     
|High         |  |                         | 3.89 |  |      |  | 3.82 |      |  |  | 4.08 |  |  |      | 3.79 |  |  |  | 3.99 | 
|Low          |  |                         | 3.54 |  |      |  | 3.36 |      |  |  | 3.70 |  |  |      | 3.47 |  |  |  | 3.40 | 
|Period end   |  |                         | 3.54 |  |      |  | 3.82 |      |  |  | 3.73 |  |  |      | 3.47 |  |  |  | 3.89 | 
|Average Rate |  |                         | 3.73 |  |      |  | 3.58 |      |  |  | 3.86 |  |  |      | 3.61 |  |  |  | 3.58 | 



8



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The following table shows, for each of the months indicated, the high and low exchange rates
between the NIS and the U.S. dollar, expressed as NIS per U.S. dollar and based upon the daily representative rate of exchange as published by the Bank of Israel:



|              |  |       |      |  |       |  |      | 
|------------- |  | ----- | ---- |  | ----- |  | ---- | 
|              |  | High  |      |  | Low   | 
|Month         |  | (NIS) |      |  | (NIS) | 
|October 2014  |  |       | 3.79 |  |       |  | 3.64 | 
|November 2014 |  |       | 3.89 |  |       |  | 3.78 | 
|December 2014 |  |       | 3.99 |  |       |  | 3.89 | 
|January 2015  |  |       | 4.00 |  |       |  | 3.90 | 
|February 2015 |  |       | 3.97 |  |       |  | 3.84 | 
|March 2015    |  |       | 4.05 |  |       |  | 3.93 | 

On April 10, 2015 the daily representative rate of exchange between the NIS and U.S. dollar as published
by the Bank of Israel was NIS 3.943 to $1.00.

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

Our business involves a high degree of risk. Please carefully consider the risks we describe below in addition to the other information set
forth elsewhere in this annual report and in our other filings with the SEC. These material risks could adversely affect our business, financial condition and results of operations.

Risks Related to Our Business and Operations

Economic conditions may make it difficult to maintain or increase occupancy rates and rents and a deterioration in economic conditions in
one or more of our key regions could adversely impact our results of operations.

In 2014, our rental income (assuming full
consolidation of jointly-controlled entities) was derived 32.0% from Canada, 21.2% from the United States, 22.0% from Northern and Western Europe, 20.9% from Central and Eastern Europe, 3.3% from Israel, and 0.6% from Brazil. During the economic
downturn of 2008-2009, general market conditions deteriorated in many of our markets, particularly the United States and Central and Eastern Europe, and a lack of financing and a decrease in consumer spending prevented retailers from expanding their
activities. As a consequence, occupancy rates declined in some of the regions in which we operate, most significantly in the United States where the occupancy rates for our shopping centers decreased from 93.2% as of December 31, 2007 to 90.7%
as of December 31, 2010. In addition, we granted rent concessions to some tenants during this period. The economic downturn adversely affected our net operating income and the value of our assets in all of the regions in which we operate. In
addition, currencies in many of our markets were devalued against the NIS during that period. Although general market conditions have improved and currencies have strengthened in those markets since 2010, our ability to maintain or increase our
occupancy rates and rent levels depends on continued improvements in global and local economic conditions.

While the economy in many of
our markets has continued to gradually improve (Russia during 2014 being a notable exception), particularly in the United States and Canada, macro-economic challenges, such as low consumer confidence, high unemployment and reduced consumer spending,
have adversely affected many retailers and continue to adversely affect the retail sales of many regional and local tenants in some of our markets and our ability to re-lease vacated space at higher rents. Moreover, companies in some of our markets
shifted to a more cautionary mode with respect to leasing as a result of the prevailing economic climate and demand for retail space has declined generally, reducing the market rental rates for our properties. As a result, in these markets we may
not be able to re-lease vacated space and, if we are able to re-lease vacated space, there is no assurance that rental rates will be equal to or in excess of current rental rates. In addition, we may incur substantial costs in obtaining new tenants,
including brokerage commissions paid by us in connection with new leases or lease renewals, and the cost of making leasehold improvements. These events and factors could adversely affect our rental income and overall results of operations.



9



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While most of our shopping centers are anchored by supermarkets, drugstores or other
necessity-oriented retailers, which are less susceptible to economic cycles, other tenants of our public subsidiaries, have been vulnerable to declining sales and reduced access to capital. Europe in particular remains vulnerable to volatile
financial and credit markets while Russia is suffering from significant economic and political turmoil. As a result, some tenants have requested rent adjustments and abatements, while other tenants have not been able to continue in business at all.
Our ability to renew or replace these tenants at comparable rents could adversely impact occupancy rates and overall results of operations.

Revenue from our properties depends on the success of our tenants.

Revenue from our properties depends primarily on the ability of our tenants to pay the full amount of rent and other charges due under their
leases on a timely basis. Any reduction in the tenants abilities to pay rent or other charges on a timely basis, including the filing by the tenants for bankruptcy protection, could adversely affect our financial condition and results of
operations. In the event of default by tenants, our subsidiaries and affiliates may experience delays and unexpected costs in enforcing their rights as landlords under the leases, which may also adversely affect our financial condition and results
of operations.

The economic performance and value of our shopping centers depend on many factors, each of which could have an
adverse impact on our cash flows and operating results.

The economic performance and value of our properties can be affected by
many factors, including the following:



| |  |  | Economic uncertainty or downturns in general, or in the areas where our properties are located;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | Local conditions, such as an oversupply of space, a reduction in demand for retail space or a change in local demographics;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | The attractiveness of our properties to tenants and competition from other available space;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | The adverse financial condition of some large retail companies and ongoing consolidation within the retail sector;
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | The growth of super-centers and warehouse club retailers and their adverse effect on traditional grocery chains;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | Changes in the perception of retailers or shoppers regarding the safety, convenience and attractiveness of our shopping centers and changes in the overall climate of the retail industry;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The ability of our subsidiaries and affiliates to provide adequate management services and to maintain our properties;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | Increased operating costs, if these costs cannot be passed through to tenants;
| | - |  | ------------------------------------------------------------------------------



| |  |  | The expense of periodically renovating, repairing and re-letting spaces;
| | - |  | ------------------------------------------------------------------------



| |  |  | The impact of increased energy costs and/or extreme weather conditions on consumers and its consequential effect on the number of shopping visits to our properties; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The consequences of any armed conflicts or terrorist attacks.
| | - |  | -------------------------------------------------------------

To the extent that any of these
conditions occur or accelerate, they are likely to impact market rents for retail space, portfolio occupancy, our ability to sell, acquire or develop properties, and cash available for distribution to stockholders.

We seek to expand through acquisitions of additional real estate assets, including other businesses; such expansion may not yield the
returns expected, may result in disruptions to our business, may strain management resources and may result in dilution to our shareholders or dilution of our interests in our subsidiaries and affiliates.

Our investing strategy and our market selection process may not ultimately be successful, may not provide positive returns on our investments
and may result in losses. The acquisition of properties, groups of properties or other businesses entails risks that include the following, any of which could adversely affect our results of operations and financial condition:



| |  |  | we may not be able to identify suitable properties to acquire or may be unable to complete the acquisition of the properties we identify;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we may not be able to integrate any acquisitions into our existing operations successfully;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | properties we acquire may fail to achieve the occupancy or rental rates we project at the time we make the decision to acquire; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



10



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| |  |  | our pre-acquisition evaluation of the physical condition of each new investment may not detect certain defects or identify necessary repairs or may fail to properly evaluate the costs involved in implementing our plans
with respect to such investment.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Together with our acquisition of individual properties and groups of properties, we have
been an active business acquirer and, as part of our growth strategy, we expect to seek to acquire real estate-related businesses in the future. The acquisition and integration of each business involves a number of risks and may result in unforeseen
operating difficulties and expenditures in assimilating or integrating the businesses, properties, personnel or operations of the acquired business. Our due diligence prior to our acquisition of a business may not uncover certain legal or regulatory
issues that could affect such business. Furthermore, future acquisitions may involve difficulties in retaining the tenants or customers of the acquired business, and disrupt our ongoing business, divert our resources and require significant
management attention that would otherwise be available for ongoing operation and development of our current business. Moreover, we can make no assurances that the anticipated benefits of any acquisition, such as operating improvements or anticipated
cost savings, would be realized or that we would not be exposed to unexpected liabilities in connection with any acquisition.

To complete
a future acquisition, we may determine that it is necessary to use a substantial amount of our available liquidity sources or cash or engage in equity or debt financing. If we raise additional funds through further issuances of equity or convertible
debt securities, our existing shareholders could suffer significant dilution, and any new equity securities we or our subsidiaries or affiliates issue could have rights, preferences and privileges senior to those of holders of our ordinary shares.
If our subsidiaries or affiliates raise additional funds through further issuances of equity or convertible debt securities, Gazit-Globe, as the holder of equity securities of our subsidiaries and affiliates, could suffer significant dilution, and
any new equity securities our subsidiaries or affiliates issue could have rights, preferences and privileges senior to those held by Gazit-Globe. We may not be able to obtain additional financing on terms favorable to us, if at all, which could
limit our ability to engage in acquisitions.

We are particularly dependent upon large tenants that serve as anchors in our shopping
centers and decisions made by these tenants or adverse developments in their businesses could have a negative impact on our financial condition.

We own shopping centers that are anchored by large tenants. Because of their reputation or other factors, these large tenants are particularly
important in attracting shoppers and other tenants to our centers. Our rental income depends upon the ability of the tenants of our properties and, in particular, these anchor tenants, to generate enough income to make their lease payments to us.
Certain of our anchor tenants may make up a significant percentage of our rental income in certain markets. For example, Kesko accounted for 15.4% of Citycons rental income in 2014, Albertsons (and other affiliated brands) accounted for 4.7%
of Equity Ones total annual minimum rent as of December 31, 2014 and Loblaws and Sobeys accounted for 10.2% and 6.8% of First Capitals total annual minimum rent as of December 31, 2014. In addition, supermarkets and other
grocery stores, many of which are anchor tenants, accounted for approximately 17% of our total rental income in 2014, assuming full consolidation of equity-accounted jointly-controlled entities. We generally develop or redevelop our shopping centers
based on an agreement with an anchor tenant. Changes beyond our control may adversely affect the tenants ability to make lease payments or could result in them terminating their leases. These changes include, among others:



| |  |  | downturns in national or regional economic conditions where our properties are located, which generally will negatively impact the rental rates;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in the buying habits of consumers in the regions surrounding those shopping centers including a shift to preference for online shopping and e-commerce;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in local market conditions such as an oversupply of properties, including space available by sublease or new construction, or a reduction in demand for our properties;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | competition from other available properties; and
| | - |  | ------------------------------------------------



| |  |  | changes in federal, state or local regulations and controls affecting rents, prices of goods, interest rates, fuel and energy consumption.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------

As a result, tenants may determine not to renew leases, delay lease commencement or adjust their square footage needs downward. In addition,
anchor tenants often have more favorable lease provisions and significant negotiating power. In some instances, we may need to seek their permission to lease to other, smaller tenants. Anchor tenants, particularly retail chains, may also change
their operating policies for their stores (such as the size of their stores) and the regions in which they operate. As a result, anchor tenants may determine not to renew leases or delay lease commencement. An anchor tenant may decide that a
particular store is unprofitable and close its operations in our center, and, while the tenant may continue to make rental payments, such a failure to occupy its premises could have an adverse effect on the property. A lease termination by an anchor
tenant or a failure by that anchor tenant to occupy the premises could result in lease terminations or reductions in rent by other tenants in the same shopping center. In addition, we are subject to the risk of



11



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##### Table of Contents

defaults by tenants or the failure of any lease guarantors to fulfill their obligations, tenant bankruptcies and other early termination of leases or non-renewal of leases. Any of these
developments could materially and adversely affect our financial condition and results of operations.

Commencement of operations in
new geographic markets and asset classes involves risks and may result in us investing significant resources without realizing a return and may adversely impact our future growth.

The commencement of operations in new geographic markets or asset classes in which we have little or no prior experience involves costs and
risks. In the past, we expanded into new regions, including Central and Eastern Europe and Brazil, and into other asset classes, such as medical office buildings and senior care facilities. While we currently have no specific plans to commence
operations in new geographic markets or asset classes, we may decide to enter into new markets or asset classes in the future when an opportunity presents itself. When commencing such operations, we need to learn and become familiar with the various
aspects of operating in these new geographic markets or asset classes, including regulatory aspects, the business and macro-economic environment, new currency exposure, as well as the necessity of establishing new systems and administrative
headquarters at substantial costs. Additionally, it may take many years for an acquisition to achieve desired results as factors such as obtaining regulatory permits, construction, signing the right mix of tenants and assembling the right management
team take time to implement. In some cases, we may commence such operations by means of a joint venture which often offers the advantage of a partner with superior experience, but also has the risks associated with any activity conducted jointly
with a non-controlled third party. In addition, entry into new geographic markets may also lead to difficulty managing geographically separated organizations and assets, difficulty integrating personnel with diverse business backgrounds and
organizational cultures and compliance with foreign regulatory requirements applicable to acquisitions. Our failure to successfully expand into new geographies and asset classes may result in us investing significant resources without realizing a
return and may adversely impact our future growth.

If we or our public subsidiaries are unable to obtain adequate capital, we may
have to limit our operations substantially.

Our acquisition and development of properties and our acquisition of other businesses
and equity interests in real estate companies are financed in part by loans received from banks, insurance companies and other financing sources, as well as from the sale of shares, notes, debentures and convertible debentures in public and private
offerings. Our public subsidiaries satisfy their capital requirements through debt and equity financings in their respective local markets. The practices in these markets vary significantly, for example, with some of the markets based entirely on
bank lending and others depending significantly on accessing the capital markets. Our ability to obtain, or obtain on economically desirable terms, financing could be affected by unavailability or a shortage of external financing sources, changes in
existing financing terms, changes in our financial condition and results of operations, legislative changes, changes in the public or private markets in our operating regions and deterioration of the economic situation in our operating regions.
Should our ability to obtain financing be impaired, our operations could be limited significantly. Our business results are dependent on our ability to obtain loans or capital in the future in order to repay our loans, notes, debentures and
convertible debentures.

Internet sales can have an impact on our tenants and our business.

The use of the internet by consumers continues to gain in popularity and growth in internet sales is likely to continue in the future. The
increase in internet sales could result in a downturn in the business of some of our current tenants and could affect the way other current and future tenants lease space. For example, the migration towards internet sales has led many retailers to
reduce the number and size of their traditional bricks and mortar locations in order to increasingly rely on e-commerce and alternative distribution channels. Many tenants also permit merchandise purchased on their websites to be picked
up at, or returned to, their physical store locations, which may have the effect of decreasing the reported amount of their in-store sales and the amount of rent we are able to collect from them (particularly with respect to those tenants who pay
rent based on a percentage of their in-store sales). We cannot predict with certainty how growth in internet sales will impact the demand for space at our properties or how much revenue will be generated at traditional store locations in the future.
If we are unable to anticipate and respond promptly to trends in retailer and consumer behavior, our occupancy levels and financial results could be negatively impacted.

Future terrorist acts and shooting incidents could harm the demand for, and the value of, our properties.

Over the past few years, a number of terrorist acts and shootings have occurred at retail properties throughout the world, including highly
publicized incidents in Arizona, New Jersey, Maryland, Oregon and Kenya. In the event concerns regarding safety were to alter shopping habits or deter customers from visiting shopping centers, our tenants would be adversely affected as would the
general demand for retail space. Additionally, if such incidents were to continue, insurance for such acts may become limited or subject to substantial cost increases.



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Many of our real estate costs are fixed, even if income from our properties decreases.

Our financial results depend in part on leasing space in the properties to tenants on favorable financial terms. Costs associated
with real estate investment, such as real estate taxes, insurance and maintenance costs, generally are not reduced even when a property is not fully occupied, rental rates decrease, or other circumstances cause a reduction in income from the
property. As a result, cash flow from the operations of the properties may be reduced if a tenant does not pay its rent or we are unable to fully lease the properties on favorable terms. Additionally, properties that we develop or redevelop may not
produce any significant revenue immediately, and the cash flow from existing operations may be insufficient to pay the operating expenses and debt service associated with such projects until they are fully occupied.

We have substantial debt obligations which may negatively affect our results of operations and financial position and put us at a
competitive disadvantage.

Our organizational documents do not limit the amount of debt that we may incur and we do not have a
policy that limits our debt to any particular level. As of December 31, 2014, we and our private subsidiaries had outstanding interest-bearing debt in the aggregate amount of NIS 13,747 million (U.S.$ 3,535 million) and other liabilities
outstanding in the aggregate amount of NIS 735 million (U.S.$ 189 million), of which approximately 11% matures during 2015. On a consolidated basis, we had debt and other liabilities outstanding as of December 31, 2014 in the aggregate
amount of NIS 44,114 million (U.S.$ 11,343 million), of which 13.5% matures during 2015. We are subject to covenant compliance obligations and each of our public subsidiaries is subject to its own covenant compliance obligations. Furthermore,
the indebtedness of each of our public subsidiaries is independent of each other public subsidiary and is not subject to any guaranty by Gazit-Globe or its wholly-owned subsidiaries.

The amount of debt outstanding from time to time could have important consequences to us and our public subsidiaries. For example, it could



| |  |  | require that we dedicate a substantial portion of cash flow from operations to payments on debt, thereby reducing funds available for operations, property acquisitions, redevelopments and other business opportunities
that may arise in the future;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | limit the ability to make distributions on equity securities, including the payment of dividends;
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | make it difficult to satisfy debt service requirements;
| | - |  | -------------------------------------------------------



| |  |  | limit flexibility in planning for, or reacting to, changes in business and the factors that affect profitability, which may place us at a disadvantage compared to competitors with less debt or debt with less restrictive
terms;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | adversely affect financial ratios and debt and operational coverage levels monitored by rating agencies and adversely affect the ratings assigned to our or our public subsidiaries debt, which could increase the
cost of capital; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | limit our or our public subsidiaries ability to obtain any additional debt or equity financing that may be needed in the future for working capital, debt refinancing, capital expenditures, acquisitions,
redevelopment or other general corporate purposes or to obtain such financing on favorable terms.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

If our or our public
subsidiaries internally generated cash is inadequate to repay indebtedness upon an event of default or upon maturity, then we or our public subsidiaries will be required to repay or refinance the debt. If we or our public subsidiaries are
unable to refinance our indebtedness on acceptable terms or if the amount of refinancing proceeds is insufficient to fully repay the existing debt, we or our public subsidiaries might be forced to dispose of properties, potentially upon
disadvantageous terms, which might result in losses and might adversely affect our cash available for distribution. If prevailing interest rates or other factors at the time of refinancing result in higher interest rates on refinancing, our interest
expense would increase without a corresponding increase in our rental rates, which would adversely affect our results of operations.

In
addition, our debt financing agreements and the debt financing agreements of our public subsidiaries contain representations, warranties and covenants, including financial covenants that, among other things, require the maintenance of certain
financial ratios. Certain of the covenants that apply to Gazit-Globe depend upon the performance of our public subsidiaries and we therefore have less control over our compliance with those covenants. For example, covenants that apply to Gazit-Globe
require Citycon to maintain a minimum ratio of equity to total assets less advances received and a minimum ratio of EBITDA to net finance expenses. Another covenant requires First Capital to maintain a minimum ratio of EBITDA to finance expenses.

Should we or our public subsidiaries breach any such representations, warranties or covenants contained in any such loan or other
financing agreement, or otherwise be unable to service interest payments or principal repayments, we or our public subsidiaries may be required immediately to repay such borrowings in whole or in part, together with any related costs and a default
under the terms of certain of our other indebtedness may result from such breach. For example, a decline in the property market or a wide scale tenant default may result in a failure to meet any loan to value or debt service coverage ratios, thereby
causing an event of default and we or our public subsidiaries, as the case may be, may be required to prepay the relevant loan. A significant portion of Gazit-Globes equity interests in its subsidiaries are pledged as collateral for
Gazit-Globes revolving credit facilities and other indebtedness incurred by Gazit-Globe directly and by its



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private subsidiaries. As of December 31, 2014, the principal amount of such indebtedness was NIS 1,220 million (U.S.$ 314 million), which constituted 3.2% of our consolidated
indebtedness as of such date. In the event that Gazit-Globe is required to prepay its loans, the lenders under such loans may determine to pursue remedies against and cause the sale of those equity interests. In addition, since certain of our
properties were mortgaged to secure payment of indebtedness with a principal amount of NIS 6,988 million (U.S.$ 1,797 million) as of December 31, 2014, which constituted 18.6% of our consolidated indebtedness as of such date, in the event
we are unable to refinance or repay our borrowing, we may be unable to meet mortgage payments, or we may default under the related mortgage, deed of trust or other pledge and such property could be transferred to the mortgagee or pledgee, or the
mortgagee or pledgee could foreclose upon the property, appoint a receiver and receive an assignment of rents and leases or pursue other remedies, all with a consequent loss of income and asset value. Moreover, any restrictions on cash distributions
as a result of breaching financial ratios, failure to repay such borrowings or, in certain circumstances, other breaches of covenants, representations and warranties under our debt financing agreements could result in us being prevented from paying
dividends to our investors and have an adverse effect on our liquidity.

Volatility in the credit markets may affect our ability to
obtain or re-finance our indebtedness at a reasonable cost.

At times during the last decade, global credit markets have
experienced significant price volatility, dislocations and liquidity disruptions, which at times caused the spreads on prospective debt financings to widen considerably. If a downturn or dislocation in credit markets were to occur or if interest
rates were to dramatically increase from their current low levels, we may experience difficulty refinancing our upcoming debt maturities at a reasonable cost or with desired financing alternatives. For example, it may be hard to raise new unsecured
financing in the form of additional bank debt or corporate bonds at interest rates that are appropriate for our long term objectives. Any change in our credit ratings could further impact our access to capital and our cost of capital, including the
cost of borrowings under our revolving lines of credit. To the extent we are unable to efficiently access the credit markets, we may need to repay maturing debt with proceeds from the issuance of equity or the sale of assets. In addition, lenders
may impose more restrictive covenants, events of default and other conditions.

The inability of any of our public subsidiaries to
satisfy their liquidity requirements may materially and adversely impact our results of operations.

Even though we present the
assets and liabilities of our public subsidiaries on a consolidated basis and equity method for an affiliate, they satisfy their short-term liquidity and long-term capital requirements through cash generated from their respective operations and
through debt and equity financings in their respective local markets. Our liquidity and available borrowings presented on a consolidated basis may not therefore be reflective of the position of any one of our public subsidiaries since the liquidity
and available borrowings of each of our public subsidiaries are not available to support the others operations. Although we have from time to time purchased equity or convertible debt securities of our public subsidiaries, we have not
generally made shareholder loans to them (with a notable exception during 2014 being our loans to Dori Group, please see Item 4Information on the CompanyHistory and Development of the Company.) and may have insufficient
resources to do so even if our overall financial position on a consolidated basis is positive. Each public subsidiary is subject to its own covenant compliance obligations and the failure of any public subsidiary to comply with its obligations could
result in the acceleration of its indebtedness which could have a material adverse effect on our financial position and results of operations.

Our results of operations may be adversely affected by fluctuations in currency exchange rates and we may not have adequately hedged
against them.

Because we own and operate assets in many regions throughout the world, our results of operations are affected by
fluctuations in currency exchange rates. For the year ended December 31, 2014, 32.0% of our rental income (assuming full consolidation of jointly-controlled entities) was earned in Canadian dollars, 31.4% in Euros, 21.6% in U.S. dollars, 7.4%
in Swedish Krona, and 3.3% in NIS. Our income from development and construction of residential projects activity is primarily generated in NIS (NIS 303 million of gross loss during 2014). In addition, our reporting currency is the New Israeli
Shekel, or NIS, and the functional currency is separately determined for each of our subsidiaries. When a subsidiarys functional currency differs from our reporting currency, the financial statements of such subsidiary are translated to NIS so
that they can be included in our financial statements. As a result, fluctuations of the currencies in which we conduct business relative to the NIS impact our results of operations and the impact may be material. For example, the average annual rate
in NIS of U.S. dollar and the Canadian dollar and the Euro weakened 0.9%, 7.7% and 1.0%, respectively, for 2014 compared to 2013, which resulted in our net operating income decreasing by a total amount of NIS 125 million, or 3.6%. We
continually monitor our exposure to currency risk and pursue a company-wide foreign exchange risk management policy, which includes seeking to hold our equity in the currencies of the various markets in which we operate in the same proportions as
the assets in each such currency bear to our total assets. We have in the past and expect to continue in the future to at least partly hedge such risks with certain financial instruments. Future currency exchange rate fluctuations that we have not
adequately hedged could adversely affect our profitability. We also face risks arising from the imposition of exchange controls and currency devaluations. Exchange controls may limit our ability to



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convert foreign currencies into NIS or to remit dividends and other payments by our foreign subsidiaries or businesses located in or conducted within a country imposing controls. Currency
devaluations result in a diminished value of funds denominated in the currency of the country instituting the devaluation.

We are
subject to a disproportionate impact on our properties due to concentration in certain areas.

As of December 31, 2014,
approximately 10.5%, 9.7%, 7.3% and 4.3% of our total GLA was located in Florida (U.S.), the greater Toronto area (Canada), the greater Montreal area (Canada) and metropolitan Helsinki (Finland), respectively. A regional recession or other major,
localized economic disruption or a natural disaster, such as an earthquake or hurricane, in any of these areas could adversely affect our ability to generate or increase operating revenues from our properties, attract new tenants to our properties
or dispose of unproductive properties. Any reduction in the revenues from our properties would effectively reduce the income we generate from them, which would adversely affect our results of operations and financial condition. Conversely, strong
economic conditions in a region could lead to increased building activity and increased competition for tenants.

Certain emerging
markets in which we have properties are subject to greater risks than more developed markets, including significant legal, economic and political risks.

Some of our current and planned investments are located in emerging markets, primarily within Central and Eastern Europe and Brazil, which as
of December 31, 2014 comprised 21.5% and 0.7% of our total GLA, respectively, and in India, where we have an investment commitment in Hiref International LLC, a real estate fund, for U.S.$ 110 million (of which we had invested U.S.$
95.2 million through December 31, 2014) and, as such, are subject to greater risks than those in markets in Northern and Western Europe and North America, including greater legal, economic and political risks. Our performance could be
adversely affected by events beyond our control in these markets, such as a general downturn in the economy of countries in which these markets are located, conflicts between states, changes in regulatory requirements and applicable laws (including
in relation to taxation and planning), adverse conditions in local financial markets and interest and inflation rate fluctuations. In addition, adverse political or economic developments in these or in neighboring countries could have a significant
negative impact on, among other things, individual countries gross domestic products, foreign trade or economies in general. Recent examples of potentially detrimental developments in emerging markets include the economic downturn in Brazil
and the geopolitical tension between Russia and its neighbors. While we currently have no plans to enter new emerging markets, some emerging economies in which we currently operate have historically experienced substantial rates of inflation, an
unstable currency, high government debt relative to gross domestic products, a weak banking system providing limited liquidity to domestic enterprises, high levels of loss-making enterprises that continue to operate due to the lack of effective
bankruptcy proceedings, significant increases in unemployment and underemployment and the impoverishment of a large portion of the population. This may have a material adverse effect on our business, financial condition or results of operations.

Our reported financial condition and results of operations under IFRS are impacted by changes in value of our real estate assets,
which is inherently subjective and subject to conditions outside of our control.

Our consolidated financial statements have been
prepared in accordance with IFRS. There are significant differences between IFRS and U.S. GAAP which lead to different results under the two systems of accounting. Currently, one of the most significant differences between IFRS and U.S. GAAP is an
option under IFRS to record the fair market value of our real estate assets in our financial statements on a quarterly basis, which we have adopted. Accordingly, our financial statements have been significantly impacted in the past by fluctuations
due to changes in fair market value of our properties even if no actual disposition of assets took place. For example, in 2014 and 2013, we increased the fair value of our properties on a consolidated basis by NIS 1,053 million and NIS
962 million, respectively.

The valuation of property is inherently subjective due to the individual nature of each property as well
as to macro- economic conditions. As a result, valuations are subject to uncertainty. Fair value of investment property including development and land was determined by accredited independent appraisers with respect to 53.6% of such investment
properties during the year ended December 31, 2014 (43.8% of which were performed at December 31, 2014). A significant proportion of the valuations of our properties were not performed by appraisers at the balance sheet date, based on
materiality thresholds and other considerations that we have applied across our properties. As a result of these factors, there is no assurance that the valuations of our interests in the properties reflected in our financial statements would
reflect actual sale prices even where any such sales occur shortly after the financial statements are prepared.

Other real estate
companies that are publicly traded in the United States use U.S. GAAP to report their financial statements and are therefore not currently required to record the fair market value of their real estate assets on a quarterly basis. As a result,
significant declines or fluctuations in the value of their real estate could impact us disproportionately compared to these other companies.

In addition, in recent years several amendments have been made to IFRS standards, including those that affect us, and we have had to revise
our accounting policies in order to comply with such amended standards. Commonly, the transition provisions of these amendments require us to implement the amendments on comparative figures as well. Figures with respect to prior periods that are not
required to be included in our financial statements are therefore not adjusted retrospectively. As a result, the utility of the comparative figures for certain years may be limited.



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Real estate is generally an illiquid investment.

Real estate is generally an illiquid investment as compared to investments in securities. While we do not currently anticipate a need to
dispose of a significant number of real estate assets in the short-term, such illiquidity may affect our ability to dispose of or liquidate real estate assets in a timely manner and at satisfactory prices in response to changes in economic, real
estate market or other conditions.

We may be obliged to dispose of our interest in a property or properties at a time, for a price or on
terms not of our choosing. In addition, some of our anchor tenants have rights of first refusal or rights of first offer to purchase the properties in which they lease space in the event that we seek to dispose of such properties. The presence of
these rights of first refusal and rights of first offer could make it more difficult for us to sell these properties in response to market conditions. These limitations on our ability to sell our properties could have an adverse effect on our
financial condition and results of operations.

Our competitive position and future prospects depend on our senior management and
the senior management of our subsidiaries and affiliates.

The success of our property development and investment activities
depend, among other things, on the expertise of our board of directors, our executive team and other key personnel in identifying appropriate opportunities and managing such activities, as well as the executive teams of our subsidiaries and
affiliates. The employment agreements pursuant to which Messrs. Katzman and Segal provide such services to Gazit-Globe have expired. Even though their employment agreements have expired, Messrs. Katzman and Segal are continuing to serve as our
executive chairman and executive vice chairman, respectively. Mr. Katzman currently also serves as the chairman of the board of Equity One, First Capital, Citycon, Atrium, and Norstar and Mr. Segal currently also serves as the vice
chairman of the board of Gazit-Globe, executive vice chairman of the board of First Capital, the vice chairman of the board of Equity One and Norstar, and as a board member of Dori Group. With respect to some of these positions, Messrs. Katzman and
Segal have written engagement and remuneration agreements with such public subsidiaries and affiliates which remain in effect. In addition, recent legislation in Israel, specifically Amendment 20 to the Israeli Companies Law, requires in certain
circumstances that the Companys compensation plan for officers as well as the employment agreement of its president be approved by a special majority shareholder vote. The loss of some or all of these individuals or an inability to attract,
retain and maintain additional personnel, including due to the possible failure to attain special majority shareholder approval mentioned above, could prevent us from implementing our business strategy and could adversely affect our business and our
future financial condition or results of operations. We do not carry key man insurance with respect to any of these individuals. We cannot guaranty that we will be able to retain all of our existing senior management personnel or to attract
additional qualified personnel when needed.

We face significant competition for the acquisition of real estate assets, which may
impede our ability to make future acquisitions or may increase the cost of these acquisitions.

We compete with many other entities
for acquisitions of necessity-driven real estate, including institutional pension funds, real estate investment trusts and other owner-operators of shopping centers. This competition may affect us in various ways, including:



| |  |  | reducing properties available for acquisition;
| | - |  | ----------------------------------------------



| |  |  | increasing the cost of properties available for acquisition;
| | - |  | ------------------------------------------------------------



| |  |  | reducing the rate of return on these properties;
| | - |  | ------------------------------------------------



| |  |  | reducing rents payable to us;
| | - |  | -----------------------------



| |  |  | interfering with our ability to attract and retain tenants;
| | - |  | -----------------------------------------------------------



| |  |  | increasing vacancy rates at our properties; and
| | - |  | -----------------------------------------------



| |  |  | adversely affecting our ability to minimize expenses of operation.
| | - |  | ------------------------------------------------------------------

The number of entities and
the amount of funds competing for suitable properties and companies may increase. Such competition may reduce the number of suitable properties and companies available for purchase and increase the bargaining position of their owners. We may lose
acquisition opportunities in the future if we do not match prices, structures and terms offered by competitors and if we match our competitors, we may experience decreased rates of return and increased risks of loss. If we must pay higher prices,
our profitability may be reduced.

Our competitors may enjoy significant competitive advantages that result from, among other things, a
lower cost of capital and enhanced operating efficiencies. Some of these competitors may also have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of acquisitions. Furthermore, companies that
are potential acquisition targets may find competitors to be more attractive because they may have greater resources, may be willing to pay more or may have a more compatible operating philosophy. These factors may create competitive disadvantages
for us with respect to acquisition opportunities.



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Our investments in development and redevelopment projects may not yield anticipated
returns, and we are subject to general construction risks which may increase costs and delay or prevent the construction of our projects.

An important component of our growth strategy is the redevelopment of properties we own and the development of new projects. Some of our
assets, representing 2.6% and 5.9% of the value of our properties (including of our equity-accounted joint ventures) as of December 31, 2014, are at various stages of development and redevelopment (including expansions), respectively. These
developments and redevelopments may not be as successful as currently expected. Expansion, renovation and development projects and the related construction entail the following considerable risks:



| |  |  | significant time lag between commencement and completion subjects us to risks of fluctuations in the general economy;
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | failure or inability to obtain construction or permanent financing on favorable terms;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | inability to achieve projected rental rates or anticipated pace of lease-up;
| | - |  | ----------------------------------------------------------------------------



| |  |  | delay of completion of projects, which may require payment of penalties under lease agreements and subject us to claims for breach of contract;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | incurrence of construction costs for a development project in excess of original estimates;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | expenditure of time and resources on projects that may never be completed;
| | - |  | --------------------------------------------------------------------------



| |  |  | acts of nature, such as harsh climate conditions in the winter, earthquakes and floods, that may damage or delay construction of properties; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | delays and costs relating to required zoning or other regulatory approvals.
| | - |  | ---------------------------------------------------------------------------

The inability to
complete the construction of a property on schedule or at all for any of the above reasons could have a material adverse effect on our business, financial condition and results of operations.

Insurance on real estate may not cover all losses.

We currently carry insurance on all of our properties. Certain of our policies contain coverage limitations, including exclusions for certain
catastrophic perils and certain aggregate loss limits. For example, we have a portfolio of properties, representing 3.8% of our total GLA, located in California, including several properties in the San Francisco Bay and Los Angeles areas. These
properties may be subject to the risk that an earthquake or other similar peril would affect the operation of these properties. We currently do not have comprehensive insurance covering losses from these perils due to the properties being
uninsurable, not justifiable and/or commercially reasonable to insure, or for which any insurance that may be available would be insufficient to repair or replace a damaged or destroyed property. In addition, we have a number of properties in
Florida and the northeastern U.S. states representing 15.1% of our total GLA, that are susceptible to hurricanes and tropical storms. While we generally carry windstorm coverage with respect to these properties, the policies contain per occurrence
deductibles and aggregate loss limits that limit the amount of proceeds that we may be able to recover. In addition, our properties in Central and Eastern Europe are generally not subject to flood insurance. Further, due to inflation, changes in
codes and ordinances, environmental considerations and other factors, it may not be feasible to use insurance proceeds to replace a building after it has been damaged or destroyed.

The availability of insurance coverage may decrease and the prices for insurance may increase as a consequence of significant losses incurred
by the insurance industry. In the event of future industry losses, we may be unable to renew or duplicate our current insurance coverage in adequate amounts or at reasonable prices. In addition, insurance companies may no longer offer coverage
against certain types of losses, or, if offered, the expense of obtaining these types of insurance may not be justified. We therefore may cease to have insurance coverage against certain types of losses and/or there may be decreases in the limits of
insurance available.

Should an uninsured loss, a loss over insured limits or a loss with respect to which insurance proceeds would be
insufficient to repair or replace the property occur, we may lose capital invested in the affected property as well as anticipated income and capital appreciation from that property, while we may remain liable for any debt or other financial
obligation related to that property.

A failure by Equity One to be treated as a REIT could have an adverse effect on our investment
in Equity One.

As of December 31, 2014, Equity One has been treated as a REIT for U.S. federal income tax purposes. Subject
to certain exceptions, a REIT generally is able to avoid entity-level tax on income it distributes to its shareholders, provided certain requirements are met, including certain income, asset, and distribution requirements. If Equity One ceases to be
treated as a REIT and cannot qualify for any relief provisions under the Internal Revenue Code of 1986, as amended, or the Code, Equity One would generally be subject to an entity-level tax on its income at the graduated rates applicable to
corporations. Such tax would reduce Equity Ones profitability and would have an adverse effect on our investment in Equity One.



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If we or third-party managers fail to efficiently manage our properties, tenants may not
renew their leases or we may become subject to unforeseen liabilities.

If we fail to efficiently manage a property or properties,
increased costs could result with respect to maintenance and improvement of properties, loss of opportunities to improve income and yield and a decline in the value of the properties. In addition, we sometimes engage third parties to provide
management services for our properties. We may not be able to locate and enter into agreements with qualified management service providers. If any third parties providing us with management services do not comply with their agreements or otherwise
do not provide services at the level that we expect, our tenant relationships and rental rates for such properties and, therefore, their condition and value, could be negatively affected.

We rely on third-party management companies to manage certain of our properties which represented 1.4% of our total GLA as of
December 31, 2014. While we are in regular contact with our third-party managers, we do not supervise them and their personnel on a day-to-day basis and we cannot guaranty that they will manage our properties in a manner that is consistent with
their obligations under our agreements, that they will not be negligent in their performance or engage in other criminal or fraudulent activity, or that they will not otherwise default on their management obligations to us. If any of the foregoing
occurs, the relationships with our tenants could be damaged, which may cause the tenants not to renew their leases, and we could incur liabilities resulting from loss or injury to the properties or to persons at the properties. If we are unable to
lease the properties or we become subject to significant liabilities as a result of third-party management performance, our operating results and financial condition could be substantially harmed.

Properties held by us are subject to multiple permits and administrative approvals and to compliance with existing and future laws and
regulations.

Our operations and properties, including our construction, development and redevelopment activities, are subject to
regulation by various governmental entities and agencies in connection with obtaining and renewing various licenses, permits, approvals and authorizations, as well as with ongoing compliance with existing and future laws, regulations and standards.
A significant change in the regime for obtaining or renewing these licenses, permits, approvals and authorizations, or a significant change in the licenses, permits, approvals and authorizations our operations and properties are subject to, could
result in us incurring substantially increased costs which could adversely affect our business, financial condition and results of operations. In addition, each maintenance, construction, development and redevelopment project we undertake must
generally receive administrative approvals from various governmental agencies, including fire, health and safety and environmental protection agencies, as well as technical approvals from various utility providers, including electricity, gas and
sewage services. These requirements may hinder, delay or significantly increase the costs of these projects, and failure to comply with these requirements may result in fines and penalties as well as cancellation of such projects even, in certain
cases, the demolition of the building already constructed. Such consequences could have a material adverse effect on our business, financial condition and results of operations.

We may be subjected to liability for environmental contamination.

As an owner and operator of real estate, we may be liable for the costs of removal or remediation of hazardous or toxic substances present at,
on, under, in or released from our properties, as well as for governmental fines and damages for injuries to persons and property. We may be liable without regard to whether we knew of, or were responsible for, the environmental contamination and
with respect to properties we have acquired, whether the contamination occurred before or after the acquisition. The presence of such hazardous or toxic substances, or the failure to remediate such substances properly, may also adversely affect our
ability to sell or lease the real estate or to borrow using the real estate as security. Laws and regulations, as these may be amended over time, may also impose liability for the release of certain materials into the air or water from a property,
including asbestos, and such release can form the basis for liability to third persons for personal injury or other damages. Other laws and regulations can limit the development of, and impose liability for, the disturbance of wetlands or the
habitats of threatened or endangered species.

We own several properties that will require or are currently undergoing varying levels of
environmental remediation. The presence of contamination or the failure to properly remediate contamination at any of our properties may adversely affect our ability to sell or lease those properties or to borrow funds by using those properties as
collateral. The costs or liabilities could exceed the value of the affected real estate. Although we have environmental insurance policies covering most of our properties, there is no assurance that these policies will cover any or all of the
potential losses or damages from environmental contamination; therefore, any liability, fine or damage could directly impact our financial results.



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We rely extensively on computer systems to process transactions and manage our business.
Disruptions in both our primary and secondary (back-up) systems or breaches of our network security could harm our ability to run our business and expose us to liability.

In order to successfully operate our business, it is essential that we maintain uninterrupted operation of our business-critical computer
systems. Our computer systems, including our back-up systems, are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, security breaches, cyber-attacks, catastrophic events such as fires,
hurricanes, earthquakes and tornadoes, and usage errors by our employees. If our computer systems cease to function properly or are damaged, we may have to make a significant investment to repair or replace them, and we may suffer interruptions in
our operations in the interim. Any material interruption in our computer systems may have a material adverse effect on our business or results of operations.

Additionally, increased global IT security threats and more sophisticated and targeted computer crime pose a risk to the security of our
systems and networks and the confidentiality, availability and integrity of our data. In the event a security breach or failure results in the disclosure of sensitive third party data or the transmission of harmful/malicious code to third parties,
we could be subject to liability claims. Depending on their nature and scope, such threats also could potentially lead to improper use of our systems and networks, manipulation and destruction of data, loss of trade secrets, system downtimes and
operational disruptions, which in turn could adversely affect our reputation, competitiveness and results of operations.

We have
significant investments in different countries and our worldwide after-tax income as well as our ability to repatriate it might be influenced by any change in the tax law in such countries.

Our effective tax rate reflected in our financial statements might increase or decrease over time as a result of changes in corporate income
tax rates, or by other changes in the tax laws of the various countries in which we operate which could reduce our after-tax income or impose or increase taxes upon the repatriation of earnings from countries in which we operate.

We cannot predict whether we will be subject to any further claims similar to those addressed in the derivative action by former
shareholders of Meinl European Land Limited or by others, and any adverse resolution of such claims could have a material adverse effect on our results of operations.

Although on July 28, 2011, our settlement agreement with Meinl Bank AG, related parties, and others became fully effective and the parties
subsequently met their obligations to have all outstanding claims dismissed, we can provide no assurance that we or Atrium will not be subject to any further claims similar to those addressed in the derivative action by former shareholders of Meinl
European Land Limited or by others. Please see also Item 8Financial InformationLegal Proceedings.

We have
in the past restated our historical financial statements. Restatements of our historical financial statements may have a material adverse effect on our business, financial condition or operations.

During 2014 we restated our audited consolidated financial statements as of December 31, 2013 and for the year then ended (which also
included corrections to the audited consolidated financial statements for December 31, 2012 and for the year then ended which were not material) and our consolidated financial statements as of March 31, 2014 and for the period then ended,
to retrospectively reflect the amendment in the estimated revenues and costs for completion of construction projects of our fully-consolidated subsidiary, U. Dori Construction Ltd.

We cannot be certain that measures we have taken to prevent future restatements will ensure that no additional restatements will occur in the
future. A restatement may affect investor confidence in the accuracy of our financial disclosures, may raise reputational issues for our business, and frequently triggers litigation.

In addition, we may receive inquiries from the SEC, the Israeli Securities Authority, or the Canadian Securities Administrators regarding our
past restated financial statements or matters relating thereto. Any future inquiries from the SEC, the Israeli Securities Authority, or the Canadian Securities Administrators as a result of the restatement of our historical financial statements
will, regardless of the outcome, likely consume a significant amount of our internal resources and result in additional legal and accounting costs. The restatement of our historical financial statements may result in litigation. If litigation were
to occur, we may incur additional substantial defense costs regardless of the outcome of such litigation. Likewise, such events might cause a diversion of our managements time and attention. If we do not prevail in any such litigation, we
could be required to pay substantial damages or settlement costs.



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We have in the past identified a material weakness in our internal control over financial
reporting.

Partially as a result of the restatement of our historical financial statements described above, we reassessed our
disclosure controls and procedures and determined that they, as of December 31, 2013, were not effective due to a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or
combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented, or detected on a timely basis.
We subsequently remediated the material weakness. For further information, please see Item 15. Controls and Procedures.

Our
management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial
statements for external purposes in accordance with IFRS.

Any failure to maintain such internal controls could adversely impact our
ability to report our financial results on a timely and accurate basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations. Insufficient internal controls could also cause investors to
lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock. It is possible that additional material weaknesses or restatements of financial results may arise in the future due to a
failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. In addition, even if we are successful in strengthening our controls and procedures, in the future those controls and procedures
may not be adequate to prevent or identify irregularities and errors or to facilitate the fair presentation of our consolidated financial statements.

Risks Related to Our Structure

We
may face difficulties in obtaining or using information from our public subsidiaries. and it is possible that such information, if received, may contain inaccuracies.

We rely on information that we receive from our public subsidiaries both to provide guidance in connection with the business and to comply with
our reporting obligations as a public company. We receive information from our public subsidiaries on a quarterly basis in connection with the preparation of our quarterly or annual results of operations. While we request that our subsidiaries
provide us with all material information that we require to manage our business and comply with our reporting obligations as a public company, we do not have formal arrangements with them requiring them to do so. In addition, directors of our public
subsidiaries who are affiliated with us receive information at their periodic board meetings and through their discussions with management. However, the ability of these directors to use or disclose that information to others at Gazit-Globe prior to
its disclosure by the public subsidiary may be subject to limitations resulting from the corporate governance and securities laws governing such subsidiaries and contractual and fiduciary obligations limiting the actions of their directors. In
limited circumstances, we could face a conflict between our disclosure obligations and the disclosure obligations of our public subsidiaries. In addition, if we wish to engage in a capital markets or other transaction in which we are required to
disclose certain information that our subsidiaries are not required or willing to disclose under their respective securities laws, we may need to change the timing or form of our capital raising plans. Our public subsidiaries are listed in different
jurisdictions and operate in different geographic markets and do not present information regarding their operations on a uniform basis. Accordingly, we may not present certain data that is typically presented by other real estate companies in
certain jurisdictions.

In addition, we consolidate the financial statements of our subsidiaries into our consolidated financial
statements and we include the financial information of unconsolidated investees, which are accounted for in our consolidated financial statements using the equity method. In doing so, we rely on their published financial statements. Accordingly, a
material inaccuracy in the financial statements of one of our subsidiaries or unconsolidated investees can result in a material error in our consolidated financial statements. In 2014, the Company was compelled to restate and refile its audited
consolidated financial statements for December 31, 2013 and for the year then ended (which also included corrections to the audited consolidated financial statements for December 31, 2012 and for the year then ended which were not
material) and its consolidated financial statements as of March 31, 2014 and for the period then ended, following the restatement and refiling of the financial statements for the same period of its fully-consolidated subsidiary, Dori
Construction, due to a material deviation in the estimates of anticipated revenues and costs with respect to construction projects. We do not supervise the preparation of the financial statements of our public subsidiaries and investees.
Accordingly, we cannot guarantee that such errors will not occur again or that the Company will not be compelled to restate its consolidated financial statements in the future.



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A significant portion of our business is conducted through public subsidiaries and our
failure to generate sufficient cash flow from these subsidiaries, or otherwise receive cash from these subsidiaries, could result in our inability to repay our indebtedness.

We conduct the substantial majority of our operations through public subsidiaries and affiliates that operate in our key regions around the
world. After satisfying their cash needs, these subsidiaries have traditionally declared dividends to their stockholders, including us. In 2014, we received dividend payments of NIS 764 million from public subsidiaries and affiliates.

The ability of our subsidiaries in general, and our public subsidiaries in particular, to pay dividends and interest or make other
distributions on equity to us, is subject to limitations that could change or become more stringent in the future. Applicable laws of the respective jurisdictions governing each subsidiary may place limitations on payments of dividends, interest or
other distributions by each of our subsidiaries or may subject them to withholding taxes. The determination to pay a dividend is made by the boards of directors of each entity and our nominees or persons otherwise affiliated with us represent less
than a majority of the members of the boards of directors of each of these entities. In addition, our subsidiaries incur debt on their own behalf and the instruments governing such debt may restrict their ability to pay dividends or make other
distributions to us. Creditors of our subsidiaries will be entitled to payment from the assets of those subsidiaries before those assets can be distributed to us. The inability of our operating subsidiaries to make distributions to us could have a
material adverse effect on our business, financial condition and results of operations.

The control that we exert over our public
subsidiaries may be subject to legal and other limitations, and a decision by us to exert that control may adversely impact perceptions of investors in those subsidiaries.

Although we have a controlling interest in each of our public subsidiaries, Equity One, First Capital, Citycon, Dori Group, and, as of
January 22, 2015, Atrium, they are publicly traded companies in which significant portions of the shares are held by public shareholders. These entities are subject to legal or regulatory requirements that are typical for public companies and
we may be unable to take certain courses of action without the prior approval of a particular shareholder or a specified percentage of shareholders (either under shareholders agreements or by operation of law or the rules of a stock exchange).
The existence of minority interests in certain of our subsidiaries may limit our ability to influence the operations of these subsidiaries, to increase our equity interests in these subsidiaries, to combine similar operations, to utilize synergies
that may exist between the operations of different subsidiaries or to reorganize our structure in ways that may be beneficial to us. Under certain circumstances, the boards of directors of those entities may decide to undertake actions that they
believe are beneficial to the shareholders of the subsidiary, but that are not necessarily in the best interests of Gazit-Globe. In addition, in the event that one of our subsidiaries or affiliates issues additional shares either for purposes of
capital raising or in an acquisition, our holdings in such subsidiary or affiliate may be diluted or we may be forced to invest capital in such subsidiary to avoid dilution at a time that is not of our choosing and that adversely impacts our capital
requirements.

The market price of our ordinary shares may be adversely affected if the market prices of our publicly traded
subsidiaries and affiliates decrease.

A significant portion of our assets is comprised of equity securities of publicly traded
companies, including Equity One, First Capital, Citycon and Atrium. The stock prices of these publicly traded companies have been volatile, and have been subject to fluctuations due to market conditions and other factors which are often unrelated to
operating results and which are beyond our control. Fluctuations in the market price and valuations of our holdings in these companies may affect the markets valuation of the price of our ordinary shares and may also thereby impact our results
of operations. If the value of our assets decreases significantly as a result of a decrease in the value of our interest in our publicly traded subsidiaries, our business, operating results and financial condition may be materially and adversely
affected and the market price of our ordinary shares may also decline.

Changes in our ownership levels of our public subsidiaries
and related determinations may impact the presentation of our financial statements and affect investor perception of us.

The
determination under IFRS as to whether we consolidate the assets, liabilities and results of operations of our public subsidiaries depends on whether we have legal or effective control over these subsidiaries. As of December 31, 2014, as
required by IFRS, we determined that we had effective control over Citycon, Equity One and First Capital even though we had less than a majority ownership interest and/or potential voting rights interest in each entity. In January 2015, we acquired
an additional stake in Atrium, and in accordance with accepted accounting principles, became its sole controlling shareholder such that commencing from its financial statements for the first quarter of 2015, we will consolidate Atriums
financial statements into our own financial statements. In the future, our public subsidiaries may undertake securities offerings or issue securities in connection with acquisitions which result in dilution of our ownership interest. To date, we
have frequently participated in securities offerings by our subsidiaries with the result that our ownership interest has generally not been diluted or the dilution has not been significant; however, there can be no assurance that we will do so in
the future. Furthermore, we may determine that it is in our best interests and the best interests of our public subsidiaries that they undertake an acquisition that results in dilution to our equity position. In the future, if we do not exercise
effective control over a particular subsidiary, we will need to account for our investment in that subsidiary on an equity basis rather than on a consolidated basis. If a change in the level of control which impacts whether and how we consolidate
our public subsidiaries occurs, such an event may affect investor perception of us and our business model even if there is no material economic impact on our company.



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Changes in accounting standards may adversely impact our financial condition and results of
operations.

New accounting standards or pronouncements that may become applicable to us from time to time, or changes in the
interpretation of existing standards and pronouncements, could have a significant adverse effect on our reported results for the affected periods.

It would have an adverse effect on our results of operations and our shareholders if we become subject to regulation under the U.S.
Investment Company Act of 1940.

We do not expect to be subject to regulation under the U.S. Investment Company Act of 1940, or the
Investment Company Act, because we are not engaged in the business of investing or trading in securities. In the event we engage in business combinations which result in our holding passive investment interests in a number of entities, we could be
subject to regulation under the Investment Company Act. In this event, we would be required to register as an investment company and become obligated to comply with a variety of substantive requirements under the Investment Company Act, including
limitations on capital structure, restrictions on specified investments, and compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly increase our operating expenses, which may make
it impractical, if not impossible, for us to continue our business as currently conducted. Furthermore, as a non-U.S. entity, we would be unable to register as an investment company under the Investment Company Act, which could result in us needing
to reincorporate as a U.S. entity or cease being a public company in the United States. As a result of these restrictions, any determination that we are an investment company would have material adverse consequences for our investors.

Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on the financial
condition of co-venturers and disputes between us and our co-venturers.

We enter into joint ventures, partnerships and other
co-ownership arrangements for the purpose of making investments, which currently include Equity Ones joint ventures with Liberty International Holdings Limited (LIH), Global Retail Investors LLC (GRI), DRA Advisors,
LLC, and the New York Common Retirement Fund, First Capitals joint venture with Main and Main Developments LP, Citycons joint venture with the Canada Pension Plan Investment Board (CPPIB) in the Kista Galleria Shopping Center
located in Stockholm, Sweden, and the subsequent governance agreement between Gazit-Globe itself and CPPIB with respect to their respective stakes in Citycon in 2014. For more information on the latter, please see Item 4Information on
the CompanyHistory and Development of the Company. Under the agreements with respect to certain of our joint ventures, we may not be in a position to exercise sole decision-making authority regarding the joint venture. Co-venturers may
have economic or other business interests or goals which are inconsistent with our business interests or goals, and may be in a position to take actions contrary to our policies or objectives. Such investments may also have the potential risk of
impasses on decisions, such as a sale, because neither we nor the co-venturer would have full control over the joint venture. Investments in joint ventures may, under certain circumstances, involve risks not present were a third party not involved,
including the possibility that partners or co-venturers might become bankrupt or fail to fund their required capital contributions. While we have not experienced any material disputes in the past, disputes between us and co-venturers may result in
litigation or arbitration that would increase our expenses and prevent our officers and/or directors from focusing their time and effort on our business. Consequently, actions by or disputes with co-venturers might result in subjecting properties
owned by the joint venture to additional risk. In addition, we may in certain circumstances be liable for the actions of our co-venturers.

Proposed changes to enhance Israeli corporate governance laws may adversely affect our ability to expand our business and raise capital.

In December 2013, the law for the promoting competition and the reducing concentration was enacted by the Israeli Knesset (the
Concentration Law). The Concentration Law imposes limitations, in addition to other restrictions, on what it deems pyramidal structures, namely a corporate structure where control in a public company is held through a chain
of more than one other public company.

The Concentration Law imposes a two-layer limitation on the total number of public companies in
pyramidal structure. Under its provisions, the Company is considered a second layer company (as it is controlled by Norstar, which is itself a public Company), the Companys subsidiary, U. Dori Group Ltd., is considered a
third layer company and the latters subsidiary, U. Dori Construction Ltd., is considered a fourth layer company. Therefore, by the end of a transition period (four years for a fourth layer company and six years for a
third layer company), we must make structural adjustments to comply with the Concentration Law since Gazit Globe, as a second layer company, will no longer be permitted to control another public company in Israel. In addition, during the transition
period, the Concentration Law strengthens corporate governance rules applicable to both U. Dori Group Ltd. and to U. Dori Construction Ltd. as third and fourth layer companies, respectively, regarding the required proportion of external directors
and/or independent directors out of their total board membership, while also precluding parent companies from participating in the election of external directors. If the Company fails to implement the aforementioned provisions of the Concentration
Law during the transition period, it will be exposed to sanctions, including the appointment of a trustee for the sale of its controlling interest in U. Dori Group Ltd. and\or the sale of the latters controlling interest in U. Dori
Construction. For further information, please see Note 2A to our audited consolidated financial statements included elsewhere in this Annual report.



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The Concentration Law authorizes the Israeli Minister of Finance establish limits with respect to
the aggregate credit that may be provided by financial institutions to a specific corporation or a business group (defined to include an ultimate controlling shareholder and the companies under its control). Such limitations, if ultimately
established, might limit our ability to refinance our debt from financial institutions.

In addition, the Concentration Law imposes
limitations on the holdings by non-finance companies in the financial sector and similar limitations on financial institutions with holdings in non-financial sectors. Such limitations restrict the ability of financial institutions or their
controlling shareholders to invest in the Company, or, in turn, restricts the ability of the Company to invest in such financial institutions.

Risks
Related to Investment in our Ordinary Shares

The price of our ordinary shares may be volatile.

The market price of our ordinary shares could be highly volatile and may fluctuate substantially as a result of many factors, including:



| |  |  | actual or anticipated fluctuations in our results of operations;
| | - |  | ----------------------------------------------------------------



| |  |  | variance in our financial performance from the expectations of market analysts;
| | - |  | -------------------------------------------------------------------------------



| |  |  | announcements by us or our competitors of significant business developments, changes in tenant relationships, acquisitions or expansion plans;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our involvement in litigation or regulatory proceedings;
| | - |  | --------------------------------------------------------



| |  |  | our sale of ordinary shares or other securities in the future;
| | - |  | --------------------------------------------------------------



| |  |  | market conditions in our industry and changes in estimates of the future size and growth rate of our markets;
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | changes in key personnel;
| | - |  | -------------------------



| |  |  | the trading volume of our ordinary shares; and
| | - |  | ----------------------------------------------



| |  |  | general economic and market conditions.
| | - |  | ---------------------------------------

Although our ordinary shares are listed on the
Tel-Aviv Stock Exchange (TASE), the New York Stock Exchange (NYSE) and the Toronto Stock Exchange (TSX), an active trading market on the NYSE and the TSX for our ordinary shares may not be sustained. If an active
market for our ordinary shares is not sustained, it may be difficult to sell ordinary shares in the U.S. and Canada.

In addition, the
stock markets have experienced extreme price and volume fluctuations. Broad market and industry factors may materially harm the market price of our ordinary shares, regardless of our operating performance. In the past, following periods of
volatility in the market price of a companys securities, securities class action litigation has often been instituted against that company. If we were involved in any similar litigation we could incur substantial costs and our
managements attention and resources could be diverted.

Future sales of our ordinary shares could reduce the market price of
our ordinary shares.

If we or our shareholders sell substantial amounts of our ordinary shares, either on the TASE or on the NYSE
or the TSX, or if there is a public perception that these sales may occur in the future, the market price of our ordinary shares may decline.

Raising additional capital by issuing securities may cause dilution to existing shareholders.

In the future, we may increase our capital resources by additional offerings of equity securities. Because our decision to issue equity
securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, holders of our ordinary shares bear the risk of our
future offerings reducing the market price of our ordinary shares and diluting their shareholdings in us.

Although we have paid
dividends in the past, and we expect to pay dividends in the future in accordance with our dividend policy, our ability to pay dividends may be adversely affected by our performance, the ability of our subsidiaries and affiliates to efficiently
distribute cash to Gazit-Globe and, since we do not only use operating cash flows to pay our dividend, our ability to obtain financing.

In the past, our policy has been, subject to legal requirements, to distribute a quarterly dividend, the minimum amount of which we set before
each fiscal year. We intend to continue our policy of distributing a quarterly dividend. Any



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dividend will depend on our earnings, financial condition and other business and economic factors affecting us at the time as our board of directors may consider relevant. We may pay dividends in
any fiscal year only out of profits, as defined by the Israeli Companies Law, unless otherwise authorized by an Israeli court, and provided that the distribution is not reasonably expected to impair our ability to fulfill our outstanding
and expected obligations.

Our ability to pay dividends is also dependent on whether our subsidiaries and affiliates distribute dividends
to Gazit-Globe so that Gazit-Globe can have adequate cash for distribution to its shareholders and, since we do not only use operating cash flows to pay our dividend, on our ability to obtain financing. In the event that our subsidiaries or
affiliates are restricted from distributing dividends due to their earnings, financial condition or results of operations or they determine not to distribute dividends, including as a result of taxes that may be payable with respect to such
distribution, and in the event that our debt or equity financing is restricted or limited, we may not be able to pay any dividends or in the amounts otherwise anticipated. If we do not pay dividends or pay a smaller dividend, our ordinary shares may
be less valuable because a return on an investment will only occur if our stock price appreciates.

Our controlling shareholder has
the ability to take actions that may conflict with the interests of other holders of our shares.

Chaim Katzman, our chairman, and
certain members of his family own or control, including through private entities owned by them and trusts under which they are the beneficiaries, directly and indirectly, approximately 25.4% of Norstars, our controlling shareholder,
outstanding shares as of April 10, 2015. In addition, Dor J. Segal, our executive vice-chairman, holds 8.8% of the outstanding shares of Norstar and Erica Ottosson (Mr. Segals spouse) holds 5.8% of the outstanding shares of Norstar.
Norstar owned 50.2% of our outstanding ordinary shares as of April 10, 2015. First U.S. Financial, LLC, or FUF, holds 18.2% of the outstanding shares of Norstar. Mr. Katzman was granted an irrevocable proxy by FUF to vote, at his
discretion, the shares of Norstar held by FUF. FUF is owned by Mr. Katzman, including through private entities owned by Mr. Katzman and members of his family, both directly and indirectly (51.4%); Erica Ottosson (22.6%); and Martin Klein
(26%). In addition, Mr. Katzman was granted an irrevocable proxy by Erica Ottosson to vote her shares of FUF stock with respect to all matters at FUF shareholder meetings. On January 30, 2013, Mr. Katzman, together with related
parties, including FUF (collectively, the Katzman Group) and Mr. Segal, Ms. Ottosson, together with related parties (collectively, the Segal Group), entered into a shareholders agreement with respect to their
holdings in Norstar, which among other things and subject to certain conditions, required the Katzman Group to vote its voting securities in favor of two nominees to the Norstar board of directors designated by the Segal Group, and for the Segal
Group to vote its voting securities in favor of nominees designated by the Katzman Group. Accordingly, Mr. Katzman will be able to exercise control over the outcome of substantially all matters required to be submitted to our shareholders for
approval, including decisions relating to the election of our board of directors, except for those matters which require special majorities under Israeli law. In addition, Mr. Katzman may be able to exercise control over the outcome of any
proposed merger or consolidation of the Company. The aforementioned may discourage third parties from seeking to acquire control of us which may adversely affect the market price of our shares. Please see also Item 7Major Shareholders
and Related Party TransactionsMajor Shareholders.

Our ordinary shares are not included in any real estate index in the
United States, which may impact demand among investors and adversely impact our share price.

We do not currently qualify to be
included in the real estate indexes in which the securities of many U.S. REITs are included. This may preclude certain investors that traditionally invest in real estate companies from investing in our shares and may adversely impact demand from
other investors. This may adversely impact our share price and liquidity in the United States.

Risks Associated with our Ordinary Shares

Our ordinary shares are traded on more than one market and this may result in price variations.

Our ordinary shares have been traded on the TASE since January 1983, on the NYSE since December 2011, and on the TSX since October 2013.
Trading in our ordinary shares on these markets takes place in different currencies (U.S. dollars on the NYSE, NIS on the TASE, and Canadian dollars on the TSX), and at different times (resulting from different time zones, different trading days and
different public holidays in the United States, Israel, and Canada). The trading prices of our ordinary shares on these three markets may differ due to these and other factors. Any decrease in the price of our ordinary shares on the TASE could cause
a decrease in the trading price of our ordinary shares on the NYSE and/or the TSX and vice versa.



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As a foreign private issuer, we follow certain home country corporate governance practices
instead of applicable SEC and NYSE requirements, which may result in less protection than is accorded to shareholders under rules applicable to domestic issuers.

As a foreign private issuer, in reliance on Section 303A.11 of the NYSE Listed Company Manual, which permits a foreign private issuer to
follow the corporate governance practices of its home country, we are permitted to follow certain home country corporate governance practices instead of those otherwise required under the NYSE corporate governance standards for domestic issuers. We
currently follow the NYSE corporate governance standards for domestic issuers, except with respect to private placements to directors, officers or 5% shareholders, with respect to which we follow home country practice in Israel, under which we may
not be required to seek the approval of our shareholders for such private placements which would require shareholder approval under NYSE rules applicable to a U.S. company. We may in the future elect to follow home country practice in Israel with
regard to formation of compensation, nominating and corporate governance committees, separate executive sessions of independent directors and non-management directors and shareholder approval for establishment and material amendments of equity
compensation plans, transactions involving below market price issuances in private placements of more than 20% of outstanding shares, or issuances that result in a change in control. If we follow our home country governance practices on these
matters, we may not have a compensation, nominating or corporate governance committee, we may not have mandatory executive sessions of independent directors and non-management directors, and we may not seek approval of our shareholders for material
amendments of equity compensation plans and the share issuances described above. Accordingly, following our home country governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on the NYSE may provide
less protection than is accorded to investors under the NYSE corporate governance standards applicable to domestic issuers. In addition, we are not currently obligated to follow additional corporate governance practices promulgated by the TSX
provided that (i) no more than 25% of the trading volume in our common stock over any six-month period occurs on the TSX and (ii) another stock exchange is providing review of the action in question. Should TSX regulations change or were
we to exceed the aforementioned 25% threshold, we could become obligated to comply with TSX corporate governance requirements that also differ from those of the NYSE and from home country practice in Israel.

We are a SEC foreign issuer under Canadian securities regulations and are exempt from certain requirements of Canadian
securities laws.

Although we are a reporting issuer in Canada, we are a SEC foreign issuer within the meaning of
National Instrument 71-102 - Continuous Disclosure and Other Exemptions Relating to Foreign Issuers under Canadian securities law statutes and are therefore exempt from certain Canadian securities laws
relating to continuous disclosure obligations and proxy solicitation as long as we comply with certain reporting requirements applicable in the United States, provided that the relevant documents filed with the SEC are filed in Canada and sent to
our shareholders in Canada to the extent and in the manner and within the time required by applicable U.S. requirements. Therefore, there may be less publicly available information in Canada about us than is regularly published by or about other
reporting issuers in Canada. In the event that we cease to be a SEC foreign issuer, we may have to comply with additional Canadian securities laws and reporting requirements.

We are incurring and may incur significant additional increased costs as a result of the registration of our ordinary shares under the
Securities Exchange Act of 1934 and the listing of our shares on the Toronto Stock Exchange and our management has been devoting and will be required to devote substantial time to compliance and new compliance initiatives.

As a public company in the United States and Canada, we are incurring and will continue to incur additional significant accounting, legal and
other expenses that we did not incur before our U.S. offering and TSX listing. We are also incurring costs associated with the requirements under Section 404 and other provisions of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act.
Similarly, while National Instrument 52-109 - Certification of Disclosure in Issuers Annual and Interim Filings under Canadian securities laws statutes permits us to satisfy the Canadian equivalent of the certification obligations under the
Sarbanes-Oxley Act on annual basis by simply re-filing as soon as practicable the same certifications in Canada as were originally filed with the SEC in the United States, we are also now obligated to file separate interim certifications in Canada
with our quarterly financial results. These rules and regulations may continue to increase our legal and financial compliance costs. In addition, becoming a public company in the United States and Canada has introduced new costs, such as additional
stock exchange listing fees and shareholder reporting and has, and will continue to take, a significant amount of managements time. In addition, we remain a publicly traded company on the TASE and are subject to Israeli securities laws and
disclosure requirements. Accordingly, we need to comply with U.S., Canadian, and Israeli disclosure requirements and the resolution of any conflicts between those requirements may lead to additional costs and require significant management time.

In addition, changing laws, regulations and standards relating to corporate governance and public disclosure and other matters, may be
implemented in the future, which may increase our legal and financial compliance costs, make some activities more time consuming and divert managements time and attention from revenue-generating activities to compliance activities. If our
efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and our
business may be harmed. Being a publicly traded company in North America and being subject to these rules and regulations has made it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced
coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee, and qualified
executive officers.



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A substantial number of the shares held by our majority shareholder, Norstar Holdings Inc.,
are pledged to secure its indebtedness and foreclosure on such pledges, or other negative developments with respect to Norstar Holdings Inc., could adversely impact the market price of our ordinary shares.

Our majority shareholder, Norstar, had voting power over 50.2% of our outstanding shares as of April 10, 2015. Norstar is a public company
listed on the TASE. As substantial number of our shares held by Norstar are pledged predominantly to a number of financial institutions who are lenders to Norstar and are otherwise pledged to secure a small portion of Norstars debentures.
Based on Norstars most recent publicly filed reports in Israel, Norstar was in compliance as of December 31, 2014 with all of the covenants governing such indebtedness, including the requirement that the value of the pledged shares
exceeds a certain percentage of the amount of outstanding indebtedness (loan to value ratios). In addition, Norstar may otherwise breach applicable covenants or default on required payments. Under those circumstances, if the secured
parties foreclose on the pledge, they may acquire and seek to sell the pledged shares. The secured parties will not be subject to any restrictions other than those that apply under applicable U.S. and Israeli securities laws, and there can be no
assurance that they would do so in an orderly manner. Furthermore, the mere foreclosure on the pledge and transfer of shares to such financial institutions would likely be perceived adversely by investors. In the event that the secured parties do
not transfer the shares immediately, their interests may differ from those of our public stockholders. In addition, should Norstar incur significant losses, it may choose to sell outstanding shares of ours and/or no longer be able to acquire
additional shares. Any of these events could adversely impact the market price of our ordinary shares.

Our United States
shareholders may suffer adverse tax consequences if we are characterized as a passive foreign investment company.

Generally, if for any taxable year 75% or more of our gross income is passive income, or at least 50% of our assets are held for the production
of, or produce, passive income, we would be characterized as a passive foreign investment company for United States federal income tax purposes. To determine whether at least 50% of our assets are held for the production of, or produce, passive
income, we may use the market capitalization method for certain periods. Under the market capitalization method, the total asset value of a company would be considered to equal the fair market value of its outstanding shares plus outstanding
indebtedness on a relevant testing date. Because the market price of our ordinary shares may fluctuate and may affect the determination of whether we will be considered a passive foreign investment company, there can be no assurance that we will not
be considered a passive foreign investment company for any taxable year. If we are characterized as a passive foreign investment company, our United States shareholders may suffer adverse tax consequences, including having gains realized on the sale
of our ordinary shares treated as ordinary income, rather than capital gain, the loss of the preferential rate applicable to dividends received on our ordinary shares by individuals who are United States holders, and having interest charges apply to
distributions by us and the proceeds of share sales.

Our United States shareholders may suffer adverse tax consequences if we are
characterized as a United States-owned foreign corporation unless such United States shareholders are eligible for the benefits of the U.S.-Israel income tax treaty and elect to apply the provisions of such treaty for U.S. tax
purposes.

Subject to certain exceptions, a portion of our dividends will be treated as U.S. source income for United States
foreign tax credit purposes, in proportion to our U.S. source earnings and profits, if we are treated as a United States-owned foreign corporation for United States federal income tax purposes. Generally, we will be treated as a United States-owned
foreign corporation if United States persons own, directly or indirectly, 50% or more of the voting power or value of our shares. To the extent any portion of our dividends is treated as U.S. source income pursuant to this rule, the ability of our
United States shareholders to claim a foreign tax credit for any Israeli withholding taxes payable in respect of our dividends may be limited. We do not expect to maintain calculations of our earnings and profits under United States federal income
tax principles and, therefore, if we are subject to the resourcing rule described above, United States shareholders should expect that the entire amount of our dividends will be treated as U.S. source income for United States foreign tax credit
purposes. Importantly, however, United States shareholders who qualify for benefits of the U.S.-Israel income tax treaty may elect to treat any dividend income otherwise subject to the sourcing rule described above as foreign source income, though
such income will be treated as a separate class of income subject to its own foreign tax credit limitations. The rules relating to the determination of the foreign tax credit are complex, and investors should consult their tax advisor to determine
whether and to what extent they will be entitled to this credit, including the impact of, and any exception available to, the special sourcing rule described in this paragraph, and the availability and impact of the U.S.-Israel income tax treaty
election described above.



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Risks Related to Our Operations in Israel

We conduct our operations in Israel and therefore our business, financial condition and results of operations may be adversely affected
by political, economic and military instability in Israel.

Our headquarters are located in central Israel and many of our key
employees and officers and most of our directors are residents of Israel. Accordingly, political, economic and military conditions in Israel directly affect our business. Since the State of Israel was established in 1948, a number of armed conflicts
have occurred between Israel and its Arab neighbors. Although Israel has entered into various agreements with Egypt, Jordan and the Palestinian Authority, there have been continuous periods of unrest, strategic threats, and terrorist activity in the
Middle East directly impacting Israel. Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our business, financial condition and results of operations.

For example, any major escalation in hostilities in the region could result in a portion of our employees, including executive officers,
directors, and key personnel, being called up to perform military duty for an extended period of time or otherwise disrupt our normal operations. In response to increases in terrorist activity, there have been periods of significant call-ups of
military reservists. Our operations could be disrupted by the absence of a significant number of our employees or of one or more of our key employees. Such disruption could materially adversely affect our business, financial condition and results of
operations. Our commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East, such as damages to our facilities resulting in disruption of our operations. Although the
Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot guaranty that this government coverage will be maintained or will be adequate in the event we submit a
claim.

Provisions of Israeli law and our articles of association may delay, prevent or otherwise impede a merger with, or an
acquisition of, our company, which could prevent a change of control, even when the terms of such a transaction are favorable to us and our shareholders.

Israeli corporate law regulates mergers, requires that acquisitions of shares above specified thresholds be conducted through special tender
offers, requires special approvals for transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. Israeli tax considerations may also make potential
transactions unappealing to us or to our shareholders whose country of residence does not have a tax treaty with Israel exempting such shareholders from Israeli tax or who are not exempt under the provisions of the Israeli Income Tax Ordinance from
Israeli capital gains tax on the sale of our shares. For example, Israeli tax law does not recognize tax-free share exchanges to the same extent as U.S. tax law. Our articles of association provide that our board of directors is divided into three
classes and one-third of the directors (other than the external directors) are elected by our shareholders for a term of three years each and shall replace the members of the class of directors whose term ended in such year. In addition, approval of
amendments to the articles of association requires the approval of 60% of the ordinary shares represented at the general meeting, by person or by proxy, and voting on the resolution. These provisions of Israeli law and our articles of association
could have the effect of delaying or preventing a change in control and may make it more difficult for a third party to acquire us, even if doing so would be beneficial to our shareholders, and may limit the price that investors may be willing to
pay in the future for our ordinary shares.

It may be difficult to enforce a U.S. judgment against us, our officers and directors
and the Israeli experts named in this annual report in Israel or the United States, or to assert U.S. securities laws claims in Israel or serve process on our officers and directors and these experts.

We are incorporated in Israel. Most of our executive officers and directors are not residents of the United States. Our independent registered
public accounting firm is not a resident of the United States. The majority of our assets and the assets of these persons are located outside the United States. Therefore, it may be difficult for an investor, or any other person or entity, to
enforce a U.S. court judgment based upon the civil liability provisions of the U.S. federal securities laws against us or any of these persons in a U.S. or Israeli court, or to effect service of process upon these persons in the United States.
Additionally, it may be difficult for an investor, or any other person or entity, to assert U.S. securities law claims in original actions instituted in Israel. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws
on the grounds that Israel is not the most appropriate forum in which to bring such a claim. Even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be
applicable, the content of applicable U.S. law must be proved as a fact which can be a time-consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the
matters described above.

Shareholder responsibilities and rights will be governed by Israeli law which differs in some respects
from the rights and responsibilities of shareholders of U.S. companies.

Since we are incorporated under Israeli law, the rights
and responsibilities of our shareholders are governed by our articles of association and Israeli law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders in typical U.S. corporations. In
particular, a shareholder of an Israeli company has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards the company and



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other shareholders and to refrain from abusing its power in the company, including, in voting at the general meeting of shareholders on certain matters, such as an amendment to the companys
articles of association, an increase of the companys authorized share capital, a merger of the company and approval of related party transactions that require shareholder approval. In addition, a controlling shareholder or a shareholder who
knows that it possesses the power to determine the outcome of a shareholders vote or to appoint or prevent the appointment of an office holder in the company or has another power with respect to the company, has a duty to act in fairness
towards the company. However, Israeli law does not define the substance of this duty of fairness. Because Israeli corporate law underwent extensive revisions approximately fifteen years ago, the parameters and implications of the provisions that
govern shareholder conduct have not been clearly determined and there is limited case law available to assist us in understanding the implications of these provisions that govern shareholders actions. These provisions may be interpreted to
impose additional obligations and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.



|ITEM 4. | INFORMATION ON THE COMPANY
|------- | --------------------------

A. History and Development of the Company

Gazit-Globe Ltd. was incorporated in Israel in May 1982. The Company is a limited liability corporation, and it operates under the Israeli
Companies Law 5759-1999. We believe we are one of the largest owners and operators of supermarket-anchored shopping centers in the world. Our 524 properties have a gross leasable area, or GLA, of approximately 68 million square feet and are
geographically diversified across over 20 countries, including the United States, Canada, Finland, Sweden, Poland, the Czech Republic, Israel, Germany and Brazil. We acquire, develop and redevelop well-located, supermarket-anchored neighborhood and
community shopping centers in urban growth markets with high barriers to entry and attractive demographic trends. Our properties are typically located in countries characterized by stable GDP growth, political and economic stability and strong
credit ratings.

We issued our first prospectus on the Tel-Aviv Stock Exchange in January 1983. Our ordinary shares are currently listed
on the Tel-Aviv Stock Exchange under the symbol GZT. In December 2011, we completed our initial offering on the New York Stock Exchange where are ordinary shares are also currently listed under the symbol GZT. In October
2013, we listed our ordinary shares on the Toronto Stock Exchange also under the symbol GZT. Our principal executive offices are located at 1 Hashalom Rd., Tel-Aviv 67892, Israel, and our telephone number is +972 3 694-8000. Our agent of
service in the United States is Gazit Group USA, Inc., 1696 NE Miami Gardens Drive, North Miami Beach, FL 33179, USA whose telephone number is (305) 947-8800.

In May 2014, Citycon announced its was undertaking a directed issuance to a wholly-owned subsidiary of the Canada Pension Plan Investment
Board (CPPIB) for approximately Euro 206.4 million and that upon the completion of the directed issuance, Citycon would undertake a rights offering to existing shareholders. The latter was completed in July 2014 and Citycon raised
an additional Euro 196.5 million (before transaction costs) of which Euro 87.6 million (NIS 411 million) came from Gazit-Globes participation. As part of the transactions, Gazit-Globe and the subsidiary of CPPIB entered into a
governance agreement that, among other things, committed each of the parties to certain agreements with respect to the election of directors at shareholders meetings, includes a tag-along right for the subsidiary of CPPIB in the event of a sale of a
certain number of shares by Gazit-Globe, and obligates both parties to work towards the application of best corporate governance practices at Citycon.

In September 2014, Gazit-Globe issued 2.4 million shares in a private placement at a price of US$ 13.25 per share, for an aggregate
of U.S.$ 31.8 million (NIS 118 million), of which 1.7 million shares were issued to a third-party institutional investor and 0.7 million shares were issued to Norstar. In addition, Gazit-Globe issued 4.8 million warrants at an
exercise price of US$ 13.00 per share, of which 3.4 million warrants were issued to the third-party institutional investor and 1.4 million warrants were issued to Norstar. The exercise period for the warrants was through
December 29, 2014 but they expired without exercise.

That same month, we participated in: (i) a public equity offering of First
Capital, pursuant to which the latter issued approximately C$ 100 million (NIS 323 million) and in which we acquired 883,000 shares in the offering for total consideration of approximately C$ 16.8 million (NIS 55 million); and (ii) a
private placement concurrent with a public offering by Equity One in which it raised approximately U.S.$ 88.9 million (NIS 257 million), in which we separately purchased an additional 675,000 shares for approximately U.S.$ 15.7 million
(NIS 58 million).

In March 2015, we participated in an additional private placement by Equity One concurrent with a public equity
offering in which the latter raised approximately U.S.$ 105 million in which we separately purchased an additional 600,000 Equity One shares for a total consideration of approximately $16.2 million (NIS 63 million).



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During the second quarter of 2014, Dori Construction discovered a material deviation in its
estimates of anticipated revenues and costs of its projects. In addition to causing Dori Construction to restate its financial statements, it also indicated that the latter suffered from a deficiency in its shareholders equity. As a result,
the Company approved an investment framework to strengthen the capital structure of Dori Group and Dori Construction. The framework included: (i) a capital injection in the amount of NIS 130 million by means of a private placement by Dori
Group to Gazit Development; (ii) an offer from Gazit Development to assign to Dori Group all the rights and obligations under the credit lines which Gazit Development granted to Dori Construction between February 2014 and June 2014, in the
total amount of NIS 250 million, in return for the issuance of a perpetual capital note by Dori Group to Gazit Development, in the par value amount of NIS 250 million; (iii) Dori Group undertook to Dori Construction that one half of the
assigned credit lines would be convertible into shares of Dori Construction; (iv) Gazit Development undertook to grant to Dori Group a loan in the amount of NIS 70 subject to certain conditions that Gazit Development had the right to waive; and
(v) Dori Group undertook to use the funds obtained from the aforementioned steps to strengthen the capital structure, liquidity and cash flow of Dori Construction, including through the provision of liquidity for its ongoing needs.

In November 2014, the Company granted an additional credit facility to Gazit Development for NIS 50 million, which was in turn used by
the latter to grant a loan to Dori Group for Dori Constructions current operations. As of the first quarter of 2015, the entire NIS 50 million credit facility was utilized. In March 2015, the Company approved a NIS 90 million
increase in the aforementioned credit facility to an aggregate amount of NIS 140 million. For further information, please see Note 9(g) and Note 9(h) to our audited consolidated financial statements included elsewhere in this Annual Report.

In addition, on March 12, 2015, the Company and Ronen Ashkenazi Holdings Ltd., the other shareholder of Gazit Development, entered into
an engagement letter with Citigroup Global Markets Limited, to explore: (i) different strategic alternatives regarding the operations of Gazit Developments income-producing properties and land for development or (ii) the holdings of
the Company and Ronen Ashkenazi Holdings Ltd. in Gazit Development. It should be noted that there is no certainty that any transaction will be undertaken nor is there any certainty regarding the terms of such potential transaction.

On January 22, 2015, Gazit-Globe entered into an agreement to purchase 52,069,622 ordinary shares of Atrium from an entity forming part
of a consortium managed by CPI CEE Management LLC (CPI), at a price of EUR 4.40 per share, for a total consideration of approximately EUR 229 million in an off-market transaction. Upon closing of the acquisition, Gazit-Globe
(through wholly-owned subsidiaries) holds 206,681,551ordinary shares of Atrium, representing approximately 55% of Atriums issued share capital and voting rights (54% on a fully diluted basis). In addition, pursuant to the transaction, the
Amended and Restated Cooperation and Voting Agreement between Gazit-Globe (through a wholly-owned subsidiary) and CPI was cancelled and the rights conferred on CPI by virtue of the Amended and Restated Relationship agreement between the Gazit-Globe
(through a wholly-owned subsidiary), CPI and Atrium were terminated. As a result of the acquisition and in accordance with IFRS, Gazit-Globe became the sole controlling shareholder of Atrium and, commencing from its financial statements for the
first quarter of 2015, it will consolidate Atriums financial statements into its own financial statements.

As part of our continued
recycling of capital, during the course of 2014, we disposed of 12 and 3 assets owned by ProMed and Gazit Germany, respectively, to third parties for a total consideration of approximately US$ 405 million (NIS 1.4 billion) and EUR
92 million (NIS 437 million) before transaction costs, respectively. In Brazil, Gazit Brazil acquired an additional property, additional rights in an existing property, and one land parcel for aggregate consideration of approximately BRL
250 million (NIS 387 million). In the first quarter of 2015, ProMed sold an additional two assets for approximately US$ 28.5 million (NIS 111 million) and Gazit Brazil acquired an additional property for approximately BRL 200 million
(NIS 310 million).

Our capital expenditures consist of the acquisition, construction and development of investment property including
land for future development and amounted to NIS 3,349 million (U.S.$ 861 million) during 2014. For the breakdown of these amounts by operating segments, please see Note 39 to our audited consolidated financial statements included elsewhere in
this Annual Report.

We financed these expenditures primarily by equity and debt offerings, and by borrowing from financial institutions.
For further information regarding our methods of financing, please see Item 5Operating and Financial Review and ProspectsLiquidity and Capital ResourcesCash Flows. For further information on our equity and debt
offerings, please also see Note 9, Note 20, and Note 40 to our audited consolidated financial statements included elsewhere in this Annual Report. Please also note that on April 1, 2015, the Company completed a public offering of debentures
(series L) in Israel in which it raised an aggregate amount of approximately NIS 680 million.



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For a discussion of our principal capital expenditures and divestitures over the last three
financial years, please see Item 5Operating and Financial Review and ProspectsLiquidity and Capital ResourcesCash Flows, Note 9 (for interests in other companies), and Note 39 to our audited consolidated financial
statements included elsewhere in this Annual Report.

As of the date of this annual report, there have been no public takeover offers by
third parties in respect of our ordinary shares or by the Company in respect of other companies shares during the last and current financial year.

B. Business Overview

We believe we are
one of the largest owners and operators of supermarket-anchored shopping centers in the world, as noted above. We operate properties with a total value of approximately U.S.$ 20.6 billion or NIS 80.1 billion (including the full value of properties
that are consolidated and of equity-accounted jointly controlled entities, and the full inclusion of the value of properties managed by us, approximately U.S.$ 5.3 billion (NIS 20.6 billion) of which is not recorded in our financial statements) as
of December 31, 2014. We acquire, develop and redevelop well-located, supermarket-anchored neighborhood and community shopping centers in urban growth markets with high barriers to entry and attractive demographic trends. Our properties are
typically located in countries characterized by stable GDP growth, political and economic stability and strong credit ratings. As of December 31, 2014, over 95% of our occupied GLA was leased to retailers and the majority of our occupied GLA
was leased to tenants that provide consumers with daily necessities and other non-discretionary products and services, such as supermarkets, drugstores, discount retailers, moderately-priced restaurants, hair salons, liquor stores, banks, dental and
medical clinics and other retail spaces. Our shopping centers draw high levels of consumer traffic and have provided us with growing rental income and strong and sustainable cash flows through different economic cycles.

Additionally, historically we have owned and operated medical office buildings in North America through public and private subsidiaries, and
owned and operated our shopping centers in Brazil, Germany and Israel through private subsidiaries. Throughout 2014, we continued to acquire properties in Brazil while disposing medical office buildings in the United States and properties in
Germany. Our broad geographical footprint supports our growth strategy by giving us access to opportunities around the world, allowing us to raise capital in different markets, and reducing the risks typically inherent in operating within a narrower
geographic area. Our unique corporate structure enables us to share the investments in our assets with the public shareholders of our subsidiaries and affiliates, which enhances our ability to expand and diversify.

We operate by establishing a local presence in a country through the direct acquisition of either individual assets or operating businesses.
We either have built or seek to build a leading position in each market through a disciplined, proactive strategy using our significant experience and local market expertise. We execute this strategy by identifying and purchasing shopping centers
that are not always broadly marketed or are in need of redevelopment or repositioning, acquiring high quality, cash generating shopping centers, selectively developing supermarket-anchored shopping centers in growing areas and executing strategic
and opportunistic mergers and acquisitions. As a result, our real estate businesses range from new operations with a small number of properties to large, well-established public companies, representing a range of return and risk profiles. We
continue to leverage our expertise to grow and improve operations, maximize profitability, and create substantial value for all shareholders. By implementing this business model, we have grown our GLA from 3.6 million square feet as of
January 1, 2000 to approximately 68 million square feet as of December 31, 2014.

Our Competitive Strengths

Necessity-driven asset class

The substantial majority of our rental income is generated from shopping centers with supermarkets as their anchor tenants that drive
consistent traffic flow throughout various economic cycles. A critical element of our business strategy is to have market-leading supermarkets as our anchor tenants. During the global economic downturn in 2008 and 2009, our average occupancy rate
was 94.5% and 93.6%, respectively, and our average same property NOI, excluding foreign exchange fluctuations, increased by 3.1% from 2008 to 2009. From 2009 to 2010 it increased by 3.6%, 4.0% from 2010 to 2011, 3.9% from 2011 to 2012 and 3.4% from
2012 to 2013. In the year ended December 31, 2014, average same property NOI increased by an additional 1.7% from the year ended December 31, 2013. For further information, please see Item 5Operating and Financial Review and
ProspectsOperating ResultsResults of OperationsSame Property NOI. Our supermarket-anchored shopping centers are generally well-located in densely populated urban growth markets with high barriers to entry and attractive
demographic trends in countries that have stable GDP growth, political and economic stability and strong credit ratings. The high barriers to entry generally result from a scarcity of commercial land, the high cost of new development or limits on
the availability of shopping center properties imposed by local planning and zoning requirements. These prime locations attract high-quality tenants seeking long-term leases, which provide us with high occupancy rates, favorable rental rates and
stable cash flows.



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Diversified global real estate platform across over 20 countries

We focus our investments primarily on developed economies, including the United States, Canada, Finland, Sweden, Poland, the Czech Republic,
and Israel. As of December 31, 2014, our asset base included 524 properties totaling approximately 68 million square feet of GLA. Approximately 94% of our net operating income, or NOI, on a proportionate consolidation basis, for the year
ended December 31, 2014 was derived from properties in countries with investment grade credit ratings as assigned either by Moodys or Standard & Poors, and 70% of our NOI on a proportionate consolidation basis for the year
ended December 31, 2014, was derived from properties in countries with at least AA+ ratings as assigned by Standard & Poors. We believe that our geographic diversity provides Gazit-Globe with flexibility to allocate its capital
and improves our resilience to changes in economic conditions and the cyclicality of markets, enabling us to apply successful ideas and proven market strategies in multiple countries. Our global reach, together with our local management, enables us
to make accretive acquisitions to expand our asset base both in countries where we already own properties and in countries where we do not. For example, during the global economic downturn in 2008 and 2009, we used the opportunity to invest an
aggregate of approximately U.S.$ 3.8 billion to acquire, develop, and redevelop new shopping centers and other properties, to initially purchase interest in Atrium, to increase our holdings in our public subsidiaries and to repurchase our debt
securities at a significant discount to par value.

Proven business model implemented in multiple markets driving growth

The business model that we have developed and implemented over the last 20 years, whereby we own and operate our properties
through our public and private subsidiaries and affiliates, has driven substantial and consistent growth. We leverage our expertise to grow and improve the operations of our subsidiaries, maximize profitability, mitigate risk and create value for
all shareholders. We enter urban growth markets that are densely populated, with high barriers to entry, by acquiring and developing well-located, supermarket-anchored shopping centers. We continue to expand our business and drive growth while
optimizing our capital structure with respect to our assets. For example, in the United States, Equity One acquired its first property in 1992 and became a publicly-traded REIT listed on the New York Stock Exchange in 1998. We continued to expand
Equity Ones platform through internal growth and acquisitions. As of December 31, 2014, Equity One owned 123 properties (including a property under development) with a GLA of 16.2 million square feet. Similarly, our business in
Canada began in 1997 with the purchase of eight properties, followed by the acquisition of a controlling stake in First Capital, a Toronto Stock Exchange-listed company in 2000. We have since expanded to 158 properties (including properties under
development) in Canada with a GLA of 23.5 million square feet as of December 31, 2014. Following our successes in both the United States and Canada, we identified new and attractive regions and expanded by replicating this business model.
For example, we successfully applied our model in Northern Europe through Citycon and in Central and Eastern Europe through Atrium, resulting in improved performance of the shopping centers acquired in those regions.

Leading presence and local market knowledge

We have a leading presence in most of our markets, which helps us generate economies of scale and marketing and operational synergies that
drive profitability. Leveraging our leading market positions and our local management teams extensive knowledge of these markets gives us access to attractive acquisition, development and redevelopment opportunities while mitigating the risks
involved in these opportunities. In addition, our senior management provides our local management teams with strategic guidance to proactively manage our business, calibrated to the needs and requirements of each local management team. This approach
also allows us to address the needs of our regional and national tenants and to anticipate trends on a timely basis.

Business and Growth Strategies

Our objective is to create value through long-term maximization of cash flow and capital appreciation, while improving our properties
and increasing our dividends. The strategies we intend to execute to achieve this objective include:

Continue to focus on
supermarket-anchored shopping centers.

We will continue to concentrate on owning and operating high quality supermarket-anchored
neighborhood and community shopping centers and other necessity-driven real estate assets predominantly in densely-populated areas with high barriers to entry and attractive demographic trends in countries with stable GDP growth, political and
economic stability and strong credit ratings. By maintaining this focus, we will seek to keep the occupancy and NOI performance of our properties consistent through different economic cycles. We believe that this approach, combined with the
geographic diversity of our current properties and our conservative approach to risk, will provide growing long-term returns. We intend to continue to actively manage and grow our presence in each region in which we operate by increasing the size
and quality of our asset base. We will continue to operate through publicly and privately-held subsidiaries and affiliates in order to maximize our ability to access capital directly or through our subsidiaries and affiliates with respect to our
properties in particular countries and to diversify the markets in which we operate globally with lower capital investment levels.

Pursue high growth opportunities to complement our stable asset base.

We intend to continue to expand into new high growth urban markets and other high growth necessity-driven asset types that generate strong and
sustainable cash flow using our experience developed over the past 20 years in entering new markets, to continue to assess opportunities, including the establishment of new real estate businesses, the acquisition of



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real estate companies and properties, primarily supermarket-anchored shopping centers and also other necessity-driven assets. In particular, while we currently have no specific plans to expand
into new geographic markets, we will seek to prudently expand into politically and economically stable countries with compelling demographics through a thorough knowledge of local markets. For example, in 2007, we first established an office in
Brazil and began assessing local opportunities. In 2008, we acquired a 154,000 square foot shopping center in Sao Paulo for U.S.$ 31.3 million. In November 2010, we completed our first development project in Brazil. By February 2015, we had acquired
eight properties in Brazil (including a property under development and a land parcel). We will also seek opportunities in other necessity-driven asset classes in order to drive shareholder value across a range of necessity-driven assets.

We also may selectively recycle capital from time to time, including from our private subsidiaries. During 2014, ProMed in the United States
sold twelve properties for an aggregate U.S.$ 405 million (in comparison to no investments or divestments in 2013. In the first quarter of 2015, ProMed disposed of two additional properties for an aggregate U.S.$ 28.5 million. Similarly, Gazit
Germany also disposed of three properties during 2014 for an aggregate amount of EUR 92 million (in comparison to no investments or divestments in 2013 and in 2012).

Enhance the performance of existing assets.

We continually seek to enhance the performance of our existing assets by repositioning, expanding and redeveloping our existing properties. We
believe that improving our properties makes them more desirable for both our supermarket anchor tenants and our other tenants, and drives more consumers to our properties, increasing occupancy and our rental income. We continue to actively manage
our tenant mix and placement, re-leasing of space, rental rates and lease durations. We will focus on attracting more consumers to our properties by using advertising and promotions, building the branding of our shopping centers and providing a more
consumer-friendly experience, for example, by improving our tenants locations. We believe that the repositioning of our properties and our active management will improve our occupancy rates and rental income, lower our costs and increase our
cash flows.

Selectively develop new properties in strategic locations.

We intend to leverage our experience in all stages of the development and ownership of real estate to continue to selectively develop new
properties in our current markets and in new markets. We intend to continue our disciplined approach to development which is characterized by developing supermarket-anchored properties for specific anchor tenants in locations that we believe have
high barriers to entry, thereby significantly decreasing the risk associated with development of real estate. We analyze development prospects utilizing our local market expertise and familiarity with tenants. From January 1, 2012 through
December 31, 2014, we invested approximately NIS 5.3 billion (U.S.$ 1.4 billion) in development, redevelopment, and expansion projects as well as in other expenditures (including leasing expenditures, tenant inducements, tenant improvements,
and other capital expenditures), including approximately NIS 3.2 billion (U.S.$ 0.8 billion) in development and redevelopment projects (excluding attributed lease expenditures) representing yearly average investment of approximately U.S.$
137 per square foot.

Proactively optimize our property base and our allocation of capital.

Using the expertise of our local management, we carefully monitor and optimize our property base by taking advantage of opportunities to
purchase and sell properties. Proactive management of our property base allows us to use our resources prudently and recycle our capital when we determine that more accretive opportunities are available. We may determine to sell a property or group
of properties for a number of reasons, including a determination that we are unable to build critical mass in a particular market, our view that additional investment in a property would not be accretive or because we acquired non-core assets as
part of a larger purchase. We plan to continue to seek creative structures through which to enhance our property base or divest non-core properties and allocate our capital. During 2012 and 2013, our subsidiary Royal Senior Care sold off its assets
in addition to our sale of other lower-tier secondary-market assets. We recycled this capital to make new core acquisitions in high-density urban markets and deleverage our balance sheet. In 2014, we began a similar process of capital recycling
through the sale of assets of ProMed and Gazit Germany. We may also use joint ventures to enter into new markets where we are not established to access attractive opportunities with lower capital risk.

For a breakdown of the location and type of our properties, see Property, Plants and EquipmentOur Properties below.



32



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Properties under Development

We had 34 properties under development or redevelopment as of December 31, 2014. The following table summarizes our properties under
development, redevelopment and expansion as of December 31, 2014:



|                                    |  |                        |    |  |                                          |  |       |                                                            |  |  |                                     |  |  |  |         | 
|----------------------------------- |  | ---------------------- | -- |  | ---------------------------------------- |  | ----- | ---------------------------------------------------------- |  |  | ----------------------------------- |  |  |  | ------- | 
|Region                              |  | Number ofProperties(1) |    |  | Estimated TotalGLA (sq. ft. inthousands) |  |       | Totalinvestments as ofDecember 31,2014 (U.S.$ inthousands) |  |  | Cost to Complete(U.S.$ inthousands) | 
|Development                         |  |                        |    |  |                                          |  |       |                                                            |  |  |                                     |  |  |  |         | 
|United States                       |  |                        | 1  |  |                                          |  | 151   |                                                            |  |  | 57,084                              |  |  |  | 16,714  | 
|Canada                              |  |                        | 5  |  |                                          |  | 1,702 |                                                            |  |  | 329,648                             |  |  |  | 148,110 | 
|Northern Europe                     |  |                        | 1  |  |                                          |  | 129   |                                                            |  |  | 48,856                              |  |  |  | 19,028  | 
|Israel                              |  |                        | 2  |  |                                          |  | 140   |                                                            |  |  | 32,142                              |  |  |  | 16,714  | 
|Brazil                              |  |                        | 1  |  |                                          |  | 312   |                                                            |  |  | 46,284                              |  |  |  | 73,798  | 
|                                    |  |                        |    |  |                                          |  |       |                                                            |  |  |                                     |  |  |  |         | 
|Total Development                   |  |                        | 10 |  |                                          |  | 2,434 |                                                            |  |  | 514,014                             |  |  |  | 274,364 | 
|Redevelopment (2)                   |  |                        |    |  |                                          |  |       |                                                            |  |  |                                     |  |  |  |         | 
|United States                       |  |                        | 6  |  |                                          |  | 398   |                                                            |  |  | 45,513                              |  |  |  | 22,371  | 
|Canada                              |  |                        | 13 |  |                                          |  | 2,919 |                                                            |  |  | 993,572                             |  |  |  | 94,369  | 
|Northern Europe                     |  |                        | 3  |  |                                          |  | 452   |                                                            |  |  | 68,655                              |  |  |  | 187,709 | 
|Central and Eastern Europe (3)      |  |                        | 2  |  |                                          |  | 258   |                                                            |  |  | 43,456                              |  |  |  | 63,255  | 
|                                    |  |                        |    |  |                                          |  |       |                                                            |  |  |                                     |  |  |  |         | 
|Total Redevelopment                 |  |                        | 24 |  |                                          |  | 4,027 |                                                            |  |  | 1,151,196                           |  |  |  | 367,704 | 
|                                    |  |                        |    |  |                                          |  |       |                                                            |  |  |                                     |  |  |  |         | 
|Total Development and Redevelopment |  |                        | 34 |  |                                          |  | 6,461 |                                                            |  |  | 1,665,210                           |  |  |  | 642,068 | 
|                                    |  |                        |    |  |                                          |  |       |                                                            |  |  |                                     |  |  |  |         | 



|(1) | Excludes land for future development.
|--- | -------------------------------------

|(2) | Including properties under expansion.
|--- | -------------------------------------

|(3) | Through unconsolidated equity-accounted investee.
|--- | -------------------------------------------------

The following table summarizes the rental
income and NOI of our shopping center and healthcare properties for the years ended December 31, 2012, December 31, 2013, and December 31, 2014. For revenues from the sale of buildings, land, and construction work performed, and
for gross profit from the sale of buildings, land and construction work performed, see Item 5Operating and Financial Review and ProspectsOperating ResultsOther Business.



|                                                      |  |                                |        |                         |       |  |                        |   |       |      |        |   |       |  |      |      |       |  |        |   |       |  |        |   |       | 
|----------------------------------------------------- |  | ------------------------------ | ------ | ----------------------- | ----- |  | ---------------------- | - | ----- | ---- | ------ | - | ----- |  | ---- | ---- | ----- |  | ------ | - | ----- |  | ------ | - | ----- | 
|                                                      |  |                                |        | Year Ended December 31, |      
|                                                      |  |                                |        | 2012                    |       |  | 2013                   |   |       | 2014 |        |   | 2012  |  |      | 2013 |       |  | 2014   |  
|                                                      |  |                                |        | Rental Income           |       |  | NOI                    |  
|Property type                                         |  | Region                         |        | (NIS in thousands) (5)  |       |  | (NIS in thousands) (5) |  
|Shopping Centers                                      |  |                                |        |                         |       |  |                        |   |       |      |        |   |       |  |      |      |       |  |        |   |       |  |        |   |       | 
|                                                      |  | United States                  |        |                         | 1,261 |  |                        |   | 1,210 |      |        |   | 1,188 |  |      |      | 918   |  |        |   | 874   |  |        |   | 874   | 
|                                                      |  | Canada                         |        |                         | 2,237 |  |                        |   | 2,216 |      |        |   | 2,100 |  |      |      | 1,426 |  |        |   | 1,396 |  |        |   | 1,318 | 
|                                                      |  | Northern Europe(1)             |        |                         | 1,185 |  |                        |   | 1,406 |      |        |   | 1,366 |  |      |      | 803   |  |        |   | 964   |  |        |   | 948   | 
|                                                      |  | Central and Eastern Europe (2) |        |                         | 1,324 |  |                        |   | 1,345 |      |        |   | 1,373 |  |      |      | 898   |  |        |   | 915   |  |        |   | 968   | 
|                                                      |  | Germany                        |        |                         | 83    |  |                        |   | 81    |      |        |   | 75    |  |      |      | 56    |  |        |   | 53    |  |        |   | 47    | 
|                                                      |  | Israel (3)                     |        |                         | 202   |  |                        |   | 211   |      |        |   | 216   |  |      |      | 151   |  |        |   | 159   |  |        |   | 162   | 
|                                                      |  | Brazil                         |        |                         | 31    |  |                        |   | 34    |      |        |   | 40    |  |      |      | 16    |  |        |   | 18    |  |        |   | 30    | 
|Healthcare                                            |  |                                |        |                         |       |  |                        |   |       |      |        |   |       |  |      |      |       |  |        |   |       |  |        |   |       | 
|                                                      |  | Medical office buildings (4)   |        |                         | 248   |  |                        |   | 200   |      |        |   | 128   |  |      |      | 173   |  |        |   | 147   |  |        |   | 94    | 
|Other Properties                                      |  |                                |        |                         |       |  |                        |   |       |      |        |   |       |  |      |      |       |  |        |   |       |  |        |   |       | 
|                                                      |  | Other properties (6)           |        |                         | 131   |  |                        |   | 6     |      |        |   |      |  |      |      | 60    |  |        |   | 1     |  |        |   |      | 
|                                                      |  |                                |        |                         |       |  |                        |   |       |      |        |   |       |  |      |      |       |  |        |   |       |  |        |  
|Total                                                 |  |                                |        |                         | 6,702 |  |                        |   | 6,709 |      |        |   | 6,486 |  |      |      | 4,501 |  |        |   | 4,527 |  |        |   | 4,441 | 
|Adjustment to Exclude Non-Consolidated Properties (7) |  |                                | (1,453 | )                       |       |  | (1,563                 | ) |       |      | (1,573 | ) |       |  | (957 | )    |       |  | (1,070 | ) |       |  | (1,112 | )
|                                                      |  |                                |        |                         |       |  |                        |   |       |      |        |   |       |  |      |      |       |  |        |   |       |  |        |  
|Total Consolidated Properties                         |  |                                |        |                         | 5,249 |  |                        |   | 5,146 |      |        |   | 4,913 |  |      |      | 3,544 |  |        |   | 3,457 |  |        |   | 3,329 | 
|                                                      |  |                                |        |                         |       |  |                        |   |       |      |        |   |       |  |      |      |       |  |        |   |       |  |        |   |       | 



|(1) | Starting from 2013, includes rental income and NOI of Kista Galleria which was purchased with a 50% partner and accounted according to the equity method.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | We operate in Central and Eastern Europe through a jointly-controlled company (Atrium) which is presented in the financial statements according to the equity method. For further information, please also refer also to
Note 9(c) to our audited consolidated financial statements included elsewhere in this Annual Report.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Includes a shopping center in Bulgaria, which is owned by and operated through Gazit Development, a private subsidiary.
|--- | -----------------------------------------------------------------------------------------------------------------------



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|(4) | Our medical office buildings are located in the United States through ProMed and in Canada through Gazit America until August 2012.
|--- | -----------------------------------------------------------------------------------------------------------------------------------

|(5) | Convenience translation of December 31, 2014 figures into U.S. dollars is provided in chart under Properties, Plants, and EquipmentOur Properties below.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | In 2012, Rental income and NOI represent mainly the senior housing facilities activity that was sold mainly during 2012.
|--- | ------------------------------------------------------------------------------------------------------------------------

|(7) | Primarily with respect to properties in Central and Eastern Europe and through 2012 also senior housing facilities, which are held through equity-accounted investees and presented above at 100% under the assumption of
full consolidation. Starting from 2013, the above also includes Kista Galleria which was purchased with a 50% partner and is also accounted for with the equity method.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our Tenants and Leases

We have strong
relationships with a diverse group of market-leading tenants in the regions in which we operate. For the year ended December 31, 2014, our top three tenants (by base rent) represented 10.9% of our consolidated rental income. Our properties are
subject to over 14,000 leases.

The following table sets forth as of December 31, 2014 the anticipated expirations of tenant leases
for our properties for each year from 2015 through 2023 and thereafter(1):



|               |  |                         |        |  |                                           |  |        |                      |  |  |                     |   |  |                                          |       |   |                              |  |           |  |  |  |       |  
|-------------- |  | ----------------------- | ------ |  | ----------------------------------------- |  | ------ | -------------------- |  |  | ------------------- | - |  | ---------------------------------------- | ----- | - | ---------------------------- |  | --------- |  |  |  | ----- | -
|               |  | Number ofExpiringLeases |        |  | GLA ofExpiringLeases(thousands ofsq. ft.) |  |        | Percent ofLeased GLA |  |  | Percent ofTotal GLA |   |  | ExpiringRental Income(U.S.$ inthousands) |       |   | Percent ofTotal RentalIncome | 
|Month-to-Month |  |                         | 469    |  |                                           |  | 604    |                      |  |  | 0.9                 | % |  |                                          | 0.9   | % |                              |  | 12,425    |  |  |  | 0.8   | %
|2015           |  |                         | 3,729  |  |                                           |  | 8,449  |                      |  |  | 13.1                | % |  |                                          | 12.6  | % |                              |  | 216,579   |  |  |  | 13.5  | %
|2016           |  |                         | 2,054  |  |                                           |  | 7,136  |                      |  |  | 11.1                | % |  |                                          | 10.6  | % |                              |  | 185,906   |  |  |  | 11.6  | %
|2017           |  |                         | 2,065  |  |                                           |  | 7,954  |                      |  |  | 12.3                | % |  |                                          | 11.8  | % |                              |  | 207,471   |  |  |  | 13.0  | %
|2018           |  |                         | 1,750  |  |                                           |  | 7,464  |                      |  |  | 11.6                | % |  |                                          | 11.1  | % |                              |  | 199,114   |  |  |  | 12.4  | %
|2019           |  |                         | 1,520  |  |                                           |  | 7,379  |                      |  |  | 11.4                | % |  |                                          | 11.0  | % |                              |  | 191,672   |  |  |  | 12.0  | %
|2020           |  |                         | 548    |  |                                           |  | 3,607  |                      |  |  | 5.6                 | % |  |                                          | 5.4   | % |                              |  | 91,234    |  |  |  | 5.7   | %
|2021           |  |                         | 406    |  |                                           |  | 3,168  |                      |  |  | 4.9                 | % |  |                                          | 4.7   | % |                              |  | 86,518    |  |  |  | 5.4   | %
|2022           |  |                         | 404    |  |                                           |  | 3,434  |                      |  |  | 5.3                 | % |  |                                          | 5.1   | % |                              |  | 92,033    |  |  |  | 5.7   | %
|2023           |  |                         | 326    |  |                                           |  | 3,105  |                      |  |  | 4.8                 | % |  |                                          | 4.6   | % |                              |  | 80,543    |  |  |  | 5.0   | %
|Thereafter     |  |                         | 1,173  |  |                                           |  | 12,266 |                      |  |  | 19.0                | % |  |                                          | 18.2  | % |                              |  | 237,401   |  |  |  | 14.9  | %
|Vacant         |  |                         | NA     |  |                                           |  | 2,751  |                      |  |  | NA                  |   |  |                                          | 4.0   | % |                              |  | NA        |  |  |  | NA    |  
|               |  |                         |        |  |                                           |  |        |                      |  |  |                     |   |  |                                          |       |   |                              |  |           |  |  |  |       |  
|Total          |  |                         | 14,444 |  |                                           |  | 67,317 |                      |  |  | 100.0               | % |  |                                          | 100.0 | % |                              |  | 1,600,896 |  |  |  | 100.0 | %
|               |  |                         |        |  |                                           |  |        |                      |  |  |                     |   |  |                                          |       |   |                              |  |           |  |  |  |       |  



|(1) | Excluding joint venture of Citycon that is accounted for according to the equity method with 1.0 million square feet.
|--- | ---------------------------------------------------------------------------------------------------------------------

We have 8.4 million, 7.1 million and 7.9 million square feet of GLA in our consolidated portfolio with leases expiring in 2015,
2016, and 2017, respectively. We expect to achieve moderate increases in average rent spreads in North America as we renew or re-lease these spaces while in Europe we do not anticipate any increases. In addition, we believe that the information
provided in Item 5Operating and Financial Review and ProspectsOperating ResultsShopping Centers. regarding the rental rates of renewed leases compared with the prior lease rental rates, provides certain indications of
the market rents across our markets.



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The following table provides a breakdown of the largest tenants of our principal investees by geographical
segment:



|                  |  |                                                                                                                                                                                                                                             |  |                                                                                                                                              
|----------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|Subsidiary        |  | Geographical Region                                                                                                                                                                                                                         |  | Anchor/Major Tenants                                                                                                                         
|Equity One        |  | United States Florida,
Georgia, Louisiana, North Carolina, California, Connecticut and the metropolitan areas of Boston, Massachusetts, New York City and Maryland                                                                          |  | Albertsons, Barneys New York, Bed Bath & Beyond, CVS Pharmacy, Food
Emporium, The Gap Inc., LA Fitness, Publix, Sports Authority, and TJ Maxx
|                  |  |                                                                                                                                                                                                                                            
|First Capital     |  | Canada Greater Toronto area
including the Golden Horseshoe area and London; the Calgary and Edmonton area; the Greater Vancouver area including Vancouver Island; the Greater Montreal area; the Ottawa and Gatineau region and Quebec City |  | Canadian Tire, CIBC, Dollarama, GoodLife Fitness, Loblaws, Metro, RBC
Royal Bank, Sobeys, TD Canada Trust and Walmart                       
|                  |  |                                                                                                                                                                                                                                            
|Citycon           |  | Northern Europe Finland,
Sweden, Denmark, and Estonia                                                                                                                                                                                       |  | ICA, H&M, Kesko Corp., S-Group, Stockmann                                                                                                    
|                  |  |                                                                                                                                                                                                                                            
|Atrium            |  | Central and Eastern Europe
Poland, the Czech Republic, Slovakia, Russia, Hungary, Romania and Latvia                                                                                                                                        |  | AFM, Ahold, ASPIAG, EMF, Hennes & Mauritz, Inditex, Kingfisher,
LPP, Metro Group, Tengelmann Group                                           
|                  |  |                                                                                                                                                                                                                                            
|Gazit Germany     |  | Germany                                                                                                                                                                                                                                     |  | Aldi, dm, Edeka, and HIT                                                                                                                     
|                  |  |                                                                                                                                                                                                                                            
|Gazit Development |  | Israel                                                                                                                                                                                                                                      |  | Cinema City, Homecenter, Mega, Supersol and Super-pharm                                                                                      
|                  |  |                                                                                                                                                                                                                                            
|Gazit Brazil      |  | Brazil Sao Paulo and Rio Grande
do Sul                                                                                                                                                                                                      |  | CBD (Pão de Açúcar), Cinepolis, Colombo, Lojas Americanas, Lojas Franca, Luigi Bertolli, Renner, Smartfit, Runner (gym)                      

Most of our shopping centers in the United States and Canada are located in suburban areas and have large
supermarkets or retailers as the anchor, with outdoor parking areas and many smaller shops that depend on the traffic generated by the anchor. They attract and cater to residents of an expanded or expanding population area. On the other hand, our
shopping centers in Europe, more typically in the Nordic region, and in Brazil are anchored by hypermarkets which combine the function of both grocery stores and retailers. They tend to be located in cities and are comprised of one or more buildings
forming a complex of retail-oriented shops with indoor parking garages. Consequently, our properties in the Nordics tend to have higher asset values and rental rates per square foot compared to our North American properties.

Medical Office Buildings

ProMed

Since 2006, we own and operate medical office buildings in the United States through our wholly-owned subsidiary, ProMed. During the
reporting period, ProMed sold to third parties 12 medical office buildings in consideration for U.S.$ 405 million (NIS 1.4 billion), and in 2015 it sold two other properties in consideration for U.S.$ 28.5 million (NIS 111 million). We
continue to pursue opportunities to maximize the value of ProMeds remaining properties.

As of December 31, 2014, ProMed had 4
income-producing properties (including the two assets subsequently sold in the first quarter of 2015), with a GLA of approximately 0.4 million square feet, which were recorded on our balance sheet at the total value of U.S.$ 177 million. For
the year ended December 31, 2014 and the year ended December 31, 2013, ProMeds properties generated rental income in the amount of U.S.$ 36 million and U.S.$ 55 million, respectively. As of December 31, 2014, the
occupancy rate of ProMeds properties was 92.7%.



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Development and Construction of residential projects in Israel and Eastern Europe

We are engaged in the development and construction of primarily residential projects in Israel and in Eastern Europe through Gazit
Developments investment in U. Dori Group Ltd., a public company listed on the TASE. Gazit Development holds indirectly, as of December 31, 2014, 84.9% of the share capital and voting rights in U. Dori Group Ltd. We refer to U. Dori Group
Ltd. and its subsidiaries, including U. Dori Construction Ltd. (59.7% of which is owned by Dori Group as of December 31, 2014) which is also traded on the TASE, and its wholly-owned subsidiaries and related companies, as Dori Group. Dori
Groups primary businesses are the development and construction primarily of residential projects in Israel and Eastern Europe. Dori Group also owns indirectly 11.25% of Dorad Energy Ltd., which operates a private power station in Ashkelon,
located in the southern coastal region of Israel.

Seasonality of the Companys main business

Our main business operations are not materially impacted by seasonality. Citycon, however, has in the past disclosed that its operations
benefited from milder weather.

Investments in India

In August 2007, we entered into an agreement to invest in Hiref International LLC, or Hiref, a real estate fund in India. Hiref was sponsored
by HDFC Group, one of the largest financial services companies in India. Hiref invests directly and indirectly in real estate companies that operate in the development and construction field and in similar fields, including in special economic and
trade zones, technological parks, combined municipal complexes, industrial parks, and buildings in the accommodation and leisure sector, such as hotels, residential buildings and commercial and recreation centers. Our investment commitment in Hiref
is U.S.$ 110 million and through December 31, 2014 we invested U.S.$ 95.2 million. As of December 31, 2014, Hiref is engaged in investment agreements for twelve projects with a total investment commitment of U.S.$ 507 million
which has been fully invested. For more details, please refer to Note 11 of our audited consolidated financial statements included elsewhere in this Annual report.

Marketing

From time to time we use
various marketing channels for the purpose of leasing our properties, principally advertising at the relevant property location; ongoing contacts with realty brokers; advertising concentrated on local and industry media; participation in
sector-orientated exhibitions and conventions; posting lists of available properties on our websites and the employment of staff whose principal roles are the marketing and leasing of our properties. The cost of such marketing activities has not
been and is not expected to be material to us.

Intellectual Property

Gazit-Globe owns a number of trademarks in Israel, including our G and LOCATION, LOCATION, LOCATION designs and has
applied for a number of trademarks in Israel, including AAA, LOCATION, LOCATION, LOCATION, GAZIT-GLOBE (in Hebrew and English) and for trademarks in the U.S., Canada, Brazil and Russia for our LOCATION,
LOCATION, LOCATION design.

Government Regulations

Our operations and properties, including our construction and redevelopment activities, are subject to regulation by various governmental
entities and agencies of the country or state where that project is located in connection with obtaining and renewing various licenses, permits, approvals and authorizations, as well as with ongoing compliance with existing and future laws,
regulations and standards. Each project must generally receive administrative approvals from various governmental agencies of the country or state where that project is located. No individual regulatory body, permit, approval or authorization is
material to our business as a whole.

C. Organizational Structure

We were incorporated in May 1982. As discussed above, we operate our business through subsidiaries in our five principal geographic regions:
the U.S., Canada, Europe, Israel and Brazil. The following chart summarizes our corporate structure as of December 31, 2014:



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##### Table of Contents

LOGO



|(1) | A company jointly controlled together with CPI, which held, to the best of the Companys knowledge, approximately 13.9% of the share capital of Atrium as of December 31, 2014. In January 2015 we acquired
CPIs remaining interest in Atrium, please see also Item 4Information on the CompanyHistory and Development of the Company.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

For the country of incorporation of each subsidiary, see Appendix A to Consolidated Financial StatementsList of Major Group
Investees as of December 31, 2014.

Our public subsidiaries are listed on stock exchanges in their local regions and are
subject to oversight by their respective boards of directors. We seek to balance our role as each companys most significant shareholder with the recognition that they are public companies in their respective countries with obligations to all
of their shareholders. Chaim Katzman, the Chairman of our Board serves as the Chairman of the Board of each of our major public subsidiariesEquity One, First Capital, Citycon and Atriumand our Executive Vice Chairman of the Board, Dor J.
Segal, serves on the boards of three of our public subsidiariesEquity One, First Capital and Dori Group. Other individuals affiliated with us also serve on the boards of our public subsidiaries. As public companies, our public subsidiaries are
generally required to have a number of directors who meet independence requirements under local law and stock exchange rules. As a result of this requirement and other factors, individuals affiliated with us represent less than a majority of the
members of the boards of directors of each of these entities. We are also active in seeking, and assisting our public subsidiaries in engaging, experienced executive management. Beyond providing oversight and guidance through our board
representation, the level of our involvement with each public subsidiary varies based on each subsidiarys general business needs, with greater guidance provided to those with less well-established operations or in connection with significant
transactions, such as an acquisition.



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##### Table of Contents

D. Property, Plants and Equipment

Our Properties

We own interests in 524
properties in over 20 countries. The following tables summarize our properties as of December 31, 2014:



|                                  |  |                            |     |  |                                |  |       |                        |  |  |           |  |  |                     |      |   |                       |  |           |                        |  |  |                           |   |  |                             |           |      |  |  |      |    |  |  |            |     
|--------------------------------- |  | -------------------------- | --- |  | ------------------------------ |  | ----- | ---------------------- |  |  | --------- |  |  | ------------------- | ---- | - | --------------------- |  | --------- | ---------------------- |  |  | ------------------------- | - |  | --------------------------- | --------- | ---- |  |  | ---- | -- |  |  | ---------- | ----
|                                  |  | As of December 31, 2014    |     |  | Year Ended December 31, 2014   |  |       | As ofDecember 31, 2014 | 
|Region                            |  | Total No. ofProperties (1) |     |  | Gazit-GlobesOwnershipInterest |  |       | GLA (1)                |  |  | Occupancy |  |  | RentalIncome (2)    |      |   | PercentofRentalIncome |  |           | NetOperatingIncome (2) |  |  | SamePropertyNOIGrowth (3) |   |  | Properties FairValue (4)(5) |          
|                                  |  |                            |     |  |                                |  |       | (thousandsof sq. ft.)  |  |  |           |  |  | (U.S.$ inthousands) |      |   |                       |  |           | (U.S.$ inthousands)    |  |  |                           |   |  | (U.S.$ inthousands)         |          
|Shopping Centers                  |  |                            |     |  |                                |  |       |                        |  |  |           |  |  |                     |      |   |                       |  |           |                        |  |  |                           |   |  |                             |           |      |  |  |      |    |  |  |            |     
|United States (6)(7)              |  |                            | 122 |  |                                |  | 43.3  | %                      |  |  | 16,246    |  |  |                     | 95.0 | % |                       |  | 305,591   |                        |  |  | 18                        | % |  |                             | 224,673   |      |  |  | 3.0  | %  |  |  | 4,074,871  |     
|Canada                            |  |                            | 153 |  |                                |  | 44.0  | %                      |  |  | 23,455    |  |  |                     | 96.0 | % |                       |  | 539,976   |                        |  |  | 33                        | % |  |                             | 338,957   |      |  |  | 2.8  | %  |  |  | 6,332,114  |     
|Northern Europe (1)               |  |                            | 59  |  |                                |  | 42.8  | %                      |  |  | 11,064    |  |  |                     | 96.3 | % |                       |  | 351,247   |                        |  |  | 21                        | % |  |                             | 243,673   |      |  |  | 2.9  | %  |  |  | 3,995,390  |     
|Central and Eastern Europe (1)    |  |                            | 153 |  |                                |  | 41.2  | %                      |  |  | 14,712    |  |  |                     | 97.1 | % |                       |  | 352,793   |                        |  |  | 21                        | % |  |                             | 249,096   |      |  |  | (0.8 | %) |  |  | 3,150,038  |     
|Germany                           |  |                            | 4   |  |                                |  | 100.0 | %                      |  |  | 529       |  |  |                     | 84.7 | % |                       |  | 19,211    |                        |  |  | 1                         | % |  |                             | 12,102    |      |  |  | (8.7 | %) |  |  | 114,803    |     
|Israel (8)                        |  |                            | 11  |  |                                |  | 84.7  | %                      |  |  | 1,415     |  |  |                     | 97.5 | % |                       |  | 55,653    |                        |  |  | 3                         | % |  |                             | 41,594    |      |  |  | 2.3  | %  |  |  | 633,216    |     
|Brazil                            |  |                            | 5   |  |                                |  | 100.0 | %                      |  |  | 505       |  |  |                     | 89.3 | % |                       |  | 10,327    |                        |  |  | 1                         | % |  |                             | 7,772     |      |  |  |     |    |  |  | 170,039    |     
|                                  |  |                            |     |  |                                |  |       |                        |  |  |           |  |  |                     |      |   |                       |  |           |                        |  |  |                           |   |  |                             |           |      |  |  |      |    |  |  |            |     
|Healthcare                        |  |                            |     |  |                                |  |       |                        |  |  |           |  |  |                     |      |   |                       |  |           |                        |  |  |                           |   |  |                             |           |      |  |  |      |    |  |  |            |     
|Medical office (9)                |  |                            | 4   |  |                                |  | 100.0 | %                      |  |  | 405       |  |  |                     | 92.7 | % |                       |  | 33,022    |                        |  |  | 2                         | % |  |                             | 24,094    |      |  |  | 3.3  | %  |  |  | 177,045    |     
|                                  |  |                            |     |  |                                |  |       |                        |  |  |           |  |  |                     |      |   |                       |  |           |                        |  |  |                           |   |  |                             |           |      |  |  |      |    |  |  |            |     
|Other Properties                  |  |                            |     |  |                                |  |       |                        |  |  |           |  |  |                     |      |   |                       |  |           |                        |  |  |                           |   |  |                             |           |      |  |  |      |    |  |  |            |     
|Land for future development       |  |                            |    |  |                                |  |      |                        |  |  |          |  |  |                     |     |   |                       |  |          |                        |  |  |                          |   |  |                             |          |      |  |  |     |    |  |  | 617,310    |     
|Properties under development (10) |  |                            | 10  |  |                                |  |      |                        |  |  |          |  |  |                     |     |   |                       |  |          |                        |  |  |                          |   |  |                             |          |      |  |  |     |    |  |  | 273,352    |     
|Other                             |  |                            | 3   |  |                                |  |      |                        |  |  | 5         |  |  |                     |     |   |                       |  |          |                        |  |  |                          |   |  |                             |          |      |  |  |     |    |  |  | 71,219     |     
|                                  |  |                            |     |  |                                |  |       |                        |  |  |           |  |  |                     |      |   |                       |  |           |                        |  |  |                           |   |  |                             |           |      |  |  |      |    |  |  |            |     
|Total                             |  |                            | 524 |  |                                |  |      |                        |  |  | 68,336    |  |  |                     | 95.9 | % |                       |  | 1,667,820 | (12)                   |  |  | 100                       | % |  |                             | 1,141,961 | (13) |  |  | 1.7  | %  |  |  | 19,609,397 | (11)
|                                  |  |                            |     |  |                                |  |       |                        |  |  |           |  |  |                     |      |   |                       |  |           |                        |  |  |                           |   |  |                             |           |      |  |  |      |    |  |  |            |     



|(1) | Amounts in this table with respect to shopping centers in Central and Eastern Europe reflect 100% of the number of properties and GLA of Atrium. Gazit-Globe jointly controls Atrium and Atrium is accounted for using the
equity method in Gazit-Globes financial statements. Likewise, in Northern Europe, the 50%-held joint venture property, Kista Galleria which is accounted for using the equity method, is presented above at 100%.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Represents amounts translated into U.S.$ using the exchange rate in effect on December 31, 2014 (U.S.$ 1.00 = NIS 3.889 ).
|--- | --------------------------------------------------------------------------------------------------------------------------

|(3) | Same property amounts are calculated as the amounts attributable to properties which have been owned and operated by us, and reported in our consolidated results, for the entirety of the relevant periods excluding the
impact of currency exchange rate fluctuation. Therefore, any properties either acquired after the first day of the earlier comparison period or sold, contributed or otherwise removed from our consolidated financial statements before the last day of
the later comparison period are excluded from same properties. Same property NOI growth excludes 49 properties that are considered under redevelopment and expansion.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Investment properties and investment properties under development are measured at fair value with changes in their fair value recognized as a gain (loss) in the income statement. For a detailed description of the
accounting treatment of investment properties and investment properties under development, the valuation methods used by the Group and the extent external appraisals are performed, see Item 5Operating and Financial Review and
ProspectsCritical Accounting PoliciesInvestment Property and Investment Property Under Development.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Includes 100% of the fair value of the properties of entities whose accounts are consolidated in Gazit-Globes financial statements. Includes 100% of the fair value of the properties of Atrium and Kista Galleria,
each of which are presented according to the equity method in Gazit-Globes financial statements with respect to the year ended December 31, 2014.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | As of December 31, 2014, includes six office, industrial, residential and storage properties.
|--- | ---------------------------------------------------------------------------------------------

|(7) | Occupancy data excludes the occupancy of six office, industrial, residential and storage properties. The properties are excluded because they are non-retail properties that are not considered part of Equity Ones
core portfolio. If these properties were included in the occupancy data, the occupancy rate as of December 31, 2014 would be 95.0%.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | Israel includes one income-producing property in Bulgaria.
|--- | ----------------------------------------------------------



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|(9) | Our medical office buildings are held through ProMed, our wholly-owned subsidiary.
|--- | ----------------------------------------------------------------------------------

|(10) | As of December 31, 2014, total GLA under development was 2.4 million square feet.
|---- | ---------------------------------------------------------------------------------

|(11) | This amount would be approximately NIS 80.1 billion (U.S.$ 20.6 billion) if it included 100% of the fair value of properties operated by us through joint ventures or other management arrangements which are accounted for
using the equity method of accounting, approximately U.S.$ 5.3 billion of this amount is not recorded in our financial statements and includes mainly Atrium and Kista, which however, are included in the table (see note 5 above). This amount
represents the following amounts recorded in our consolidated statements of financial position as of December 31, 2014: NIS 56,646 million (U.S.$ 14,565 million) of investment property, NIS 1,642 million (U.S.$ 422 million) of
investment property under development, NIS 1,046 million (U.S.$ 269 million) of assets classified as held for sale and NIS 171 million (U.S.$ 44 million) of fixed assets, net, but excludes furniture, fixtures and other equipment.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(12) | This amount includes rental income from equity-accounted joint ventures in the amount of U.S.$ 404 million.
|---- | -----------------------------------------------------------------------------------------------------------

|(13) | This amount includes net operating income from equity-accounted joint ventures in the amount of U.S.$ 286 million.
|---- | ------------------------------------------------------------------------------------------------------------------

Environmental

Due to our ownership of
real estate, we are subject to national, state and local environmental legislation in every jurisdiction in which we operate. Under this legislation, we could be held responsible for, and have to bear, the clearance and reclamation costs in respect
of various environmental hazards, pollution, and toxic materials that are found at, or are emitted from, our properties and could also have to pay fines and compensation in respect of such hazards. These costs could be material. Certain
environmental regulations lay strict liability for environmental hazards on the holders or owners of the properties. Failure to remove these hazards could have a material adverse effect on our ability to sell, rent or pledge the properties at which
such hazards are found, and could even result in a lawsuit. As of December 31, 2014, we were aware of a number of properties that require study or repair relating to environmental issues. We do not believe, however, that such environmental
issues will have a material adverse effect on our financial position. Nevertheless, we are unable to guarantee that the information in our possession reveals all potential liabilities in respect of environmental hazards, or that former owners of
properties we have acquired had not acted in a manner that contravenes relevant provisions of environmental laws, or that due to some other reason a material breach of such provisions has not been, or will not be, committed. Furthermore, future
amendments to environmental laws could have a material adverse effect on our position, from both an operational and a financial perspective.

We seek to conduct our business in an environmentally-friendly manner. We are investing resources in environmental conservation and in the
construction of environmentally-friendly shopping centers. We believe that, in the long-term, the consumers, the retailers and we will benefit from these investments. For example, we expect that the use of green energy and the recycling of various
materials will benefit the community, preserve the environment, and in the long-term decrease our costs. In addition, we believe that the growing awareness of the need to preserve the environment will lead the population to prefer visiting
green shopping centers over regular shopping centers, thus increasing the value of such properties.

Leasing expenditures

Leasing expenditures, such as tenant improvement costs and leasing commissions, are not material to our business as a whole and therefore
additional disclosure would not be meaningful to prospective investors. See also Item 4Information on the CompanyBusiness OverviewGovernment Regulations.



|ITEM 4A. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------

None.



|ITEM 5 | OPERATING AND FINANCIAL REVIEW AND PROSPECTS
|------ | --------------------------------------------



| | A. | Operating Results
| | -- | -----------------

We believe we are one of the largest owners and
operators of supermarket-anchored shopping centers in the world. Our 524 properties have a GLA of approximately 68 million square feet and are geographically diversified across over 20 countries. We operate properties with a total value of
approximately U.S.$ 20.6 billion or NIS 80.1 billion (including the full value of properties that are consolidated and of equity-accounted jointly controlled entities, approximately U.S.$ 5.3 billion, or NIS 20.6 billion, of which is not recorded in
our financial statements) as of December 31, 2014. We acquire, develop



39



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and redevelop well-located, supermarket-anchored neighborhood and community shopping centers in urban growth markets with high barriers to entry and attractive demographic trends. Our properties
are typically located in countries characterized by stable GDP growth, political and economic stability and strong credit ratings. As of December 31, 2014, over 95% of our occupied GLA was leased to retailers and the majority of our occupied
GLA was leased to tenants that provide consumers with daily necessities and other non-discretionary products and services.

Our properties are owned and operated through a variety of public and private subsidiaries and affiliates. Our primary public
subsidiaries and affiliates are Equity One in the United States, First Capital in Canada, Citycon in Northern Europe, and Atrium in Central and Eastern Europe. Additionally, we own and operate medical office buildings in North America through
private subsidiaries, and we own and operate our shopping centers in Brazil, Germany and Israel through private subsidiaries.

We intend to continue our focus on owning and operating high quality supermarket-anchored neighborhood and community shopping
centers and other necessity-driven real estate assets predominantly in densely-populated, urban growth markets with high barriers to entry and attractive demographic trends in countries with stable GDP growth, political and economic stability and
strong credit ratings. By maintaining this focus, we will seek to keep the occupancy and NOI performance of our properties consistent through different economic cycles.

We intend to continue to prudently expand into new high growth markets in politically and economically stable countries with
compelling demographics and other high growth necessity-driven asset types that generate strong and sustainable cash flow, using our experience developed over the past 20 years in entering new markets and through our thorough knowledge of local
markets. We will use this experience and knowledge to continue to assess opportunities, including the establishment of new necessity-driven real estate businesses, the acquisition of real estate companies and properties, primarily
supermarket-anchored shopping centers and also other necessity-driven assets.

We also intend to divest non-core properties
and allocate our capital. During 2012 and 2013, our subsidiary Royal Senior Care sold off its assets in addition to our sale of other lower-tier secondary-market assets. Gazit Germany and ProMed made similar dispositions of many of their properties
during 2014. We recycled this capital to make new core acquisitions in high-density urban markets and to deleverage our balance sheet.

Factors Impacting our Results of Operations

Rental income. We derive revenues primarily from rental income. For the years ended December 31, 2014, 2013
and 2012, rental income represented 78%, 75% and 75% of our total revenues, respectively (83%, 80%, 79%, respectively, assuming full consolidation of equity-accounted jointly-controlled entities). Our rental income is a product of the number of
income producing properties we own, the occupancy rates at our properties and the rental rates we charge our tenants.

Our rental
income is impacted by a number of factors:



| |  |  | Global, regional and local economic conditions.The economic downturn of 2008 and 2009 resulted in many companies shifting to a more cautionary mode with respect to leasing. Potential tenants may be
looking to consolidate, reduce overhead and preserve operating capital. The downturn also impacted the financial condition of some our tenants and their ability to fulfill their lease commitments which, in turn, impacted our ability in some of our
regions to maintain or increase the occupancy level and/or rental rates of our properties. While the economy in most of our markets has improved since the downturn of 2008 and 2009, we are still facing macro-economic challenges in some of our
markets, particularly in Europe which remains particularly vulnerable to volatility, and Russia which is suffering from significant economic and politic turmoil.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Scheduled lease expirations. As of December 31, 2014, leases representing 12.6% and 10.6% of the GLA of our properties will expire during 2015 and 2016, respectively. Our results of operations will
depend on whether expiring leases are renewed and, with respect to renewed leases (including of equity-accounted joint ventures), whether the properties are re-leased at base rental rates equal to or above our current average base rental rates. We
proactively manage our properties to reduce the risk that expiring leases are not renewed or that properties are not re-leased and to reduce the risk that renewals and re-leases are at base rental rates lower than our current average base rental
rates. However, our ability to renew leases at base rental rates equal to or above our current average base rental rates is dependent on a number of factors, including micro- and macro-economic factors in the markets in which we operate.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Availability of properties for acquisition. We grow our property base through targeted acquisitions of properties. Our results of operations depend on whether we are able to identify suitable properties to
acquire and whether we can complete the acquisition of the properties we identify on commercially attractive terms. Our results of operations also depend on whether we successfully integrate acquisitions into our existing operations and achieve the
occupancy or rental rates we project at the time we make the decision to acquire a property. Our results of operations for the year ended December 31, 2014 were impacted by the acquisition of 7 income-producing properties and the disposition of
59 income-producing properties across our markets which resulted in a net decrease in GLA of 3.1 million square feet. Similarly results of operations for the year ended December 31, 2013 were impacted by the acquisition of 12 properties
including Kista Galleria in Stockholm, Sweden and the disposition of 53 properties across our markets, including the remaining assets of Royal Senior Care. Similarly, our results of operations for the year ended December 31, 2012 were impacted
by the net disposition of four properties across our markets which resulted in a net decrease of our GLA in a net amount of 0.8 million square feet.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Development and Redevelopment. Our results of operations also depend on our ability to develop new shopping centers and redevelop existing shopping centers in a timely and cost-efficient manner, since
developed and redeveloped properties tend to generate higher rental rates, and to locate anchor tenants for these properties prior to development or redevelopment. For the year ended December 31, 2014, we completed the development and
redevelopment of properties representing 1.0 million square feet of GLA. For the year ended December 31, 2013, we completed the development and redevelopment of properties representing 0.8 million square feet of GLA. For the year
ended December 31, 2012, we completed the development and redevelopment of properties representing 1.6 million square feet of GLA.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Estimates for Expected Revenues and Costs in Dori Constructions Projects.The preparation of our consolidated financial statements requires management to utilize estimates related to expected
revenues and costs from Dori Constructions projects. However, these estimates require the use of managements judgment and therefor may vary substantially from the actual revenues and costs ultimately attributed to such projects.
Consequently, our results of operations may fluctuate as a result of such variance.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Other factors.Factors including changes in consumer preferences and fluctuations in inflation rates can affect the ability of tenants to meet their commitments to us. In addition, those factors and
changes in interest rates, oversupply of properties, competition from other properties and prices of goods, fuel and energy consumption can affect our ability to continue renting our properties at the same rent levels.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Change in fair value of our properties. Our results of operations, which are reflected in our financial
statements based on IFRS, are impacted by changes in the fair market value of our properties. After initial recognition at cost (including costs directly attributable to the acquisition), investment property is measured at fair value, which reflects
market conditions at the balance sheet date. Gains or losses arising from changes in fair value of investment property are recognized in profit or loss when they arise. Accordingly, our results of operations will be impacted by such changes even
though no actual disposition of assets took place and no cash or other value was received. Property valuation typically requires the use of certain judgments and assumptions with respect to a variety of factors, including supply and demand of
comparable properties, the rate of economic growth in the location of the property, interest rates, inflation and political and economic developments in the region in which the property is located. For the year ended December 31, 2012,
valuation gains from investment property and investment property under development were NIS 1.9 billion. For the year ended December 31, 2013, valuation gains from investment property and investment property under development were NIS 1.0
billion. For the year ended December 31, 2014, valuation gains from investment property and investment property under development were NIS 1.1 billion (U.S. $ 271 million).

Interest expense.Our results of operations depend on expenses relating to our debt service and our liquidity. In
addition, our ability to acquire new assets is highly dependent on our ability to access capital in a cost efficient manner. The securities of Gazit-Globe and the securities of its major subsidiaries and affiliates are traded on six international
stock exchanges, and we have benefited from the flexibility offered by raising debt or equity on many of these public markets. We believe that this global access to liquidity provides us with the ability to pursue opportunities and execute
transactions quickly and efficiently. A significant portion of our debt is fixed rate and fluctuations in our interest expense in a particular period typically result from changes in outstanding debt balances.

Functional currency and currency fluctuations. We operate globally in multiple regions and countries within each
region. Our functional currency and our reporting currency is the New Israel Shekel.



41



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Our principal subsidiaries have the following functional currencies: Equity OneU.S. dollar, First CapitalCanadian dollar, CityconEuro and AtriumEuro. The financial
statements of these and our other subsidiaries and affiliates whose functional currencies are not the NIS are translated into NIS for inclusion in our financial statements. The resulting translation differences are recognized as other comprehensive
income (loss) in a separate component of shareholders equity under the capital reserve foreign currency translation reserve. The translation resulted in the inclusion in our statement of comprehensive income (loss) of a loss of NIS
0.4 billion for the year ended December 31, 2012, a loss of NIS 2.4 billion for the year ended December 31, 2013 and a gain of NIS 1.1 billion (U.S.$ 295 million) for the year ended December 31, 2014. In addition to translation
differences, we are exposed to risks associated with fluctuations in currency exchange rates between the NIS, the U.S. dollar, the Canadian dollar, the Euro and certain other currencies in which we conduct business. Our policy is to maintain a high
correlation between the currency in which our assets are purchased and the currency in which the liabilities relating to the purchase of these assets are assumed in order to reduce currency risk. As part of this policy, we enter into cross currency
swap transactions and forward contracts as part of this policy. However, these transactions are measured in the financial statements at their fair value and in some cases, these fair value changes are recognized in profit or loss which could
materially impact our net income. Accordingly, during the year ended December 31, 2014 we recognized a NIS 190 million (U.S.$ 49 million) devaluation loss and during the year ended December 31, 2013 we recognized a NIS
431 million revaluation gain in profit or loss with respect to such derivatives. See also Item 11Quantitative and Qualitative Disclosures About Market Risk for a discussion of our hedging activities.

Shopping Centers

United States. In the United States, we acquire, develop and manage shopping centers through our subsidiary Equity One,
which is a REIT listed on the New York Stock Exchange. Equity Ones properties are located primarily in the southeastern United States, mainly in Florida, in the northeastern United States mainly in New York, Massachusetts, Maryland and
Connecticut and on the west coast of the United States, mainly in California.



|                                                 |  |                    |       |   |      |  |       |      |  |  |       |  
|------------------------------------------------ |  | ------------------ | ----- | - | ---- |  | ----- | ---- |  |  | ----- | -
|                                                 |  | As of December 31, |      
|                                                 |  | 2012               |       |   | 2013 |  |       | 2014 | 
|Our economic interest in Equity One              |  |                    | 45.5  | % |      |  | 45.2  | %    |  |  | 43.3  | %
|Shopping centers (1)                             |  |                    | 160   |   |      |  | 135   |      |  |  | 116   |  
|Other properties (2)                             |  |                    | 7     |   |      |  | 7     |      |  |  | 6     |  
|Properties under development                     |  |                    | 1     |   |      |  | 1     |      |  |  | 1     |  
|GLA (millions of square feet) (1)                |  |                    | 20.5  |   |      |  | 18.4  |      |  |  | 16.2  |  
|Occupancy rate (3)                               |  |                    | 92.1  | % |      |  | 92.4  | %    |  |  | 95.0  | %
|Average annualized base rent (U.S.$ per sq. ft.) |  |                    | 14.58 |   |      |  | 16.16 |      |  |  | 17.34 |  



|(1) | Includes properties of equity-accounted joint ventures.
|--- | -------------------------------------------------------

|(2) | Comprised of office, industrial, residential and storage properties.
|--- | --------------------------------------------------------------------

|(3) | Excludes six office, industrial, residential and storage properties. The properties are excluded because they are non-retail properties that are not considered part of Equity Ones core portfolio. If these
properties were included in the occupancy data, the occupancy rate would be 91.7% as of December 31, 2012, 92.5% as of December 31, 2013 and 95.0% as of December 31, 2014.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                                        |  |                                                  |       |  |                    |  |       |      |  |  |       |  |  |  |     | 
|--------------------------------------------------------------------------------------- |  | ------------------------------------------------ | ----- |  | ------------------ |  | ----- | ---- |  |  | ----- |  |  |  | --- | 
|                                                                                        |  | Year Ended December 31,                          |      
|                                                                                        |  | 2012                                             |       |  | 2013               |  |       | 2014 |  |  | 2014  | 
|                                                                                        |  | (NIS in millions except sameproperty NOI growth) |       |  | (U.S.$ inmillions) | 
|Rental income                                                                           |  |                                                  | 1,261 |  |                    |  | 1,210 |      |  |  | 1,188 |  |  |  | 306 | 
|Net operating income                                                                    |  |                                                  | 918   |  |                    |  | 874   |      |  |  | 874   |  |  |  | 225 | 
|Increase in value of investment property and investment property under development, net |  |                                                  | 538   |  |                    |  | 686   |      |  |  | 654   |  |  |  | 168 | 
|Same property NOI growth (%)                                                            |  |                                                  | 3.3   |  |                    |  | 3.1   |      |  |  | 3.0   |  |  |  | N/A | 

The decrease in Equity Ones rental income to NIS 1,188 million (U.S.$ 306 million)
for the year ended December 31, 2014 was driven primarily by the net disposition of properties during the years 2014 and 2013. The decrease in Equity Ones rental income to NIS 1,210 million for the year ended December 31,



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2013 from NIS 1,261 million for the year ended December 31, 2012 was driven primarily by a lower average U.S.$/NIS exchange rate in the year 2013 compared to the year 2012, offset by
property acquisitions, rent commencement of development and redevelopment projects and an increase in expense recovery income.

The
following table summarizes Equity Ones leasing activities for the years ended December 31 2012, 2013, and 2014:



|                                                                    |  |                         |       |  |      |  |       |      |  |  |       | 
|------------------------------------------------------------------- |  | ----------------------- | ----- |  | ---- |  | ----- | ---- |  |  | ----- | 
|                                                                    |  | Year Ended December 31, |      
|                                                                    |  | 2012                    |       |  | 2013 |  |       | 2014 | 
|Renewals                                                            |  |                         |       |  |      |  |       |      |  |  |       | 
|Number of leases                                                    |  |                         | 274   |  |      |  | 256   |      |  |  | 261   | 
|GLA leased (square feet at end of period, in thousands)             |  |                         | 948   |  |      |  | 1,320 |      |  |  | 1,386 | 
|New contracted annualized rent per leased square foot (U.S.$)       |  |                         | 17.67 |  |      |  | 16.33 |      |  |  | 16.97 | 
|Prior contracted annualized rent per leased square foot (U.S.$)     |  |                         | 16.55 |  |      |  | 14.76 |      |  |  | 15.66 | 
|New Leases                                                          |  |                         |       |  |      |  |       |      |  |  |       | 
|Number of leases                                                    |  |                         | 207   |  |      |  | 158   |      |  |  | 187   | 
|GLA leased (square feet at end of period, in thousands)             |  |                         | 720   |  |      |  | 735   |      |  |  | 790   | 
|Contracted annualized rent per leased square foot (U.S.$)           |  |                         | 17.52 |  |      |  | 26.55 |      |  |  | 18.67 | 
|Total New Leases and Renewals                                       |  |                         |       |  |      |  |       |      |  |  |       | 
|Number of leases                                                    |  |                         | 481   |  |      |  | 414   |      |  |  | 448   | 
|GLA leased (square feet at end of period, in thousands)             |  |                         | 1668  |  |      |  | 2055  |      |  |  | 2,176 | 
|Contracted annualized rent per leased square foot (U.S.$)           |  |                         | 17.61 |  |      |  | 18.75 |      |  |  | 17.32 | 
|Expired Leases                                                      |  |                         |       |  |      |  |       |      |  |  |       | 
|Number of leases (1)                                                |  |                         | 199   |  |      |  | 181   |      |  |  | 145   | 
|GLA of expiring leases (square feet at end of period, in thousands) |  |                         | 772   |  |      |  | 832   |      |  |  | 644   | 



|(1) | Excludes developments and non-retail properties.
|--- | ------------------------------------------------

Most of Equity Ones
leases provide for the monthly payment in advance of fixed minimum rent, the tenants pro rata share of property taxes, insurance (including fire and extended coverage, rent insurance and liability insurance) and common area maintenance for the
property. Equity Ones leases may also provide for the payment of additional rent based on a percentage of the tenants sales. Utilities are generally paid directly by tenants except where common metering exists with respect to a property.
In those cases, Equity One makes the payments for the utilities and is reimbursed by the tenants on a monthly basis. Generally, Equity Ones leases prohibit its tenants from assigning or subletting their spaces. Generally, Equity Ones
leases contain escalations that occur at specified times during the term of the lease. These escalations are either fixed amounts, fixed percentage increases or increases based on changes to the Consumer Price Index. A small number of Equity
Ones leases also include clauses enabling it to receive percentage rents based on a tenants gross sales above predetermined levels, which sales generally increase as prices rise, or escalation clauses which are typically related to
increases in the Consumer Price Index or similar inflation indices. The leases also require tenants to use their spaces for the purposes designated in their lease agreements and to operate their businesses on a continuous basis. Some of the lease
agreements with major or national or regional tenants contain modifications of these basic provisions in view of the financial condition, stability or desirability of those tenants. Where a tenant is granted the right to assign its space, the lease
agreement generally provides that the original tenant will remain liable for the payment of the lease obligations under that lease agreement.

While throughout 2014 Equity One witnessed a gradual, continuous improvement in the economic conditions, the pace of the
economic improvement varied among its different operating regions. Equity One assesses that the continued growth and the diversity of its properties portfolio in quality urban markets, together with the lack of availability of commercial properties
in the relevant operating regions, which limits competition, will continue to help it counter the effects of existing challenges to its business. It further anticipates that its same-property net operating income for 2015 will reflect an increase
over 2014 of 2.75% to 3.5%.

Equity One has 1.6 million square feet of GLA in its consolidated shopping center
portfolio with leases expiring in 2015 with an average rent per square foot of U.S.$ 13.82 and another approximately 234.3 thousand square feet of GLA under month-to-month leases. Equity One expects to
achieve moderate increases in average rent spreads as it renews or re-leases these spaces, although there is no assurance of such increases.



43



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Canada. In Canada, we acquire, develop and manage income-producing
properties, comprised mostly of shopping centers, through our subsidiary First Capital, which is listed on the Toronto Stock Exchange. First Capitals properties are located primarily in growing metropolitan areas in the provinces of Ontario,
Quebec, Alberta and British Columbia. The following data is presented on a fully consolidated basis without reflecting non-controlling interests.



|                                              |  |                    |       |   |      |  |       |      |  |  |       |  
|--------------------------------------------- |  | ------------------ | ----- | - | ---- |  | ----- | ---- |  |  | ----- | -
|                                              |  | As of December 31, |      
|                                              |  | 2012               |       |   | 2013 |  |       | 2014 | 
|Our economic interest in First Capital        |  |                    | 45.6  | % |      |  | 45.2  | %    |  |  | 44.0  | %
|Income-Producing Properties                   |  |                    | 169   |   |      |  | 160   |      |  |  | 153   |  
|Properties under development                  |  |                    | 6     |   |      |  | 4     |      |  |  | 5     |  
|GLA (millions of square feet)                 |  |                    | 24.1  |   |      |  | 23.8  |      |  |  | 23.5  |  
|Occupancy rate                                |  |                    | 95.6  | % |      |  | 95.5  | %    |  |  | 96.0  | %
|Average annualized base rent (C$ per sq. ft.) |  |                    | 17.51 |   |      |  | 17.96 |      |  |  | 18.42 |  



|                                                                                        |  |                                                  |       |  |                    |  |       |      |  |  |       |  |  |  |     | 
|--------------------------------------------------------------------------------------- |  | ------------------------------------------------ | ----- |  | ------------------ |  | ----- | ---- |  |  | ----- |  |  |  | --- | 
|                                                                                        |  | Year Ended December 31,                          |      
|                                                                                        |  | 2012                                             |       |  | 2013               |  |       | 2014 |  |  | 2014  | 
|                                                                                        |  | (NIS in millions except sameproperty NOI growth) |       |  | (U.S.$ inmillions) | 
|Rental income                                                                           |  |                                                  | 2,237 |  |                    |  | 2,216 |      |  |  | 2,100 |  |  |  | 540 | 
|Net operating income                                                                    |  |                                                  | 1,426 |  |                    |  | 1,396 |      |  |  | 1,318 |  |  |  | 339 | 
|Increase in value of investment property and investment property under development, net |  |                                                  | 1,121 |  |                    |  | 217   |      |  |  | 137   |  |  |  | 35  | 
|Same property NOI growth (%) (1)(2)(3)                                                  |  |                                                  | 1.4   |  |                    |  | 2.7   |      |  |  | 2.8   |  |  |  | N/A | 



|(1) | In 2012, 2013 and 2014 including expansion and development, same property NOI growth was 2.3%, 3.7% and 3.2%, respectively.
|--- | ---------------------------------------------------------------------------------------------------------------------------

The decrease in First Capitals rental income to NIS 2,100 million (U.S.$ 540 million) for the year ended
December 31, 2014 from NIS 2,216 million for the year ended December 31, 2013 was driven primarily by a lower average C$/NIS exchange rate in the year 2014 compared to the year 2013 offset by acquisitions and completion of
developments and redevelopments. The decrease in First Capitals rental income to NIS 2,216 million for the year ended December 31, 2013 from NIS 2,237 million for the year ended December 31, 2012 was driven primarily by a
lower average C$/NIS exchange rate in the year 2013 compared to the year 2012 which was offset by an increase in base rent and recoveries from tenants as a result of an increase in rental rates due to step-ups and lease renewals, in addition to net
acquisitions and developments coming on line.

The following table summarizes First Capitals leasing activities for the years ended
December 31, 2012, 2013, and 2014:



|                                                                    |  |                         |       |  |      |  |       |      |  |  |       | 
|------------------------------------------------------------------- |  | ----------------------- | ----- |  | ---- |  | ----- | ---- |  |  | ----- | 
|                                                                    |  | Year Ended December 31, |      
|                                                                    |  | 2012                    |       |  | 2013 |  |       | 2014 | 
|Renewals                                                            |  |                         |       |  |      |  |       |      |  |  |       | 
|Number of leases                                                    |  |                         | 393   |  |      |  | 478   |      |  |  | 600   | 
|GLA leased (square feet at end of period, in thousands)             |  |                         | 1,301 |  |      |  | 1,419 |      |  |  | 2,415 | 
|New contracted annualized rent per leased square foot (C$)          |  |                         | 18.65 |  |      |  | 20.13 |      |  |  | 18.56 | 
|Prior contracted annualized rent per leased square foot (C$)        |  |                         | 16.95 |  |      |  | 18.30 |      |  |  | 16.93 | 
|New Leases                                                          |  |                         |       |  |      |  |       |      |  |  |       | 
|Number of leases                                                    |  |                         | 425   |  |      |  | 339   |      |  |  | 348   | 
|GLA leased (square feet at end of period, in thousands)             |  |                         | 1,407 |  |      |  | 1,007 |      |  |  | 978   | 
|Contracted annualized rent per leased square foot (C$)              |  |                         | 21.47 |  |      |  | 21.23 |      |  |  | 17.07 | 
|Total New Leases and Renewals                                       |  |                         |       |  |      |  |       |      |  |  |       | 
|Number of leases                                                    |  |                         | 818   |  |      |  | 817   |      |  |  | 948   | 
|GLA leased (square feet at end of period, in thousands)             |  |                         | 2,708 |  |      |  | 2,426 |      |  |  | 3,393 | 
|Contracted annualized rent per leased square foot (C$)              |  |                         | 20.11 |  |      |  | 20.59 |      |  |  | 18.13 | 
|Expired Leases                                                      |  |                         |       |  |      |  |       |      |  |  |       | 
|Number of leases                                                    |  |                         | 290   |  |      |  | 352   |      |  |  | 357   | 
|GLA of expiring leases (square feet at end of period, in thousands) |  |                         | 947   |  |      |  | 687   |      |  |  | 896   | 



44



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##### Table of Contents

Each of First Capitals properties is subject to property tax and common
area maintenance costs (e.g., cleaning, repairs or insurance) among other expenses. First Capital generally passes on these costs to its tenants through clauses in their leases. However, some leases stipulate payment ceilings in connection with
these expenses, and First Capital must bear the difference in these instances rather than recoup the costs from its tenants.

In addition, First Capital currently has two residential projects under development (through a joint venture with a third party
who engages in the residential development sector; each of the parties owns 50% of the venture) that are adjacent to its shopping centers. one project comprising 246 residential units, which were all sold as of December 31, 2014 and the second
project is in an early stage of development.

As of December 31, 2014, Canadas economy is growing at a moderate
pace, yet uncertainty regarding the global economic environment has not dissipated. Consequently, in 2014 the yields on long-term Canadian government bonds were volatile, declining over time. Within this economic environment, First Capital is
focusing on maintaining access to all long-term capital resources at the lowest possible cost. In particular, First Capital has continued to attempt to refinance while increasing the terms of its public debentures.

For the year ended December 31, 2014, First Capitals gross new leasing including development and redevelopment space
totaled 978 thousand square feet. Renewal leasing totaled 2,415 thousand square feet with a 9.6% increase over expiring lease rates. The weighted average rate per occupied square foot increased to C$ 18.29 at December 31, 2014 before
acquisitions and dispositions from C$ 17.74 at December 31, 2013 as a result of leasing and development activity. During 2014, First Capital acquired properties with gross leasable area totaling 469 thousand square feet with an average
lease rate of C$ 25.56, bringing the total portfolio average in place rent to C$ 18.42 per square foot at year end. Compared to the year ending December 31, 2013, average lease rate per occupied square foot increased by 2.6%.

During 2014, new term leases on existing space averaged C$ 16.45 per square foot, and renewals averaged C$ 18.56 per
square foot. Newly developed space was leased at an average rate of C$ 19.02 per square foot. First Capitals management considers that these openings and renewals broadly reflect market rates for the portfolio. First Capitals
management believes that the weighted average rental rate for the portfolio if it were at market would be in the C$ 23.0 to C$ 25.0 per square foot range, while the expiring leases during the next three years reflect an average rent per square
foot of C$ 17.4.

First Capital intends to continue carrying out selective acquisitions of quality urban properties in
attractive locations and properties adjacent to its existing properties, selective sales of properties that are not part of its core business, as well as to continue its development activities.

Northern Europe. In Northern Europe, we acquire, develop and manage shopping centers through our subsidiary
Citycon, which is listed on the NASDAQ OMX Helsinki Stock Exchange. Citycon operates primarily in Finland and Sweden, as well as Denmark, and Estonia. The following data is presented on a fully consolidated basis without reflecting non-controlling
interests.



|                                                |  |                    |       |   |      |  |       |      |  |  |       |  
|----------------------------------------------- |  | ------------------ | ----- | - | ---- |  | ----- | ---- |  |  | ----- | -
|                                                |  | As of December 31, |      
|                                                |  | 2012               |       |   | 2013 |  |       | 2014 | 
|Our economic interest inCitycon                 |  |                    | 48.8  | % |      |  | 49.3  | %    |  |  | 42.8  | %
|Shopping centers (1)                            |  |                    | 78    |   |      |  | 72    |      |  |  | 60    |  
|Properties under development                    |  |                    |      |   |      |  | 1     |      |  |  | 1     |  
|GLA (millions of square feet) (1)               |  |                    | 10.8  |   |      |  | 11.4  |      |  |  | 11.1  |  
|Occupancy rate                                  |  |                    | 95.7  | % |      |  | 95.7  | %    |  |  | 96.3  | %
|Average annualized base rent (Euro per sq. ft.) |  |                    | 23.06 |   |      |  | 23.95 |      |  |  | 24.07 |  



|                                                                                        |  |                                                  |       |  |                    |  |       |      |  |  |       |  |  |  |     | 
|--------------------------------------------------------------------------------------- |  | ------------------------------------------------ | ----- |  | ------------------ |  | ----- | ---- |  |  | ----- |  |  |  | --- | 
|                                                                                        |  | Year Ended December 31,                          |      
|                                                                                        |  | 2012                                             |       |  | 2013               |  |       | 2014 |  |  | 2014  | 
|                                                                                        |  | (NIS in millions except sameproperty NOI growth) |       |  | (U.S.$ inmillions) | 
|Rental income (1)                                                                       |  |                                                  | 1,185 |  |                    |  | 1,406 |      |  |  | 1,366 |  |  |  | 351 | 
|Net operating income (1)                                                                |  |                                                  | 803   |  |                    |  | 964   |      |  |  | 948   |  |  |  | 244 | 
|Increase in value of investment property and investment property under development, net |  |                                                  | 117   |  |                    |  | 126   |      |  |  | 75    |  |  |  | 19  | 
|Same property NOI growth (%)                                                            |  |                                                  | 4.9   |  |                    |  | 4.6   |      |  |  | 2.9   |  |  |  | N/A | 



|(1) | Including equity-accounted joint venture acquired in 2013.
|--- | ----------------------------------------------------------



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##### Table of Contents

Citycons rental income for the year ended December 31, 2014 compared
to the year ended December 31, 2013 decreased by 2.8% due mainly to divestments and weaker Swedish Krona offsets by increase in same property NOI.

The increase in Citycons rental income by 18.6% for the year ended December 31, 2013 compared to the year ended
December 31, 2012 was a result the acquisition of the Kista Galleria equity-accounted joint venture in January 2013 and due to completion of redevelopment projects of retail properties, acquisitions of additional properties and growth of
like-for-like rental income, which were offset by lower average EUR/NIS exchange rate in the year 2013 compared to the year 2012.

The following table summarizes Citycons leasing activities for the years ended December 31, 2012, 2013, and 2014:



|                                                                    |  |                         |       |  |      |  |       |      |  |  |       | 
|------------------------------------------------------------------- |  | ----------------------- | ----- |  | ---- |  | ----- | ---- |  |  | ----- | 
|                                                                    |  | Year Ended December 31, |      
|                                                                    |  | 2012                    |       |  | 2013 |  |       | 2014 | 
|Renewals                                                            |  |                         |       |  |      |  |       |      |  |  |       | 
|Number of leases                                                    |  |                         | 137   |  |      |  | 107   |      |  |  | 95    | 
|GLA leased (square feet at end of period, in thousands)             |  |                         | 442   |  |      |  | 455   |      |  |  | 332   | 
|New contracted annualized rent per leased square foot (EUR)         |  |                         | 27.0  |  |      |  | 25.1  |      |  |  | 29.2  | 
|Prior contracted annualized rent per leased square foot (EUR)       |  |                         | 27.1  |  |      |  | 25.0  |      |  |  | 30.2  | 
|New Leases                                                          |  |                         |       |  |      |  |       |      |  |  |       | 
|Number of leases                                                    |  |                         | 655   |  |      |  | 504   |      |  |  | 500   | 
|GLA leased (square feet at end of period, in thousands)             |  |                         | 1,078 |  |      |  | 1,161 |      |  |  | 988   | 
|Contracted annualized rent per leased square foot (EUR)             |  |                         | 21.1  |  |      |  | 19.4  |      |  |  | 19.8  | 
|Total New Leases and Renewals                                       |  |                         |       |  |      |  |       |      |  |  |       | 
|Number of leases                                                    |  |                         | 792   |  |      |  | 611   |      |  |  | 595   | 
|GLA leased (square feet at end of period, in thousands)             |  |                         | 1,520 |  |      |  | 1,616 |      |  |  | 1,320 | 
|Contracted annualized rent per leased square foot (EUR)             |  |                         | 22.8  |  |      |  | 20.9  |      |  |  | 22.2  | 
|Expired Leases                                                      |  |                         |       |  |      |  |       |      |  |  |       | 
|Number of leases                                                    |  |                         | 1,064 |  |      |  | 1,117 |      |  |  | 724   | 
|GLA of expiring leases (square feet at end of period, in thousands) |  |                         | 1,615 |  |      |  | 2,009 |      |  |  | 1,560 | 

According to most of the lease agreements between Citycon and its tenants, these tenants
undertake to pay, in addition to rent, management fees to cover operating costs which Citycon incurs in maintaining the property. In addition, Citycon has lease agreements in which the rent is determined also based on a certain percentage of the
revenues turnover of the propertys tenant, while setting a minimum rent; however this component does not represent a material share of Citycons total rental revenues. Lease agreements with Citycons anchor tenants are mostly for
long periods of 10 and even 20 years, while with smaller tenants the lease agreements are mostly for periods of three to five years. Citycon also enters into lease agreements for undefined periods, which may be terminated by giving advance notice,
usually of 3 to 12 months.

The year ending December 31, 2014 continued to be challenging in Finland, while the
Swedish economy continued to show signs of recovery. During the reporting period, the consumer confidence index remained relatively stable in all countries in which Citycon operates. In the Nordic countries, the index remained positive, while in
Estonia it remained slightly negative.

During 2014, the growth rate of retail sales was positive and strong in Estonia and
Sweden, but negative in Finland and Denmark. Furthermore, the consumer price index recorded moderate increases in Finland and Denmark, while in the rest of the countries in which Citycon operates experienced slightly negative inflation. All
countries in which Citycon operates, recorded low average unemployment rates relative to the average unemployment rate within the Eurozone.

During the year ended December 31, 2014, Citycons occupancy rate, calculated by the economic method on a rental
income basis, increased to 96.3% mainly due to decreased vacancy in supermarkets and shops in Finland and in Swedish shopping center portfolio. The average rent level of new lease agreements made during the year increased moderately compared to the
previous year.

The average rent of the leases that began in 2014 was EUR 22.2/sq. ft. and the average annualized rent of
the leases that ended in 2014 was EUR 23.4/sq. ft. More specifically, in Finland, the average annualized rent increased moderately during 2014 from EUR 25.0/sq. ft. to EUR 25.2/sq. ft., and the occupancy rate increased to 95.6% from 95.1% mainly due
to decreased vacancy. In Sweden, during 2014, the average annualized rent decreased from EUR 23.2/sq. ft. to EUR 22.3/sq. ft., while the occupancy rate rose to 96.1% from 95.1%, mainly due to improved occupancy rate in specific properties.



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##### Table of Contents

Citycons management believes that, as a whole, its existing rental rates
correspond to the current rental market. In Sweden, the economic outlook is positive, retail sales have increased and prime rental growth is expected to continue. Also in Estonia retail sales have developed well but rental growth is expected to
remain flat as rents are already close to their maximum potential. In Finland the market conditions are more challenging and the weaker outlook for retail sales limits the rental growth potential. This may result in leases being negotiated at
somewhat lower rental levels.

Central and Eastern Europe. In Central and Eastern Europe, we own, operate and
develop shopping centers through Atrium, which is listed on the Vienna Stock Exchange and on the Euronext Stock Exchange, Amsterdam. Atrium operates primarily in Poland, the Czech Republic, Slovakia, and Russia, as well as Hungary, Romania and
Latvia. The following data is presented on a 100% basis.



|                                                |  |                    |       |   |      |  |       |      |  |  |       |  
|----------------------------------------------- |  | ------------------ | ----- | - | ---- |  | ----- | ---- |  |  | ----- | -
|                                                |  | As of December 31, |      
|                                                |  | 2012               |       |   | 2013 |  |       | 2014 | 
|Our economic interest in Atrium                 |  |                    | 34.5  | % |      |  | 39.8  | %    |  |  | 41.2  | %
|Shopping centers                                |  |                    | 156   |   |      |  | 153   |      |  |  | 153   |  
|Properties under development                    |  |                    | 1     |   |      |  | 1     |      |  |  |      |  
|GLA (millions of square feet)                   |  |                    | 13.4  |   |      |  | 13.6  |      |  |  | 14.7  |  
|Occupancy rate                                  |  |                    | 97.4  | % |      |  | 97.6  | %    |  |  | 97.1  | %
|Average annualized base rent (Euro per sq. ft.) |  |                    | 13.09 |   |      |  | 13.43 |      |  |  | 13.46 |  



|                                                                                        |  |                                                  |       |   |                    |  |       |      |  |  |       |   |  |  |      |  
|--------------------------------------------------------------------------------------- |  | ------------------------------------------------ | ----- | - | ------------------ |  | ----- | ---- |  |  | ----- | - |  |  | ---- | -
|                                                                                        |  | Year Ended December 31,                          |      
|                                                                                        |  | 2012                                             |       |   | 2013               |  |       | 2014 |  |  | 2014  |  
|                                                                                        |  | (NIS in millions except sameproperty NOI growth) |       |   | (U.S.$ inmillions) | 
|Rental income                                                                           |  |                                                  | 1,324 |   |                    |  | 1,345 |      |  |  | 1,373 |   |  |  | 353  |  
|Net operating income                                                                    |  |                                                  | 898   |   |                    |  | 915   |      |  |  | 968   |   |  |  | 249  |  
|Decrease in value of investment property and investment property under development, net |  |                                                  | (25   | ) |                    |  | (101  | )    |  |  | (803  | ) |  |  | (206 | )
|Same property NOI growth (%)                                                            |  |                                                  | 7.3   |   |                    |  | 3.7   |      |  |  | (0.8  | ) |  |  | N/A  |  

The increase in Atriums rental income by 2.1% for the year ended December 31, 2014
compared to the year ended December 31, 2013 was a result of property acquisition in Poland and completion of development project and rental indexation which was offset by a lower average EUR/NIS exchange rate in 2014 compared to the year 2013.

The increase in Atriums rental income by 1.6% for the year ended December 31, 2013 compared to the year ended
December 31, 2012 was a result of property acquisitions, mainly in Poland, rental indexation and reduction in the level of temporary discounts previously granted to tenants.

For the years ended December 31, 2009 through 2013, we accounted for our interest in Atrium using the equity method. For
further information on our acquisition of Atrium shares during 2014 and 2015 and becoming the sole controlling shareholder of Atrium in 2015, please refer to Note 9(c) and 40(a) to our audited consolidated financial statements included elsewhere in
this Annual Report.



47



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##### Table of Contents

The following table summarizes Atriums leasing activities for the years ended
December 31, 2012, 2013 and 2014:



|                                                                    |  |                         |       |  |      |  |       |      |  |  |       | 
|------------------------------------------------------------------- |  | ----------------------- | ----- |  | ---- |  | ----- | ---- |  |  | ----- | 
|                                                                    |  | Year Ended December 31, |      
|                                                                    |  | 2012                    |       |  | 2013 |  |       | 2014 | 
|Renewals                                                            |  |                         |       |  |      |  |       |      |  |  |       | 
|Number of leases                                                    |  |                         | 394   |  |      |  | 739   |      |  |  | 580   | 
|GLA leased (square feet at end of period, in thousands)             |  |                         | 1,720 |  |      |  | 1,194 |      |  |  | 1,764 | 
|New contracted annualized rent per leased square foot (EUR)         |  |                         | 13.20 |  |      |  | 18.05 |      |  |  | 12.92 | 
|Prior contracted annualized rent per leased square foot (EUR)       |  |                         | 13.90 |  |      |  | 18.49 |      |  |  | 14.03 | 
|New Leases                                                          |  |                         |       |  |      |  |       |      |  |  |       | 
|Number of leases                                                    |  |                         | 565   |  |      |  | 285   |      |  |  | 251   | 
|GLA leased (square feet at end of period, in thousands)             |  |                         | 1,084 |  |      |  | 675   |      |  |  | 561   | 
|Contracted annualized rent per leased square foot (EUR)             |  |                         | 17.37 |  |      |  | 15.60 |      |  |  | 12.7  | 
|Total New Leases and Renewals                                       |  |                         |       |  |      |  |       |      |  |  |       | 
|Number of leases                                                    |  |                         | 959   |  |      |  | 1,024 |      |  |  | 831   | 
|GLA leased (square feet at end of period, in thousands)             |  |                         | 2,804 |  |      |  | 1,869 |      |  |  | 2,325 | 
|Contracted annualized rent per leased square foot (EUR)             |  |                         | 14.82 |  |      |  | 17.16 |      |  |  | 12.81 | 
|Expired Leases                                                      |  |                         |       |  |      |  |       |      |  |  |       | 
|Number of leases                                                    |  |                         | 613   |  |      |  | 647   |      |  |  | 659   | 
|GLA of expiring leases (square feet at end of period, in thousands) |  |                         | 929   |  |      |  | 1,019 |      |  |  | 1,043 | 

A significant portion of Atriums lease agreements are with international retail chains.
Most of the lease agreements into which Atrium enters are linked to various consumer price indices. A growing number of lease agreements include provisions to raise the rent as the tenants income increases.

During the year ending December 31, 2014, Atriums core markets, specifically Poland, the Czech Republic and
Slovakia, continued to enjoy improving local demand, which was reflected in a moderate growth in retail sales. The improvement in the job market and increases in real wages have bolstered local demand, which continues to offset the weaker demand
from other trade partners within the Eurozone. This contrasts with the situation in Russia, which faced economic sanctions imposed by the West, as well as a sharp fall in oil prices during the second half of the year. As a result, while 2014 saw
stable growth in Atriums main operating regions, the Russian economy faced many challenges.

A focus on operational
efficiency in shopping center management resulted in an increase in Atriums operating margin and NOI. In particular, Atriums NOI increased 6.9% from EUR 190.8 million for the year ended December 31, 2013 to EUR
204.0 million for the year ended December, 31 2014. Occupancy rates decreased from 97.6% at the end of 2013 to 97.1% at the end of 2014, and same property NOI decrease by 0.8% to EUR 179.6 million for the year ended December 31, 2014
compared to EUR 181.0 million for the year ended December 31, 2013 mainly due to doubtful debtors in Russia.

One
of the common realities challenging all real estate investors across many markets is that we are currently operating in a low, flat, or in some cases, negative rental growth environment. This situation is further compounded in the Central and
Eastern Europe where some markets are reaching maturity and are therefore becoming more saturated, adding additional pressure on all market participants to improve their professional and property management skills. Atriums management believes
that the ongoing efforts and proven track record of its strong operational teams, particularly when combined with the various pro-active asset management initiatives it continues to implement, will play a significant role in mitigating the impact of
these market conditions.

Germany. We own and operate shopping centers in Germany through our wholly owned
subsidiary, Gazit Germany. We fully consolidate the results of Gazit Germany.



|                                                |  |                    |       |   |      |  |       |      |  |  |       |  
|----------------------------------------------- |  | ------------------ | ----- | - | ---- |  | ----- | ---- |  |  | ----- | -
|                                                |  | As of December 31, |      
|                                                |  | 2012               |       |   | 2013 |  |       | 2014 | 
|Shopping centers                                |  |                    | 6     |   |      |  | 6     |      |  |  | 3     |  
|Other properties                                |  |                    | 1     |   |      |  | 1     |      |  |  | 1     |  
|GLA (millions of square feet)                   |  |                    | 1.1   |   |      |  | 1.1   |      |  |  | 0.5   |  
|Occupancy rate                                  |  |                    | 92.5  | % |      |  | 88.0  | %    |  |  | 84.7  | %
|Average annualized base rent (Euro per sq. ft.) |  |                    | 13.60 |   |      |  | 13.93 |      |  |  | 15.65 |  



48



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##### Table of Contents

|                                                                                                   |  |                                                  |      |   |                    |  |      |      |  |  |      |   |  |  |     | 
|-------------------------------------------------------------------------------------------------- |  | ------------------------------------------------ | ---- | - | ------------------ |  | ---- | ---- |  |  | ---- | - |  |  | --- | 
|                                                                                                   |  | Year Ended December 31,                          |     
|                                                                                                   |  | 2012                                             |      |   | 2013               |  |      | 2014 |  |  | 2014 |  
|                                                                                                   |  | (NIS in millions except sameproperty NOI growth) |      |   | (U.S.$ inmillions) | 
|Rental income                                                                                      |  |                                                  | 83   |   |                    |  | 81   |      |  |  | 75   |   |  |  | 19  | 
|Net operating income                                                                               |  |                                                  | 56   |   |                    |  | 53   |      |  |  | 47   |   |  |  | 12  | 
|Increase (Decrease) in value of investment property and investment property under development, net |  |                                                  | (38  | ) |                    |  | (45  | )    |  |  | 26   |   |  |  | 7   | 
|Same property NOI growth (%)                                                                       |  |                                                  | (5.0 | ) |                    |  | (0.5 | )    |  |  | (8.7 | ) |  |  | N/A | 

Israel. In Israel, we acquire, develop and manage shopping centers through Gazit
Development. In addition to the properties in Israel, Gazit Development owns one shopping center in Bulgaria, as well as parcels of land in Bulgaria and Macedonia. The following data is presented on a fully consolidated basis without reflecting
non-controlling interests.



|                                               |  |                    |        |   |      |  |        |      |  |  |        |  
|---------------------------------------------- |  | ------------------ | ------ | - | ---- |  | ------ | ---- |  |  | ------ | -
|                                               |  | As of December 31, |       
|                                               |  | 2012               |        |   | 2013 |  |        | 2014 | 
|Our economic interest in Gazit Development     |  |                    | 75.0   | % |      |  | 82.5   | %    |  |  | 84.7   | %
|Shopping centers                               |  |                    | 11     |   |      |  | 11     |      |  |  | 11     |  
|Properties under development                   |  |                    | 1      |   |      |  | 2      |      |  |  | 2      |  
|GLA (millions of square feet)                  |  |                    | 1.4    |   |      |  | 1.4    |      |  |  | 1.4    |  
|Occupancy rate                                 |  |                    | 98.6   | % |      |  | 97.1   | %    |  |  | 97.5   | %
|Average annualized base rent (NIS per sq. ft.) |  |                    | 108.14 |   |      |  | 113.09 |      |  |  | 112.87 |  



|                                                                                        |  |                                                  |     |  |                    |  |     |      |  |  |      |  |  |  |     | 
|--------------------------------------------------------------------------------------- |  | ------------------------------------------------ | --- |  | ------------------ |  | --- | ---- |  |  | ---- |  |  |  | --- | 
|                                                                                        |  | Year Ended December 31,                          |    
|                                                                                        |  | 2012                                             |     |  | 2013               |  |     | 2014 |  |  | 2014 | 
|                                                                                        |  | (NIS in millions exceptsame property NOI growth) |     |  | (U.S.$ inmillions) | 
|Rental income                                                                           |  |                                                  | 202 |  |                    |  | 211 |      |  |  | 216  |  |  |  | 56  | 
|Net operating income                                                                    |  |                                                  | 151 |  |                    |  | 159 |      |  |  | 162  |  |  |  | 42  | 
|Increase in value of investment property and investment property under development, net |  |                                                  | 35  |  |                    |  | 28  |      |  |  | 120  |  |  |  | 31  | 
|Same property NOI growth (%)                                                            |  |                                                  | 3.5 |  |                    |  | 3.6 |      |  |  | 2.3  |  |  |  | N/A | 

Brazil. In Brazil, we acquire, develop and manage shopping centers through our
wholly-owned subsidiary, Gazit Brazil. We fully consolidate the results of Gazit Brazil.



|                                               |  |                    |       |   |      |  |       |      |  |  |       |  
|---------------------------------------------- |  | ------------------ | ----- | - | ---- |  | ----- | ---- |  |  | ----- | -
|                                               |  | As of December 31, |      
|                                               |  | 2012               |       |   | 2013 |  |       | 2014 | 
|Shopping centers                               |  |                    | 3     |   |      |  | 4     |      |  |  | 5     |  
|Properties under development                   |  |                    | 1     |   |      |  | 1     |      |  |  | 1     |  
|GLA (millions of square feet)                  |  |                    | 0.25  |   |      |  | 0.35  |      |  |  | 0.51  |  
|Occupancy rate                                 |  |                    | 90.1  | % |      |  | 92.4  | %    |  |  | 89.3  | %
|Average annualized base rent (BRL per sq. ft.) |  |                    | 52.40 |   |      |  | 45.30 |      |  |  | 60.95 |  



|                                                                                                   |  |                         |    |  |                    |  |     |      |  |  |      |   |  |  |    |  
|-------------------------------------------------------------------------------------------------- |  | ----------------------- | -- |  | ------------------ |  | --- | ---- |  |  | ---- | - |  |  | -- | -
|                                                                                                   |  | Year Ended December 31, |   
|                                                                                                   |  | 2012                    |    |  | 2013               |  |     | 2014 |  |  | 2014 |  
|                                                                                                   |  | (NIS in millions)       |    |  | (U.S.$ inmillions) | 
|Rental income                                                                                      |  |                         | 31 |  |                    |  | 34  |      |  |  | 40   |   |  |  | 10 |  
|Net operating income                                                                               |  |                         | 16 |  |                    |  | 18  |      |  |  | 30   |   |  |  | 8  |  
|Increase (Decrease) in value of investment property and investment property under development, net |  |                         | 58 |  |                    |  | (42 | )    |  |  | (17  | ) |  |  | (4 | )



49



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Healthcare Properties

Medical Office Buildings

ProMed. We own and operate medical office buildings in the United States through ProMed, our wholly-owned
subsidiary. We fully consolidate the results of ProMed.



|                                                 |  |                    |       |   |      |  |       |      |  |  |       |  
|------------------------------------------------ |  | ------------------ | ----- | - | ---- |  | ----- | ---- |  |  | ----- | -
|                                                 |  | As of December 31, |      
|                                                 |  | 2012               |       |   | 2013 |  |       | 2014 | 
|Medical office buildings                         |  |                    | 16    |   |      |  | 16    |      |  |  | 4     |  
|GLA (millions of square feet)                    |  |                    | 1.5   |   |      |  | 1.5   |      |  |  | 0.4   |  
|Occupancy rate                                   |  |                    | 96.3  | % |      |  | 96.0  | %    |  |  | 92.7  | %
|Average annualized base rent (U.S.$ per sq. ft.) |  |                    | 30.31 |   |      |  | 30.45 |      |  |  | 39.01 |  



|                                                                                                   |  |                         |     |  |                    |  |     |      |  |  |      |  |  |  |    | 
|-------------------------------------------------------------------------------------------------- |  | ----------------------- | --- |  | ------------------ |  | --- | ---- |  |  | ---- |  |  |  | -- | 
|                                                                                                   |  | Year Ended December 31, |    
|                                                                                                   |  | 2012                    |     |  | 2013               |  |     | 2014 |  |  | 2014 | 
|                                                                                                   |  | (NIS in millions)       |     |  | (U.S.$ inmillions) | 
|Rental income                                                                                      |  |                         | 193 |  |                    |  | 200 |      |  |  | 128  |  |  |  | 33 | 
|Net operating income                                                                               |  |                         | 142 |  |                    |  | 147 |      |  |  | 94   |  |  |  | 24 | 
|Increase (Decrease) in value of investment property and investment property under development, net |  |                         | 83  |  |                    |  | (6  | )    |  |  | 58   |  |  |  | 15 | 

Other Businesses

Dori Group. Gazit Development indirectly holds 84.9% of the share capital and voting rights of U. Dori Group
Ltd., a company listed on the TASE. Prior to April 17, 2011, Gazit-Globe held 36.9% of U. Dori Group Ltd. and on April 17, 2011, it increased its holding in U. Dori Group Ltd. to 73.8% by acquiring the outstanding remaining 50% interest in
Acad that it did not previously own. In June 2011, Gazit-Globe sold 100% of Acad, which held a 73.8% interest in U. Dori Group Ltd., to Gazit Development. In September 2014, Gazit Development invested NIS 130 million in Dori Groups
equity, increasing its stake in Dori Group from 73.9% to 84.9%. For further information on financing provided to Dori Group, please refer to Note 9(g) in our audited consolidated financial statements included elsewhere in this Annual Report. Dori
Group is primarily engaged in the development and construction of residential projects in Israel and Eastern Europe. We fully consolidate the results of Dori Group:



|                                                                       |  |                         |       |  |                    |  |       |      |  |  |       |   |  |  |     |  
|---------------------------------------------------------------------- |  | ----------------------- | ----- |  | ------------------ |  | ----- | ---- |  |  | ----- | - |  |  | --- | -
|                                                                       |  | Year Ended December 31, |      
|                                                                       |  | 2012                    |       |  | 2013               |  |       | 2014 |  |  | 2014  |  
|                                                                       |  | (NIS in millions)       |       |  | (U.S.$ inmillions) | 
|Revenues from sale of buildings, land and construction works performed |  |                         | 1,760 |  |                    |  | 1,569 |      |  |  | 1,355 |   |  |  | 348 |  
|Gross profit (loss)                                                    |  |                         | 40    |  |                    |  | (26   | )    |  |  | (298  | ) |  |  | (77 | )

Results of Operations

The following describe line items from our audited consolidated income statements important in understanding our results of
operations.

Rental income. Rental income consists of rents earned from tenants under lease agreements,
including percentage rents based on tenants sales volume, property tax and operating cost recoveries and incidental income, including lease cancellation payments. Tenant inducements, including rent abatements and the costs of certain
improvements and other incentives, are deducted from rental income on a straight-line basis over the term of the tenants lease in cases where the tenant is considered to be the primary beneficiary of such incentives.

Property operating expenses. Property operating expenses consist primarily of taxes and fees on properties,
repairs and maintenance of properties, salaries and other expenses relating to management of properties, insurance, security and utilities.



50



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##### Table of Contents

Revenues from sale of buildings, land and construction work
performed. Such revenues primarily consist of revenues from construction works performed by Dori Group and revenues from the sale of residential inventory by Dori Group. Beginning in 2013, it also included revenues from First Capitals
residential development activity.

Cost of buildings sold, land and construction work performed. Cost of
buildings sold, land and construction work performed primarily consists of construction work performed and cost of residential inventory sold by Dori Group and First Capital, including the cost of land, raw materials and subcontractors.

Fair Value gain from investment property and investment property under development, net. We apply the fair value
model, as prescribed in IAS 40. Investment property consists primarily of shopping centers, other retail space and medical office buildings. Investment property under development consists of shopping centers under development. Investment property
and investment property under development are also presented at fair value, which has been determined based on valuations principally conducted by accredited independent appraisers with recognized professional expertise and vast experience as to the
location and category of the property being valued, and by management assessments.

General and administrative
expenses. Our general and administrative expenses include primarily salaries and other benefits, consulting and professional fees, depreciation, sales and marketing expenses and office maintenance.

Other income. Other income primarily consists of gain from bargain purchase in connection with acquisitions of
affiliates, which results from shares in these investees having been acquired at a price lower than the fair value of the affiliates identifiable net assets, capital gain and other income.

Other expenses. Other expenses primarily consist of impairment loss, capital loss from property dispositions
(including selling costs), and loss from dilution of interest in affiliates.

Companys share in earnings of
equity-accounted investees, net. Companys share in earnings (losses) of equity-accounted investees, net, primarily consists of our share in the net income (loss) of Atrium. The remainder of our share in earnings (losses) of
equity-accounted investees, net, reflects our share in certain joint ventures, primarily of Equity One, Citycon, First Capital and Dori Group with third parties.

Finance expenses. Finance expenses primarily consist of interest paid on and expenses related to debentures,
convertible debentures and liabilities to financial institutions and others, losses on financial derivatives, loss from early redemption of debentures, unwinding of financial derivatives, and exchange rate differences, net of finance expenses
carried mainly to cost of real estate under development.

Finance income. Finance income primarily consists
of gain from marketable securities, dividend income, interest income, and revaluation of financial derivatives.

Taxes on income (tax benefit). Taxes on income primarily consist of deferred tax benefit or expense, which arises
mainly from changes in deferred tax liability with respect to investment property, as a result of changes in its fair value, as well as from deferred tax resulting from changes in corporate tax rates, deferred taxes resulting from changes in the
fair value of financial derivatives, current tax expenses including from disposal of properties and taxes with respect to previous years.



51



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Year ended December 31, 2014 compared to year ended December 31, 2013



|                                                                                      |  |                        |        |   |           |  |        |                    |  |  |                            |   |  |  |       |   |  |  |       |  
|------------------------------------------------------------------------------------- |  | ---------------------- | ------ | - | --------- |  | ------ | ------------------ |  |  | -------------------------- | - |  |  | ----- | - |  |  | ----- | -
|                                                                                      |  | Year EndedDecember 31, |        |   |           |  |        |                    |  |  | Year EndedDecember 31,2014 |  
|                                                                                      |  | 2013                   |        |   | 2014      |  |        | Increase           |  |  |                            |   | 
|                                                                                      |  | (NIS in millions)      |        |   | Change(%) |  |        | (U.S.$ inmillions) | 
|Rental income                                                                         |  |                        | 5,146  |   |           |  | 4,913  |                    |  |  | (233                       | ) |  |  | (5    | ) |  |  | 1,263 |  
|Property operating expenses                                                           |  |                        | 1,689  |   |           |  | 1,584  |                    |  |  | (105                       | ) |  |  | (6    | ) |  |  | 407   |  
|                                                                                      |  |                        |        |   |           |  |        |                    |  |  |                            |   |  |  |       |   |  |  |       |  
|Net operating rental income                                                           |  |                        | 3,457  |   |           |  | 3,329  |                    |  |  | (128                       | ) |  |  | (4    | ) |  |  | 856   |  
|                                                                                      |  |                        |        |   |           |  |        |                    |  |  |                            |   |  |  |       |   |  |  |       |  
|Revenues from sale of buildings, land and construction works performed                |  |                        | 1,672  |   |           |  | 1,357  |                    |  |  | (315                       | ) |  |  | (19   | ) |  |  | 349   |  
|Cost of buildings sold, land and construction works performed                         |  |                        | 1,688  |   |           |  | 1,660  |                    |  |  | (28                        | ) |  |  | (2    | ) |  |  | 427   |  
|                                                                                      |  |                        |        |   |           |  |        |                    |  |  |                            |   |  |  |       |   |  |  |       |  
|Gross loss from sale of buildings, land and construction works performed              |  |                        | (16    | ) |           |  | (303   | )                  |  |  | (287                       | ) |  |  | 1,794 |   |  |  | (78   | )
|                                                                                      |  |                        |        |   |           |  |        |                    |  |  |                            |   |  |  |       |   |  |  |       |  
|Total gross profit                                                                    |  |                        | 3,441  |   |           |  | 3,026  |                    |  |  | (415                       | ) |  |  | (12   | ) |  |  | 778   |  
|Fair value gain on investment property and investment property under development, net |  |                        | 962    |   |           |  | 1,053  |                    |  |  | 91                         |   |  |  | 9     |   |  |  | 271   |  
|General and administrative expenses                                                   |  |                        | (610   | ) |           |  | (619   | )                  |  |  | (9                         | ) |  |  | 1     |   |  |  | (159  | )
|Other income                                                                          |  |                        | 218    |   |           |  | 55     |                    |  |  | (163                       | ) |  |  | (75   | ) |  |  | 14    |  
|Other expenses                                                                        |  |                        | (74    | ) |           |  | (81    | )                  |  |  | (7                         | ) |  |  | 9     |   |  |  | (21   | )
|Companys share in earnings of equity-accounted investees, net                        |  |                        | 149    |   |           |  | 12     |                    |  |  | (137                       | ) |  |  | (92   | ) |  |  | 3     |  
|                                                                                      |  |                        |        |   |           |  |        |                    |  |  |                            |   |  |  |       |   |  |  |       |  
|Operating income                                                                      |  |                        | 4,086  |   |           |  | 3,446  |                    |  |  | (640                       | ) |  |  | (16   | ) |  |  | 886   |  
|Finance expenses                                                                      |  |                        | (2,185 | ) |           |  | (2,115 | )                  |  |  | 70                         |   |  |  | (3    | ) |  |  | (544  | )
|Finance income                                                                        |  |                        | 549    |   |           |  | 157    |                    |  |  | (392                       | ) |  |  | (71   | ) |  |  | 40    |  
|                                                                                      |  |                        |        |   |           |  |        |                    |  |  |                            |   |  |  |       |   |  |  |       |  
|Income before taxes on income                                                         |  |                        | 2,450  |   |           |  | 1,488  |                    |  |  | (962                       | ) |  |  | (39   | ) |  |  | 382   |  
|Taxes on income                                                                       |  |                        | 265    |   |           |  | 405    |                    |  |  | 140                        |   |  |  | 53    |   |  |  | 104   |  
|                                                                                      |  |                        |        |   |           |  |        |                    |  |  |                            |   |  |  |       |   |  |  |       |  
|Net income                                                                            |  |                        | 2,185  |   |           |  | 1,083  |                    |  |  | (1,102                     | ) |  |  | (50   | ) |  |  | 278   |  
|                                                                                      |  |                        |        |   |           |  |        |                    |  |  |                            |   |  |  |       |   |  |  |       |  



52



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##### Table of Contents

Rental Income

The decrease of NIS 233 million (U.S.$ 60 million), or 5%, in rental income, or decrease of NIS 30 million (U.S.$ 8
million), or 1%, excluding the impact of currency exchange rates, for the year ended December 31, 2014 compared to the year ended December 31, 2013, was due primarily to:



| |  |  | a decrease of NIS 16 million in Citycon primarily from divestments and a weaker Swedish Krona; and
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | a decrease of NIS 10 million in Equity One primarily from disposition of income-producing properties, net of acquisitions; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | a decrease of NIS 68 million in ProMed primarily from disposition of properties.
| | - |  | --------------------------------------------------------------------------------

offset
by:



| |  |  | an increase of NIS 59 million due to acquisitions, the completion of development where average rental rates and recovery terms were higher than the rates and terms of disposed properties as well as from step-ups of
rental rates in First Capital;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Property operating expenses

The decrease of NIS 105 million (U.S.$ 27 million), or 6%, in property operating expenses, or decrease of NIS
31 million (U.S.$ 8 million), or 2%, excluding the impact of currency exchange rates, for the year ended December 31, 2014 compared to the year ended December 31, 2013, was due primarily to:



| |  |  | a decrease of NIS 57 million due to disposition of properties in ProMed, Equity One, Gazit Germany and Citycon.
| | - |  | ---------------------------------------------------------------------------------------------------------------

offset by:



| |  |  | an increase of NIS 28 million primarily from completion of development and redevelopment initiatives and leasing activities;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------

Property operating expenses, as a percentage of rental income, was 32.2% for the year ended December 31, 2014 compared to
32.8% for the year ended December 31, 2013. The decrease in the percentage is derived primarily from Equity One and Brazil due to a decrease of bad debt expenses and from Citycon, primarily from strict property expenses management supported by
a decrease in energy expenses due to a mild winter.

Assuming the average exchange rates of 2013, the net operation rental
income in 2014 would have been unchanged from last year.

Same Property NOI

Same-property NOI is primarily impacted by changes in rental rates, operating expenses and the recovery of the latter from
tenants, and changes in occupancy.

Same-property NOI increased by NIS 52 million, or 1.7% , for the year ended
December 31, 2014 as compared to the year ended December 31, 2013. The increase in same-property NOI was primarily driven by a net increase in rental rates due to rent commencements, renewals, contractual rent increases including
indexation increases, as well as from an increase in the same property occupancy rate and an increase in the operating expenses recovery ratio from tenants and a lower bad debt expense.

Revenues from sale of buildings, land and construction works performed

The decrease of NIS 315 million (U.S.$ 81 million), or 19%, in revenues from sale of buildings, land and construction
works performed, for the year ended December 31, 2014 compared to the year ended December 31, 2013, was due to:



| |  |  | a decrease of NIS 220 million in revenues from construction work performed due to an update of estimates and increases in duration of projects; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a decrease of NIS 98 million in revenues from sale of buildings and land mainly from initial revenues of NIS 103 million which were recognized in 2013 by First Capital.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Cost of buildings sold, land and construction works performed

The decrease of NIS 28 million (U.S.$ 7 million), or 2%, in cost of buildings sold, land and construction works performed,
for the year ended December 31, 2014 compared to the year ended December 31, 2013, was due primarily to:



| |  |  | a decrease of NIS 90 million due to the completion of residential projects in the first quarter of 2014.
| | - |  | --------------------------------------------------------------------------------------------------------

Offset by:



| |  |  | an increase of NIS 68 million due to costs estimates of projects under construction.
| | - |  | ------------------------------------------------------------------------------------

Fair value gain from investment property and investment property under development, net

We apply the fair value model as prescribed in IAS 40. During the year ended December 31, 2014, the fair value gain of our
properties increased by NIS 1,053 million (U.S.$ 271 million), compare with a gain of NIS 962 million, in 2013. The increase in the gain from investment property derives mainly from Gazit Development, ProMed and Gazit Germany and is due a
decrease in capitalization rates in 2014 compared with relatively stable capitalization rates in 2013.

With respect to our
investment properties in the United States, we have experienced an overall increase in the fair value of our properties during 2014. The availability of low cost capital combined with increased demand from both U.S. and foreign investors has made
dominant retail assets in major metropolitan U.S. cities highly sought after. The combined effect of capital flows and low interest rates have led to further cap rate compression during 2014. This compression has been most notable in our target
markets of California, the northeastern United States, and South Florida, all of which are particularly constrained in relation to the supply of dominant retail properties. With respect to our investment properties in Northern Europe, we have
experienced a yield compression in our Swedish market due to improved market conditions and strong investor demand. In our Baltic markets we have experienced yield compression for prime properties due to stronger economic fundamentals. However, in
our Finnish market we have experienced a valuation loss driven by decreasing purchasing-power of consumers and a challenging economic environment resulting in lower market rents, which was offset by moderate yield compression. Lastly, with respect
to our investment properties in Canada, during 2014 we have experienced a net fair value gain which was mainly driven by a moderate compression in the weighted average capitalization rates in the Eastern and Central regions and higher overall
stabilized NOI from the properties across Canada, partially offset by a valuation loss from development property in the Eastern region.

For additional information regarding average capitalization rates and average market rent per square meter used in the
Groups property valuations, by segment, as of December 31, 2014 and December 31, 2013 as well as sensitivity analysis, please refer to Notes 12 and 13 to our audited consolidated financial statements included elsewhere in this Annual
Report.

It is difficult to predict whether these market factors will continue into future periods, and the fair value of
our properties could be adversely impacted to the extent that capitalization rates increase as a result of an increase in borrowing costs or weakened demand for retail properties in the markets in which we operate.

General and administrative expenses

The increase of NIS 9 million (U.S.$ 2 million), or 1%, in general and administrative expenses, or NIS 13 million
(U.S.$ 3 million), or 2%, excluding the impact of currency exchange rates, for the year ended December 31, 2014 compared to the year ended December 31, 2013, was due primarily to an increase in non-recurring employment termination expenses
with respect to senior employees at Equity One and First Capital.

Other income

The decrease of NIS 163 million (U.S.$ 42 million), or 75%, in other income, for the year ended December 31, 2014
compared to the year ended December 31, 2013, was due primarily to:



| |  |  | decrease of NIS 126 million resulting from a gain from bargain purchase on the acquisition of Atriums shares on the stock exchange in 2014 compared to 2013 in which the gain from bargain purchase was with
respect to acquisitions made through an investor from the CPI Group; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| |  |  | In 2013 a gain from bargain purchase of NIS 25 million was recognized due to acquisition of Ronson shares by Dori Group.
| | - |  | ------------------------------------------------------------------------------------------------------------------------

Other expenses

The increase of NIS 7 million (U.S.$ 2 million) or 9% in other expenses for the year ended December 31, 2014 compared
to the year ended December 31, 2013 was due primarily to:



| |  |  | an increase of NIS 7 million in loss on the sale of properties with respect to ProMed, Equity One and First Capital, and
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of NIS 10 million due to amortization of intangible assets allocated to the investment in Dori Group recognized in 2014.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------

offset by:



| |  |  | a decrease of NIS 10 million of loss recognized from dilution in Atrium.
| | - |  | ------------------------------------------------------------------------

Companys share in earnings of equity-accounted investees, net

The decrease of NIS 137 million (U.S.$ 35 million) or 92% in Companys share in earnings of equity-accounted
investees, net, for the year ended December 31, 2014 compared to the year ended December 31, 2013 is comprised mainly of:



| |  |  | the Companys share of Atriums loss in 2014, in an amount of NIS 98 million, compared to earnings of NIS 127 million in 2013. The decrease in Atriums earnings was mainly due to a devaluation
(loss) in the fair value on its investment properties and investment properties under development which was larger in 2014 than in 2013, in a net amount of NIS 280 million (the Companys share), which was offset by lower finance expenses
in 2014 than in 2013 in an amount of NIS 22 million (the Companys share).
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

offset by:



| |  |  | Earnings that the Company recorded in 2014 of NIS 88 million mainly from the fair value gain from investment property partnerships of Citycon, Equity One and First Capital.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Finance expenses

The decrease of NIS 70 million (U.S.$ 18 million), or 3%, in finance expenses, for the year ended December 31, 2014
compared to the year ended December 31, 2013, was due primarily to:



| |  |  | a decrease of NIS 76 million resulting from raising debt in 2013 and 2014 at lower interest rates than the debt settled and a decrease in average interest bearing debt in the aforementioned period; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a decrease of NIS 180 million from liabilities that are linked to the Israeli consumer price index in the year ended December 31, 2014 compared to the year ended December 31, 2013; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a decrease of NIS 15 million due to capitalization of more finance expenses in 2014.
| | - |  | ------------------------------------------------------------------------------------

partially offset by:



| |  |  | an increase of NIS 190 million due to devaluation of financial derivatives (mainly currency swap hedging transactions); and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of NIS 12 million in the loss from early redemption of interest bearing liabilities and financial derivatives.
| | - |  | --------------------------------------------------------------------------------------------------------------------------

Finance income

The decrease of NIS 392 million (U.S.$ 101 million), or 71%, in finance income, for the year ended December 31, 2014
compared to the year ended December 31, 2013, was due primarily to:



| |  |  | and a decrease of NIS 428 million gain from the revaluation of financial derivatives, primarily with respect to currency hedging transactions; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a decrease of NIS 16 million in interest income.
| | - |  | ------------------------------------------------



55



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##### Table of Contents

partially offset by:



| |  |  | an increase of NIS 48 million from the realization of securities and from dividend income.
| | - |  | ------------------------------------------------------------------------------------------

Taxes on income

Taxes on income amounted to NIS 405 million (U.S.$ 104 million) in the year ended December 31, 2014 compared to NIS
265 million in the year ended December 31, 2013. The increase of NIS 140 Million (U.S.$ 36 Million), or 53%, was due mainly to increased deferred tax expenses of NIS 229 million primarily from higher fair value gains from investment
property and investment property under development in 2014 compared with 2013, offset by a change in the Companys expectation regarding the utilization of carryforward tax losses against gains on financial derivatives and marketable securities
in 2013. In 2014, the Group companies current tax expenses totaled NIS 167 million (of which NIS 155 million is with respect to the disposal of properties), net of current tax expenses carried directly to capital reserves, compared
with current tax expenses of NIS 53 million in 2013. Moreover, tax expenses of NIS 9 million were recorded in 2014, with respect to prior years, as same as in 2013.

Year ended December 31, 2013 compared to year ended December 31, 2012



|                                                                                      |  |                        |        |   |                    |  |        |   |  |  |        |   |  |  |      |  
|------------------------------------------------------------------------------------- |  | ---------------------- | ------ | - | ------------------ |  | ------ | - |  |  | ------ | - |  |  | ---- | -
|                                                                                      |  | Year EndedDecember 31, |        |   | Increase(decrease) |  |        |   | 
|                                                                                      |  | 2012                   |        |   | 2013               |  |        |   |  | 
|                                                                                      |  | (NIS in millions)      |        |   | Change (%)         | 
|Rental income                                                                         |  |                        | 5,249  |   |                    |  | 5,146  |   |  |  | (103   | ) |  |  | (2   | )
|Property operating expenses                                                           |  |                        | 1,705  |   |                    |  | 1,689  |   |  |  | (16    | ) |  |  | (1   | )
|                                                                                      |  |                        |        |   |                    |  |        |   |  |  |        |   |  |  |      |  
|Net operating rental income                                                           |  |                        | 3,544  |   |                    |  | 3,457  |   |  |  | (87    | ) |  |  | (2   | )
|                                                                                      |  |                        |        |   |                    |  |        |   |  |  |        |   |  |  |      |  
|Revenues from sale of buildings, land and construction                                |  |                        | 1,760  |   |                    |  | 1,672  |   |  |  | (88    | ) |  |  | (5   | )
|Cost of buildings sold, land and construction works performed                         |  |                        | 1,720  |   |                    |  | 1,688  |   |  |  | (32    | ) |  |  | (2   | )
|                                                                                      |  |                        |        |   |                    |  |        |   |  |  |        |   |  |  |      |  
|Gross profit (loss) from sale of buildings, land and construction works performed     |  |                        | 40     |   |                    |  | (16    | ) |  |  | (56    | ) |  |  | (140 | )
|                                                                                      |  |                        |        |   |                    |  |        |   |  |  |        |   |  |  |      |  
|Total gross profit                                                                    |  |                        | 3,584  |   |                    |  | 3,441  |   |  |  | (143   | ) |  |  | (4   | )
|Fair value gain on investment property and investment property under development, net |  |                        | 1,938  |   |                    |  | 962    |   |  |  | (976   | ) |  |  | (50  | )
|General and administrative expenses                                                   |  |                        | (673   | ) |                    |  | (610   | ) |  |  | 63     |   |  |  | (9   | )
|Other income                                                                          |  |                        | 164    |   |                    |  | 218    |   |  |  | 54     |   |  |  | 33   |  
|Other expenses                                                                        |  |                        | (47    | ) |                    |  | (74    | ) |  |  | (27    | ) |  |  | 57   |  
|Companys share in earnings of equity-accounted investees, net                        |  |                        | 299    |   |                    |  | 149    |   |  |  | (150   | ) |  |  | (50  | )
|                                                                                      |  |                        |        |   |                    |  |        |   |  |  |        |   |  |  |      |  
|Operating income                                                                      |  |                        | 5,265  |   |                    |  | 4,086  |   |  |  | (1,179 | ) |  |  | (22  | )
|Finance expenses                                                                      |  |                        | (2,214 | ) |                    |  | (2,185 | ) |  |  | 29     |   |  |  | (1   | )
|Finance income                                                                        |  |                        | 120    |   |                    |  | 549    |   |  |  | 429    |   |  |  | 358  |  
|                                                                                      |  |                        |        |   |                    |  |        |   |  |  |        |   |  |  |      |  
|Income before taxes on income                                                         |  |                        | 3,171  |   |                    |  | 2,450  |   |  |  | (721   | ) |  |  | (23  | )
|Taxes on income                                                                       |  |                        | 758    |   |                    |  | 265    |   |  |  | (493   | ) |  |  | (65  | )
|                                                                                      |  |                        |        |   |                    |  |        |   |  |  |        |   |  |  |      |  
|Net income                                                                            |  |                        | 2,413  |   |                    |  | 2,185  |   |  |  | (228   | ) |  |  | (9   | )
|                                                                                      |  |                        |        |   |                    |  |        |   |  |  |        |   |  |  |      |  



56



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##### Table of Contents

Rental Income

The decrease of NIS 103 million (U.S.$ 26 million), or 2%, in rental income, or increase of NIS 216 million
(U.S.$ 56 million), or 4%, excluding the impact of currency exchange rates, for the year ended December 31, 2013 compared to the year ended December 31, 2012, was due primarily to:



| |  |  | an increase of NIS 145 million due to acquisitions, the completion of development and redevelopment, increases and step-ups of rental rates in First Capital;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of NIS 47 million in Citycon primarily from acquisitions, completion of development projects and growth of like for like rental income in Citycon; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of NIS 32 million in Equity One primarily from acquisitions, completion of development and redevelopment projects and rent commencements.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------

Property operating expenses

The decrease
of NIS 16 million (U.S.$ 4 million), or 1%, in property operating expenses, or increase of NIS 92 million (U.S.$ 24 million), or 5%, excluding the impact of currency exchange rates, for the year ended December 31, 2013
compared to the year ended December 31, 2012, was due primarily to:



| |  |  | an increase of NIS 100 million due to the growth in GLA associated with properties acquired and the completion of development and redevelopment in 2012 and 2013.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

Property operating expenses, as a percentage of rental income, was 32.8% for the year ended December 31, 2013 compared to 32.5% for the year ended
December 31, 2012. The increase was mainly due to the development and redevelopment of properties, the net operating income with respect to which is affected by the stage they are at, the acquisition of properties with a lower net operating
income margin as of the acquisition date, and current accounting amortization of tenant incentive carried to the rental income line item, starting in the second quarter of 2013.

Same Property NOI

Same-property NOI is
primarily impacted by changes in rental rates, operating expenses and the recovery of the latter from tenants, and changes in occupancy.

Same-property NOI increased by NIS 103 million, or 3.4%, for the year ended December 31, 2013 as compared to the year ended
December 31, 2012. The increase in same-property NOI was primarily driven by a net increase in rental rates due to rent commencements, renewals, contractual rent increases including indexation increases, as well as from higher expense
recovery income due to higher recoverable operating expenses and an increase in the expense recovery ratios, partially offset by higher bad debt expense and lower lease termination fees.

Revenues from sale of buildings, land and construction work performed

The decrease of NIS 88 million (U.S.$ 23 million), or 5%, in revenues from sale of buildings, land and construction work performed, for
the year ended December 31, 2013 compared to the year ended December 31, 2012, was due to:



| |  |  | a decrease of NIS 216 million in revenues from construction work in Dori Group mainly due to less construction work in which Dori Group was engaged in compared to the year ended December 31, 2012 primarily
resulted from a decrease in projects backlog.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

partially offset by:



| |  |  | an increase of NIS 103 million due to initial revenues in the year ended December 31, 2013 from residential inventory in First Capital; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of NIS 25 million in revenues from sale of buildings and land in Dori Group compared to the year ended December 31, 2012.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------

Cost of buildings sold, land and construction work performed

The decrease of NIS 32 million (U.S.$ 8 million), or 2%, in cost of buildings sold, land and construction work performed, for the year
ended December 31, 2013 compared to the year ended December 31, 2012, was due primarily to:



| |  |  | a decrease of NIS 134 million due to costs arising from less construction work in which Dori Group was engaged in compared to the year ended December 31, 2012 and due to an increase in the costs estimates in
projects under construction.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



57



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offset by:



| |  |  | an increase of NIS 93 million due to the initial costs in the year ended December 31, 2013 from the sale of residential inventory by First Capital; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of NIS 5 million due to costs arising from the sale of buildings and land in Dori Group compared to the year ended December 31, 2012.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------

Fair value gain from investment property and investment property under development, net

We apply the fair value model as prescribed in IAS 40. During the year ended December 31, 2013, the fair value of our properties increased
by NIS 962 million (U.S.$ 247 million), due mainly to increase in the fair value of Equity Ones, Citycons and First Capitals properties. This compares to a fair value gain during the year ended December 31, 2012 of NIS
1,938 million. The decrease of NIS 976 million (U.S.$ 251 million) in the fair value gain in 2013 compared to 2012 was due mainly to First Capital, deriving from a decrease in capitalization rates in 2012 compared with relatively stable
capitalization rates in 2013.

With respect to our investment properties in the United States, we experienced an overall increase in the
fair value of our properties during 2013. A significant factor in the overall increase is compression in the weighted average capitalization rates caused by historically low borrowing costs and increased demand for dominant retail properties in the
markets in which we operate. This compression has been most notable in our target markets of California, the northeastern United States, and South Florida, all of which are particularly constrained in relation to the supply of dominant retail
properties. With respect to our investment properties in Northern Europe, weighted average capitalization rates and average market rents in our Finnish and Swedish markets remained largely unchanged during 2013, however we experienced a yield
compression and increase in the average market rents in our Baltic countries market due to strong economic fundamentals. Lastly, with respect to our investment properties in Canada, we experienced during 2013 a moderate compression in weighted
average capitalization rates, which along with certain improvement in the stabilized NOI from the properties, were the main drivers to the fair value gain in Canada.

It is difficult to predict whether these market factors will continue into future periods, and the fair value of our properties could be
adversely impacted to the extent that capitalization rates increase as a result of an increase in borrowing costs or weakened demand for retail properties in the markets in which we operate.

General and administrative expenses

The
decrease of NIS 63 million (U.S.$ 16 million), or 9%, in general and administrative expenses, or NIS 94 million (U.S.$ 24 million), or 4%, excluding the impact of currency exchange rates, for the year ended December 31, 2013
compared to the year ended December 31, 2012, was due primarily to a decrease at Equity One and Citycon, as a result of a decrease in legal expenses, professional consultancy expenses and salary expenses, and additional saving in administrative
expenses as a result of structural changes in 2012, which included the privatization of Gazit America.

Other income

The increase of NIS 54 million (U.S.$ 14 million), or 33%, in other income, for the year ended December 31, 2013 compared to the year
ended December 31, 2012, was due primarily to:



| |  |  | increase of NIS 39 million resulting from a gain from bargain purchase on the acquisition of Atriums shares from CPI in 2013 compared to 2012 in which the gain from bargain purchase was with respect to
acquisitions made through trades on the Vienna Stock Exchange; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | increase of NIS 25 million resulting from a gain from bargain purchase of Ronson shares by Dori Group.
| | - |  | ------------------------------------------------------------------------------------------------------

Other expenses

The increase of NIS
27 million (U.S.$ 7 million) or 57% in other expenses for the year ended December 31, 2013 compared to the year ended December 31, 2012 was due primarily to an increase of NIS 32 million in loss on sale of properties with respect
to Equity One and First Capital.

Companys share in earnings of equity-accounted investees, net

The decrease of NIS 150 million (U.S.$ 39 million) or 50% in Companys share in earnings of equity-accounted investees, net, for the
year ended December 31, 2013 compared to the year ended December 31, 2012 is comprised mainly of:



| |  |  | the Companys share of Atriums earnings in 2013, in an amount of NIS 127 million, compared to NIS 159 million in 2012. The decrease in Atriums earnings was mainly due to a higher devaluation
(loss) in the fair value on its investment properties (primarily with respect to lands) in 2013, compared to 2012; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | in 2012, the Company included the Companys share of Royal Senior Cares earnings in an amount of NIS 63 million primarily with respect to a capital gain from the sale of 12 senior housing facilities.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Finance expenses

The
decrease of NIS 29 million (U.S.$ 7 million), or 1%, in finance expenses, for the year ended December 31, 2013 compared to the year ended December 31, 2012, was due primarily to:



| |  |  | a decrease of NIS 116 million resulting from raising debt in 2012 and 2013 at lower interest rates than the debt settled and a decrease in average interest bearing debt in the aforementioned period.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



58



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partially offset by:



| |  |  | an increase of NIS 63 million in the effective interest rate of liabilities that are linked to the Israeli consumer price index in the year ended December 31, 2013 compared to the year ended December 31,
2012;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of NIS 19 million due to capitalization of more finance expenses in 2012.
| | - |  | -------------------------------------------------------------------------------------

Finance income

The increase of NIS 429 million (U.S.$ 110 million), or 358%, in finance income, for the year ended December 31, 2013
compared to the year ended December 31, 2012, was due primarily to:



| |  |  | an increase of NIS 418 million gain from the revaluation of financial derivatives, primarily with respect to currency hedging transactions; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of NIS 39 million in interest income.
| | - |  | -------------------------------------------------

partially offset by:



| |  |  | a decrease of NIS 23 million from the realization of securities and from dividend income.
| | - |  | -----------------------------------------------------------------------------------------

Taxes on
income

Taxes on income amounted to NIS 265 million (U.S.$ 68 million) in the year ended December 31, 2013 compared to NIS
758 million in the year ended December 31, 2012. The decrease was due mainly to deferred tax expenses of NIS 203 million primarily with respect to a decrease in deferred tax expenses amounting to NIS 303 million arising from a
lower increase in the fair value of investment property and investment property under development in 2013 compared with 2012, changes in the Companys and a subsidiarys estimation, net of the ability to offset tax losses against gains
from hedge transactions and others, in the amount of NIS 72 million, and a total of NIS 104 million resulting from a decrease in the tax rate in Finland starting in 2014. Our current tax expenses totaled NIS 53 million in the
reporting period, compared with expenses of NIS 19 million in 2012.



|B. | Liquidity and Capital Resources
|-- | -------------------------------

We conduct the substantial majority of our income
producing property operations in the United States, Canada, Northern Europe and Central and Eastern Europe through our public subsidiaries and affiliates. We also conduct our real estate development and construction operations in Israel and Eastern
Europe through our public subsidiary, Dori Group. We conduct the remainder of our operations, including our shopping center business in Israel, Germany and Brazil and our medical office building business in the United States, through privately owned
subsidiaries.

Our public subsidiaries and affiliates have traditionally satisfied their own short-term liquidity and
long-term capital requirements in their local markets. We or our wholly-owned subsidiaries have from time to time purchased their equity when they have issued equity in their local public markets. In addition, while Gazit-Globe has not generally
made shareholder loans to our principal public subsidiaries and affiliates, Equity One, First Capital, Citycon or Atrium, Gazit-Globe has in the past invested in convertible debentures issued by First Capital, Citycon and Atrium.

The short-term liquidity requirements of our public subsidiaries and affiliates and of Gazit-Globe and its wholly-owned
subsidiaries consist primarily of normal recurring operating expenses, regular debt service requirements (including debt service relating to additional or replacement debt, as well as scheduled debt maturities), recurring company expenditures, such
as general and administrative expenses, non-recurring company expenditures (such as tenant improvements and tenant-specific redevelopment) and dividends payable by our public subsidiaries and affiliates to their shareholders and by Gazit-Globe to
our shareholders. Historically, these requirements have been satisfied principally through cash generated from operations and, where necessary, short-term borrowings under credit facilities. In addition, where necessary, we use proceeds from debt
and equity offerings to fund our dividend payments. Due to the nature of our business, we and our subsidiaries typically generate significant amounts of cash from operations.

The long-term capital requirements of our public subsidiaries (other than Dori Group) and affiliates and of Gazit-Globe and its
private subsidiaries consist primarily of maturities under long-term debt, development and redevelopment costs and the costs related to growing our business, including acquisitions. Historically, these requirements have been funded through a
combination of sources, including additional and replacement secured and unsecured credit facilities, mortgages, proceeds from the issuance of additional debt, equity and convertible securities and proceeds from the recycling of capital.



59



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In addition to the sources described above, Gazit-Globe and its wholly owned
subsidiaries finance their operations from, among other things, dividends and/or interest payments received from Equity One, First Capital, Citycon, and Atrium. In the year ended December 31, 2014, we received dividend payments in the amount of
NIS 764 million (U.S.$ 197 million) from these subsidiaries and affiliate. In 2013, we received dividend payments in the amount of NIS 690 million from these subsidiaries. In 2012, we received dividend payments in the amount of NIS
675 million from these subsidiaries and interest payments in the amount of NIS 9 million on account of debt securities that we held in Citycon.

Because a significant portion of our operations are conducted through public subsidiaries and affiliates, we believe that the
most meaningful way to present our sources of liquidity and our capital resources is by referring on a separate basis to Gazit-Globe and its private subsidiaries, and to each of our principal public subsidiaries and affiliates.

As of December 31, 2014, our available liquid assets on a consolidated basis, including short term investments, totaled
NIS 1.3 billion (U.S.$ 339 million). As of December 31, 2014, we had revolving credit lines on a consolidated basis in the total amount of NIS 11.9 billion (U.S.$ 3.1 billion), of which we had drawn a total of NIS 1.7 billion (U.S.$ 0.4
billion) and had NIS 10.2 billion (U.S.$ 2.6 billion) available for immediate drawdown. In total, our liquid assets and approved unutilized credit facilities as of December 31, 2014 amounted to NIS 11.5 billion (U.S.$ 3.0 billion) on a
consolidated basis. As of December 31, 2014, we also had on a consolidated basis unencumbered investment property which was carried on our books at its fair value of NIS 44.4 billion (U.S.$ 11.4 billion). Our interest-bearing debt on a
consolidated basis was NIS 36.4 billion (U.S.$ 9.3 billion) (excluding NIS 1.3 billion (U.S.$ 322 million) of convertible debentures) as of December 31, 2014.

As of December 31, 2014, we had a working capital deficiency of NIS 2,079 million (U.S.$ 533 million) on a
consolidated basis. We believe that the above-mentioned sources, including our revolving, approved credit lines (under which NIS 10.2 billion (U.S.$ 2.6 billion) was available for immediate drawdown as of December 31, 2014) on which we may draw
to pay down our current liabilities if we do not refinance them, together with the positive cash flow generated from operating activities, will allow us to repay current liabilities when due.

As of December 31, 2014, the available liquid assets of Gazit-Globe and its private subsidiaries on a consolidated basis,
including short term investments, totaled NIS 428 million (U.S.$ 110 million). As of December 31, 2014, Gazit-Globe and its private subsidiaries had revolving credit lines on a consolidated basis in the total amount of NIS 4.1 billion
(U.S.$ 1.1 billion), of which they had drawn a total of NIS 0.9 billion (U.S.$ 0.2 billion) and had NIS 3.2 billion (U.S.$ 0.8 billion) available for immediate drawdown. In total, the liquid assets and approved unutilized credit facilities of
Gazit-Globe and its private subsidiaries as of December 31, 2014, amounted to NIS 3.7 billion (U.S.$ 0.9 billion) on a consolidated basis. As of December 31, 2014, Gazit-Globe and its private subsidiaries also had on a consolidated basis
unencumbered investment property which was carried on our books at its fair value of NIS 1.8 billion (U.S.$ 0.5 billion). The interest-bearing debt of Gazit-Globe and its private subsidiaries on a consolidated basis was NIS 13.9 billion (U.S.$ 3.6
billion) as of December 31, 2014.

Credit Facilities and Indebtedness of Gazit-Globe and its Private Subsidiaries

We have set forth below information regarding the credit facilities and other indebtedness of Gazit-Globe and its private
subsidiaries. As of December 31, 2014, Gazit-Globe and its private subsidiaries had outstanding debentures in the aggregate amount of NIS 10.9 billion (U.S.$ 2.8 billion) and indebtedness to financial institutions in the aggregate amount of NIS
3.0 billion (U.S.$ 0.8 billion). As of December 31, 2013, Gazit-Globe and its private subsidiaries had outstanding debentures in the aggregate amount of NIS 10.8 billion (U.S.$ 2.8 billion) and indebtedness to financial institutions in the
aggregate amount of NIS 3.9 billion (U.S.$ 1.0 billion).



60



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The following table sets forth information regarding the credit facilities and
other indebtedness to which Gazit-Globe and its private subsidiaries are party as of December 31, 2014:



|                        |  |                 |  |                                            |       |  |                 |  |     |                                       |  |  |                                   |  |  |                             |       |  |  |  |     |  
|----------------------- |  | --------------- |  | ------------------------------------------ | ----- |  | --------------- |  | --- | ------------------------------------- |  |  | --------------------------------- |  |  | --------------------------- | ----- |  |  |  | --- | -
|Facilities              |  | Denomination    |  | CarryingAmount ofLiability(NIS inmillions) |       |  | Maturity(Years) |  |     | AggregateAvailability(NIS inmillions) |  |  | AmountOutstanding(NIS inmillions) |  |  | WeightedAverageInterestRate |      
|Revolving Facilities    |  | Various(1)      |  |                                            | 861   |  |                 |  | 2.1 |                                       |  |  | 3,234                             |  |  |                             | 4,127 |  |  |  | 2.6 | %
|Term Loan               |  | EUR             |  |                                            | 472   |  |                 |  | 4.1 |                                       |  |  | N/A                               |  |  |                             | N/A   |  |  |  | 2.7 | %
|Term Loan               |  | U.S.$           |  |                                            | 687   |  |                 |  | 9.6 |                                       |  |  | N/A                               |  |  |                             | N/A   |  |  |  | 5.8 | %
|Term Loans              |  | U.S.$           |  |                                            | 260   |  |                 |  | 7.2 |                                       |  |  | N/A                               |  |  |                             | N/A   |  |  |  | 7.0 | %
|Fixed-Rate mortgages    |  | NIS+Israeli CPI |  |                                            | 649   |  |                 |  | 5.0 |                                       |  |  | N/A                               |  |  |                             | N/A   |  |  |  | 2.6 | %
|Floating-Rate mortgages |  | NIS             |  |                                            | 55    |  |                 |  | 0.7 |                                       |  |  | N/A                               |  |  |                             | N/A   |  |  |  | 3.3 | %
|                        |  |                 |  |                                            |       |  |                 |  |     |                                       |  |  |                                   |  |  |                             |       |  |  |  |     |  
|Total                   |  |                 |  |                                            | 2,984 |  |                 |  |     |                                       |  |  |                                   |  |  |                             |       |  |  |  |     |  
|                        |  |                 |  |                                            |       |  |                 |  |     |                                       |  |  |                                   |  |  |                             |       |  |  |  |     |  



|(1) | NIS 26 million is denominated in EUR, NIS 332 million is denominated in C$ and NIS 397 million is denominated in U.S.$. and the remainder is denominated in NIS net of NIS 32 million of deferred
expenses.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table sets forth information regarding Gazit-Globes outstanding debentures as
of December 31, 2014:



|                                             |  |                      |      |  |                                   |  |        |                                 |  |  |                       |   |  |               |      |   |                                   |  |      |  |  |                            
|-------------------------------------------- |  | -------------------- | ---- |  | --------------------------------- |  | ------ | ------------------------------- |  |  | --------------------- | - |  | ------------- | ---- | - | --------------------------------- |  | ---- |  |  | ---------------------------
|Series                                       |  | Par ValueOutstanding |      |  | Balance in theFinancialStatements |  |        | Type of Interestand Annual Rate |  |  | EffectiveInterestRate |   |  | FinalMaturity |      |   | Linkage Basis Terms/Denominations
|                                             |  | (NIS inmillions)     |      |  | (NIS inmillions)                  |  |        |                                 |  |  |                       |   |  |               |      |   |                                  
|Series A                                     |  |                      | 164  |  |                                   |  | 132    |                                 |  |  | 6.50                  | % |  |               | 6.18 | % |                                   |  | 2017 |  |  | U.S. dollar                
|Series B                                     |  |                      | 114  |  |                                   |  | 98     |                                 |  |  | 2.17                  | % |  |               | 2.27 | % |                                   |  | 2016 |  |  | Euro                       
|                                             |  |                      |      |  |                                   |  |        |                                 |  |  | EURIBOR+2             | % |  |               |      |   |                                   |  |      |  |  |                            
|Series C                                     |  |                      | 766  |  |                                   |  | 954    |                                 |  |  | 4.95                  | % |  |               | 4.88 | % |                                   |  | 2018 |  |  | increase in the Israeli CPI
|Series D                                     |  |                      | 2069 |  |                                   |  | 2463   |                                 |  |  | 5.10                  | % |  |               | 5.02 | % |                                   |  | 2021 |  |  | increase in the Israeli CPI
|Series E                                     |  |                      | 556  |  |                                   |  | 548    |                                 |  |  | 0.95                  | % |  |               | 1.45 | % |                                   |  | 2017 |  |  | None/NIS                   
|                                             |  |                      |      |  |                                   |  |        |                                 |  |  | TELBOR+0.7            | % |  |               |      |   |                                   |  |      |  |  |                            
|Series F                                     |  |                      | 570  |  |                                   |  | 567    |                                 |  |  | 6.40                  | % |  |               | 6.73 | % |                                   |  | 2016 |  |  | None/NIS                   
|Series I                                     |  |                      | 1223 |  |                                   |  | 1441   |                                 |  |  | 5.30                  | % |  |               | 5.58 | % |                                   |  | 2018 |  |  | increase in the Israeli CPI
|Series J (Secured)                           |  |                      | 727  |  |                                   |  | 847    |                                 |  |  | 6.50                  | % |  |               | 5.76 | % |                                   |  | 2019 |  |  | increase in the Israeli CPI
|Series K                                     |  |                      | 2653 |  |                                   |  | 2937   |                                 |  |  | 5.35                  | % |  |               | 4.35 | % |                                   |  | 2024 |  |  | increase in the Israeli CPI
|Series L                                     |  |                      | 865  |  |                                   |  | 881    |                                 |  |  | 4.00                  | % |  |               | 3.82 | % |                                   |  | 2027 |  |  | increase in the Israeli CPI
|Non-listed issued by wholly-owned subsidiary |  |                      | 17   |  |                                   |  | 20     |                                 |  |  | 4.57                  | % |  |               | 4.98 | % |                                   |  | 2015 |  |  | increase in the Israeli CPI
|                                             |  |                      |      |  |                                   |  |        |                                 |  |  |                       |   |  |               |      |   |                                   |  |      |  |  |                            
|Total                                        |  |                      |      |  |                                   |  | 10,888 |                                 |  |  |                       |   |  |               |      |   |                                   |  |      |  |  |                            
|                                             |  |                      |      |  |                                   |  |        |                                 |  |  |                       |   |  |               |      |   |                                   |  |      |  |  |                            

Gazit-Globes revolving lines of credit and its term loan are secured by pledges of its
shares of its public subsidiaries and affiliates. Gazit-Globes Series J notes are secured by interests in properties owned by Gazit Development. For further information on the debentures terms and maturity table see Note 20 to our
audited consolidated financial statements included elsewhere in this Annual Report.



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The terms of certain of the debt instruments set forth in the table above and the credit
facilities with Israeli banks contain covenants, include: (i) maintenance of a ratio of actual drawn credit to value of securities (listed securities of public subsidiaries and affiliates of Gazit-Globe) of 47.5% to 91%, (ii) maintenance
of minimum shareholders equity excluding non-controlling interests of NIS 3.75 billion for Gazit-Globe on a consolidated basis, (iii) maintenance of a ratio of net interest bearing liabilities to value of total assets, based on
consolidated financial statements, not in excess of 75%, (iv) maintenance of a ratio of net interest bearing liabilities to value of total assets, on an expanded solo basis, not in excess of 77.5% based on the equity method for investments in
investees, (v) a requirement that shareholders equity for Atrium (attributable to equity holders of Atrium) not be less than EUR 1.5 billion, (vi) maintenance of a ratio of Atriums net interest bearing liabilities to total
assets not above 45%, (vii) maintenance of a ratio of annual dividend from First Capital shares which are held as collateral, to interest expense on actual drawn credit, over any three consecutive quarters shall not be less than 1.5 (or 1.75,
subject to shareholders equity lower than NIS 5.5 billion or if the ratio of the consolidated net financial debt exceeds 62.5%), (viii) Company maintenance of average quarterly EPRA Earnings (FFO calculated according to EPRA), over any two
consecutive quarters, will be not less than NIS 60 million, (ix) maintenance of a ratio of Citycons equity (including capital loans, but excluding non-controlling interests, the fair value of derivatives and the tax effect thereof)
to Citycons total assets of not less than 30%, (x) maintenance of a ratio of Citycons EBITDA (with certain adjustments) to Citycons net financial expenses of not less than 1.6, (xi) maintenance of the percentage of First
Capitals shares pledged will be no less than 26% (20% on a diluted basis and, if there is another holder of First Capitals shares who owns over 19.99% of its share capital, the Company will pledge additional shares such that the
Companys proportion shall exceed such amount by at least 10%, (xii) but in no event less than 34% of First Capitals share capital, (xiii) maintenance of a ratio of First Capitals net financial debt proportional to the
shares pledged, with the addition of the leverage that is reflected by the amount utilized out of the relevant credit facility, to First Capitals EBITDA not in excess of 14.2 and not in excess of 13.5 over any three consecutive quarters,
(xiv) maintenance of a ratio of First Capitals EBITDA to First Capitals financial expenses of not less than 1.55x or 1.75x during three consecutive quarters, (xv) maintenance of the ratio First Capitals net financial debt
proportional to the shares pledged, with the addition of the utilized credit out of the total credit facility, to the proportion of First Capitals real estate value (by the ratio of First Capitals shares that are pledged) shall not
exceed 82% and shall not exceed 80% over any three consecutive quarters, (xvi) the ratio of Equity Ones EBITDA (as adjusted) to Equity Ones finance expenses shall not be less than 1.65, (xvii) the ratio of the sum of Equity
Ones net interest bearing debt and the utilized (outstanding amount) under the relevant credit facility to Equity Ones consolidated adjusted EBITDA shall not exceed 14, and the ratio of the interest bearing debt and the outstanding
amount under the credit facility to Equity Ones consolidated NOI shall not exceed 13, (xviii) maintenance of the ratio of actual drawn credit to value of securities (pledged Citycon shares whose securities value is the average of its
market value and net asset value) shall not exceed 70%, (xix) maintenance of the ratio of Citycon shares used as collateral shall not be less than 30% of Citycons share capital, (xx) maintenance of the ratio of EQY shares pledged or
not pledged to any party shall not be less than 28% of EQYs share capital on a fully diluted basis, and ratio of EQY shares used as collateral to bank shall not be less than 20% from EQYs fully diluted share capital., (xxi) ratio of
dividends from Equity One shares which are held as collateral, to interest expense on actual drawn credit, shall not be less than 1.25 over any three consecutive quarters, (xxii) ratio of Equity Ones interest bearing debt proportional to
the shares pledged, with the addition of the utilized credit out of the total credit facility, to the proportion Equity Ones real estate value (by the ratio of Equity Ones shares that are pledged) shall not exceed 82.5%,
(xxiii) maintenance of the ratio of actual drawn credit to value of securities (Equity Ones shares by average of market value and net asset value) shall not exceed 70% and (xxiv) the number of shares pledged to the bank shall not be
less than 20% of the issued and paid up share capital of CTY and also that, in the event of financial institution who does not manage third parties funds for any third party that holds 15% or more of CTYs share capital, the Company shall
pledge additional CTY shares to the bank so that the pledged shares as a percentage of the total issued and paid up capital of CTY shall be at least 5% higher than the percentage held by the aforementioned financial institution of the issued and
paid up capital of CTY, but not more than 30.1% of the issued and paid up capital of CTY. As of December 31, 2014, Gazit-Globe was in compliance with all of the covenants that were in effect at such time.

In addition, some of Gazit Globes credit facilities also include additional customary conditions requiring their
immediate repayment. Such customary conditions, include, but are not limited to: the change of control in the Company, consolidated subsidiaries or in companies whose securities are pledged to secure the facility, structural changes, certain
material legal proceedings (including with respect to liquidation, receivership and assets sale proceedings), and cessation of activities.



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As part of the issuance of debentures (series L), the Company has agreed to
comply with the following covenants: maintenance of minimum shareholders equity (excluding non-controlling interests) of U.S.$ 650 million during every four consecutive quarters; a ratio of net financial debt to total assets of less than
80% during every four consecutive quarters; the credit rating (Israeli scale) in the last of the said four quarters shall be not less than BBB- by S&P Maalot and Baa3 by Midroog: absence of change of control; and, any event in which would cause
the Company to be required to immediately redeem any of its other listed debentures in an amount no less of the greater of (i) NIS 200 million, and (ii) 10.0% of its shareholders equity (excluding non-controlling interests),
will trigger the immediate redemption of the debentures (series L).

In addition for our debentures (series K), the
Company has agreed to comply with the following covenants: maintenance of minimum shareholders equity (net of non-controlling interests) of U.S.$ 500 million during four consecutive quarters; a ratio of net interest-bearing debt to total
assets not to exceed 80% during four consecutive quarters; the credit rating of its debentures in the last of the four abovementioned quarters shall be higher than S&P Maalots BBB- rating and Midroogs Baa3 rating; and the absence of
change in control. In addition, any event in which would cause the Company to be required to immediately redeem any of its other listed debentures in an amount of at least the greater of: (i) NIS 300 million and (ii) 12.5% of
shareholders equity (net of non-controlling interests) will trigger the immediate redemption of the debentures (series K). As of the reporting rate, the Company is in compliance with the above covenants.

We believe, based on currently proposed plans and assumptions relating to Gazit-Globes operations, that its existing
financial arrangements will be sufficient to satisfy its cash requirements for at least the next twelve months.

Credit Facilities
and Other Indebtedness of Other Group Entities

We have set forth below information regarding the indebtedness of other group
entities.

Equity One

The following table sets forth information regarding Equity Ones indebtedness as of December 31, 2014:



|                                                                    |  |              |  |                         |      |  |                                  |  |      |                                               |  |  |                 |  |  |  |     | 
|------------------------------------------------------------------- |  | ------------ |  | ----------------------- | ---- |  | -------------------------------- |  | ---- | --------------------------------------------- |  |  | --------------- |  |  |  | --- | 
|Debt Instrument                                                     |  | Denomination |  | AverageInterestRate (%) |      |  | AverageEffectiveInterest Rate(%) |  |      | CarryingAmount ofLiability(U.S.$ inthousands) |  |  | Maturity(years) | 
|Unsecured debentures                                                |  | U.S.$        |  |                         | 5.02 |  |                                  |  | 5.07 |                                               |  |  | 727,328         |  |  |  | 4.3 | 
|Mortgages                                                           |  | U.S.$        |  |                         | 6.03 |  |                                  |  | 5.40 |                                               |  |  | 309,140         |  |  |  | 4.4 | 
|Unsecured Term Loan (U.S.$ 250 million) (1)                         |  | U.S.$        |  |                         | 2.62 |  |                                  |  | 2.62 |                                               |  |  | 250,000         |  |  |  | 4.1 | 
|Unsecured credit facilities: Bank Syndicate
(U.S.$ 600 million) (2) |  | U.S.$        |  |                         | 1.22 |  |                                  |  | 1.22 |                                               |  |  | 37,000          |  |  |  | 4.0 | 
|City National Bank of Florida ($5 million)(3)                       |  | U.S.$        |  |                         |     |  |                                  |  |     |                                               |  |  |                |  |  |  | 0.4 | 
|                                                                    |  |              |  |                         |      |  |                                  |  |      |                                               |  |  |                 |  |  |  |     | 
|Total                                                               |  |              |  |                         |      |  |                                  |  |      |                                               |  |  | 1,323,468       |  |  |  |     | 
|                                                                    |  |              |  |                         |      |  |                                  |  |      |                                               |  |  |                 |  |  |  |     | 



|(1) | Interest rate represents the effective fixed interest rate according to interest rate swap transactions entered into by Equity One.
|--- | -----------------------------------------------------------------------------------------------------------------------------------

|(2) | As of December 31, 2014, U.S.$ 598 million was the maximum availability of which U.S.$ 37 million was drawn.
|--- | ------------------------------------------------------------------------------------------------------------

|(3) | As of December 31, 2014, the credit facility was unutilized.
|--- | ------------------------------------------------------------

The terms of
certain of the debt instruments set forth in the tables above contain covenants, including: (i) maintenance of a ratio of total debt to total assets not in excess of 60%, (ii) maintenance of a ratio of secured debt to value of total assets
not in excess of 40%, (iii) maintenance of a ratio of EBITDA to debt service (principal and interest payments) at a minimum level of 1.50x, (iv) maintenance of a ratio of unsecured debt to unsecured assets not in excess of 60%,
(v) maintenance of a ratio of NOI deriving from non-pledged assets to interest on unsecured debt at a minimum level of 1.75x, (vi) maintenance of a ratio of the amount of investments in non-income-producing properties (with respect to
investment in vacant land, properties under development, mortgage loans, equity securities and investments in unconsolidated affiliates) to Equity Ones total assets not in excess of 35%, (vii) budgeted development investments are not to
exceed 20% of the total assets value, and (viii) investments in mortgage loans and mezzanine loans are not to exceed 10% of the total asset value. As of December 31, 2014, Equity One was in compliance with all of these covenants.



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In light of the resources that are available to Equity One, mainly unutilized and
committed credit facilities available for immediate drawdown in the amount of U.S.$ 566 million (NIS 2,201 million) as of December 31, 2014, and cash and cash equivalents in the amount of U.S.$ 27.7 million (NIS 108 million) as of
December 31, 2014, together with the addition of the positive cash flows from operating activities, we believe that Equity One has sufficient cash and resources to cover its contractual obligations for the next year. In the future, we expect
that Equity One will meet its contractual obligations through a combination of sources including additional and replacement secured and unsecured borrowings, proceeds from the issuance of additional debt or equity securities, capital from
institutional partners that desire to form joint venture relationships with Equity One and proceeds from property dispositions.

First
Capital

The following table sets forth information regarding First Capitals indebtedness as of December 31, 2014:



|                                               |  |              |  |  |                         |  |      |                                  |  |  |                                             |  |  |                 |           |  |  |  |     | 
|---------------------------------------------- |  | ------------ |  |  | ----------------------- |  | ---- | -------------------------------- |  |  | ------------------------------------------- |  |  | --------------- | --------- |  |  |  | --- | 
|Debt Instrument                                |  | Denomination |  |  | AverageInterestRate (%) |  |      | AverageEffectiveInterest Rate(%) |  |  | CarryingAmount ofLiability (C$in thousands) |  |  | Maturity(years) |          
|Unsecured debentures (1)                       |  | C$           |  |  |                         |  | 4.71 |                                  |  |  | 4.81                                        |  |  |                 | 2,149,174 |  |  |  | 7.0 | 
|Unsecured convertible debentures               |  | C$           |  |  |                         |  | 5.08 |                                  |  |  | 6.35                                        |  |  |                 | 373,277   |  |  |  | 3.7 | 
|Mortgages                                      |  | C$           |  |  |                         |  | 5.00 |                                  |  |  | 4.68                                        |  |  |                 | 1,176,982 |  |  |  | 3.8 | 
|Unsecured credit facilities (C$800 million)(2) |  | C$           |  |  |                         |  |     |                                  |  |  |                                            |  |  |                 |          |  |  |  | 2.5 | 
|Secured credit facilities (C$75 million)(2)    |  | C$           |  |  |                         |  |     |                                  |  |  |                                            |  |  |                 |          |  |  |  | 1.0 | 
|                                               |  |              |  |  |                         |  |      |                                  |  |  |                                             |  |  |                 |           |  |  |  |     | 
|                                               |  |              |  |  |                         |  |      |                                  |  |  |                                             |  |  |                 | 3,699,433 |  |  |  |     | 
|                                               |  |              |  |  |                         |  |      |                                  |  |  |                                             |  |  |                 |           |  |  |  |     | 



|(1) | After the reporting date, First Capital completed an offering in Canada of C$ 90 million par value (NIS 302 million) unsecured debentures (Series S) by way of an expansion of a listed series. The debentures bear a
fixed annual interest at the rate of 4.32%, and mature on July 31, 2025.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | As of December 31, 2014, the total availability for immediate drawdown amounted to C$ 832.8 million, net of letter of credits provided.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------

The terms of certain of the debt instruments set forth in the table above contain covenants, including: (i) maintenance of
a ratio of debt to total assets not in excess of 65%, (ii) maintenance of a ratio of EBITDA to interest expenses at a minimum level of 1.65x, (iii) maintenance of a ratio of EBITDA to debt service (principal and interest payments) at a
minimum level of 1.5x, (iv) a requirement that First Capitals average equity over the last four consecutive quarters may not fall below C$ 1.4 billion, (v) maintenance of a ratio of unpledged assets (not including
properties under development) to unsecured debt at a minimum level of 1.3x, and (vi) maintenance of ratio of secured debt to total assets shall not exceed 40%. As of December 31, 2014, First Capital was in compliance with all of these
covenants.

In light of the resources that are available to First Capital as of December 31, 2014, mainly unused and
committed credit facilities available for immediate drawdown in the amount of C$ 832.8 million (NIS 2,797 million) as of December 31, 2014, and cash and cash equivalents in the amount of C$ 17.3 million (NIS 58 million) as of
December 31, 2014, together with the addition of the positive cash flows from operating activities, we believe that First Capital has sufficient cash and resources to cover its contractual obligations for the next year. In the future, we expect
that First Capital will meet its contractual obligations to repay its debt through a combination of additional sources, including additional and replacement secured and unsecured credit facilities, mortgages, proceeds from the issuance of additional
debt, equity and convertible securities and proceeds from property dispositions.



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##### Table of Contents

Citycon

The following table sets forth information regarding Citycons indebtedness as of December 31, 2014:



|                                                                   |  |              |     |  |                         |  |      |                                  |  |  |                                             |  |  |                 |           |  |  |  |     | 
|------------------------------------------------------------------ |  | ------------ | --- |  | ----------------------- |  | ---- | -------------------------------- |  |  | ------------------------------------------- |  |  | --------------- | --------- |  |  |  | --- | 
|Debt Instrument(1)                                                 |  | Denomination |     |  | AverageInterestRate (%) |  |      | AverageEffectiveInterest Rate(%) |  |  | CarryingAmount ofLiability(EUR inthousands) |  |  | Maturity(years) |          
|Unsecured debentures                                               |  |              | EUR |  |                         |  | 3.38 |                                  |  |  | 3.54                                        |  |  |                 | 977,705   |  |  |  | 6.5 | 
|Unsecured credit facility (EUR 500 million)- variable interest (2) |  |              | SEK |  |                         |  | 1.11 |                                  |  |  | 1.11                                        |  |  |                 | 103,860   |  |  |  | 5.0 | 
|Other unsecured debts-variable interest (2)                        |  |              | EUR |  |                         |  | 1.06 |                                  |  |  | 1.06                                        |  |  |                 | 17,500    |  |  |  | 2.0 | 
|Other unsecured debts-fixed interest                               |  |              | SEK |  |                         |  | 4.25 |                                  |  |  | 4.25                                        |  |  |                 | 10,199    |  |  |  | 0.8 | 
|                                                                   |  |              |     |  |                         |  |      |                                  |  |  |                                             |  |  |                 |           |  |  |  |     | 
|                                                                   |  |              |     |  |                         |  |      |                                  |  |  |                                             |  |  |                 | 1,109,264 |  |  |  |     | 
|                                                                   |  |              |     |  |                         |  |      |                                  |  |  |                                             |  |  |                 |           |  |  |  |     | 



|(1) | Excluding commercial papers amounting to EUR 68.4 Million.
|--- | ----------------------------------------------------------

|(2) | Citycon has entered into interest rate swap transactions to pay fixed interest rates with respect of a notional amount of EUR 58.6 million of these variable interest loans.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The terms of certain of the debt instruments set forth in the table above contain covenants, including: (i) maintenance of
a ratio of shareholders equity (plus debt components with equity characteristics) to total asset value not below 32.5% , (ii) maintenance of a debt coverage ratio (EBITDA to net interest expenses) of a minimum of 1.8, (iii) maintenance of
a ratio of secured debt to total debt that shall not exceed 7.5%, (iv) absence of change of control as defined in the agreement, and (v) further with respect to the EUR 500 million and EUR 350 million Eurobond issuances, Citycon has
committed to maintain the solvency ratio at below 65% and the secured solvency ratio at below 25%. In addition, change of control as defined in the debentures agreement will entitle the holders to the right of early redemption of the debentures. As
of December 31, 2014, Citycon was in compliance with all of these covenants.

Since Citycons strategy is based
on expansion, Citycon will need both equity capital and borrowings. Its goal is to arrange financing on a long term basis and to avoid any large concentration of maturity dates for its indebtedness. Citycon aims to guaranty the availability and
flexibility of financing through unused credit lines and by using several banks and financing methods.

In light of the
fact that resources that are available to Citycon are mainly unused and committed credit facilities in the amount of EUR 397.5 million (NIS 1,878 million) and unutilized cash pools amount to EUR 17.9 million (NIS 85 million) and EUR
380 million and EUR 17 million as of December 31, 2014 and December 31, 2013, respectively, and cash and cash equivalents amount to EUR 34 million (NIS 162 million) and EUR 38 million as of December 31, 2014 and
December 31, 2013, respectively, together with the addition of the positive cash flows from operating activities, we believe that Citycon has sufficient cash and resources to cover its contractual obligations for the next year. In the long-term
debt refinancing and disposals of investment properties may be considered by Citycon.



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##### Table of Contents

Atrium

The following table sets forth information regarding Atriums indebtedness as of December 31, 2014:



|                                             |  |              |  |                        |      |  |                                 |  |      |                                             |  |  |                 |  |  |  |     | 
|-------------------------------------------- |  | ------------ |  | ---------------------- | ---- |  | ------------------------------- |  | ---- | ------------------------------------------- |  |  | --------------- |  |  |  | --- | 
|Debt Instrument                              |  | Denomination |  | AverageInterestRate(%) |      |  | AverageEffectiveInterestRate(%) |  |      | CarryingAmount ofLiability(EUR inthousands) |  |  | Maturity(years) | 
|Floating rate unsecured debentures           |  | EUR          |  |                        | 4.00 |  |                                 |  | 4.52 |                                             |  |  | 83,652          |  |  |  | 2.6 | 
|Fixed rate debentures(1)                     |  | EUR          |  |                        | 3.80 |  |                                 |  | 3.97 |                                             |  |  | 699,061         |  |  |  | 6.6 | 
|Floating rate debentures                     |  | Czech Krona  |  |                        | 1.62 |  |                                 |  | 1.94 |                                             |  |  | 25,219          |  |  |  | 0.6 | 
|Secured loans at fixed rate                  |  | EUR          |  |                        | 3.10 |  |                                 |  | 3.62 |                                             |  |  | 48,318          |  |  |  | 3.0 | 
|Secured loan at floating rate                |  | EUR          |  |                        | 4.37 |  |                                 |  | 4.63 |                                             |  |  | 211,827         |  |  |  | 4.2 | 
|Unsecured credit facilities (EUR 50 million) |  | EUR          |  |                        |     |  |                                 |  |     |                                             |  |  |                |  |  |  | 5.0 | 
|                                             |  |              |  |                        |      |  |                                 |  |      |                                             |  |  |                 |  |  |  |     | 
|                                             |  |              |  |                        |      |  |                                 |  |      |                                             |  |  | 1,068,076       |  |  |  |     | 
|                                             |  |              |  |                        |      |  |                                 |  |      |                                             |  |  |                 |  |  |  |     | 



|(1) | Includes EUR 5.4 million in secured debentures, while the remainder debentures are unsecured.
|--- | ---------------------------------------------------------------------------------------------

Atriums debt is subject to several customary financial covenants including solvency ratios, debt coverage ratios and
assets to debt ratio. As of December 31, 2014, Atrium is in compliance with all these covenants.

As of
December 31, 2014 and December 31, 2013, Atrium had cash and cash equivalents of EUR 425.2 million (NIS 2,009 million) and EUR 305.6 million, respectively. Atrium management plans to meet its contractual obligations to repay its
debt through a combination of additional sources, including additional and replacement secured and unsecured credit facilities, proceeds from the issuance of equity and convertible securities, proceeds from property dispositions and available cash.

Dori Group

The
following table sets forth information regarding Dori Groups indebtedness as of December 31, 2014:



|                            |  |              |  |                         |           |  |                                  |  |           |                                             |  |  |                 |  |  |  |           | 
|--------------------------- |  | ------------ |  | ----------------------- | --------- |  | -------------------------------- |  | --------- | ------------------------------------------- |  |  | --------------- |  |  |  | --------- | 
|Debt Instrument             |  | Denomination |  | AverageInterestRate (%) |           |  | AverageEffectiveInterestRate (%) |  |           | CarryingAmount ofLiability(NIS inthousands) |  |  | Maturity(years) | 
|Unsecured debentures        |  | NIS          |  |                         | 5.12      |  |                                  |  | 5.97      |                                             |  |  | 66,427          |  |  |  | 2015      | 
|Unsecured debentures        |  | Israeli CPI  |  |                         | 5.12      |  |                                  |  | 5.44      |                                             |  |  | 413,950         |  |  |  | 2015-2021 | 
|Long term loans and credit  |  | NIS          |  |                         | 3.4-4.3   |  |                                  |  | 3.4-4.3   |                                             |  |  | 16,035          |  |  |  | 2015-2019 | 
|Short term loans and credit |  | NIS          |  |                         | 2.45-5.25 |  |                                  |  | 2.45-5.25 |                                             |  |  | 105,435         |  |  |  | 2015      | 
|                            |  |              |  |                         |           |  |                                  |  |           |                                             |  |  |                 |  |  |  |           | 
|                            |  |              |  |                         |           |  |                                  |  |           |                                             |  |  | 601,847         |  |  |  |           | 
|                            |  |              |  |                         |           |  |                                  |  |           |                                             |  |  |                 |  |  |  |           | 

The terms of certain of the debt instruments set forth in the table above contain covenants,
including: (i) maintenance of ratio of equity to total assets on consolidated basis shall not be less than 15%, (ii) maintenance of ratios of equity to total assets on consolidated basis in investees shall not be less than 13%-20%;
(iii) U. Dori Construction Ltd. (Dori Construction) equity (excluding non-controlling interests) shall not be less than NIS 100 million, (iv) liquidity (cash and unutilized credit facilities) at Dori Construction and at
its consolidated subsidiary is to be no less than NIS 40 million and NIS 30 million, respectively, (v) a ratio of Dori Constructions financial debt to its capital of no more than 70% (vi) a ratio of financial debt plus
guarantees of no more than three times Dori Constructions tangible capital, (vii) a ratio of debt to total assets at Dori Construction and its subsidiary of no more than 30%, (viii) Dori Construction has undertaken not to pledge its
assets or to transfer them to third parties, and (ix) the financing banks share shall not exceed 30% of the financial debt (including guarantees) of Dori Construction Ltd. (x) an undertaking of Dori Construction not to draw on
shareholders loans granted to a subsidiary and/or dividends, if Dori Construction is not in compliance with its undertakings to the bank. As of December 31, 2014, Dori Group and Dori Construction were not in compliance with certain
covenants for which waivers were received. Please also refer to Note 22(d)(6) to our audited consolidated financial statement included elsewhere in this Annual Report.



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In addition, within the framework of debentures (series G), Dori Group committed
to comply with the following covenants: equity of not less than NIS 200 million in the three preceding quarters and a ratio of financial debt to CAP (financial debt plus equity) that will not exceed 75%. It was also stipulated that, in the
event of a credit rating downgrade, the interest rate would be raised by up to 1% in prescribed stages. Moreover, Dori Group committed not to register a floating charge on its properties in favor of a third party and not to expand the debenture
series (series G), other than under the circumstances specified in the trust deed. As of December 31, 2014, Dori Group is in compliance with its covenants.

Within the framework of its debentures (series A), Dori Construction committed to comply with the following covenants: the
ratio of net financial debt to EBITDA is not to exceed 8, with the provision that equity is not to fall below NIS 100 million; and the ratio of equity to total assets is not to be less than 12%, with the provision that equity is not to fall
below NIS 120 million. Moreover, Dori Construction committed not to register a floating charge on its properties in favor of a third party and not to expand the debenture series, other than under the circumstances specified in the trust deed.

As of December 31, 2014, Dori Construction is not in compliance with the financial ratios prescribed in the trust
deed of its debentures and, in the interest of caution, is deemed to be a breach of financial ratios according to the trust deed. As a result the holders of the debentures might have a claim for an immediate redemption. Dori Construction classified
its debentures as a current liability.

Cash Flows

The following summary discussion of our cash flows is based on the consolidated statements of cash flows.



|                                                    |  |                         |        |   |          |  |        |      |  |  |             |   |  |  |     |  
|--------------------------------------------------- |  | ----------------------- | ------ | - | -------- |  | ------ | ---- |  |  | ----------- | - |  |  | --- | -
|                                                    |  | Year Ended December 31, |        |   | Increase | 
|                                                    |  | 2012                    |        |   | 2013     |  |        | 2014 |  |  | 2012 Vs2013 |  
|                                                    |  | (NIS in millions)       |        |   | (%)      | 
|Net cash provided by operating activities           |  |                         | 1,368  |   |          |  | 1,189  |      |  |  | 1,026       |   |  |  | (13 | )
|Net cash used in investing activities               |  |                         | (4,621 | ) |          |  | (2,208 | )    |  |  | (768        | ) |  |  | (52 | )
|Net cash provided by (used in) financing activities |  |                         | 3,490  |   |          |  | 428    |      |  |  | (701        | ) |  |  | (88 | )
|Cash and cash equivalents, end of period            |  |                         | 1,683  |   |          |  | 1,018  |      |  |  | 650         |   |  |  | (40 | )

Net Cash Provided by Operating Activities

Net cash provided by operating activities consists primarily of net operating income from our income producing properties
(rental and other revenues less property operating expenses) and dividends from joint ventures, less cash flow used in construction works performed by Dori Construction, general and administrative expenses and net interest expense.

Net cash provided by operating activities totaled NIS 1,026 million (U.S.$ 264 million) for the year ended
December 31, 2014 compared to NIS 1,189 million for the year ended December 31, 2013. The decrease of NIS 163 million, or 14%, was due primarily to negative cash flows from activity in the field of construction works.

Net cash provided by operating activities totaled NIS 1,189 million for the year ended December 31, 2013 compared to
NIS 1,368 million for the year ended December 31, 2012. The decrease of NIS 179 million, or 13%, was due primarily to time differences and non-recurring dividends from a joint venture recorded in 2012 amounted to NIS 282 million,
which was offset by interest received due to the unwinding of hedge transactions amounting to NIS 187 million and lower interest paid.

Net Cash Used in Investing Activities

Net cash used in investing activities consists primarily of property acquisitions and dispositions, costs incurred with respect
to developments, investment in shares of investees and investments in (disposals of) available-for-sale and other financial assets.



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Net cash used in investing activities totaled NIS 768 million (U.S.$ 197
million) for the year ended December 31, 2014 compared with NIS 2,208 million used in investing activities for the year ended December 31, 2013. The decrease of NIS 1,440 million in cash used for investing activities, or 65%, was
due primarily to decrease of NIS 236 million (U.S.$ 61 million) with respect to the acquisition of investment properties, net of cash flows from disposition, for the year ended 2014 compared with the year ended 2013 and a decrease of NIS
962 million (U.S.$ 247 million) in investments and loans to investees for the year ended 2014 compared with the investment in 2013.

Net cash used in investing activities totaled NIS 2,208 million for the year ended December 31, 2013 compared with
NIS 4,621 million used in investing activities for the year ended December 31, 2012. The increase of NIS 2,413 million, or 52%, was due primarily to a decrease of NIS 3,327 million with respect to the acquisition of investment
properties, net of cash flows from dispositions, for the year ended 2013 compared with the year ended 2012 offset by a decrease of NIS 224 million in the net proceeds from the net sale of financial assets and the grant of loans for the year
ended 2013 compared to the year ended 2012, and an increase of NIS 1,009 million in investments and loans to investees for the year ended 2013 compared with the investment in 2012.

Net Cash Provided by (Used for) Financing Activities

Net cash provided by (used for) financing activities consists primarily of capital issuance by Gazit-Globe and its
subsidiaries, proceeds from obtaining loans, proceeds from credit facilities and the issuance of debentures and convertible debentures, less repayment and redemption of debt, acquisition of non-controlling interests and dividends paid to
shareholders.

Net cash used in financing activities totaled NIS 701 million (US$ 180 million) for the year ended
December 31, 2014 compared with NIS 428 million net cash provided by financing activities for the year ended December 31, 2013. The decrease of NIS 1,129 million, or 264%, is due primarily to a decrease of NIS 2,183 million
(U.S.$ 561 million) in net debenture issuance compared to the year ended December 31, 2013, offset by an increase of NIS 1,458 million (U.S.$ 375 million) in capital issuance.

Net cash provided by financing activities totaled NIS 428 million for the year ended December 31, 2013 compared with
NIS 3,490 million net cash provided by financing activities for the year ended December 31, 2012. The decrease of NIS 3,062 million, or 88%, is due primarily to the lower receipt of long-term loans, decrease in capital issuance to
non-controlling interests compared to the year ended December 31, 2012 offset by an increase of capital issuance by the Company as well as lower repayments of debentures and amounts received due to unwinding of hedge transactions.

2014. During the year ended December 31, 2014, we financed our activities primarily by:



| |  |  | the issuance of equity amounting to NIS 2,483 million, comprised of the issuance of equity amounting to NIS 118 million in Gazit-Globe, C$ 120 million of equity securities by First Capital, U.S.$
145 million of equity securities by Equity One, EUR 313 million of equity securities by Citycon and NIS 4 million of equity securities by Gazit Development; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the issuance of debentures, net of repayments, amounting to NIS 2,484 million, comprised of the net issuance of C$ 277 million of debentures and convertible debentures by First Capital, net issuance of
debentures by Gazit-Globe and its private subsidiaries in the amount of NIS 167 million, net issuance of EUR 327 million by Citycon, and net repayment of debentures by Dori Group and its subsidiary in the amount of NIS 96 million; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

offset by:



| |  |  | acquisition of non-controlling interests amounting to NIS 325 million;
| | - |  | ----------------------------------------------------------------------



| |  |  | repayments of long-term loans and credit facilities, net of loans and proceeds from credit facilities, amounting to NIS 4,529 million, comprised of NIS 585 million repaid by Gazit-Globe and its private
subsidiaries, U.S.$ 187 million repaid by Equity One, C$ 177 million repaid by First Capital, and EUR 572 million repaid by Citycon; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | dividend distributions amounting to NIS 1,057 million mainly comprised of NIS 318 million paid by Gazit-Globe, U.S.$ 67 million paid by Equity One, C$ 95 million paid by First Capital and EUR
34 million paid by Citycon.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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2013. During the year ended December 31, 2013, we financed our activities primarily
by:



| |  |  | the issuance of equity amounting to NIS 1,025 million, comprised of the issuance of equity amounting to NIS 489 million in Gazit-Globe, C$ 5 million of equity securities by First Capital, U.S.$
5 million of equity securities by Equity One, EUR 99 million of equity securities by Citycon and NIS 27 million of equity securities by U. Dori Construction Ltd.; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the issuance of debentures and convertible debentures, net of repayments, amounting to NIS 4,667 million, comprised of the net issuance of C$ 442 million of debentures and convertible debentures by First
Capital, net issuance of debentures by Gazit-Globe and its private subsidiaries in the amount of NIS 923 million, net issuance of EUR 428 million by Citycon, and net repayment of debentures by Dori Group and its subsidiary in the amount of
NIS 115 million; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

offset by:



| |  |  | acquisition of non-controlling interests amounting to NIS 102 million; and
| | - |  | --------------------------------------------------------------------------



| |  |  | repayments of long-term loans and credit facilities, net of loans and proceeds from credit facilities, amounting to NIS 4,558 million, comprised of NIS 1,195 million repaid by Gazit-Globe and its private
subsidiaries, U.S.$ 94 million repaid by Equity One, C$ 235 million repaid by First Capital, and EUR 476 million repaid by Citycon; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | dividend distributions amounting to NIS 996 million mainly comprised of NIS 298 million paid by Gazit-Globe, U.S.$ 71 million paid by Equity One, C$ 96 million paid by First Capital and EUR
25 million paid by Citycon.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

2012. During the year ended December 31, 2012, we financed our activities
primarily by:



| |  |  | the issuance of equity amounting to NIS 1,835 million, comprised of the issuance of equity amounting to NIS 3 million in Gazit-Globe, C$ 317 million of equity securities by First Capital, U.S.$
79 million of equity securities by Equity One and EUR 49 million of equity securities by Citycon; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the issuance of debentures and convertible debentures, net of repayments, amounting to NIS 2,991 million, comprised of the net issuance of C$ 340 million of debentures and convertible debentures by First
Capital, net issuance of debentures by Gazit-Globe and its private subsidiaries in the amount of NIS 959 million and net issuance of EUR 140 million by Citycon, and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

offset by:



| |  |  | acquisition of non-controlling interests amounting to NIS 263 million; and
| | - |  | --------------------------------------------------------------------------



| |  |  | repayments of long-term loans and credit facilities, net of loans and proceeds from credit facilities, amounting to NIS 156 million, comprised of NIS 110 million repaid by Gazit-Globe and its private
subsidiaries, U.S.$ 242 million received by Equity One, C$ 87 million repaid by First Capital, EUR 138 million repaid by Citycon; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | dividend distributions amounting to NIS 917 million comprised of NIS 264 million paid by Gazit-Globe, U.S.$ 55 million paid by Equity One, C$ 83 million paid by First Capital and EUR 22 million
paid by Citycon.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Distributions

In November 1998, Gazit-Globes Board of Directors adopted a policy of distributing a quarterly cash dividend, pursuant to
which it announces in the fourth quarter of each year the amount of the minimum dividend it will pay in the four quarters of the coming year. Our distribution policy is subject to the existence of adequate amounts of distributable profits at the
relevant dates, and is subject to our discretion, including concerning the appropriation of our profits for other purposes and/or the revision of this dividend distribution policy. On April 23, 2014, Gazit-Globe paid a quarterly cash dividend
of NIS 0.45 (U.S.$ 0.12) per share. On July 8, 2014, Gazit-Globe paid a quarterly cash dividend of NIS 0.45 (U.S.$ 0.12) per share. On October 1, 2014, Gazit-Globe paid a quarterly cash dividend of NIS 0.45 (U.S.$ 0.12) per
share. On December 29, 2014, Gazit-Globe paid a quarterly cash dividend of NIS 0.45 (U.S.$ 0.12) per share. On April 14, 2015, Gazit-Globe paid a quarterly cash dividend of NIS 0.46 (U.S.$ 0.12) per share.

In November 2014, we announced that our minimum dividend to be declared in 2015 will not be less than NIS 0.46 (U.S.$
0.12) per share per quarter (NIS 1.84 (U.S.$ 0.47) per annum).



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Our ability to pay dividends is also dependent on whether our subsidiaries and
affiliates distribute dividends to Gazit-Globe so that Gazit-Globe can have adequate cash for distribution to its shareholders and, since we do not only use operating cash flows to pay our dividend, on our ability to obtain financing. In the event
that our subsidiaries or affiliates are restricted from distributing dividends due to their earnings, financial condition or results of operations or they determine not to distribute dividends, including as a result of taxes that may be payable with
respect to such distribution, and in the event that our debt or equity financing is restricted or limited, we may not be able to pay any dividends or in the amounts otherwise anticipated. If we do not pay dividends or pay a smaller dividend, our
ordinary shares may be less valuable because a return on an investment will only occur if our stock price appreciates.

For
our discussion of the use of financial instruments for hedging purposes, see Item 11Quantitative and Qualitative Disclosures About Market Risk.

For our discussion of our material commitments for capital expenditures, please see Cash Flows above in this
section and Note 26(c) to our audited consolidated financial statements included elsewhere in this Annual report.

Additional
Supplemental Investor Information Concerning Our Assets and Liabilities

The following table presents additional
information summarizing our assets as of December 31, 2014. The table presents information on the assets of Gazit-Globe and its private subsidiaries (based on Gazit-Globes proportionate ownership of its private subsidiaries), with each of
our public subsidiaries and affiliates being presented according to the equity method under IFRS. This table presents the book value attributable to our private subsidiaries on a gross asset basis.

A significant proportion of our consolidated assets are held through our public subsidiaries and affiliates, the results of
each of which are either fully consolidated or accounted for using the equity method in accordance with IFRS in our consolidated financial statements. The securities in our public subsidiaries and affiliates presented in the table below are publicly
traded. We believe this additional disclosure together with the net liabilities presented in the following table is valuable to investors in analyzing and understanding our net asset value, or NAV, also referred to as equity attributable to equity
holders of the Company, in addition to our EPRA NAV and EPRA NNNAV presented below. In particular, we believe the tables provide investors with information that can be used to compute our NAV (for example, by calculating NAV based on the market
price of the securities of our public subsidiaries and affiliates).

We present our investment in public subsidiaries and
affiliates net of liabilities in the following table because our public subsidiaries and affiliates have traditionally satisfied their own short-term liquidity and long-term capital requirements through cash generated from their respective
operations and through debt and equity financings in their respective local markets. The liquidity and available borrowings of each of our public subsidiaries and affiliates are not available to support the others operations. We present the
book value attributable to our private subsidiaries on a gross asset basis in the following table because traditionally the short-term liquidity and long-term capital requirements of our private subsidiaries have been funded through a combination of
sources, primarily from Gazit-Globe. The liquidity and available borrowings of Gazit-Globe and its private subsidiaries are generally available to support of all of our private subsidiaries operations (as well as investments in our public
subsidiaries).



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Assets Summary Table



|                       |  |                                                          |  |                          |       |  |                  |  |        |                 |  |  |       |   |  |       |       |  |  |  |       | 
|---------------------- |  | -------------------------------------------------------- |  | ------------------------ | ----- |  | ---------------- |  | ------ | --------------- |  |  | ----- | - |  | ----- | ----- |  |  |  | ----- | 
|Name of
Company/Region |  | Type of Security/Property                                |  | Holding(Number ofShares) |       |  | Book Value(1)(2) |  |        | Market Value(3) | 
|                       |  |                                                          |  |                          |       |  | NIS              |  |        | U.S.$           |  |  | NIS   |   |  | U.S.$ |      
|                       |  |                                                          |  | In millions              |      
|Equity One             |  | Shares (NYSE)                                            |  |                          | 53.9  |  |                  |  | 3,465  |                 |  |  | 891   |   |  |       | 5,312 |  |  |  | 1,366 | 
|First Capital          |  | Shares (TSX)                                             |  |                          | 95.1  |  |                  |  | 5,121  |                 |  |  | 1,318 |   |  |       | 5,962 |  |  |  | 1,533 | 
|Citycon                |  | Shares (OMX)                                             |  |                          | 254.1 |  |                  |  | 3,338  |                 |  |  | 858   |   |  |       | 3,098 |  |  |  | 797   | 
|Atrium                 |  | Shares (Euronext,VSX)                                    |  |                          | 154.6 |  |                  |  | 4,079  |                 |  |  | 1,049 |   |  |       | 2,988 |  |  |  | 768   | 
|Dori Group (4)         |  | Shares (TASE)                                            |  |                          | 168.5 |  |                  |  | (20    | )               |  |  | (5    | ) |  |       | 53    |  |  |  | 14    | 
|Dori Group (4)         |  | Capital note                                             |  |                          |      |  |                  |  | 184    |                 |  |  | 47    |   |  |       |      |  |  |  |      | 
|Property in Europe     |  | Income-producing property                                |  |                          |      |  |                  |  | 478    |                 |  |  | 122   |   |  |       |      |  |  |  |      | 
|Land in Europe(5)      |  | property under development and land                      |  |                          |      |  |                  |  | 196    |                 |  |  | 50    |   |  |       |      |  |  |  |      | 
|ProMed                 |  | Income-producing property                                |  |                          |      |  |                  |  | 689    |                 |  |  | 177   |   |  |       |      |  |  |  |      | 
|Brazil                 |  | Income-producing property and property under development |  |                          |      |  |                  |  | 904    |                 |  |  | 232   |   |  |       |      |  |  |  |      | 
|Israel (5)             |  | Income-producing property                                |  |                          |      |  |                  |  | 2,114  |                 |  |  | 544   |   |  |       |      |  |  |  |      | 
|Land in Israel (5)     |  | property under development and land                      |  |                          |      |  |                  |  | 247    |                 |  |  | 64    |   |  |       |      |  |  |  |      | 
|                       |  |                                                          |  |                          |       |  |                  |  |        |                 |  |  |       |   |  |       |       |  |  |  |       | 
|Total book value       |  |                                                          |  |                          |       |  |                  |  | 20,795 |                 |  |  | 5,347 |   |  |       |       |  |  |  |       | 
|                       |  |                                                          |  |                          |       |  |                  |  |        |                 |  |  |       |   |  |       |       |  |  |  |       | 



|(1) | With respect to the book value of securities, this represents the investment in such securities as of December 31, 2014 according to the equity method under IFRS. The presentation of our investment in securities of
our public subsidiaries and affiliates is according to the equity method under IFRS. The table presents the book value of such investment with each public subsidiary and affiliate on an unconsolidated basis. As a consequence, the value of assets in
this table less net liabilities presented in the following table results in a net asset value which is equal to the equity attributable to equity holders of the Company in our consolidated financial statements.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | With respect to the book value of properties, this represents the fair value of such properties as of December 31, 2014 as determined in accordance with IAS 40 or IAS 16 and as such investments are presented in our
consolidated financial statements.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Represents the market value of the applicable securities based on the closing price of such securities on the applicable securities exchange on December 31, 2014.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Represents the economic interest in Dori Group.
|--- | -----------------------------------------------

|(5) | Presented according to the proportionate consolidation method (84.7%).
|--- | ----------------------------------------------------------------------



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##### Table of Contents

The following table presents information on the assets of Gazit-Globe and its
subsidiaries and affiliates as of December 31, 2014, with each of our operating subsidiaries and affiliates being presented according to the equity method under IFRS.



|                       |  |                       |  |                          |       |  |               |  |        |                 |  |  |       |  |  |       |       |  |  |  |       | 
|---------------------- |  | --------------------- |  | ------------------------ | ----- |  | ------------- |  | ------ | --------------- |  |  | ----- |  |  | ----- | ----- |  |  |  | ----- | 
|Name of
Company/Region |  | Type of Security      |  | Holding(Number ofShares) |       |  | Book Value(1) |  |        | Market Value(2) | 
|                       |  |                       |  |                          |       |  | NIS           |  |        | U.S.$           |  |  | NIS   |  |  | U.S.$ |      
|                       |  |                       |  | In millions              |      
|Equity One             |  | Shares (NYSE)         |  |                          | 53.9  |  |               |  | 3,465  |                 |  |  | 891   |  |  |       | 5,312 |  |  |  | 1,366 | 
|First Capital          |  | Shares (TSX)          |  |                          | 95.1  |  |               |  | 5,121  |                 |  |  | 1,318 |  |  |       | 5,962 |  |  |  | 1,533 | 
|Citycon                |  | Shares (OMX)          |  |                          | 254.1 |  |               |  | 3,338  |                 |  |  | 858   |  |  |       | 3,098 |  |  |  | 797   | 
|Atrium                 |  | Shares (Euronext,VSX) |  |                          | 154.6 |  |               |  | 4,079  |                 |  |  | 1,049 |  |  |       | 2,988 |  |  |  | 768   | 
|Gazit Germany          |  | Shares                |  |                          |      |  |               |  | 175    |                 |  |  | 45    |  |  |       |      |  |  |  |      | 
|Gazit Development      |  | Shares                |  |                          |      |  |               |  | 420    |                 |  |  | 108   |  |  |       |      |  |  |  |      | 
|ProMed                 |  | Shares                |  |                          |      |  |               |  | 139    |                 |  |  | 35    |  |  |       |      |  |  |  |      | 
|Brazil                 |  | Shares                |  |                          |      |  |               |  | 882    |                 |  |  | 226   |  |  |       |      |  |  |  |      | 
|                       |  |                       |  |                          |       |  |               |  |        |                 |  |  |       |  |  |       |       |  |  |  |       | 
|Total book value       |  |                       |  |                          |       |  |               |  | 17,619 |                 |  |  | 4,530 |  |  |       |       |  |  |  |       | 
|                       |  |                       |  |                          |       |  |               |  |        |                 |  |  |       |  |  |       |       |  |  |  |       | 



|(1) | This represents the book value of the investments as of December 31, 2014 according to the equity method under IFRS. The table presents the book value of such investments on an unconsolidated basis.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Represents the market value of the applicable securities based on the closing price of such securities on the applicable securities exchange on December 31, 2014.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table presents the liabilities of Gazit-Globe and its wholly-owned, non-operating private subsidiaries,
Gazit-Globe and its private subsidiaries (based on Gazit-Globes proportionate ownership of its private subsidiaries) and our consolidated liabilities as of December 31, 2014. Liabilities of public subsidiaries and affiliates are not
presented in this table as the investment in public subsidiaries and affiliates in the table above has been presented according to the equity method (i.e., net of liabilities). We believe that this presentation of liabilities of Gazit-Globe and its
private subsidiaries (based on Gazit-Globes proportionate ownership of its private subsidiaries) is consistent with the presentation of our assets in the Assets Summary Table above.

Liabilities Summary Table



|                                                |  |                |        |      |                                         |  |       |              |  |  |        |      |  |     |       |  |       |  |        |      |  |  |        | 
|----------------------------------------------- |  | -------------- | ------ | ---- | --------------------------------------- |  | ----- | ------------ |  |  | ------ | ---- |  | --- | ----- |  | ----- |  | ------ | ---- |  |  | ------ | 
|                                                |  | Gazit-Globe(1) |        |      | Gazit-Globe and itsPrivate Subsidiaries |  |       | Consolidated | 
|In millions                                     |  | NIS            |        |      | U.S.$                                   |  |       | NIS          |  |  | U.S.$  |      |  | NIS |       |  | U.S.$ | 
|Debentures                                      |  |                | 11,576 | (2)  |                                         |  | 2,977 |              |  |  | 11,576 | (2)  |  |     | 2,977 |  |       |  | 26,038 | (3)  |  |  | 6,695  | 
|Debts to financial institutions                 |  |                | 1,220  | (4)  |                                         |  | 314   |              |  |  | 2,171  | (5)  |  |     | 558   |  |       |  | 10,211 | (6)  |  |  | 2,626  | 
|Other liabilities                               |  |                | 194    | (7)  |                                         |  | 49    |              |  |  | 751    | (8)  |  |     | 193   |  |       |  | 23,966 | (9)  |  |  | 6,162  | 
|                                                |  |                |        |      |                                         |  |       |              |  |  |        |      |  |     |       |  |       |  |        |      |  |  |        | 
|Total liabilities and non-controlling interests |  |                | 12,990 |      |                                         |  | 3,340 |              |  |  | 14,498 |      |  |     | 3,728 |  |       |  | 60,215 |      |  |  | 15,483 | 
|Lessmonetary assets and other investments (10) |  |                | 3,394  | (11) |                                         |  | 873   |              |  |  | 1,726  | (12) |  |     | 444   |  |       |  | 3,495  | (13) |  |  | 898    | 
|                                                |  |                |        |      |                                         |  |       |              |  |  |        |      |  |     |       |  |       |  |        |      |  |  |        | 
|Liabilities, net                                |  |                | 9,596  |      |                                         |  | 2,467 |              |  |  | 12,772 |      |  |     | 3,284 |  |       |  | 56,720 |      |  |  | 14,585 | 
|                                                |  |                |        |      |                                         |  |       |              |  |  |        |      |  |     |       |  |       |  |        |      |  |  |        | 



|(1) | Includes Gazit-Globes wholly-owned, non-operating private subsidiaries.
|--- | ------------------------------------------------------------------------

|(2) | Represents NIS 24,433 million of debentures recorded as non-current liabilities and NIS 1,605 million of debentures recorded as current liabilities, in each case on our consolidated statements of financial
position as of December 31, 2014, minus NIS 15,149 million of debentures issued by public subsidiaries and affiliates, plus NIS 687 million Globes loan from financial institution. No debentures of our wholly-owned, operating
private subsidiaries are recorded on our consolidated financial statements as of December 31, 2014.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Represents NIS 24,433 million of debentures recorded as non-current liabilities and NIS 1,605 million of debentures recorded as current liabilities, in each case on our consolidated statements of financial
position as of December 31, 2014.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(4) | Represents NIS 8,552 million of debt to financial institutions recorded as non-current liabilities and NIS 1,659 million of debt to financial institutions recorded as current liabilities, in each case on our
consolidated statements of financial position as of December 31, 2014, minus NIS 7,336 million of public subsidiary and affiliate debt to financial institutions, minus NIS 968 million of our operating private subsidiaries debt to
financial institutions, minus NIS 687 million Globes loan from financial institution.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Represents NIS 8,552 million of debt to financial institutions recorded as non-current liabilities and NIS 1,659 million of debt to financial institutions recorded as current liabilities, in each case on our
consolidated statements of financial position as of December 31, 2014, minus NIS 7,336 million of public subsidiary and affiliate debt to financial institutions, minus NIS 687 million Globes loan from financial institution and
minus NIS 17 million of debt to financial institutions of Gazit Development (reflecting the 15.3% minority interest in such debt).
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Represents NIS 8,552 million of debt to financial institutions recorded as non-current liabilities and NIS 1,659 million of debt to financial institutions recorded as current liabilities, in each case on our
consolidated statements of financial position as of December 31, 2014.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Represents NIS 2,295 million of financial derivatives, trade payables, other accounts payable and current tax payable recorded as current liabilities, NIS 3,824 million of financial derivatives, other
financial liabilities, employee benefit liability, net, and deferred taxes recorded as non-current liabilities net of deferred taxes recorded as non-current assets and NIS 17,847 million of non-controlling interests, in each case on our
consolidated statements of financial position as of December 31, 2014, minus NIS 4,879 million of such liabilities of public subsidiaries and affiliates and our operating private subsidiaries, minus NIS 18,252 million of
non-controlling interests of our public subsidiaries and affiliates and our operating private subsidiaries, minus NIS 641 million of other adjustments attributable to our public subsidiaries and affiliates.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | Represents NIS 2,295 million of financial derivatives, trade payables, other accounts payable and current tax payable recorded as current liabilities, NIS 3,824 million of financial derivatives, other
financial liabilities, employee benefit liability, net, and deferred taxes recorded as non-current liabilities net of deferred taxes recorded as non-current assets and NIS 17,847 million of non-controlling interests, in each case on our
consolidated statements of financial position as of December 31, 2014, minus NIS 4,282 million of such liabilities of public subsidiaries and affiliates, minus NIS 59 million of such liabilities of Gazit Development (reflecting the
15.3% minority interest in such liabilities), minus NIS 18,252 million of non-controlling interests of our public subsidiaries and affiliates, minus NIS 63 million of such liabilities of Gazit Development (reflecting the 15.3% minority
interest in such liabilities) and minus NIS 559 million of other adjustments attributable to our public subsidiaries and affiliates and the 15.3% minority interest in Gazit Development.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | Represents NIS 2,295 million of financial derivatives, trade payables, other accounts payable and current tax payable recorded as current liabilities, NIS 3,824 million of financial derivatives, other
financial liabilities, employee benefit liability, net, and deferred taxes recorded as non-current liabilities net of deferred taxes recorded as non-current assets and NIS 17,847 million of non-controlling interests, in each case on our
consolidated statements of financial position as of December 31, 2014.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(10) | Monetary assets and other investments consists of cash and cash equivalents, marketable securities, bank and other deposits, accounts receivable, financial derivatives, and other long term investments and loans.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(11) | Represents NIS 2,260 million of monetary assets recorded as current assets and NIS 1,235 million of monetary assets recorded as non-current assets, in each case on our consolidated statements of financial
position as of December 31, 2014, minus NIS 2,330 million of such assets of public subsidiaries and affiliates and our operating private subsidiaries, plus NIS 2,229 million of loans to our operating private subsidiaries.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



73



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|(12) | Represents NIS 2,260 million of monetary assets recorded as current assets and NIS 1,235 million of monetary assets recorded as non-current assets, in each case on our consolidated statements of financial
position as of December 31, 2014, minus NIS 2,008 million of such assets of public subsidiaries and affiliates plus NIS 239 million of monetary assets of Gazit Development.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(13) | Represents NIS 2,260 million of monetary assets recorded as current assets and NIS 1,235 million of monetary assets recorded as non-current assets, in each case on our consolidated statements of financial
position as of December 31, 2014.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table presents the aggregate book value of investments
according to the equity method under IFRS in the Assets Summary Table above, the Liabilities, net of Gazit-Globe (and wholly-owned, non-operating private subsidiaries) in the Liabilities Summary Table above and equity attributable to equity holders
of the Company in our consolidated financial statements as of December 31, 2014:



|                                                                                              |  |                |        |   |                  |  |        |  
|--------------------------------------------------------------------------------------------- |  | -------------- | ------ | - | ---------------- |  | ------ | -
|                                                                                              |  | NIS inmillions |        |   | U.S.$ inmillions | 
|Book value according to the equity method under IFRS in the table above:                      |  |                | 17,619 |   |                  |  | 4,530  |  
|Liabilities, net                                                                              |  |                | (9,596 | ) |                  |  | (2,467 | )
|                                                                                              |  |                |        |   |                  |  |        |  
|Net Asset Value (NAV)                                                                         |  |                | 8,023  |   |                  |  | 2,063  |  
|                                                                                              |  |                |        |   |                  |  |        |  
|Equity attributable to equity holders of the Company in our consolidated financial statements |  |                | 8,023  |   |                  |  | 2,063  |  
|                                                                                              |  |                |        |   |                  |  |        |  

The following table presents the aggregate book value of investments in public subsidiaries
(according to the equity method under IFRS) and fair value of properties of private subsidiaries in the Assets Summary Table above, the Liabilities, net of Gazit-Globe and its private subsidiaries in the Liabilities Summary Table above and equity
attributable to equity holders of the Company in our consolidated financial statements as of December 31, 2014:



|                                                                                              |  |                |         |   |                  |  |        |  
|--------------------------------------------------------------------------------------------- |  | -------------- | ------- | - | ---------------- |  | ------ | -
|                                                                                              |  | NIS inmillions |         |   | U.S.$ inmillions | 
|Book value according to the equity method under IFRS in the table above:                      |  |                | 20,795  |   |                  |  | 5,347  |  
|Liabilities, net                                                                              |  |                | (12,772 | ) |                  |  | (3,284 | )
|                                                                                              |  |                |         |   |                  |  |        |  
|Net Asset Value (NAV)                                                                         |  |                | 8,023   |   |                  |  | 2,063  |  
|                                                                                              |  |                |         |   |                  |  |        |  
|Equity attributable to equity holders of the Company in our consolidated financial statements |  |                | 8,023   |   |                  |  | 2,063  |  
|                                                                                              |  |                |         |   |                  |  |        |  

Additional information is presented below regarding our share in the income-producing
properties owned by us as of December 31, 2014, based on capitalized NOI (rental income, net of property operating expenses, other than depreciation expenses) methodology. NOI based on our proportionate share in the NOI of our subsidiaries and
affiliates is a non-IFRS financial measure that is intended to provide additional information, based on methodology that is generally accepted in the regions in which we operate, which might serve as an additional method in analyzing the value of
our properties on the basis of our financial results for the reporting period. It is emphasized that this information in no way represents our estimate of the present or future value of our assets. It should only be used as an alternative measure of
our financial performance.

In calculating the NOI, the following assumptions were taken into account:



| |  |  | The NOI for the period for each of our subsidiaries and affiliates.
| | - |  | -------------------------------------------------------------------



| |  |  | Our proportionate share in the NOI of our subsidiaries and affiliates.
| | - |  | ----------------------------------------------------------------------



74



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|                                                                                                     |  |                        |        |   |                                |  |        |                 |  |  |                  |   |  |  |       |   |  |  |       |   |  |  |      |  
|---------------------------------------------------------------------------------------------------- |  | ---------------------- | ------ | - | ------------------------------ |  | ------ | --------------- |  |  | ---------------- | - |  |  | ----- | - |  |  | ----- | - |  |  | ---- | -
|                                                                                                     |  | Year EndedDecember 31, |        |   | Three Months EndedDecember 31, | 
|                                                                                                     |  | 2013                   |        |   | 2014                           |  |        | 2013            |  |  | 2014             |  
|                                                                                                     |  | NIS in millions        |        |   | U.S.$ inmillions               |  |        | NIS in millions |  |  | U.S.$ inmillions |  
|Rental income                                                                                        |  |                        | 5,146  |   |                                |  | 4,913  |                 |  |  | 1,263            |   |  |  | 1,269 |   |  |  | 1,259 |   |  |  | 324  |  
|Property operating expenses                                                                          |  |                        | (1,689 | ) |                                |  | (1,584 | )               |  |  | (407             | ) |  |  | (414  | ) |  |  | (419  | ) |  |  | (108 | )
|                                                                                                     |  |                        |        |   |                                |  |        |                 |  |  |                  |   |  |  |       |   |  |  |       |   |  |  |      |  
|NOI for the period                                                                                   |  |                        | 3,457  |   |                                |  | 3,329  |                 |  |  | 856              |   |  |  | 855   |   |  |  | 840   |   |  |  | 216  |  
|Lessminoritys share in NOI                                                                         |  |                        | (1,687 | ) |                                |  | (1,660 | )               |  |  | (427             | ) |  |  | (413  | ) |  |  | (435  | ) |  |  | (112 | )
|AddCompanys share in NOI of jointly controlled companies                                           |  |                        | 332    |   |                                |  | 386    |                 |  |  | 99               |   |  |  | 91    |   |  |  | 100   |   |  |  | 26   |  
|                                                                                                     |  |                        |        |   |                                |  |        |                 |  |  |                  |   |  |  |       |   |  |  |       |   |  |  |      |  
|NOI for the periodOur proportionate share                                                           |  |                        | 2,102  |   |                                |  | 2,055  |                 |  |  | 528              |   |  |  | 533   |   |  |  | 505   |   |  |  | 130  |  
|                                                                                                     |  |                        |        |   |                                |  |        |                 |  |  |                  |   |  |  |       |   |  |  |       |   |  |  |      |  
|NOI based on our proportionate share in the NOI of our subsidiaries and affiliates for the period(1) |  |                        | 2,102  |   |                                |  | 2,055  |                 |  |  | 528              |   |  |  | 2,132 |   |  |  | 2,020 |   |  |  | 520  |  
|                                                                                                     |  |                        |        |   |                                |  |        |                 |  |  |                  |   |  |  |       |   |  |  |       |   |  |  |      |  



|(1) | NOI for the fourth quarter of 2014 or 2013, as applicable, multiplied by four. Results for interim periods are not necessarily indicative of results that may be expected for the entire year and this number does not
equal our actual NOI based on our proportionate share in the NOI of our subsidiaries and affiliates for the year ended December 31, 2014 and 2013, as applicable.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table presents a reconciliation between gross profit and NOI based on our proportionate share in the NOI of our
subsidiaries and affiliates for the periods presented:



|                                                                                   |  |                        |        |   |                                |  |        |                 |  |  |                  |   |  |  |      |   |  |  |      |   |  |  |      |  
|---------------------------------------------------------------------------------- |  | ---------------------- | ------ | - | ------------------------------ |  | ------ | --------------- |  |  | ---------------- | - |  |  | ---- | - |  |  | ---- | - |  |  | ---- | -
|                                                                                   |  | Year EndedDecember 31, |        |   | Three Months EndedDecember 31, | 
|                                                                                   |  | 2013                   |        |   | 2014                           |  |        | 2013            |  |  | 2014             |  
|                                                                                   |  | NIS in millions        |        |   | U.S.$ inmillions               |  |        | NIS in millions |  |  | U.S.$ inmillions |  
|Gross profit                                                                       |  |                        | 3,441  |   |                                |  | 3,026  |                 |  |  | 778              |   |  |  | 775  |   |  |  | 801  |   |  |  | 206  |  
|Revenues from sale of buildings, land and construction works performed(1)          |  |                        | (1,672 | ) |                                |  | (1,357 | )               |  |  | (349             | ) |  |  | (397 | ) |  |  | (343 | ) |  |  | (88  | )
|Cost of buildings sold, land and construction works performed (1)                  |  |                        | 1,688  |   |                                |  | 1,660  |                 |  |  | 427              |   |  |  | 477  |   |  |  | 382  |   |  |  | 98   |  
|Non-controlling interests share in the NOI                                        |  |                        | (1,687 | ) |                                |  | (1,660 | )               |  |  | (427             | ) |  |  | (413 | ) |  |  | (435 | ) |  |  | (112 | )
|Groups share in the NOI of jointly controlled companies                           |  |                        | 332    |   |                                |  | 386    |                 |  |  | 99               |   |  |  | 91   |   |  |  | 100  |   |  |  | 26   |  
|                                                                                   |  |                        |        |   |                                |  |        |                 |  |  |                  |   |  |  |      |   |  |  |      |   |  |  |      |  
|NOI based on our proportionate share in the NOI of our subsidiaries and affiliates |  |                        | 2,102  |   |                                |  | 2,055  |                 |  |  | 528              |   |  |  | 533  |   |  |  | 505  |   |  |  | 130  |  
|                                                                                   |  |                        |        |   |                                |  |        |                 |  |  |                  |   |  |  |      |   |  |  |      |   |  |  |      |  



|(1) | Revenues from sale of buildings, land and construction works performed primarily comprises revenue from construction works performed by Dori Group and starting in 2013, First Capital. Cost of sale of buildings, land and
construction works performed primarily comprises costs of construction work performed by Dori Group and starting in 2013, First Capital.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The sensitivity analyses shown in the table below describe the implied value of our income-producing properties using the
aforesaid methodology according to the range of different capitalization rates, or cap rates, generally accepted in the regions in which we operate, as of December 31, 2014. It should be noted that this presentation does not take into account
income from premises that have not been leased and additional building rights that exist with respect to our income-producing properties.



75



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The following table presents the value of proportionately consolidated
income-producing property based on NOI for the three months ended December 31, 2014:



|                                                         |  |  |        |   |  |  |        |   |  |  |        |   |  |  |        |   |  |  |        |  
|-------------------------------------------------------- |  |  | ------ | - |  |  | ------ | - |  |  | ------ | - |  |  | ------ | - |  |  | ------ | -
|Capitalization Rate:                                     |  |  | 6.50   | % |  |  | 6.75   | % |  |  | 7.00   | % |  |  | 7.25   | % |  |  | 7.50   | %
|                                                         |  |  |        |   | 
|Value of income-producing property (NIS in millions) (1) |  |  | 31,107 |   |  |  | 29,955 |   |  |  | 28,885 |   |  |  | 27,889 |   |  |  | 26,959 |  
|                                                         |  |  |        |   |  |  |        |   |  |  |        |   |  |  |        |   |  |  |        |  
|(U.S.$ in millions)                                      |  |  | 7,999  |   |  |  | 7,702  |   |  |  | 7,427  |   |  |  | 7,171  |   |  |  | 6,932  |  
|                                                         |  |  |        |   |  |  |        |   |  |  |        |   |  |  |        |   |  |  |        |  



|(1) | NOI divided by the capitalization rate.
|--- | ---------------------------------------

Properties under development, which
are not yet operating or whose development has not get been completed, which includes land for future development and which are presented at their fair values in our books (according to the proportionate consolidation method) as of December 31,
2014, amounted to NIS 2,157 million (U.S.$ 555 million). The following table presents a reconciliation to the amount of investment property under development presented in our statement of financial position as of December 31, 2014:



|                                                                                            |  |                |       |   |                  |  |      |  
|------------------------------------------------------------------------------------------- |  | -------------- | ----- | - | ---------------- |  | ---- | -
|                                                                                            |  | NIS inmillions |       |   | U.S.$ inmillions | 
|Investment property under development and Land (1)                                          |  |                | 1,740 |   |                  |  | 447  |  
|Adjustments to properties under development(2)                                              |  |                | 395   |   |                  |  | 102  |  
|Non-controlling interests portion of such properties                                       |  |                | (697  | ) |                  |  | (179 | )
|Groups share in such properties of jointly controlled companies                            |  |                | 719   |   |                  |  | 185  |  
|                                                                                            |  |                |       |   |                  |  |      |  
|Investment property under development (according to the proportionate consolidation method) |  |                | 2,157 |   |                  |  | 555  |  
|                                                                                            |  |                |       |   |                  |  |      |  



|(1) | Including land held for sale in amount of NIS 98 Million.
|--- | ---------------------------------------------------------

|(2) | Adjustments to exclude the operating portion with respect to properties under development and to include properties which began to operate at the end of 2014 and thus has not yet produced income.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our liabilities, net of monetary assets (according to the proportionate consolidation method) as of December 31, 2014,
amounted to NIS 22,762 million (U.S.$ 5,853 million). The following table presents our liabilities, net of monetary assets (according to the proportionate consolidation method) and our consolidated liabilities as of December 31, 2014:



|                                               |  |                            |        |     |              |  |       |     |  |  |        |     |  |  |        | 
|---------------------------------------------- |  | -------------------------- | ------ | --- | ------------ |  | ----- | --- |  |  | ------ | --- |  |  | ------ | 
|                                               |  | ProportionateConsolidation |        |     | Consolidated | 
|In millions                                    |  | NIS                        |        |     | U.S.$        |  |       | NIS |  |  | U.S.$  |    
|Debentures                                     |  |                            | 19,570 | (1) |              |  | 5,032 |     |  |  | 26,038 | (2) |  |  | 6,695  | 
|Debts to financial institutions                |  |                            | 5,600  | (3) |              |  | 1,440 |     |  |  | 10,211 | (4) |  |  | 2,626  | 
|Other liabilities                              |  |                            | 484    | (5) |              |  | 125   |     |  |  | 23,966 | (6) |  |  | 6,162  | 
|                                               |  |                            |        |     |              |  |       |     |  |  |        |     |  |  |        | 
|Total liabilities and non-controlling interest |  |                            | 25,654 |     |              |  | 6,597 |     |  |  | 60,215 |     |  |  | 15,483 | 
|Lessmonetary assets and other investments (7) |  |                            | 2,892  | (8) |              |  | 744   |     |  |  | 3,495  | (9) |  |  | 898    | 
|                                               |  |                            |        |     |              |  |       |     |  |  |        |     |  |  |        | 
|Liabilities, net                               |  |                            | 22,762 |     |              |  | 5,853 |     |  |  | 56,720 |     |  |  | 14,585 | 
|                                               |  |                            |        |     |              |  |       |     |  |  |        |     |  |  |        | 



|(1) | Represents NIS 24,433 million of debentures recorded as non-current liabilities and NIS 1,605 million of debentures recorded as current liabilities, in each case on our consolidated statements of financial
position as of December 31, 2014, minus NIS 7,155 million of debentures which we do not proportionately consolidate, plus NIS 687 million Globes loan from financial institution.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Represents NIS 24,433 million of debentures recorded as non-current liabilities and NIS 1,605 million of debentures recorded as current liabilities, in each case on our consolidated statements of financial
position as of December 31, 2014.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Represents NIS 8,552 million of debt to financial institutions recorded as non-current liabilities and NIS 1,659 million of debt to financial institutions recorded as current liabilities, in each case on our
consolidated statements of financial position as of December 31, 2014, minus NIS 3,924 million of debt to financial institutions which we do not proportionately consolidate, minus NIS 687 million Globes loan from financial
institution.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Represents NIS 8,552 million of debt to financial institutions recorded as non-current liabilities and NIS 1,659 million of debt to financial institutions recorded as current liabilities, in each case on our
consolidated statements of financial position as of December 31, 2014.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(5) | Represents NIS 2,295 million of financial derivatives, trade payables, other accounts payable and current tax payable recorded as current liabilities, NIS 3,824 million of financial derivatives, other
financial liabilities, employee benefit liability, net, and deferred taxes recorded as non-current liabilities net of deferred taxes recorded as non-current assets and NIS 17,847 million of non-controlling interests, in each case on our
consolidated statements of financial position as of December 31, 2014, minus NIS 17,917 million of non-controlling interests plus our proportionately consolidated portion of convertible debentures in the amount of NIS 554 million, and
excluding NIS 2,295 million of financial derivatives, trade payables, other accounts payable, current tax payable and dividend payable recorded as current liabilities and NIS 3,824 million of financial derivatives, other financial
liabilities, employee benefit liability, net, and deferred taxes recorded as non-current liabilities net of deferred taxes recorded as non-current assets.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Represents NIS 2,295 million of financial derivatives, trade payables, other accounts payable and current tax payable recorded as current liabilities, NIS 3,824 million of financial derivatives, other
financial liabilities, employee benefit liability, net, and deferred taxes recorded as non-current liabilities net of deferred taxes recorded as non-current assets and NIS 17,847 million of non-controlling interests, in each case on our
consolidated statements of financial position as of December 31, 2014.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Monetary assets and other investments consists of cash and cash equivalents, marketable securities, bank and other deposits, accounts receivables, financial derivatives, and other long term investments and loans.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | Represents NIS 2,260 million of monetary assets recorded as current assets and NIS 1,235 million of monetary assets recorded as non-current assets, in each case on our consolidated statements of financial
position as of December 31, 2014, minus NIS 297 million consisting of cash and cash equivalents, marketable securities, bank and other deposits, financial derivatives, and other long term investments and loans which we do not
proportionately consolidate, minus NIS 853 million of trades and accounts receivables, plus NIS 265 million of loans to Gazit Development, plus NIS 237 million representing the net asset value of Dori Group and plus NIS
45 million of other investments.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | Represents NIS 2,260 million of monetary assets recorded as current assets and NIS 1,235 million of monetary assets recorded as non-current assets, in each case on our consolidated statements of financial
position as of December 31, 2014.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Capitalization Rates

The following table presents the average cap rates implied in the valuations of our operating investment properties in our
principal areas of operations:



|                  |  |     |     |  |        |  |     |                          |  |  |                       |  |  |        |     |  |  |  |     | 
|----------------- |  | --- | --- |  | ------ |  | --- | ------------------------ |  |  | --------------------- |  |  | ------ | --- |  |  |  | --- | 
|                  |  | USA |     |  | Canada |  |     | NorthernandWesternEurope |  |  | Central-EasternEurope |  |  | Israel |    
|                  |  | %   |    
|December 31, 2014 |  |     | 6.1 |  |        |  | 5.8 |                          |  |  | 6.1                   |  |  |        | 8.0 |  |  |  | 7.2 | 
|December 31, 2013 |  |     | 6.5 |  |        |  | 5.9 |                          |  |  | 6.3                   |  |  |        | 8.2 |  |  |  | 7.5 | 

Non-IFRS Financial Measures

Net Operating Income

This annual report includes a discussion of property net operating income, or NOI. NOI is a non-IFRS financial measure that we
define as rental income less property operating expenses, net of depreciation expense. This measure provides an operating perspective not immediately apparent from IFRS operating income or loss. NOI is most comparable to gross profit. We use NOI to
evaluate our performance on a property-by-property basis because NOI allows us to evaluate the impact that factors such as lease structure, lease rates and tenant base, which vary by property, have on our operating results. However, NOI should only
be used as an alternative measure of our financial performance.



77



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##### Table of Contents

The following table presents the calculation of NOI for the periods presented:



|                            |  |                         |        |   |                    |  |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |       |  
|--------------------------- |  | ----------------------- | ------ | - | ------------------ |  | ------ | ---- |  |  | ------ | - |  | ---- | ------ | - | ---- |  | ------ | - |  |  | ----- | -
|                            |  | Year Ended December 31, |       
|                            |  | 2010                    |        |   | 2011               |  |        | 2012 |  |  | 2013   |   |  | 2014 |        |   | 2014 | 
|                            |  | (NIS in millons)        |        |   | (U.S.$ inmillions) | 
|Rental income               |  |                         | 4,147  |   |                    |  | 4,718  |      |  |  | 5,249  |   |  |      | 5,146  |   |      |  | 4,913  |   |  |  | 1,263 |  
|Property operating expenses |  |                         | (1,341 | ) |                    |  | (1,522 | )    |  |  | (1,705 | ) |  |      | (1,689 | ) |      |  | (1,584 | ) |  |  | (407  | )
|                            |  |                         |        |   |                    |  |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |       |  
|Net operating income        |  |                         | 2,806  |   |                    |  | 3,196  |      |  |  | 3,544  |   |  |      | 3,457  |   |      |  | 3,329  |   |  |  | 856   |  
|                            |  |                         |        |   |                    |  |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |       |  

The following table shows the reconciliation between gross profit and NOI for the periods presented:



|                                                                          |  |                         |       |  |                    |  |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |      |  
|------------------------------------------------------------------------- |  | ----------------------- | ----- |  | ------------------ |  | ------ | ---- |  |  | ------ | - |  | ---- | ------ | - | ---- |  | ------ | - |  |  | ---- | -
|                                                                          |  | Year Ended December 31, |      
|                                                                          |  | 2010                    |       |  | 2011               |  |        | 2012 |  |  | 2013   |   |  | 2014 |        |   | 2014 | 
|                                                                          |  | (NIS in millions)       |       |  | (U.S.$ inmillions) | 
|Reconciliation of gross profit to NOI:                                    |  |                         |       |  |                    |  |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |      |  
|Gross Profit                                                              |  |                         | 2,806 |  |                    |  | 3,230  |      |  |  | 3,584  |   |  |      | 3,441  |   |      |  | 3,026  |   |  |  | 778  |  
|Revenues from sale of buildings, land and construction works performed(1) |  |                         |      |  |                    |  | (1,001 | )    |  |  | (1,760 | ) |  |      | (1,672 | ) |      |  | (1,357 | ) |  |  | (349 | )
|Cost of buildings sold, land and construction works performed (1)         |  |                         |      |  |                    |  | 967    |      |  |  | 1,720  |   |  |      | 1,688  |   |      |  | 1,660  |   |  |  | 427  |  
|                                                                          |  |                         |       |  |                    |  |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |      |  
|NOI                                                                       |  |                         | 2,806 |  |                    |  | 3,196  |      |  |  | 3,544  |   |  |      | 3,457  |   |      |  | 3,329  |   |  |  | 856  |  
|                                                                          |  |                         |       |  |                    |  |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |      |  



|(1) | Revenues from sale of buildings, land and construction work performed primarily comprises revenue from construction work performed by Dori Group and starting in 2013, First Capital. Cost of sale of buildings, land and
construction work performed primarily comprises costs of construction work performed by Dori Group and starting in 2013, First Capital. Through April 17, 2011, Dori Group was included in our financial statements as an equity-accounted investee
as required under IFRS. Since April 17, 2011, Dori Group has been fully consolidated due to our acquisition of an additional 50% interest in Acad.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Adjusted EBITDA

Adjusted EBITDA represents net income (loss) before depreciation and amortization, income taxes and net finance expense or
income, excluding valuation gains or losses from investment property, gain from bargain purchase, our share in earnings or losses of equity-accounted investees, net, and increase or decrease in value of financial investments, adjusted to include our
share in the adjusted EBITDA of equity-accounted investees, as further adjusted to eliminate the impact of certain items that we do not consider indicative of our ongoing performance. Our management believes that adjusted EBITDA is useful to
investors because it allows investors to evaluate and compare our performance from period to period in a meaningful and consistent manner in addition to standard financial measurements under IFRS. Adjusted EBITDA is not a measurement of financial
performance under IFRS and should not be considered as an alternative to net income, as an indicator of operating performance or any measure of performance derived in accordance with IFRS.



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The following table shows the reconciliation between net income and adjusted EBITDA for the
periods presented:



|                                                                 |  |                         |       |   |                    |  |        |      |  |  |        |   |  |      |       |   |      |  |        |   |  |  |      |  
|---------------------------------------------------------------- |  | ----------------------- | ----- | - | ------------------ |  | ------ | ---- |  |  | ------ | - |  | ---- | ----- | - | ---- |  | ------ | - |  |  | ---- | -
|                                                                 |  | Year Ended December 31, |      
|                                                                 |  | 2010                    |       |   | 2011               |  |        | 2012 |  |  | 2013   |   |  | 2014 |       |   | 2014 | 
|                                                                 |  | (NIS in millions)       |       |   | (U.S.$ inmillions) | 
|Reconciliation of net income to adjusted EBITDA:                 |  |                         |       |   |                    |  |        |      |  |  |        |   |  |      |       |   |      |  |        |   |  |  |      |  
|Net income                                                       |  |                         | 1,689 |   |                    |  | 2,029  |      |  |  | 2,413  |   |  |      | 2,185 |   |      |  | 1,083  |   |  |  | 278  |  
|Depreciation                                                     |  |                         | 21    |   |                    |  | 28     |      |  |  | 34     |   |  |      | 34    |   |      |  | 32     |   |  |  | 8    |  
|Non-recurring items (1)                                          |  |                         | 93    |   |                    |  | 130    |      |  |  | 36     |   |  |      | 40    |   |      |  | 45     |   |  |  | 12   |  
|Valuation gains from investment property                         |  |                         | (935  | ) |                    |  | (1,692 | )    |  |  | (1,938 | ) |  |      | (962  | ) |      |  | (1,053 | ) |  |  | (271 | )
|Other income                                                     |  |                         | (21   | ) |                    |  | (115   | )    |  |  | (164   | ) |  |      | (218  | ) |      |  | (55    | ) |  |  | (14  | )
|Other expenses                                                   |  |                         | 46    |   |                    |  | 110    |      |  |  | 47     |   |  |      | 74    |   |      |  | 81     |   |  |  | 21   |  
|share in earnings of equity-accounted investees, net             |  |                         | (171  | ) |                    |  | (334   | )    |  |  | (299   | ) |  |      | (149  | ) |      |  | (12    | ) |  |  | (3   | )
|Companys share in adjusted EBITDA of equity-accounted investees |  |                         | 197   |   |                    |  | 231    |      |  |  | 276    |   |  |      | 287   |   |      |  | 333    |   |  |  | 85   |  
|Finance expenses                                                 |  |                         | 1,764 |   |                    |  | 2,197  |      |  |  | 2,214  |   |  |      | 2,185 |   |      |  | 2,115  |   |  |  | 544  |  
|Finance income                                                   |  |                         | (525  | ) |                    |  | (72    | )    |  |  | (120   | ) |  |      | (549  | ) |      |  | (157   | ) |  |  | (40  | )
|Taxes on income                                                  |  |                         | 390   |   |                    |  | 352    |      |  |  | 758    |   |  |      | 265   |   |      |  | 405    |   |  |  | 104  |  
|                                                                 |  |                         |       |   |                    |  |        |      |  |  |        |   |  |      |       |   |      |  |        |   |  |  |      |  
|Adjusted EBITDA                                                  |  |                         | 2,548 |   |                    |  | 2,864  |      |  |  | 3,257  |   |  |      | 3,192 |   |      |  | 2,817  |   |  |  | 724  |  
|                                                                 |  |                         |       |   |                    |  |        |      |  |  |        |   |  |      |       |   |      |  |        |   |  |  |      |  



|(1) | Adjustments related to incremental leasing costs not capitalized to properties, adjustments related to transaction costs in relation to acquisitions and investments executed or evaluated, adjustments of expenses arising
from the termination of the engagement of senior officers, the adjustment (through 2011) of income from the waiver of bonuses by our chairman and our executive vice chairman (including with respect to the expiry of the employment agreement with our
chairman) and extraordinary legal proceedings not related to the reporting periods.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

EPRA FFO and Adjusted EPRA FFO

In countries in which companies prepare their financial statements under IFRS, it is customary for companies with
income-producing property to publish their EPRA Earnings, which we refer to as EPRA FFO. EPRA FFO is a measure for presenting the operating results of a company that are attributable to its equity holders. We believe that these measures
are consistent with the position paper of the European Public Real Estate Association, or EPRA, which states as its objective the promotion of greater transparency, uniformity and comparability of the financial information reported by property
companies. The EPRA FFO is calculated as the net income attributable to the equity holders of a company with certain adjustments for non-operating items, which are affected by the fair value revaluation of assets and liabilities, primarily
adjustments to the fair value of investment property, investment property under development and other investments, various capital gains and losses, gains (losses) from early redemption of debentures and unwinding of financial derivatives, gains
from bargain purchase, goodwill impairment, changes in the fair value through profit or loss with respect to financial instruments including derivatives, deferred taxes and our share in equity-accounted investees, as well as non-controlling
interests share with respect to the above items.

In the United States, where financial statements are prepared in
conformity with United States generally accepted accounting principles, it is customary for companies with income-producing property to publish their funds from operations, or FFO, results (which is the net income attributable to its equity holders,
reported after neutralizing income and expenses of a capital nature and with the addition of the companys share in property depreciation and other amortization), in accordance with the position paper issued by the U.S.-based National
Association of Real Estate Investment Trusts, or NAREIT.

We believe that EPRA FFO is similar in substance to FFO, with
adjustments primarily for the results reported under IFRS. We believe that publication of EPRA FFO, which is computed according to the directives of EPRA, and Adjusted EPRA FFO are more useful to investors than FFO because our financial statements
are prepared in conformity with IFRS. In addition, publication of Adjusted EPRA FFO provides a better basis for the comparison of our operating results in a particular period to those of previous periods and strengthens the uniformity and the
comparability of this financial measure to that published by other European property companies.



79



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As clarified in the EPRA and NAREIT position papers, the EPRA FFO and FFO
measures do not represent cash flows from current operations according to accepted accounting principles, nor do they reflect the cash held by a company or its ability to distribute that cash, they are not a substitute for the reported net income
and are unaudited.

The tables below present the calculation of our Adjusted EPRA FFO which is what management uses to
evaluate the performance of our company, as well as EPRA FFO computed according to the directives of EPRA, for the stated periods:



|                                                                                                                                                                 |  |                         |         |   |          |  |         |      |  |  |         |   |  |  |         |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------- | - | -------- |  | ------- | ---- |  |  | ------- | - |  |  | ------- | -
|                                                                                                                                                                 |  | Year Ended December 31, |        
|                                                                                                                                                                 |  | 2012                    |         |   | 2013     |  |         | 2014 |  |  | 2014    |  
|In millions (except for per share data)                                                                                                                          |  | (NIS )                  |         |   | (U.S.$ ) | 
|Net income attributable to equity holders of the Company                                                                                                         |  |                         | 901     |   |          |  | 927     |      |  |  | 73      |   |  |  | 19      |  
|Adjustments:                                                                                                                                                     |  |                         |         |   |          |  |         |      |  |  |         |   |  |  |         |  
|Fair value gain on investment property and investment property under development, net                                                                            |  |                         | (1,938  | ) |          |  | (962    | )    |  |  | (1,053  | ) |  |  | (271    | )
|Capital loss on sale of investment property                                                                                                                      |  |                         | 5       |   |          |  | 52      |      |  |  | 65      |   |  |  | 17      |  
|Changes in the fair value of financial instruments including derivatives, measured at fair value through profit and loss                                         |  |                         | (36     | ) |          |  | (435    | )    |  |  | 156     |   |  |  | 40      |  
|Adjustments with respect to equity-accounted investees                                                                                                           |  |                         | (43     | ) |          |  | 60      |      |  |  | 324     |   |  |  | 83      |  
|Loss from decrease in interest in investees                                                                                                                      |  |                         | 4       |   |          |  | 11      |      |  |  | 1       |   |  |  |        |  
|Deferred taxes and current taxes with respect to disposal of properties                                                                                          |  |                         | 752     |   |          |  | 262     |      |  |  | 399     |   |  |  | 103     |  
|Acquisition costs recognized in profit or loss                                                                                                                   |  |                         | 26      |   |          |  | 10      |      |  |  | 6       |   |  |  | 2       |  
|Gain from bargain purchase                                                                                                                                       |  |                         | (134    | ) |          |  | (173    | )    |  |  | (47     | ) |  |  | (12     | )
|Loss from early redemption of interest-bearing liabilities and financial derivatives                                                                             |  |                         | 147     |   |          |  | 142     |      |  |  | 154     |   |  |  | 40      |  
|Non-controlling interests share in the above adjustments                                                                                                        |  |                         | 643     |   |          |  | 375     |      |  |  | 267     |   |  |  | 68      |  
|                                                                                                                                                                 |  |                         |         |   |          |  |         |      |  |  |         |   |  |  |         |  
|Total adjustments                                                                                                                                                |  |                         | (574    | ) |          |  | (658    | )    |  |  | 272     |   |  |  | 70      |  
|                                                                                                                                                                 |  |                         |         |   |          |  |         |      |  |  |         |   |  |  |         |  
|EPRA FFO                                                                                                                                                         |  |                         | 327     |   |          |  | 269     |      |  |  | 345     |   |  |  | 89      |  
|Additional adjustments: (1)                                                                                                                                      |  |                         |         |   |          |  |         |      |  |  |         |   |  |  |         |  
|CPI and currency exchange rate linkage differences                                                                                                               |  |                         | 94      |   |          |  | 152     |      |  |  | (5      | ) |  |  | (1      | )
|Depreciation and amortization                                                                                                                                    |  |                         | 16      |   |          |  | 16      |      |  |  | 13      |   |  |  | 3       |  
|Adjustments with respect to equity-accounted investees                                                                                                           |  |                         | 2       |   |          |  | 27      |      |  |  | (3      | ) |  |  | (1      | )
|Other adjustments (2)                                                                                                                                            |  |                         | 94      |   |          |  | 121     |      |  |  | 294     |   |  |  | 76      |  
|                                                                                                                                                                 |  |                         |         |   |          |  |         |      |  |  |         |   |  |  |         |  
|Total additional adjustments                                                                                                                                     |  |                         | 206     |   |          |  | 316     |      |  |  | 299     |   |  |  | 77      |  
|                                                                                                                                                                 |  |                         |         |   |          |  |         |      |  |  |         |   |  |  |         |  
|Adjusted EPRA FFO                                                                                                                                                |  |                         | 533     |   |          |  | 585     |      |  |  | 644     |   |  |  | 166     |  
|                                                                                                                                                                 |  |                         |         |   |          |  |         |      |  |  |         |   |  |  |         |  
|Basic net income per share                                                                                                                                       |  |                         | 5.46    |   |          |  | 5.41    |      |  |  | 0.41    |   |  |  | 0.11    |  
|                                                                                                                                                                 |  |                         |         |   |          |  |         |      |  |  |         |   |  |  |         |  
|Diluted net income per share                                                                                                                                     |  |                         | 5.25    |   |          |  | 5.35    |      |  |  | 0.39    |   |  |  | 0.10    |  
|                                                                                                                                                                 |  |                         |         |   |          |  |         |      |  |  |         |   |  |  |         |  
|EPRA FFO per share (basic and diluted)                                                                                                                           |  |                         | 1.98    |   |          |  | 1.57    |      |  |  | 1.96    |   |  |  | 0.50    |  
|                                                                                                                                                                 |  |                         |         |   |          |  |         |      |  |  |         |   |  |  |         |  
|Adjusted EPRA FFO per share (basic)                                                                                                                              |  |                         | 3.23    |   |          |  | 3.42    |      |  |  | 3.65    |   |  |  | 0.94    |  
|                                                                                                                                                                 |  |                         |         |   |          |  |         |      |  |  |         |   |  |  |         |  
|Adjusted EPRA FFO per share (diluted)                                                                                                                            |  |                         | 3.23    |   |          |  | 3.41    |      |  |  | 3.65    |   |  |  | 0.94    |  
|                                                                                                                                                                 |  |                         |         |   |          |  |         |      |  |  |         |   |  |  |         |  
|Weighted average number of shares used to calculate: basic net income per share, EPRA FFO per share and adjusted EPRA FFO per share (in
thousands of shares) (3) |  |                         | 164,912 |   |          |  | 171,103 |      |  |  | 176,459 |   |  |  | 176,459 |  
|                                                                                                                                                                 |  |                         |         |   |          |  |         |      |  |  |         |   |  |  |         |  
|Diluted Net Income per share (in thousands of shares) (3)                                                                                                        |  |                         | 165,016 |   |          |  | 171,413 |      |  |  | 176,546 |   |  |  | 176,546 |  
|                                                                                                                                                                 |  |                         |         |   |          |  |         |      |  |  |         |   |  |  |         |  



|(*) | Represents an amount less than U.S.$ 1 million.
|--- | -----------------------------------------------

|(1) | Additional adjustments are presented net of non-controlling interests share.
|--- | -----------------------------------------------------------------------------

|(2) | Income and expenses adjustments including expenses arising from non-recurring expenses related to the termination of the engagements with senior Group officers; extraordinary legal proceedings not related to the
reporting periods; income and expenses from operations not related to income producing property (including the results of Dori Group); and incremental leasing costs (mainly salary) incurred in the leasing of properties.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Weighted average for each applicable period.
|--- | --------------------------------------------



80



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##### Table of Contents

|                                                                                                                         |  |                         |        |   |       |  |       |      |  |  |       |   |  |  |       |  
|------------------------------------------------------------------------------------------------------------------------ |  | ----------------------- | ------ | - | ----- |  | ----- | ---- |  |  | ----- | - |  |  | ----- | -
|                                                                                                                         |  | Year Ended December 31, |       
|                                                                                                                         |  | 2012                    |        |   | 2013  |  |       | 2014 |  |  | 2014  |  
|Per share                                                                                                                |  | NIS                     |        |   | U.S.$ | 
|Net income attributable to equity holders of the Company                                                                 |  |                         | 5.46   |   |       |  | 5.41  |      |  |  | 0.41  |   |  |  | 0.11  |  
|Adjustments:                                                                                                             |  |                         |        |   |       |  |       |      |  |  |       |   |  |  |       |  
|Fair value gain on investment property and investment property under development, net                                    |  |                         | (11.75 | ) |       |  | (5.62 | )    |  |  | (5.97 | ) |  |  | (1.54 | )
|Capital loss on sale of investment property                                                                              |  |                         | 0.03   |   |       |  | 0.30  |      |  |  | 0.37  |   |  |  | 0.10  |  
|Changes in the fair value of financial instruments including derivatives, measured at fair value through profit and loss |  |                         | (0.22  | ) |       |  | (2.54 | )    |  |  | 0.88  |   |  |  | 0.23  |  
|Adjustments with respect to equity-accounted investees                                                                   |  |                         | (0.26  | ) |       |  | 0.35  |      |  |  | 1.84  |   |  |  | 0.47  |  
|Loss from decrease in interest in investees                                                                              |  |                         | 0.02   |   |       |  | 0.07  |      |  |  | 0.01  |   |  |  | (*)  |  
|Deferred taxes and current taxes with respect to disposal of properties                                                  |  |                         | 4.56   |   |       |  | 1.53  |      |  |  | 2.27  |   |  |  | 0.58  |  
|Acquisition costs recognized in profit or loss                                                                           |  |                         | 0.16   |   |       |  | 0.06  |      |  |  | 0.03  |   |  |  | 0.01  |  
|Gain from bargain purchase                                                                                               |  |                         | (0.81  | ) |       |  | (1.01 | )    |  |  | (0.27 | ) |  |  | (0.07 | )
|Loss from early redemption of interest-bearing liabilities and financial derivatives                                     |  |                         | 0.89   |   |       |  | 0.83  |      |  |  | 0.87  |   |  |  | 0.22  |  
|Non-controlling interests share in the above adjustments                                                                |  |                         | 3.90   |   |       |  | 2.19  |      |  |  | 1.52  |   |  |  | 0.39  |  
|                                                                                                                         |  |                         |        |   |       |  |       |      |  |  |       |   |  |  |       |  
|Total adjustments                                                                                                        |  |                         | (3.48  | ) |       |  | (3.84 | )    |  |  | 1.55  |   |  |  | 0.39  |  
|                                                                                                                         |  |                         |        |   |       |  |       |      |  |  |       |   |  |  |       |  
|EPRA FFO                                                                                                                 |  |                         | 1.98   |   |       |  | 1.57  |      |  |  | 1.96  |   |  |  | 0.50  |  
|                                                                                                                         |  |                         |        |   |       |  |       |      |  |  |       |   |  |  |       |  
|Additional adjustments: (1)                                                                                              |  |                         |        |   |       |  |       |      |  |  |       |   |  |  |       |  
|CPI and currency exchange rate linkage differences                                                                       |  |                         | 0.57   |   |       |  | 0.89  |      |  |  | (0.03 | ) |  |  | (0.01 | )
|Depreciation and amortization                                                                                            |  |                         | 0.10   |   |       |  | 0.09  |      |  |  | 0.07  |   |  |  | 0.02  |  
|Adjustments with respect to equity-accounted investees                                                                   |  |                         | 0.01   |   |       |  | 0.16  |      |  |  | (0.02 | ) |  |  | (0.01 | )
|Other adjustments (2)                                                                                                    |  |                         | 0.57   |   |       |  | 0.71  |      |  |  | 1.41  |   |  |  | 0.37  |  
|                                                                                                                         |  |                         |        |   |       |  |       |      |  |  |       |   |  |  |       |  
|Total additional adjustments                                                                                             |  |                         | 1.25   |   |       |  | 1.85  |      |  |  | 1.43  |   |  |  | 0.37  |  
|                                                                                                                         |  |                         |        |   |       |  |       |      |  |  |       |   |  |  |       |  
|Adjusted EPRA FFO                                                                                                        |  |                         | 3.23   |   |       |  | 3.42  |      |  |  | 3.39  |   |  |  | 0.87  |  
|                                                                                                                         |  |                         |        |   |       |  |       |      |  |  |       |   |  |  |       |  



|(1) | Additional adjustments are presented net of non-controlling interests share.
|--- | -----------------------------------------------------------------------------

|(2) | Income and expenses adjustments including expenses arising from non-recurring expenses related to the termination of engagements with senior Group officers; extraordinary legal proceedings not related to the reporting
periods; income and expenses from operations not related to income producing property (including the results of Dori Group); and incremental leasing costs (mainly salary) incurred in the leasing of properties.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

EPRA NAV and EPRA NNNAV

As is customary in the European countries in which we are active and consistent with EPRAs position paper, we disclose
net asset value data, referred to as EPRA NAV. EPRA NAV is a non-IFRS financial measure that reflects our net asset value adjusted to remove the impact of (1) revaluation adjustments with respect to the fair value of financial derivatives (with
the exception of financial derivatives used for currency hedging), which are treated as hedging instruments from an economic perspective, but which do not meet the criteria for hedge accounting and (2) deferred tax adjustments with respect to
the revaluation of properties to their fair value. We also disclose EPRA triple net asset value data, referred to as EPRA NNNAV, which is also a non-IFRS financial measure based on EPRA NAV (1) readjusted for revaluation adjustments with
respect to the fair value of financial instruments of the kind referred to above and (2) adjusted to reflect the impact of changes in the fair value of financial liabilities and certain adjustments to the provision for deferred taxes.

According to EPRA, shareholders equity, also referred to as net asset value, or NAV, reported in the financial statements
under IFRS does not provide investors with the most relevant information on the fair value of the assets and liabilities within an ongoing real estate investment company with a long-term investment strategy. The purpose of EPRA NAV is to highlight
the fair value of net assets on an ongoing, long-term basis. Assets and liabilities that are not expected to crystallize in normal circumstances, such as the fair value of financial derivatives and deferred taxes on property valuation surpluses are
therefore excluded. Similarly, properties acquired exclusively with a view to subsequent disposal in the near future or for development and resale are adjusted to their fair value under EPRA NAV.



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While EPRA NAV is designed to provide a consistent measure of the fair value of a
companys net assets on a going concern basis, some investors like to use a spot measure of NAV which shows all assets and liabilities at their fair value. The objective of EPRA NNNAV is to report net asset value including fair
value adjustments in respect of all material balance sheet items which are not reported at their fair value as part of the EPRA NAV.

These data do not constitute a valuation of our assets and do not replace the data presented in our financial statements.
Rather they provide an additional way of viewing our results in accordance with the recommendations of EPRA. In addition, these measures enable our results to be compared with those of other European property companies. We calculate EPRA NAV and
EPRA NNNAV in accordance with EPRAs Best Practices Recommendations.

The following tables present a calculation of EPRA NAV and EPRA
NNNAV for the periods presented:



|                                                                                                    |  |                    |         |   |       |  |         |      |  |  |         |   |  |  |         |  
|--------------------------------------------------------------------------------------------------- |  | ------------------ | ------- | - | ----- |  | ------- | ---- |  |  | ------- | - |  |  | ------- | -
|                                                                                                    |  | As of December 31, |        
|                                                                                                    |  | 2012               |         |   | 2013  |  |         | 2014 |  |  | 2014    |  
|in millions                                                                                         |  | NIS                |         |   | U.S.$ | 
|EPRA NAV                                                                                            |  |                    |         |   |       |  |         |      |  |  |         |   |  |  |         |  
|Equity attributable to the equity holders of the Company, per the financial statements              |  |                    | 7,681   |   |       |  | 7,802   |      |  |  | 8,023   |   |  |  | 2,063   |  
|Adjustments for neutralization of fair value of derivatives (1)                                     |  |                    | (83     | ) |       |  | (60     | )    |  |  | (9      | ) |  |  | (2      | )
|Provision for tax on revaluation of investment property to fair value (net of minoritys share) (2) |  |                    | 2,203   |   |       |  | 2,158   |      |  |  | 2,363   |   |  |  | 608     |  
|Adjustments with respect to affiliates                                                              |  |                    | 236     |   |       |  | 300     |      |  |  | 363     |   |  |  | 93      |  
|                                                                                                    |  |                    |         |   |       |  |         |      |  |  |         |   |  |  |         |  
|Net asset valueEPRA NAV                                                                            |  |                    | 10,037  |   |       |  | 10,200  |      |  |  | 10,740  |   |  |  | 2,762   |  
|                                                                                                    |  |                    |         |   |       |  |         |      |  |  |         |   |  |  |         |  
|EPRA NAV per share (in NIS)                                                                         |  |                    | 60.7    |   |       |  | 57.9    |      |  |  | 60.2    |   |  |  | 15.5    |  
|                                                                                                    |  |                    |         |   |       |  |         |      |  |  |         |   |  |  |         |  
|Number of shares used to calculate EPRA NAV per share(in thousands of shares)
(3)                   |  |                    | 165,483 |   |       |  | 176,094 |      |  |  | 178,485 |   |  |  | 178,485 |  
|                                                                                                    |  |                    |         |   |       |  |         |      |  |  |         |   |  |  |         |  



|(1) | Represents the fair value less the intrinsic value of financial derivatives that are not accounted for as a hedge from an accounting perspective. The fair value of investments that are traded in active markets is
determined by reference to quoted market prices at each reporting date. For investments where there is no active market, fair value is determined using appropriate valuation techniques. For more details regarding valuation techniques used to
determine the fair value of derivatives see Notes 2(n) and 37(b) to our audited consolidated financial statements included elsewhere in this Annual Report. This adjustment is recommended by EPRA because, under normal circumstances, these derivatives
are held until maturity and therefore the theoretical gain or loss at the balance sheet date may not materialize. In calculating EPRA NNNAV (see below) the fair value of these derivatives is reinstated.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | This adjustment is recommended by EPRA because taxes in respect of the difference between fair value and book value of investment property, development property held for investment or other non-current investments would
only become payable if the assets were sold. Accordingly, in accordance with EPRAs Best Practices Recommendations, the provision of these taxes is added back to shareholders equity, or NAV, reported in the financial statements under IFRS
in order to calculate EPRA NAV.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Represents the number of issued shares (in thousands), excluding treasury shares held by the Company, on a fully diluted basis.
|--- | -------------------------------------------------------------------------------------------------------------------------------



|                                                                                                    |  |                    |      |   |       |  |      |      |  |  |      |   |  |  |      | 
|--------------------------------------------------------------------------------------------------- |  | ------------------ | ---- | - | ----- |  | ---- | ---- |  |  | ---- | - |  |  | ---- | 
|                                                                                                    |  | As of December 31, |     
|                                                                                                    |  | 2012               |      |   | 2013  |  |      | 2014 |  |  | 2014 |  
|                                                                                                    |  | NIS                |      |   | U.S.$ | 
|EPRA NAVPer Share                                                                                  |  |                    |      |   |       |  |      |      |  |  |      |   |  |  |      | 
|Equity attributable to the equity holders of the Company, per the financial statements              |  |                    | 46.5 |   |       |  | 44.3 |      |  |  | 45.0 |   |  |  | 11.6 | 
|Adjustments for neutralization of fair value of derivatives (1)                                     |  |                    | (0.5 | ) |       |  | (0.3 | )    |  |  | (0.1 | ) |  |  |     | 
|Provision for tax on revaluation of investment property to fair value (net of minoritys share) (2) |  |                    | 13.3 |   |       |  | 12.2 |      |  |  | 13.3 |   |  |  | 3.4  | 
|Adjustments with respect to affiliates                                                              |  |                    | 1.4  |   |       |  | 1.7  |      |  |  | 2.0  |   |  |  | 0.5  | 
|                                                                                                    |  |                    |      |   |       |  |      |      |  |  |      |   |  |  |      | 
|Net asset valueEPRA NAV                                                                            |  |                    | 60.7 |   |       |  | 57.9 |      |  |  | 60.2 |   |  |  | 15.5 | 
|                                                                                                    |  |                    |      |   |       |  |      |      |  |  |      |   |  |  |      | 



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|(1) | Represents the fair value less the intrinsic value of financial derivatives that are not accounted for as a hedge from accounting perspective. The fair value of investments that are traded in active markets is
determined by reference to quoted market prices at each reporting date. For investments where there is no active market, fair value is determined using appropriate valuation techniques. For more details regarding valuation techniques used to
determine the fair value of derivatives see Notes 2(n) and 37(b) to our audited consolidated financial statements included elsewhere in this Annual Report. This adjustment is recommended by EPRA because, under normal circumstances, these
derivatives are held until maturity and therefore the theoretical gain or loss at the balance sheet date may not materialize. In calculating EPRA NNNAV (see below) the fair value of these derivatives is reinstated.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | This adjustment is recommended by EPRA because taxes in respect of the difference between fair value and book value of investment property, development property held for investment or other non-current investments would
only become payable if the assets were sold. Accordingly, in accordance with EPRAs Best Practices Recommendations, the provision of these taxes is added back to shareholders equity, or NAV, reported in the financial statements under IFRS
in order to calculate EPRA NAV.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                                     |  |                    |         |   |       |  |         |      |  |  |         |   |  |  |         |  
|------------------------------------------------------------------------------------ |  | ------------------ | ------- | - | ----- |  | ------- | ---- |  |  | ------- | - |  |  | ------- | -
|                                                                                     |  | As of December 31, |        
|                                                                                     |  | 2012               |         |   | 2013  |  |         | 2014 |  |  | 2014    |  
|in millions                                                                          |  | NIS                |         |   | U.S.$ | 
|EPRA NNNAV                                                                           |  |                    |         |   |       |  |         |      |  |  |         |   |  |  |         |  
|EPRA NAV                                                                             |  |                    | 10,037  |   |       |  | 10,200  |      |  |  | 10,740  |   |  |  | 2,762   |  
|Adjustment for addition of fair value of derivatives (1)                             |  |                    | 83      |   |       |  | 60      |      |  |  | 9       |   |  |  | 2       |  
|Adjustments of financial liabilities to fair value (2)                               |  |                    | (1,495  | ) |       |  | (1,460  | )    |  |  | (1,833  | ) |  |  | (471    | )
|Other adjustments to provision for deferred taxes (3)                                |  |                    | (1,214  | ) |       |  | (1,124  | )    |  |  | (1,266  | ) |  |  | (326    | )
|Adjustments with respect to affiliates                                               |  |                    | (254    | ) |       |  | (315    | )    |  |  | (441    | ) |  |  | (113    | )
|                                                                                     |  |                    |         |   |       |  |         |      |  |  |         |   |  |  |         |  
|Adjusted net asset valueEPRA NNNAV                                                |  |                    | 7,157   |   |       |  | 7,361   |      |  |  | 7,209   |   |  |  | 1,854   |  
|                                                                                     |  |                    |         |   |       |  |         |      |  |  |         |   |  |  |         |  
|EPRA NNNAV per share (in NIS)                                                        |  |                    | 43.3    |   |       |  | 41.8    |      |  |  | 40.4    |   |  |  | 10.4    |  
|                                                                                     |  |                    |         |   |       |  |         |      |  |  |         |   |  |  |         |  
|Number of shares used to calculate EPRA NNNAV per share (in thousands of shares)
(4) |  |                    | 165,483 |   |       |  | 176,094 |      |  |  | 178,485 |   |  |  | 178,485 |  
|                                                                                     |  |                    |         |   |       |  |         |      |  |  |         |   |  |  |         |  



|(1) | Represents the fair value less the intrinsic value of hedge derivatives that are not accounted for as a hedge from an accounting perspective. The fair value of investments that are traded in active markets is determined
by reference to quoted market prices at each reporting date. For investments where there is no active market, fair value is determined using appropriate valuation techniques. For more details regarding valuation techniques used to determine the fair
value of such derivatives see Notes 2(n) and 37(b) to our consolidated financial statements included elsewhere in this Annual Report.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Represents the difference between interest-bearing financial liabilities included in the balance sheet at amortized costs, and the fair value of interest-bearing financial liabilities. The fair value of financial
instruments that are quoted in an active market (such as marketable securities, debentures) is calculated by reference to quoted market prices at the close of business on the balance sheet date. The fair value of financial instruments that are not
quoted in an active market is estimated using standard pricing valuation models. For more details regarding valuation techniques used to determine the fair value of financial liabilities see Notes 2(n) and 37(b) to our audited consolidated financial
statements included elsewhere in this Annual Report.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Represents the add back of provisions for deferred tax in respect of revaluation of investment property excluding such deferred tax in regions where it is customary to defer the payment of capital gains tax. The fair
value of the deferred tax is based on the expected method of realization of the underlying assets and liabilities and is calculated based on gross liabilities without discounting.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Represents the number of issued shares (in thousands), excluding treasury shares held by the Company, on a fully diluted basis.
|--- | -------------------------------------------------------------------------------------------------------------------------------



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|                                                         |  |                    |      |   |       |  |      |      |  |  |       |   |  |  |      |  
|-------------------------------------------------------- |  | ------------------ | ---- | - | ----- |  | ---- | ---- |  |  | ----- | - |  |  | ---- | -
|                                                         |  | As of December 31, |     
|EPRA NNNAVPer Share                                     |  | 2012               |      |   | 2013  |  |      | 2014 |  |  | 2014  |  
|                                                         |  | NIS                |      |   | U.S.$ | 
|EPRA NAV                                                 |  |                    | 60.7 |   |       |  | 57.9 |      |  |  | 60.2  |   |  |  | 15.5 |  
|Adjustment for addition of fair value of derivatives (1) |  |                    | 0.5  |   |       |  | 0.3  |      |  |  | 0.1   |   |  |  |     |  
|Adjustments of financial liabilities to fair value (2)   |  |                    | (9.0 | ) |       |  | (8.2 | )    |  |  | (10.3 | ) |  |  | (2.7 | )
|Other adjustments to provision for deferred taxes (3)    |  |                    | (7.4 | ) |       |  | (6.4 | )    |  |  | (7.1  | ) |  |  | (1.8 | )
|Adjustments with respect to affiliates                   |  |                    | (1.5 | ) |       |  | (1.8 | )    |  |  | (2.5  | ) |  |  | (0.6 | )
|                                                         |  |                    |      |   |       |  |      |      |  |  |       |   |  |  |      |  
|Adjusted net asset valueEPRA NNNAV                    |  |                    | 43.3 |   |       |  | 41.8 |      |  |  | 40.4  |   |  |  | 10.4 |  
|                                                         |  |                    |      |   |       |  |      |      |  |  |       |   |  |  |      |  



|(1) | Represents the fair value less the intrinsic value of hedge derivatives that are not accounted for as a hedge for accounting purposes. The fair value of investments that are traded in active markets is determined by
reference to quoted market prices at each reporting date. For investments where there is no active market, fair value is determined using appropriate valuation techniques. For more details regarding valuation techniques used to determine the fair
value of such derivatives see Notes 2(n) and 37(b) to our audited consolidated financial statements included elsewhere in this Annual report.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Represents the difference between interest-bearing financial liabilities included in the balance sheet at amortized costs, and the fair value of interest-bearing financial liabilities. The fair value of financial
instruments that are quoted in an active market (such as marketable securities, debentures) is calculated by reference to quoted market prices at the close of business on the balance sheet date. The fair value of financial instruments that are not
quoted in an active market is estimated using standard pricing valuation models. For more details regarding valuation techniques used to determine the fair value of financial liabilities see Notes 2(n) and 37(b) audited to our consolidated financial
statements included elsewhere in this Annual report.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Represents the add back of provisions for deferred tax in respect of revaluation of investment property excluding such deferred tax in regions where it is customary to defer the payment of capital gains tax. The fair
value of the deferred tax is based on the expected method of realization of the underlying assets and liabilities and is calculated based on gross liabilities without discounting.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Critical Accounting Policies

Our accounting policies and their effect on our financial condition and results of operations are more fully described in our
audited consolidated financial statements included elsewhere in this annual report. The preparation of financial statements in conformity with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards
Board, or IASB, requires management to make estimates and assumptions that in certain circumstances affect the reported amounts of assets and liabilities, revenues and expenses and disclosure of contingent assets and liabilities. These estimates are
prepared using our best judgment, after considering past and current events and economic conditions. While management believes the factors evaluated provide a meaningful basis for establishing and applying sound accounting policies, management
cannot guarantee that the estimates will always be consistent with actual results. In addition, certain information relied upon by us in preparing such estimates includes internally generated financial and operating information, external market
information, when available, and when necessary, information obtained from consultations with third party experts. Actual results could differ from these estimates and could have a material adverse effect on our reported results. See Item
3Key InformationRisk Factors for a discussion of the possible risks which may affect these estimates.

We
believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance, as these policies relate to the more significant areas involving managements estimates and
assumptions. We consider an accounting estimate to be critical if: (1) it requires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making our
estimate; and (2) changes in the estimate could have a material impact on our financial condition or results of operations.

Principles of Consolidation

Our financial statements reflect the consolidation of the financial statements of companies that we control based on legal
control or effective control. Legal control exists when we are exposed to, or have the rights to, variable returns from the involvement with the entity and the ability to affect those returns through our power over the entity. When assessing
control, we consider its potential voting rights as well as potential voting rights held by other parties, to determine whether we have the power. Those potential voting rights are considered only if the rights are substantive. We must have a
practical ability to exercise those rights. In addition, as required by accounting standards we consolidate on the basis of effective control even if we do not have voting control. The determination that effective control exists involves significant
judgment.

In evaluating the effective control on our investees we consider the following aspects to determine if effective control exists:



| |  |  | Whether we hold a significant voting interest (but less than half the voting rights).
| | - |  | -------------------------------------------------------------------------------------



| |  |  | Whether there is a wide diversity of public holdings of the remaining shares conferring voting rights.
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | Whether in the past we had the majority of the voting power participating in the general meetings of shareholders and therefore, have in fact had the ability to nominate the majority of the board members.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The absence of a single entity beside us, which holds a significant portion of the investees shares.
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | Our ability to establish policies and guide operations by indirectly appointing the remainder of the investees senior management.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | Whether the minority shareholders have participation rights or other preferential rights, excluding traditional shareholder protective rights.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------

Entities we control are fully consolidated in our financial statements. All significant intercompany balances and transactions
are eliminated in consolidation. Non-controlling interests of subsidiaries represent the non-controlling shareholders proportionate interest in the comprehensive income (loss) of the subsidiaries and fair value of the net assets or the net
identifiable assets upon the acquisition of the subsidiaries.

For the year ended December 31, 2014, Equity One, First
Capital and Citycon were consolidated based on our determination of effective control. Please see Note 2© to our audited consolidated financial statements included elsewhere in this Annual
Report for a discussion of the determinations regarding consolidation of our other subsidiaries and investees.

Transactions with
non-controlling interests

Non-controlling interests represent the equity in subsidiaries that are not
attributable, directly or indirectly, to us. Profit or loss and each component of other comprehensive income are attributed both to us and to non-controlling interests. Losses are attributed to non-controlling interests even if the non-controlling
interests balance reported in the consolidated statement of financial position is negative.



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In cases where we provide loans and/or guarantees for a subsidiarys debts
in excess of our holding interest therein, we recognize our equity in the comprehensive income/loss of the subsidiary in accordance with the holding interest in the subsidiary. This notwithstanding, in the Statement of Changes in Equity, we makes a
reattribution of the losses generated, so that the non-controlling interests are not presented at an amount that is less than the amount of financing to which they have committed.

When the we acquire non-controlling interests, the difference between the consideration and the carrying amount of the acquired
interest is recorded as a reduction or increase in equity under transactions with non-controlling interests. Upon disposal of rights in a subsidiary that does not result in a loss of control, an increase or decrease in equity is recognized as the
difference between the consideration we received and the carrying amount of the non controlling interests in the subsidiary, adjusted for the disposal of goodwill in the subsidiary, if any, and for amounts recognized in other comprehensive income,
if any. Transaction costs in respect of transactions with non-controlling interests are also recorded in equity.

Functional and
Foreign Currencies

The presentation currency of our financial statements and our functional currency is the NIS.
When the functional currency of an entity in which we own an equity interest (other than securities held for sale), which is referred to as an investee, differs from our functional currency, that investee represents a foreign operation whose
financial statements are translated as follows: (1) assets and liabilities are translated at the closing rate at the date of that balance sheet, (2) income and expenses are translated at average exchange rates for the presented periods and
(3) share capital and capital reserves are translated at the exchange rate prevailing at the date of incurrence. All resulting translation differences are recognized in a separate component in equity - adjustments from translation of
financial statements, as other comprehensive income (loss).

Investment Property and Investment Property Under Development

Under IAS 40 Investment Property, investment property is initially valued at cost, including costs
directly attributable to the acquisition. Thereafter, IAS 40 allows us to measure the value of our investment property (i) at cost less depreciation and impairment or (ii) at fair value. We measure the value of investment property at fair
value. Gains or losses arising from changes in fair value of our investment property are recognized in profit or loss when they arise. Accordingly, such changes can have a significant impact on our profit or loss. For example, in the year ended
December 31, 2014, we wrote up the value of our properties on a consolidated basis by NIS 1,053 million (of which Gazit-Globes share was NIS 554 million). This compares to a write up in 2013 of NIS 962 million (of which
Gazit-Globes share was NIS 388 million) and a write up in 2012 of NIS 1,938 million (of which Gazit-Globes share was NIS 962 million). Investment properties are not systematically depreciated.

Investment property under development, designated for future use as investment property, is also measured at fair value,
provided that fair value can be reliably measured. However, when fair value is not reliably determinable, such property is measured at cost, less any impairment losses, if any, until either development is completed, or its fair value becomes
reliably determinable, whichever is earlier. The cost of investment property under development includes the cost of land, construction costs, as well as borrowing costs used to finance the land and the construction, direct incremental planning and
development costs, as well as brokerage fees relating to agreements to lease the property and other incremental lease-up costs. As of December 31, 2014, 61.2% of our investment property under development and land for future development were
measured at fair value.

Fair value of investment property was determined by accredited independent appraisers with respect
to 53.3% of such investment properties for the year ended December 31, 2014 in fair value terms (of which 43.7% were performed at December 31, 2014). Fair value of investment property under development and land was determined by accredited
independent appraisers with respect to 63.2% of such investment properties during the year ended December 31, 2014 (45.2% of which were performed at December 31, 2014). The remainder of the valuations was performed by the management of our
subsidiaries including by internal professional appraisers. Fair value of investment property and investment property under development, is determined by the appraisers and our management based on market conditions using either (1) the
Comparative Method (i.e. based on comparison data for similar properties in the vicinity with similar uses, including required adjustments for location, size or quality), (2) the Discounted Cash Flow Method (less cost to complete and developer
profit in the case of investment property under development, also referred to as Residual Method) or (3) the Income Capitalization Method. When using the Comparative Method we and the external valuation experts rely on market prices, applying
necessary adjustments, to the extent that such information is available (During 2014, 86.5% of land valuations in fair value terms). However, when such information is not available, we use valuation techniques (DCF including Residual Method, or
Income Capitalization) based on current market yields to which necessary adjustments are applied. In order to estimate future cash flows and the appropriate discount rate, the Discounted Cash Flow Method requires assumptions regarding the required
yield rates on our properties, future rental prices,



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occupancy levels, renewal of leases, probability of lease of vacant space, property operating expenses, the financial strength of tenants and future capital expenditure projections. Changes in
the assumptions that are used to measure the investment property may lead to a change in the fair value. See Note 12(c) to our audited consolidated financial statements included elsewhere in this Annual Report for the capitalization rates implied in
the valuations and the market rent of the investment property. See Notes 12(c) and 13(d) to our audited consolidated financial statements included elsewhere in this Annual Report for a sensitivity analysis regarding changes in the most
significant assumptions used in our fair value estimates.

Financial Derivatives

We utilize financial derivatives, principally cross-currency swaps, interest rate swaps and currency forward contracts to
manage our exposure to fluctuations in interest rates, changes in the Israeli consumer price index and changes in foreign exchange rates. We have established policies and procedures for risk assessment, and the approval, reporting and monitoring of
financial derivatives activities. We have not entered into, and do not plan to enter into, financial derivative transactions for trading or speculative purposes. Additionally, we have a policy of entering into derivative contracts only with major
financial institutions.

Such financial derivatives are initially recognized at fair value and attributed transaction costs
are reflected in our income statement when incurred. Any gains or losses arising from changes in fair value of derivatives that do not qualify for hedge accounting are recognized in profit or loss. At the inception of a hedge relationship, we
formally designate and document the hedge relationship to which we wish to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The hedge effectiveness is assessed regularly at each reporting period. The
fair value of the derivatives is determined based on the estimation of the applicable yield curves, expected exchange rates, inter-currency liquidity gaps, inflation expectations and the credit risk of the parties. Changes in these valuation
assumptions could result in significant change in the value of the derivatives. Any gains or losses arising from changes in fair value of derivatives that qualify for hedge accounting are recognized in the statement of other comprehensive income.

On unwinding hedging transactions, whether or not they are designated as an accounting hedge, when the transaction
includes a cash flows hedge with respect to principal and interest, the cash flows received are classified in the statement of cash flow under financing activity, in respect of the cash flows representing the hedge of the principal component, and
under operating activity, in respect of the cash flows representing the hedge of the interest component. With regard to unwinding of cross-currency swap hedging transactions during 2014, refer to Note 37(d) to our audited consolidated financial
statements included elsewhere in this Annual Report.

Fair Value Measurements

IFRS 13 establishes guidance for the measurement of fair value, to the extent that such measurement is required according to
IFRS. The measurement guidance and new disclosures were applied prospectively commencing January 1, 2014 and were not applied to comparative figures. In addition, the disclosures required by IFRS 13 are included in Note 37(b) to our audited
consolidated financial statements included elsewhere in this Annual Report.

All assets and liabilities that are measured
at fair value or whose fair value is disclosed are divided into categories within a fair value hierarchy, based on the lowest level input that is significant to the entire fair value measurement:



| |  |  | Level 1: Prices quoted (un-adjusted) on active markets of similar assets and liabilities.
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | Level 2: Data other than quoted prices included in level 1, which may be directly or indirectly observed.
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | Level 3: Data not based on observable market information (valuation techniques not involving use of observable market data). Such techniques include using recent arms length market transactions; reference to the
current market value of another instrument that is substantially the same; a discounted cash flow analysis or other valuation models.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Changes in the underlying valuation assumptions could result in significant changes in the values of our assets and liabilities and our results
of operations.



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Business Combinations and Goodwill

Business combinations are accounted for by applying the acquisition method. Under this method, the assets and liabilities of
the acquired business are identified at fair value on the acquisition date. The cost of the acquisition is the aggregate fair value of the identified assets granted, identified liabilities assumed and equity rights issued by the acquirer on the date
of acquisition. In respect of all business combinations, non-controlling interests are measured either at fair value on the acquisition date or at the relative share of the non-controlling interests in the acquired entitys net identifiable
assets. The direct costs relating to the acquisition are recognized immediately as an expense in profit or loss and are not part of the acquisition cost.

On the acquisition date, the existing assets and liabilities are reclassified and redesignated in accordance with the
contractual terms, economic circumstances and other pertinent conditions that exist at the acquisition date, including a separation of embedded derivatives from the host contract by the acquiree.

In a business combination achieved in stages, equity rights in the acquired entity that had been previously held by the
acquirer prior to obtaining control are measured at the acquisition date at fair value and included in the acquisition consideration by recognizing in the income statement the gain or loss resulting from the fair value measurement. In addition,
amounts previously recorded in other comprehensive income are reclassified to profit or loss.

Goodwill is initially
measured at cost which represents the excess acquisition consideration and non-controlling interests over the net identifiable assets acquired and liabilities assumed as measured on the acquisition date. If the excess is negative, the difference is
recognized as a gain from bargain purchase in profit or loss upon acquisition. After initial recognition, goodwill is measured at cost less, if appropriate, any accumulated impairment losses. Goodwill is not systematically amortized.

Acquisitions of Subsidiaries and Properties that are not Business Combinations

Upon the acquisition of subsidiaries and properties that do not constitute a business, the acquisition consideration is only
allocated between the acquired identifiable assets and liabilities based on their relative fair values on the acquisition date without attributing any amount to goodwill or to deferred taxes, whereby the non-controlling interests, if any,
participate at their relative share of the fair value of the net identifiable assets on the acquisition date. Directly attributed costs are recognized as part of the acquisition cost. As for an amendment to IAS 40 - Investment Property, see Recently
Issued Accounting Pronouncements section below.

Investments in Associates and Joint Ventures

Associates are companies in which we have significant influence over the financial and operating policies without having
control, according to IAS 28. Joint ventures are entities owned by us and other parties, in which we have a contractual arrangement for joint control with other parties, according to IFRS 11.

An investment in associates or joint ventures is accounted for using the equity method. Under the equity method, the investment
in associates or joint ventures is accounted for in the financial statements at cost plus changes in our share in the net assets, including other comprehensive income (loss), of the associates or joint ventures. We apply the equity method until we
lose significant influence or joint control or when we classify the investment as non-current asset held-for-sale.

Goodwill relating to the acquisition of associates or joint ventures and to the increase in holding rate is initially measured
as the difference between the acquisition cost and our share in the net fair value of the associates or joint ventures net identifiable assets. After initial recognition, goodwill is measured at cost less, if applicable, any accumulated
impairment loss and is not systematically amortized. Goodwill is examined for impairment as part of the investment in the associate or joint venture as a whole. In case the acquisition cost is lower than the net fair value of the associated net
identified assets the difference is recognized as a gain from bargain purchase in profit or loss.

We examine whether it is
necessary to recognize any additional impairment loss with respect to investments in the associates or joint ventures. The recoverable amount is the higher of fair value and value in use which is determined based on the estimated net cash flows to
be generated by the associate or joint venture. Impairment loss, as above, is not attributed specifically to goodwill. Therefore, it may be reversed in full in subsequent periods, up to the recognized impairment loss, if the recoverable amount of
the investment increases. For additional information, refer to Note 9(c) to our audited consolidated financial statements included elsewhere in this Annual Report.



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Profits and losses resulting from transactions between the Group and associates
or joint ventures are eliminated to the extent of the interest in the investees. The financial statements of the Company and of the associates or joint ventures are prepared as of the same dates and periods. The accounting policy in the financial
statements of the associates and joint ventures has been applied consistently and uniformly with the policy applied in the financial statements of the Group.

Rental Income

Our management has determined that all of the leases with our various tenants are operating leases since we retain
substantially all risks and rewards incidental to ownership of such properties. Rental income with scheduled rent increases is recognized using the straight-line method over the respective terms of the leases commencing when the tenant takes
possession of the premises. Similarly, lease incentives granted to tenants, in cases where the tenants are the primary beneficiary of such incentives, are deducted and considered as an integral part of total rental income and recognized on a
straight-line average basis over the lease term. Leases also generally contain provisions under which the tenants reimburse us for a portion of property operating expenses and real estate taxes incurred; such income is recognized in the periods
earned. Management considers whether we are acting as a principal or as an agent in the transaction. In cases where we operate as a broker or agent without retaining the risks and rewards associated with the transaction, revenues are presented on a
net basis. However, in cases where we operate as a main supplier and retain the risks and rewards associated with the transaction, revenues are presented on a gross basis. In addition, certain operating leases contain contingent rent provisions
under which tenants are required to pay, as additional rent, a percentage of their sales in excess of a specified amount. We recognize contingent rental income only when those specified sales targets are met and notification is received from the
tenant.

Income Taxes

The tax results in respect of current or deferred taxes are recognized in the statement of income except to the extent that the
tax arises from items which are recognized in other comprehensive income or directly in equity.

Current tax liability is
measured using the tax rates and tax laws that have been enacted or substantively enacted by the reporting date as well as adjustments required in connection with the tax liability in respect of previous years . Significant estimates are required to
determine the amount of deferred tax assets that can be recognized based upon the availability of offsetting deferred tax liability, likely timing and level of future taxable profits together with future tax planning strategies.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is
realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date. All deferred tax assets and deferred tax liabilities are presented on the balance sheet as non-current
assets and non-current liabilities, respectively. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is not probable that the related tax benefit will be realized. Similarly, temporary differences (such as
carry-forward tax losses) for which deferred tax assets have not been recognized are reviewed, and deferred tax assets are recognized to the extent that their utilization has become probable. Any resulting reduction or reversal is recognized in the
statement of income, unless related to an item that is recognized in equity. As of December 31, 2014, we had NIS 78 million (U.S.$ 20 million) of deferred tax assets and NIS 3,618 million (U.S.$ 930 million) of deferred tax liabilities as
compared to NIS 106 million of deferred tax assets and NIS 3,276 million of deferred tax liabilities as of December 31, 2013.

In situations where we hold single asset entities and where the manner in which we expect to realize the investment is by
selling the shares of the single asset entity rather than by disposing of the asset itself, we recognize deferred taxes both in relation to the temporary inside differences arising from the gap between the tax basis of the asset and its book value
and, if relevant, also in relation to the temporary outside differences arising from the gap between the tax basis of the shares of the single asset entity and the shares of the company that holds the net assets of the single asset entity in the
consolidated financial statements.

Taxes that would apply in the event of the sale of investments in subsidiaries have not
been taken into account in recognizing deferred taxes, as long as the realization of the investments in investees is not expected in the foreseeable future. Also, deferred tax liabilities that may arise with respect to distribution of earnings by
investee companies as dividends have not been taken into account in recognizing deferred taxes,



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since it is our policy not to initiate dividend distributions that trigger additional tax liability. For further information and the impact of the concentration Law on deferred taxes, refer to
Note 2(a) to our audited consolidated financial statements included elsewhere in this Annual report.

Nevertheless,
deferred taxes are recognized for the undistributed earnings of a subsidiary, which qualifies as a REIT for tax purposes, such as Equity One, due to the REITs policy to distribute most of its taxable income to its shareholders. These deferred
taxes are recognized based on our interests in the REIT. For additional information refer to Note 25(b) to our audited consolidated financial statements included elsewhere in this Annual report.

Recently Adopted Accounting Pronouncements

International Financial Reporting Clarification No. 21 (IFRIC 21), Levies

In May 2013, the IASB published International Reporting Clarification NO.21 (IFRIC 21) (the Interpretation) regarding levies that
are imposed by government through legislation. Pursuant to the Interpretation an obligation for the payment of a levy will only be recognized upon the occurrence of the event creating the payment obligation. The adoption of the Interpretation
did not have a material impact on our consolidated financial statements.

Recently Issued Accounting Pronouncements

IFRS 15, Revenue from Contracts with Customers

The Standard introduces the following five-step model that applies to revenue from contracts with customers:

Step 1: Identify the contract with a customer, including reference to contract consolidation and accounting for contract modifications.

Step 2: Identify the distinct performance obligations in the contract.

Step 3: Determine the transaction price, including reference to variable consideration, financing components that are significant to the
contract, non-cash consideration and any consideration payable to the customer.

Step 4: Allocate the transaction price to the separate
performance obligations on a relative stand-alone selling price basis using observable information, if it is available, or by making estimates and assessments.

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation over time or at a point in time.

The Amendment will be adopted retrospectively from the financial statements for annual periods beginning on January 1,
2017 or thereafter. Earlier application is permitted. We are evaluating the potential effect of the adoption of IFRS 15 but at this stage we are unable to assess their effect, if any, on our financial statements.

IFRS 9, Financial Instruments

In July 2014, the IASB published the full and final text of IFRS 9 Financial Instruments, which replaces IAS 39 Financial Instruments:
Recognition and Measurement. IFRS 9 (the Standard) focuses primarily on the classification and measurement of financial assets and applies to all the financial assets in the scope of IAS 39.

The Standard prescribes that, at initial recognition, all the financial assets are to be measured at fair value. In subsequent periods,
investments in debt instruments are to be measured at amortized cost only if the two following cumulative conditions are met:



| |  |  | The asset is held within a business model whose objective is to hold assets in order to collect the contractual cash flows arising therefrom.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In accordance with the contractual terms of the financial asset, the company is entitled, on specified dates, to receive cash flows that are solely payments of principal and interest on the principal amount outstanding.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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The subsequent measurement of all other debt instruments and other financial assets will be at
fair value. The Standard makes a distinction between debt instruments to be measured at fair value through profit or loss and debt instruments to be measured at fair value through other comprehensive income.

Financial assets that are equity instruments are to be measured in subsequent periods at fair value, with the value changes recognized in
profit or loss or in other comprehensive income (loss), as elected by the company for each individual instrument. When dealing with equity instruments that are held for trading, it is mandatory for such instruments to be measured at fair value
through profit or loss.

With regard to derecognition and financial liabilities, the Standard prescribes the same provisions as are
required under the provisions of IAS 39 with regard to derecognition and financial liabilities for which the fair value option has not been elected.

Pursuant to the Standard, the amount of the change in the fair value of liabilities  attributable to changes in the credit risk 
will be presented in other comprehensive income. The whole of the remaining amount of the change in the fair value will be presented in profit or loss.

The Standard includes new hedge accounting requirements.

The Standard is effective for periods beginning on or after January 1, 2018, with early adoption permitted. We are studying the potential
effects of the Standard, but we are unable, at this stage, to assess its effect, if any, on our financial statements.

Amendment to IAS
40, Investment Property

The amendment clarifies that, at the time of determining whether an acquired investment property is an
asset or a business (with regard to the existence of a business combination), no reliance is to be placed on the ancillary services characteristic referred to in IAS 40; instead, use should be made of the criteria for the existence of a
business referred to in IFRS 3 (section B7 - Inputs, outputs and processes). The ancillary services characteristic is intended only to differentiate between investment property and property used by its owners.

The amendment is effective prospectively for annual periods beginning on or after July 1, 2014. In our opinion, the amendment is not
expected to have a material effect on the financial statements.



| | C. | Research and Development, Patents and Licenses, Etc.
| | -- | ----------------------------------------------------

Not applicable.



| | D. | Trend Information
| | -- | -----------------

See Item 5Operating and Financial Review and
ProspectsOperating ResultsShopping Centers.



| | E. | Off-Balance Sheet Arrangements
| | -- | ------------------------------

We do not have any material off-balance sheet
arrangements.



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| | F. | Tabular Disclosure of Contractual Obligations
| | -- | ---------------------------------------------

The following table
summarizes the contractual obligations of Gazit-Globe and its private subsidiaries as of December 31, 2014:



|                         |  |                        |            |  |                 |  |           |           |  |  |           |  |  |                  |           |  |  |  |           | 
|------------------------ |  | ---------------------- | ---------- |  | --------------- |  | --------- | --------- |  |  | --------- |  |  | ---------------- | --------- |  |  |  | --------- | 
|                         |  | Payments Due by Period |           
|Contractual Obligations  |  | Total                  |            |  | Less than 1year |  |           | 2-3 years |  |  | 4-5 years |  |  | More than5 years |          
|                         |  | (NIS in thousands)     |           
|Credit facilities/loans  |  |                        | 2,050,208  |  |                 |  | 113,065   |           |  |  | 642,477   |  |  |                  | 641,800   |  |  |  | 652,866   | 
|Mortgages                |  |                        | 971,749    |  |                 |  | 188,249   |           |  |  | 47,883    |  |  |                  | 450,323   |  |  |  | 285,294   | 
|Unsecured Debentures (1) |  |                        | 10,489,788 |  |                 |  | 995,937   |           |  |  | 1,750,801 |  |  |                  | 2,844,782 |  |  |  | 4,898,268 | 
|Leases                   |  |                        | 26,439     |  |                 |  | 11,194    |           |  |  | 14,765    |  |  |                  | 480       |  |  |  |          | 
|Interest obligations     |  |                        | 3,521,180  |  |                 |  | 590,132   |           |  |  | 987,439   |  |  |                  | 682,780   |  |  |  | 1,260,829 | 
|Financial guarantees     |  |                        | 66,154     |  |                 |  | 39,268    |           |  |  | 1,175     |  |  |                  |          |  |  |  | 25,711    | 
|Purchase contracts       |  |                        | 9,820      |  |                 |  | 9,820     |           |  |  |          |  |  |                  |          |  |  |  |          | 
|                         |  |                        |            |  |                 |  |           |           |  |  |           |  |  |                  |           |  |  |  |           | 
|Total                    |  |                        | 17,135,338 |  |                 |  | 1,947,665 |           |  |  | 3,444,540 |  |  |                  | 4,620,165 |  |  |  | 7,122,968 | 
|                         |  |                        |            |  |                 |  |           |           |  |  |           |  |  |                  |           |  |  |  |           | 



|(1) | Includes a secured series amounting to NIS 847 million
|--- | ------------------------------------------------------

The following table summarizes the
contractual obligations of Equity One as of December 31, 2014:



|                         |  |                        |           |  |                 |  |         |           |  |  |           |  |  |                  |           |  |  |  |           | 
|------------------------ |  | ---------------------- | --------- |  | --------------- |  | ------- | --------- |  |  | --------- |  |  | ---------------- | --------- |  |  |  | --------- | 
|                         |  | Payments Due by Period |          
|Contractual Obligations  |  | Total                  |           |  | Less than 1year |  |         | 2-3 years |  |  | 4-5 years |  |  | More than5 years |          
|                         |  | (NIS in thousands)     |          
|Credit facilities/loans  |  |                        | 1,116,143 |  |                 |  |        |           |  |  |          |  |  |                  | 1,116,143 |  |  |  |          | 
|Mortgages                |  |                        | 1,212,504 |  |                 |  | 102,977 |           |  |  | 568,898   |  |  |                  | 334,874   |  |  |  | 205,755   | 
|Unsecured debentures     |  |                        | 2,843,388 |  |                 |  | 418,087 |           |  |  | 1,258,601 |  |  |                  |          |  |  |  | 1,166,700 | 
|Leases                   |  |                        | 173,575   |  |                 |  | 6,938   |           |  |  | 12,029    |  |  |                  | 11,018    |  |  |  | 143,590   | 
|Construction commitments |  |                        | 225,480   |  |                 |  | 214,054 |           |  |  | 11,426    |  |  |                  |          |  |  |  |          | 
|Interest obligations     |  |                        | 937,418   |  |                 |  | 240,978 |           |  |  | 356,698   |  |  |                  | 167,312   |  |  |  | 172,430   | 
|                         |  |                        |           |  |                 |  |         |           |  |  |           |  |  |                  |           |  |  |  |           | 
|Total                    |  |                        | 6,508,508 |  |                 |  | 983,034 |           |  |  | 2,207,652 |  |  |                  | 1,629,347 |  |  |  | 1,688,475 | 
|                         |  |                        |           |  |                 |  |         |           |  |  |           |  |  |                  |           |  |  |  |           | 

The following table summarizes First Capitals contractual obligations as of December 31, 2014:



|                          |  |                        |            |  |                 |  |           |           |  |  |           |  |  |                  |           |  |  |  |           | 
|------------------------- |  | ---------------------- | ---------- |  | --------------- |  | --------- | --------- |  |  | --------- |  |  | ---------------- | --------- |  |  |  | --------- | 
|                          |  | Payments Due by Period |           
|Contractual Obligations   |  | Total                  |            |  | Less than 1year |  |           | 2-3 years |  |  | 4-5 years |  |  | More than5 years |          
|                          |  | (NIS in thousands)     |           
|Credit facilities/loans   |  |                        | 12,239     |  |                 |  | 121       |           |  |  | 12,118    |  |  |                  |          |  |  |  |          | 
|Mortgages                 |  |                        | 3,951,985  |  |                 |  | 878,113   |           |  |  | 962,723   |  |  |                  | 880,857   |  |  |  | 1,230,292 | 
|Unsecured debentures      |  |                        | 7,254,576  |  |                 |  |          |           |  |  | 839,650   |  |  |                  | 1,007,580 |  |  |  | 5,407,346 | 
|Convertible debentures(1) |  |                        | 1,303,721  |  |                 |  |          |           |  |  | 387,797   |  |  |                  | 724,010   |  |  |  | 191,914   | 
|Leases                    |  |                        | 74,618     |  |                 |  | 3,254     |           |  |  | 6,583     |  |  |                  | 6,677     |  |  |  | 58,104    | 
|Construction commitments  |  |                        | 668,670    |  |                 |  | 414,871   |           |  |  | 253,799   |  |  |                  |          |  |  |  |          | 
|Interest obligations      |  |                        | 3,258,479  |  |                 |  | 602,986   |           |  |  | 1,031,628 |  |  |                  | 757,281   |  |  |  | 866,584   | 
|Financial guarantees      |  |                        | 141,733    |  |                 |  |          |           |  |  |          |  |  |                  |          |  |  |  | 141,733   | 
|                          |  |                        |            |  |                 |  |           |           |  |  |           |  |  |                  |           |  |  |  |           | 
|Total                     |  |                        | 16,666,021 |  |                 |  | 1,899,345 |           |  |  | 3,494,298 |  |  |                  | 3,376,405 |  |  |  | 7,895,973 | 
|                          |  |                        |            |  |                 |  |           |           |  |  |           |  |  |                  |           |  |  |  |           | 



|(1) | Consistent with existing practice, it is First Capitals intention to continue to satisfy its obligations of principal and interest payments in respect of all of its outstanding convertible debentures by the
issuance of common shares.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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The following table summarizes Citycons contractual obligations as of December 31,
2014:



|                         |  |                        |           |  |                 |  |           |           |  |  |           |  |  |                  |         |  |  |  |           | 
|------------------------ |  | ---------------------- | --------- |  | --------------- |  | --------- | --------- |  |  | --------- |  |  | ---------------- | ------- |  |  |  | --------- | 
|                         |  | Payments Due by Period |          
|Contractual Obligations  |  | Total                  |           |  | Less than 1year |  |           | 2-3 years |  |  | 4-5 years |  |  | More than5 years |        
|                         |  | (NIS in thousands)     |          
|Credit facilities/loans  |  |                        | 944,667   |  |                 |  | 392,626   |           |  |  | 49,535    |  |  |                  | 502,506 |  |  |  |          | 
|Unsecured debentures     |  |                        | 4,669,795 |  |                 |  |          |           |  |  | 653,885   |  |  |                  |        |  |  |  | 4,015,910 | 
|Leases                   |  |                        | 58,021    |  |                 |  | 11,846    |           |  |  | 15,430    |  |  |                  | 15,430  |  |  |  | 15,315    | 
|Construction commitments |  |                        | 1,156,204 |  |                 |  | 511,769   |           |  |  | 644,435   |  |  |                  |        |  |  |  |          | 
|Interest obligations     |  |                        | 1,111,354 |  |                 |  | 177,061   |           |  |  | 358,673   |  |  |                  | 405,846 |  |  |  | 169,774   | 
|Financial guarantees     |  |                        | 312,830   |  |                 |  | 34,905    |           |  |  | 218,098   |  |  |                  |        |  |  |  | 59,827    | 
|                         |  |                        |           |  |                 |  |           |           |  |  |           |  |  |                  |         |  |  |  |           | 
|Total                    |  |                        | 8,252,871 |  |                 |  | 1,128,207 |           |  |  | 1,940,056 |  |  |                  | 923,782 |  |  |  | 4,260,826 | 
|                         |  |                        |           |  |                 |  |           |           |  |  |           |  |  |                  |         |  |  |  |           | 

The following table summarizes Atriums contractual obligations as
of December 31, 2014:



|                         |  |                        |           |  |                 |  |         |           |  |  |           |  |  |                  |         |  |  |  |           | 
|------------------------ |  | ---------------------- | --------- |  | --------------- |  | ------- | --------- |  |  | --------- |  |  | ---------------- | ------- |  |  |  | --------- | 
|                         |  | Payments Due by Period |          
|Contractual Obligations  |  | Total                  |           |  | Less than 1year |  |         | 2-3 years |  |  | 4-5 years |  |  | More than5 years |        
|                         |  | (NIS in thousands)     |          
|Mortgages                |  |                        | 1,238,233 |  |                 |  | 17,098  |           |  |  | 709,725   |  |  |                  | 19,697  |  |  |  | 491,713   | 
|Unsecured debentures     |  |                        | 3,853,199 |  |                 |  | 145,097 |           |  |  | 400,882   |  |  |                  |        |  |  |  | 3,307,220 | 
|Leases                   |  |                        | 1,033,505 |  |                 |  | 20,467  |           |  |  | 38,933    |  |  |                  | 36,564  |  |  |  | 937,541   | 
|Construction commitments |  |                        | 401       |  |                 |  |        |           |  |  |          |  |  |                  | 373     |  |  |  | 28        | 
|Interest obligations     |  |                        | 1,177,732 |  |                 |  | 287,780 |           |  |  | 367,527   |  |  |                  | 300,737 |  |  |  | 221,688   | 
|                         |  |                        |           |  |                 |  |         |           |  |  |           |  |  |                  |         |  |  |  |           | 
|Total                    |  |                        | 7,303,070 |  |                 |  | 470,442 |           |  |  | 1,517,067 |  |  |                  | 357,371 |  |  |  | 4,958,190 | 
|                         |  |                        |           |  |                 |  |         |           |  |  |           |  |  |                  |         |  |  |  |           | 

The following table summarizes Dori Groups contractual
obligations as of December 31, 2014:



|                        |  |                        |         |  |                 |  |         |           |  |  |           |  |  |                  |         |  |  |  |        | 
|----------------------- |  | ---------------------- | ------- |  | --------------- |  | ------- | --------- |  |  | --------- |  |  | ---------------- | ------- |  |  |  | ------ | 
|                        |  | Payments Due by Period |        
|Contractual Obligations |  | Total                  |         |  | Less than 1year |  |         | 2-3 years |  |  | 4-5 years |  |  | More than5 years |        
|                        |  | (NIS in thousands)     |        
|Credit facilities/loans |  |                        | 123,201 |  |                 |  | 114,530 |           |  |  | 6,001     |  |  |                  | 2,670   |  |  |  |       | 
|Unsecured debentures    |  |                        | 478,034 |  |                 |  | 122,786 |           |  |  | 133,821   |  |  |                  | 133,821 |  |  |  | 87,606 | 
|Purchase contracts      |  |                        | 6,318   |  |                 |  | 6,318   |           |  |  |          |  |  |                  |        |  |  |  |       | 
|Interest obligations    |  |                        | 74,879  |  |                 |  | 24,905  |           |  |  | 31,217    |  |  |                  | 15,267  |  |  |  | 3,490  | 
|                        |  |                        |         |  |                 |  |         |           |  |  |           |  |  |                  |         |  |  |  |        | 
|Total                   |  |                        | 682,432 |  |                 |  | 268,539 |           |  |  | 171,039   |  |  |                  | 151,758 |  |  |  | 91,096 | 
|                        |  |                        |         |  |                 |  |         |           |  |  |           |  |  |                  |         |  |  |  |        | 

The following table summarizes our contractual obligations on a
consolidated basis as of December 31, 2014:



|                           |  |                        |            |  |                 |  |           |           |  |  |            |  |  |                  |            |  |  |  |            | 
|-------------------------- |  | ---------------------- | ---------- |  | --------------- |  | --------- | --------- |  |  | ---------- |  |  | ---------------- | ---------- |  |  |  | ---------- | 
|                           |  | Payments Due by Period |           
|Contractual Obligations(1) |  | Total                  |            |  | Less than 1year |  |           | 2-3 years |  |  | 4-5 years  |  |  | More than5 years |           
|                           |  | (NIS in thousands)     |           
|Credit facilities/loans    |  |                        | 4,246,458  |  |                 |  | 620,342   |           |  |  | 710,131    |  |  |                  | 2,263,119  |  |  |  | 652,866    | 
|Mortgages                  |  |                        | 6,136,238  |  |                 |  | 1,169,339 |           |  |  | 1,579,504  |  |  |                  | 1,666,054  |  |  |  | 1,721,341  | 
|Unsecured debentures*)     |  |                        | 25,735,581 |  |                 |  | 1,536,810 |           |  |  | 4,636,758  |  |  |                  | 3,986,183  |  |  |  | 15,575,830 | 
|Convertible debentures**)  |  |                        | 1,303,721  |  |                 |  |          |           |  |  | 387,797    |  |  |                  | 724,010    |  |  |  | 191,914    | 
|Leases                     |  |                        | 332,653    |  |                 |  | 33,232    |           |  |  | 48,807     |  |  |                  | 33,605     |  |  |  | 217,009    | 
|Construction commitments   |  |                        | 2,050,354  |  |                 |  | 1,140,694 |           |  |  | 909,660    |  |  |                  |           |  |  |  |           | 
|Interest obligations       |  |                        | 8,903,310  |  |                 |  | 1,636,062 |           |  |  | 2,765,655  |  |  |                  | 2,028,486  |  |  |  | 2,473,107  | 
|Financial guarantees       |  |                        | 520,717    |  |                 |  | 74,173    |           |  |  | 219,273    |  |  |                  |           |  |  |  | 227,271    | 
|Purchase contracts         |  |                        | 16,138     |  |                 |  | 16,138    |           |  |  |           |  |  |                  |           |  |  |  |           | 
|                           |  |                        |            |  |                 |  |           |           |  |  |            |  |  |                  |            |  |  |  |            | 
|Total                      |  |                        | 49,245,170 |  |                 |  | 6,226,790 |           |  |  | 11,257,585 |  |  |                  | 10,701,457 |  |  |  | 21,059,338 | 
|                           |  |                        |            |  |                 |  |           |           |  |  |            |  |  |                  |            |  |  |  |            | 



|(1) | Excludes Atrium which is accounted for with the equity method.
|--- | --------------------------------------------------------------

|*) | Refer to footnote (1) in Gazit-Globe and its private subsidiaries table of this section.
|-- | ----------------------------------------------------------------------------------------

|**) | Refer to footnote (1) in First Capital table of this section
|--- | ------------------------------------------------------------



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|ITEM 6 | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
|------ | ------------------------------------------



|A. | Directors and Senior Management
|-- | -------------------------------

The following table sets forth information for our
directors and senior management.



|                               |  |     |  |                                                             |  |                  
|------------------------------ |  | --- |  | ----------------------------------------------------------- |  | -----------------
|Name                           |  | Age |  | Position                                                    |  | Current Term Ends
|Chaim Katzman (2)              |  | 65  |  | Chairman of the Board                                       |  | 2016             
|Arie Mientkavich               |  | 72  |  | Deputy Chairman of the Board                                |  | 2016             
|Dor J. Segal (2)               |  | 53  |  | Executive Vice Chairman of the Board                        |  | 2015             
|Aharon Soffer                  |  | 44  |  | President                                                   |  | November 2016    
|Gil Kotler                     |  | 49  |  | Senior Executive Vice President and Chief Financial Officer |  | October 2016     
|Yair Orgler (1)(2)(3)(4)(5)(6) |  | 75  |  | Director                                                    |  | November 2016    
|Haim Ben-Dor (1)(3)(4)(6)      |  | 76  |  | Director                                                    |  | 2015             
|Shaiy Pilpel (1)(3)(4)         |  | 65  |  | Director                                                    |  | 2017             
|Noga Knaz (1)(3)(4)(5)(6)      |  | 48  |  | Director                                                    |  | September 2017   
|Gary Epstein                   |  | 67  |  | Director                                                    |  | 2017             
|Douglas Sesler                 |  | 53  |  | Director                                                    |  | 2017             
|Ronnie Bar-On (1)(3)(4)(5)     |  | 66  |  | Director                                                    |  | May 2016         
|Rachel Lavine                  |  | 49  |  | Director                                                    |  | 2016             



|(1) | Member of Audit Committee
|--- | -------------------------

|(2) | Member of Investment Committee
|--- | ------------------------------

|(3) | Member of Compensation Committee
|--- | --------------------------------

|(4) | Member of Nominating and Corporate Governance Committee
|--- | -------------------------------------------------------

|(5) | External Director under Israeli law and subject to different rules than other directors as discussed below under External Directors.
|--- | --------------------------------------------------------------------------------------------------------------------------------------

|(6) | Member of the Corporate Responsibility Committee.
|--- | -------------------------------------------------

Chaim Katzman has served as
the chairman of our board of directors since May 1995, and currently also serves as the chairman of the board of directors of Equity One, First Capital, Citycon and Atrium. He is currently also the chairman of the board of directors of Norstar, our
controlling shareholder and as a director of Gazit Development. Mr. Katzman has been involved in the acquisition, development and management of commercial and residential real estate in the United States since 1980. Mr. Katzman holds an
LL.B. from Tel Aviv University.

Arie Mientkavich has served as the deputy chairman of our board of directors since April
2005. He also serves as chairman of the board of directors of our subsidiary Dori Group. In addition, Mr. Mientkavich serves as chairman of the board of Elron Electronics Industries, Ltd., or Elron, which holds interests in companies in fields
of advanced technology including medical devices, information and communications technology and clean technology. He also currently serves as chairman of the board of Rafael Development Corporation and vice-chairman of the board of Ronson Europe
N.V. From May 2006 to January 2014, Mr. Mientkavich served as vice chairman of the board of IDB Holding Corporation and, from November 1997 to January 2006, as chairman of the board of Israel Discount Bank Ltd. and several of its major
subsidiaries including Israel Discount Bank of NY and Mercantile Discount Bank. From 1987 to 1997, Mr. Mientkavich was the chairman of the Israel Securities Authority, the Israeli equivalent of the SEC. Prior to 1987, Mr. Mientkavich held
a number of positions at the Israeli Ministry of Finance, including general counsel. Mr. Mientkavich holds a B.A. in political science and an LL.B. from The Hebrew University of Jerusalem.

Dor J. Segal has served as the executive vice chairman of our board of directors since February 2008 and as a director since
December 1993. From August 2000 until February 2015, Mr. Segal has served as chief executive officer, president and vice chairman of the board of First Capital. Mr. Segal currently serves as executive vice chairman of the board of First
Capital, vice chairman of the board of directors of Equity One, president of Norstar Israel Ltd., vice chairman of Norstar Holdings Inc., as a director in Dori Group and in various private subsidiaries owned by Norstar Holdings Inc. and the Company.

Aharon Soffer has served as our president since November 2009 and as our acting president from June 2009 until his
appointment as president. Since September 2006, Mr. Soffer has served as chief executive officer of Gazit Group USA, our wholly-owned subsidiary, located in Miami, Florida, and prior to that as vice president of Gazit-Globe. Since joining
Gazit-Globe in 1997, Mr. Soffer has held various positions, and, among other things, has been responsible for investor relations and capital raising for Gazit-Globe, was involved with mergers and acquisitions in both the retail and healthcare
real estate sectors worldwide, and oversaw Gazit-Globes U.S. securities portfolio. Mr. Soffer serves as a director of



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Atrium, and as executive chairman of ProMed Properties. In November 2014, he was also appointed as Interim CEO of U. Dori Group Ltd. Mr. Soffer received a B.A. in Economics and an LL.B from
the College of Management, Academic Studies, in Israel.

Gil Kotler has served as senior executive vice president and chief
financial officer since October 2012. Mr. Kotler joined Gazit-Globe in 1998 and previously served as chief financial officer until 2009. Between 2009 and 2012, Mr. Kotler served as chief strategy officer and was located at the
Companys offices in Miami, Florida. During his tenure as chief strategy officer, Mr. Kotler was engaged in a wide range of strategic activities including leading our international financial activities. Prior to joining Gazit-Globe,
Mr. Kotler served as a Manager at Ernst & Young Israel. Mr. Kotler holds a B.A. in Economics and Accounting from Tel-Aviv University and he is a graduate of the Harvard Business School General Management Program for executives.
Mr. Kotler is a Certified Public Accountant (CPA).

Dr. Yair Orgler has served as a director since November 2007.
Dr. Orgler is Professor Emeritus at the Leon Recanati Graduate School of Business Administration, Tel Aviv University. Dr. Orgler serves as a director at Israel Chemicals Ltd., a manufacturer of chemical products, and Ceragon Networks,
Ltd., a company developing high capacity wireless backhaul solutions, all of which shares are listed on the Tel Aviv Stock Exchange while the shares of Israel Chemicals Ltd. are also listed on the New York Stock Exchange and the shares of Ceragon
are also listed on the Nasdaq Global Market. He also serves as a director in Atidim Ltd. Other public positions previously held by Dr. Orgler include director at Discount Investment Corporation Ltd., Bank Hapoalim, B.M. and founder and chairman
of Maalot, Israels first securities rating company. Previous academic positions held by Dr. Orgler include vice rector of Tel-Aviv University and before that dean of the Recanati Graduate School of Business Administration. For
over 20 years he was the incumbent of the Goldreich Chair in International Banking at Tel-Aviv University and served frequently as a Visiting Professor of Finance at the Kellogg Graduate School of Management at Northwestern University.
Dr. Orgler holds a Ph.D. in Industrial Administration (finance) from Carnegie Mellon University, an M.Sc. in industrial engineering from University of Southern California and a B.Sc. in Management and Industrial Engineering from the Technion,
Israel Institute of Technology.

Haim Ben Dor has served as a director since January 1999. Mr. Ben-Dor is a business
advisor to public and private companies in the area of capital markets and investments (among them pension funds, mutual funds and ARIIsraeli Physician Organization). Mr. Ben-Dor is also a lecturer at the Hebrew University and a corporate
consultant in the field of finance and investments working through Haim Ben-Dor Ltd. He also currently serves Member of the Dan Investments Committee and the Teachers Association. Mr. Ben-Dor holds a degree in accounting from the College of
Management, Jerusalem and an Auditors Certificate from the Ministry of Justice.

Dr. Shaiy Pilpel has served as a
director since December 2006. Since 2006, Dr. Pilpel has served as the chief executive officer of Wexford Capital Israel Ltd., an investment firm. From 1996 to 2001, he headed the trading operations at Wexford Management. Previously,
Dr. Pilpel was a managing director of Canadian Imperial Bank of Commerce where he headed the Mortgage Arbitrage and Quantitative Strategies proprietary trading group and was a portfolio manager for Steinhardt Partners. In addition,
Dr. Pilpel previously served as a director of Equity One. Since 2009, Dr. Pilpel also serves as a member of the General Assembly of the Israel Securities Authority. Dr. Pilpel holds a B.S. in Mathematics and a B.A. in Philosophy from
Tel Aviv University, an M.Sc. in mathematics from The Hebrew University in Jerusalem, a Ph.D. in statistics from the University of California at Berkeley and an M.B.A. from Columbia University.

Noga Knaz has served as a director since August 2008. Ms. Knaz is currently the vice-chairman of Rosario Capital Ltd., an
investment banking firm, where she previously served as chief executive officer from September 2007 until May 2013. From July 2006 until August 2007, Ms. Knaz served as the chief executive officer of Dash Underwriting Ltd. and chief investment
officer of Dash Securities and Investments Ltd. Previously, she served in various positions with Migdal Capital Markets and as co-chief executive officer of Madanes Financial Services Ltd. She also serves as a director of Pointer Telocation Ltd., a
company that provides mobile resource management products and services for the automotive and insurance industries whose shares are listed on the Nasdaq Capital Market. Ms. Knaz holds a B.A. in Economics and Business Administration from Haifa
University, and an investment portfolio management license.

Gary Epstein has served as a director since January 2012.
Mr. Epstein is chair of the Global Corporate and Securities Department, a member of the Executive Committee and a Principal Shareholder at Greenberg Traurig, LLP, an international law firm. Mr. Epstein has been with Greenberg Traurig since
1980. Mr. Epstein received a B.A. and B.H.L. in English and Jewish Studies at Yeshiva University, an M.A. in English Literature from New York University and a J.D. from Harvard Law School.

Douglas Sesler has served as a director since January 2012. Mr. Sesler is currently a business consultant and also serves
as a director of Baypoint Navigation, Inc. From January 2009 through February 2011, Mr. Sesler served as head of global real estate principal investments of Bank of America, Merrill Lynch. From 2007 until December 2008, Mr. Sesler served
as co-head of real estate investment banking at Merrill Lynch. Prior to that, Mr. Sesler was a managing partner in the real estate investment banking group of Merrill Lynch since April 2005. Mr. Sesler received a B.A. in Government from
Cornell University.



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Ronnie Bar-On has served as a director since May 2013. Between 2003-2013,
Mr. Bar-On served in a variety of governmental positions in Israel, including as Minister of Finance, Minister of the Interior, Minister of National Infrastructure, Minister of Science and Technology, Chairman of the State Control Committee,
Chairman of the Foreign Affairs and Defense Committee, and as a member of the Knesset. Since 2013, Mr. Bar-On also serves as a board member of Alrov Properties and Lodging, a company that is publicly listed on the TASE. Prior to entering public
service, Mr. Bar-On practiced law for twenty seven years in a private law firm of which he was also the founding partner. Mr. Bar-On has a law degree from the Hebrew University of Jerusalem.

Rachel Lavine has served as a director since December 2014. Ms. Lavine has also served as the Chairman of Gazit Development
since January 2015, the Executive Vice Chairman of Atrium European Real Estate since December 2014, and as a member of its board of directors since August 2008. She is also currently a member of the Board of Citycon and of EPRA. Ms. Lavine
served as Chief Executive Officer of Atrium European Real Estate from August 2008 until November 2014. In addition, she previously served as President and CEO of Plaza Centres and President and CEO of Elscint Ltd. Ms. Lavine is a certified
public accountant and earned a BA in business management from the College of Management in Israel and an Executive MBA from the Kellogg School of Management at Tel Aviv University.



|B. | Compensation
|-- | ------------

The following table presents information for the year ended
December 31, 2014 regarding compensation accrued in our financial statements for our chairman, executive vice chairman, deputy chairman, president, an executive officers and former executive officer, as well as the CEOs of two our investees and
the deputy president and chief financial officer of one of those investees as of December 31, 2014.



|                                                                                           |  |                    |       |  |                     |  |       |                    |  |  |                   |     |  |       |        |      |       |  |        |     |  |  |       | 
|------------------------------------------------------------------------------------------ |  | ------------------ | ----- |  | ------------------- |  | ----- | ------------------ |  |  | ----------------- | --- |  | ----- | ------ | ---- | ----- |  | ------ | --- |  |  | ----- | 
|Name and Position                                                                          |  | Salary             |       |  | Bonus               |  |       | Share-BasedPayment |  |  | OtherCompensation |     |  | Total |        |      | Total | 
|                                                                                           |  | (NIS in thousands) |       |  | (U.S.$ inthousands) | 
|Dor J. Segal                                                                               |  |                    | 2,786 |  |                     |  |      |                    |  |  | 4,935             | (1) |  |       | 14,994 | (2)  |       |  | 22,715 | (3) |  |  | 5,841 | 
|Executive Vice Chairman of the Board                                                       |  |                    |       |  |                     |  |       |                    |  |  |                   |     |  |       |        |      |       |  |        |     |  |  |       | 
|Chaim Katzman                                                                              |  |                    | 5,020 |  |                     |  |      |                    |  |  | 10,802            | (4) |  |       |       |      |       |  | 15,822 | (5) |  |  | 4,068 | 
|Chairman of the Board                                                                      |  |                    |       |  |                     |  |       |                    |  |  |                   |     |  |       |        |      |       |  |        |     |  |  |       | 
|Rachel Lavine                                                                              |  |                    | 3,588 |  |                     |  | 5,193 | (6)                |  |  | 2,844             |     |  |       |       |      |       |  | 11,625 |     |  |  | 2,989 | 
|Former CEO of Atrium, Vice Chairperson of the Board of Atrium, and Director of the Company |  |                    |       |  |                     |  |       |                    |  |  |                   |     |  |       |        |      |       |  |        |     |  |  |       | 
|Mark Langer                                                                                |  |                    | 1,851 |  |                     |  | 2,820 |                    |  |  | 2,627             |     |  |       | 859    | (7)  |       |  | 8,157  |     |  |  | 2,097 | 
|Deputy President and CFO of Equity One                                                     |  |                    |       |  |                     |  |       |                    |  |  |                   |     |  |       |        |      |       |  |        |     |  |  |       | 
|David Lukes                                                                                |  |                    | 2,112 |  |                     |  | 1,371 |                    |  |  | 2,668             |     |  |       | 1,789  | (8)  |       |  | 7,940  |     |  |  | 2,042 | 
|CEO of Equity One                                                                          |  |                    |       |  |                     |  |       |                    |  |  |                   |     |  |       |        |      |       |  |        |     |  |  |       | 
|Aharon Soffer                                                                              |  |                    | 2,763 |  |                     |  | 480   |                    |  |  | 4,125             |     |  |       |       |      |       |  | 7,368  |     |  |  | 1,895 | 
|President                                                                                  |  |                    |       |  |                     |  |       |                    |  |  |                   |     |  |       |        |      |       |  |        |     |  |  |       | 
|Gil Kotler                                                                                 |  |                    | 2,142 |  |                     |  | 285   |                    |  |  | 900               |     |  |       |       |      |       |  | 3,327  |     |  |  | 855   | 
|Senior Executive Vice President and Chief Financial Officer                                |  |                    |       |  |                     |  |       |                    |  |  |                   |     |  |       |        |      |       |  |        |     |  |  |       | 
|Eran Ballan                                                                                |  |                    | 202   |  |                     |  |      |                    |  |  | 638               | (9) |  |       | 2,400  | (10) |       |  | 3,240  |     |  |  | 833   | 
|Former Senior Executive Vice President and General Counsel                                 |  |                    |       |  |                     |  |       |                    |  |  |                   |     |  |       |        |      |       |  |        |     |  |  |       | 
|Arie Mientkavich                                                                           |  |                    | 1,665 |  |                     |  |      |                    |  |  | 1,281             |     |  |       |       |      |       |  | 2,946  |     |  |  | 758   | 
|Deputy Chairman of the Board                                                               |  |                    |       |  |                     |  |       |                    |  |  |                   |     |  |       |        |      |       |  |        |     |  |  |       | 



|(1) | Includes NIS 3,145 thousand due to the acceleration of the vesting period of securities allotted to Mr. Segal by First Capital following the conclusion of his employment as President of First Capital.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Lump-sum granted to Mr. Segal on the conclusion of his employment as President and CEO of First Capital pursuant to the terms of his expiring employment agreement with First Capital.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Mr. Segal did not receive compensation from Gazit-Globe in 2014.
|--- | ----------------------------------------------------------------

|(4) | Consists of amounts recognized as an expense on our income statement for the year ended December 31, 2014 with respect to the vesting of restricted stock units granted to Mr. Katzman by Equity One, restricted
share units granted to Mr. Katzman by First Capital, and share options granted to Mr. Katzman by Atrium.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Mr. Katzman did not receive compensation from Gazit-Globe for 2014. This amount includes compensation paid to Mr. Katzman by Atrium.
|--- | ------------------------------------------------------------------------------------------------------------------------------------

|(6) | Includes a special bonus paid to Ms. Lavine by Atrium upon the conclusion of her employment as CEO as well as her annual guaranteed bonus pursuant to her employment agreement with Atrium. Does not include an
additional Euro 280,000 bonus payment from Atrium to Ms. Lavine paid subsequently.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(7) | Consists of a retention bonus granted to Mr. Langer by Equity One.
|--- | ------------------------------------------------------------------

|(8) | Consists of a signing bonus granted to Mr. Lukes upon his appointment as CEO of Equity One.
|--- | -------------------------------------------------------------------------------------------

|(9) | Consists of the securities allotted to Mr. Ballan during his employment whose vesting accelerated.
|--- | --------------------------------------------------------------------------------------------------

|(10) | Consists of a lump-sum payment made to Mr. Ballan upon the termination of his employment with Gazit-Globe.
|---- | ----------------------------------------------------------------------------------------------------------

There are no other amounts for pension, retirement or similar benefits set aside by Gazit-Globe or its subsidiaries for members of management
beyond what is included in their gross compensation as disclosed above. Please note that directors are not entitled to such benefits and are entitled only to what is disclosed in Directors Compensation below.

Employment and Consultant Agreements

Chaim Katzman

Mr. Katzman does not currently have an employment agreement with and does not receive any compensation from Gazit-Globe. Mr. Katzman,
however, is entitled to continue using the means that are at the disposal of the Companys management for the purpose of fulfilling his duties as chairman.

Equity One Chairman Compensation Agreement

Mr. Katzman and Equity One were parties to a chairman compensation agreement for the period beginning on January 1, 2011 through
December 31, 2014. Pursuant thereto, Mr. Katzman was entitled to an annual bonus which is determined in the discretion of Equity Ones compensation committee as well as to a reimbursement of expenses. In the event of termination by
Equity One of the chairman compensation agreement (other than a termination for cause) or Mr. Katzmans resignation for good reason (as defined in the chairman compensation agreement), Mr. Katzman was entitled to the immediate vesting
of all the stock options and shares of restricted stock in his possession at the time that would have otherwise vested in the succeeding 365 days (90 days in the case of death or disability). On June 2, 2014, Mr. Katzman entered into a new
chairman compensation agreement that took effect on January 1, 2015 and whose term ends on December 31, 2017, after which it will be automatically renewed for one-year periods unless one party terminates at least 90 days prior to the
renewal date. The major terms of the new agreement are similar to those of the prior agreement.

First Capital Chairman Compensation
Agreement

Through December 31, 2014, Mr. Katzman and First Capital were parties to a chairman compensation agreement which
remained in effect as long as Mr. Katzman served as chairman of First Capitals board of directors. Mr. Katzman was entitled to annual compensation of C$ 500,000 plus an annual grant of restricted share units equal to C$ 500,000
issued under First Capitals Restricted Share Unit Plan. In the event of termination of the chairman compensation agreement by First Capital (other than a termination for cause) or Mr. Katzmans resignation for good reason (as defined
in the chairman compensation agreement) within 24 months after a change of control of First Capital (as defined in the chairman compensation agreement), Mr. Katzman was entitled to a payment equivalent to 2.99 times his annual cash
compensation, the immediate vesting of all the share units in his possession at the time and the immediate release of the lock-up restrictions on all the restricted share units held by him at that time. On January 1, 2015, Mr. Katzman and
First Capital entered into a new agreement replacing the prior agreement upon Mr. Katzmans appointment as Non-Executive Chairman of the Board of First Capital Under the new agreement, Mr. Katzman is entitled to annual compensation of
C$ 150,000 as well as the annual grant of deferred restricted share units valued at C$ 150,000 which are convertible into shares of First Capital, the exact amount which will be calculated every year pursuant to First Capitals Deferred Share
Plan. The parties further agreed that all share options and restricted share units to which Mr. Katzman was entitled would continue to vest according to their existing terms subject to certain exceptions stated in the original agreement. The
term of the new agreement is two years, with provisions for early termination.

Atrium Consultant Agreement

Mr. Katzman and a wholly-owned subsidiary of Atrium are party to an agreement pursuant to which Mr. Katzman provides Atrium and its
subsidiaries with consulting services. The consulting agreement automatically renews for successive one-year periods, unless either party gives the other written notice of termination. Mr. Katzman is entitled to annual fees in the amount of EUR
550,000 and to the payment of his expenses in relation to the provision of the consultancy services under the agreement. Mr. Katzman is not entitled to directors fees from Atrium.

Compensation from Citycon

For Mr. Katzmans service as chairman of the board of directors of Citycon, he received annual compensation of EUR 165,000 in 2014.



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Dor J. Segal

Mr. Segal does not currently have an employment agreement with and does not receive any compensation from Gazit-Globe. Mr. Segal,
however, is entitled to continue using the means that are at the disposal of the Companys management for the purpose of fulfilling his duties as executive vice-chairman.

First Capital Employment Agreement

Through 2014, Mr. Segal and First Capital were party to an employment agreement that provides for annual cash compensation (C$ 778,000,
including related costs, in 2014) to Mr. Segal. Pursuant to the employment agreement, Mr. Segal was also entitled to an annual bonus determined by the board of directors of First Capital and to participate in First Capitals incentive
compensation plans. For 2014, Mr. Segal was not granted an annual bonus. In December 2014, First Capital and Mr. Segal entered into an agreement terminating his service as President and CEO and appointing him as Executive Vice Chairman of
First Capital. Mr. Segal received a lump-sum payment of C$ 4.63 million pursuant to his termination of his service as President and CEO under his previous employment agreement. The parties further agreed that all share options and
restricted share units to which Mr. Segal was entitled would continue to vest according to their existing terms subject to certain exceptions stated in the original employment agreement. According to the new agreement, Mr. Segal is
entitled to annual compensation of C$ 700,000, as well as an annual grant of restricted share units in the amount of C$ 300,000, which will be calculated each year according to First Capitals Restricted Share Unit Plan and which First Capital
may choose to redeem in cash. The term of the new agreement is two years, with provisions for early termination.

Compensation from
Equity One

With respect to his appointment to the board of directors of Equity One, Mr. Segal received 3,500 restricted shares
for 2014 (in 2013, it was 3,300 restricted shares), with this being within the overall compensation framework for members of Equity Ones board of directors. With respect to 2014, Mr. Segal also received directors fees in cash from
Equity One in the amount of U.S.$ 74,500.

Aharon Soffer

The Company and Aharon Soffer entered into a new employment agreement in September of 2013 that provides Mr. Soffer with a monthly salary
of NIS 160,000 (as of December 31, 2014) to be adjusted annually in accordance with the percentage increase in the Israeli consumer price index. Mr. Soffer is also entitled to an annual bonus of up to 100% of his annual base salary
calculated based on weighted measurable targets set forth for the Companys performance, specifically FFO per share, NAV per share, leverage ratio (on a solo and consolidated basis), Company share performance, and attainment of general and
administrative expense targets. In addition, up to 20% of Mr. Soffers total annual bonus remains at the discretion of the compensation committee and board of directors. Pursuant to the new employment agreement, Mr. Soffers term
will end in November 2016. In addition, Mr. Soffer is entitled to the customary social and related benefits, including managerial insurance (including for loss of working capacity) and contributions to a further studies fund. Mr. Soffer is
entitled to the refund of the amounts needed to gross up certain related benefits for tax purposes (with respect to provisions that exceed the income tax ceilings). Either we or Mr. Soffer may terminate the agreement at any time upon 180 days
advance notice. In the event we terminate Mr. Soffers employment prior to the end of the term of the agreement (except in a case of dismissal for cause), Mr. Soffer will be entitled to: (i) his full salary and the related
benefits thereto during the 180-day notice period described above; (ii) an amount equal to his full salary, including social and related benefits payable under the agreement for six months and the lower of his monthly base salary for an
additional 12 months or with respect to the period remaining until the end of the term of the agreement; (iii) a proportionate part of the total annual bonus to which he is entitled through the date of termination, which is calculated based on
the annual bonus with respect to the year of his employment was terminated; and (iv) acceleration of vesting of all equity-based compensation components that he holds at that time which had not yet vested. In the event that
Mr. Soffers employment is terminated within 12 months following a change in control of Gazit-Globe (as defined in the employment agreement), Mr. Soffer will be entitled to acceleration of vesting of all of the equity-based
compensation components which he holds at that time and a bonus equal to 200% of his annual base salary in the year that the change of control occurs. In addition, under the employment agreement, if Mr. Soffer is entitled to directors fees and
other compensation from his appointment as an officer in the companies that are affiliates or under the Companys control, such amounts shall be transferred to the Company directly and/or offset against the compensation to which Mr. Soffer
is entitled by virtue of his employment agreement with the Company.

Arie Mientkavich

The Company and Arie Mientkavich, our deputy chairman (who provides services to us on a part-time basis), entered into a new compensation
agreement in September of 2013 that provides for a monthly salary to Mr. Mientkavich of NIS 80,000 (as of December 31, 2014), to be adjusted annually in accordance with the percentage increase in the Israeli consumer price index. Pursuant
to the new compensation agreement, Mr. Mientkavichs term will end in 2016. Mr. Mientkavich



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is also entitled to an annual bonus not to exceed NIS 500,000 calculated based on weighted measurable targets set forth for the Companys performance, specifically FFO per share, NAV per
share, leverage ratio (on a solo and consolidated basis), Company share performance, and attainment of general and administrative expense targets. Up to 20% of Mr. Mientkavichs total annual bonus also remains at the discretion of the
compensation committee and board of directors. For 2014, Mr. Mientkavich was not granted a bonus. In addition, under the compensation agreement, Mr. Mientkavich is entitled to customary social and related benefits, including managerial
insurance (including for loss of working capacity) and contributions to a further studies fund. Mr. Mientkavich shall receive a refund of the amounts needed to gross up certain related benefits for tax purposes (with respect to provisions that
exceed the income tax ceilings). Each of the parties may terminate the compensation agreement upon 60 days advance notice. Pursuant to the compensation agreement, if we terminate the compensation agreement (other than under certain
circumstances in which Mr. Mientkavich would not be entitled to notice or severance payment as set forth in the compensation agreement), Mr. Mientkavich will be entitled to a payment equal to six months payment of his base salary for
the prior month plus related benefits to be paid in six equal installments over a six-month period.

Gil Kotler

The Company and Gil Kotler, our Senior Executive Vice President and Chief Financial Officer are party to an employment agreement that provides
for a monthly salary that as of December 31, 2014 was NIS 112,500 and increases quarterly based on the Israeli consumer price index. Mr. Kotler is also entitled to an annual bonus of up to 75% of his annual salary. Pursuant to the
employment agreement, as amended, Mr. Kotlers term of employment is through October 2016. In addition, Mr. Kotler is entitled to the customary social benefits and related benefits, including managerial insurance and contributions to
a further studies fund. Mr. Kotler is entitled to the refund of the amounts needed to gross up the aforesaid benefits for tax purposes (with regard to provisions that exceed the income tax ceilings). Either we or Mr. Kotler may terminate
the agreement at any time upon 180 days advance notice. In the event we terminate Mr. Kotlers employment (except in a case of dismissal for cause), Mr. Kotler will be entitled to: (i) his full salary and the related benefits
thereto during the 180-day notice period described above; (ii) an amount equal to his full salary, including social and related benefits for the first four months and his monthly salary (excluding related benefits) for the remaining eight
months or with respect to the period remaining until the end of the term of the agreement; (iii) a proportionate part of the total annual bonus to which he is entitled through the date of termination, which is calculated based on the annual
bonus with respect to the year preceding the termination of his employment; and (iv) acceleration of vesting of all of the share options and other equity-based compensation he holds at that time. In the event of a change in control of
Gazit-Globe (as defined in the employment agreement), Mr. Kotler would be entitled to acceleration of vesting of the share options and other equity-based compensation which he holds at that time and a bonus equal to 200% of his annual salary.

Director Compensation

For the
fiscal year ended December 31, 2014, our external and non-external directors other than our chairman, deputy chairman and executive vice chairman were entitled to receive annual cash compensation of U.S.$ 56,000. Both our external and
non-external directors, other than our chairman, deputy chairman and executive vice chairman, also received during the fiscal year ended December 31, 2014, and continue to receive, U.S.$ 1,480 per board meeting and per committee meeting,
60% of such amount in the case of telephonic participation, or 50% of such amount in the case of written resolution.



|C. | Board Practices
|-- | ---------------

As an Israeli corporation we are subject to various corporate
governance requirements under Israeli law relating to such matters as external directors, independent directors, the audit committee and an internal auditor. These requirements are in addition to the corporate governance requirements imposed by the
NYSE Listed Company Manual and other applicable provisions of U.S. securities laws to which we are subject. Under the NYSE Listed Company Manual, a foreign private issuer may generally follow its home country rules of corporate governance in lieu of
the comparable requirements of the NYSE Listed Company Manual, except for the composition and responsibilities of the audit committee and the independence of its members within the meaning of the rules and regulations of the SEC. In addition, we are
not currently obligated to follow additional corporate governance practices promulgated by the TSX provided that no more than 25% of the trading volume in our common stock over any six-month period occurs on the TSX and another stock exchange is
providing review of the action in question. We may follow home country practice in Israel with regard to the other corporate governance standards otherwise imposed by the NYSE Listed Company Manual for U.S. domestic issuers.

Following our home country governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on the NYSE
may provide less protection than is accorded to investors under the NYSE corporate governance standards applicable to domestic issuers. For further information, see Item 3Key InformationRisk Factors.



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Under the Israeli Companies Law and our articles of association, the supervision of the
management of our business is vested in our board of directors. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to executive management. Our president (referred to as a
general manager under the Israeli Companies Law) is responsible for our day-to-day management. Our president is appointed by, and serves at the discretion of, our board of directors, subject to the employment agreement that we have
entered into with him. All other executive officers are appointed by our president, and are subject to the terms of any applicable employment agreements that we may enter into with them.

Following the amendment to our articles of association in January 2012, our board of directors may consist of at least 5 and not more than 11
directors, including external directors, one-third of whom are to be independent directors (which may include external directors). As of January 2012, the directors, other than the external directors, are divided into three classes, referred to as
Class 1, Class 2 and Class 3 so that, as nearly as possible, each of the three classes has an equal number of directors. The members of Class 1 were reelected at the annual general meeting in 2012 and their term shall expire at the annual general
meeting in calendar year 2015 and the members of Class 2 were reelected at the annual general meeting in 2013 and their term shall expire in the calendar year 2016. The term of the members of Class 3 is until the annual general meeting in the
calendar year 2014. The Class 1 directors are Messrs. Ben-Dor and Segal, the Class 2 directors are Mr. Katzman, Mr. Mientkavich, and Ms. Lavine and the Class 3 directors are Dr. Pilpel and Messrs. Epstein and Sesler.

Beginning with the annual general meeting in 2012, one-third of the directors (other than the external directors, who are subject to
re-election in 2016 and 2017 as described below) were elected by our shareholders for a term of three years each and shall replace the members of the class of directors whose term ended in such year. In the event that the number of directors is not
divisible by three, in determining the number of directors in each class, the board of directors shall determine whether to round the number of directors up or down. Election of each director at the annual general meeting requires the affirmative
vote of a majority of the shares of the shareholders who are present and voting (in person or by proxy). In the event that the number of directors elected at the meeting exceeds the number of directors up for election, the candidates who received
the greatest numbers of votes will be appointed.

In addition, our articles of association allow our board of directors to appoint
directors to fill vacancies on our board of directors or to appoint additional directors, so long as the total number of directors does not exceed eleven. In such event, the director appointed by the board of directors shall be added to the class of
the director who is being replaced or, if the director is not replacing another director, to any class determined by the board of directors, provided that, as nearly as possible, each of the three classes has an equal number of directors. Removal of
any director at a general meeting shall be upon the vote of 75% of the shares of shareholders who are present and voting (in person or by proxy), except as provided by applicable law with respect to external directors, as described below.

External directors are elected for an initial term of three years and may be elected for additional three-year terms under the circumstances
described below. External directors may be removed from office only under very narrow circumstances set forth in the Israeli Companies Law. See External Directors below. There are no family relationships among any of our directors
or executive officers.

Chairman of the Board

Our articles of association provide that the chairman of the board is appointed by the members of the board of directors and serves as chairman
of the board throughout his term as a director. Under the Israeli Companies Law, the general manager or a relative of the general manager may not serve as the chairman of the board of directors, and the chairman or a relative of the chairman may not
be vested with authorities of the general manager without shareholder approval (including a special majority requirement). In addition, a person subordinated, directly or indirectly, to the general manager may not serve as the chairman of the board
of directors; the chairman of the board may not be vested with authorities that are granted to those subordinated to the general manager; and the chairman of the board may not serve in any other position in the company or a controlled company, but
he may serve as a director or chairman of a subsidiary.

External Directors

Under the Israeli Companies Law, the boards of directors of companies whose shares are publicly traded are required to include at least two
members who qualify as external directors. Yair Orgler, who was elected on November 27, 2007 and re-elected in 2010 and in 2013 for his final term, Noga Knaz, who was elected August 12, 2008 re-elected in 2011 and again in 2014, and Ronnie
Bar-On who was elected on May 1, 2013, each qualify and was elected to serve as an external director, with terms ending on November 26, 2016, September 13, 2017, and May 1, 2016, respectively. The principal requirements with
respect to external directors are set forth below.

The Israeli Companies Law provides for special approval requirements for the election
of external directors. External directors must be elected by a majority vote of the shares present and voting at a shareholders meeting, provided that either:



| |  |  | such majority includes at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest in such election (other than a personal interest which is not
derived from a relationship with a controlling shareholder), present and voting at such meeting; or
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | the total number of shares of non-controlling shareholders and shareholders that do not have a personal interest in such election (other than a personal interest which is not derived from a relationship with a
controlling shareholder) voting against the election of an external director does not exceed two percent of the aggregate voting rights in the company.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

After an initial term of three years, external directors may be reelected to serve in that capacity for two additional terms of three years
under one of two alternatives. Under the first alternative, the external director may be nominated by a shareholder(s) holding 1% or more of the voting power and at the general meeting of shareholders such reelection is approved by a majority of
those shares present and voting that are held by shareholders that are non-controlling shareholders and do not have a personal interest in the reelection, provided that such shares represent at least 2% of the total voting power in the company.
Under the second alternative, the external director may be nominated by the board of directors, and such external directors reelection is approved by the same majority of shareholders that was required to elect such external director, in such
directors initial election. The term of office for external directors for Israeli companies traded on certain foreign stock exchanges, including the NYSE, may be extended indefinitely in increments of additional three-year terms, in each case
provided that the audit committee and the board of directors of the company confirm that, in light of the external directors expertise and special contribution to the work of the board of directors and its committees, the reelection for such
additional period(s) is beneficial to the company (and provided that the external director is reelected subject to the same approval method as if elected for the first time). External directors may be removed from office by a special general meeting
of shareholders called by the board of directors, which approves such dismissal by the same shareholder vote percentage required for their election or by a court, in each case, only under limited circumstances, including ceasing to meet the
statutory qualification for appointment, or violating their duty of loyalty to the company. If an external directorship becomes vacant and there are less than two external directors on the board of directors at the time, then the board of directors
is required under the Israeli Companies Law to call a shareholders meeting as soon as practicable to appoint a replacement external director. Each committee of the board of directors that exercises the powers of the board of directors must
include at least one external director, except that the audit committee must include all external directors then serving on the board of directors. Under the Israeli Companies Law, external directors of a company are prohibited from receiving,
directly or indirectly, any compensation from the company other than for their services as external directors pursuant to the provisions and limitations set forth in regulations promulgated under the Israeli Companies Law, which compensation is
determined prior to their appointment and may not be changed throughout the term of their service as external directors (except for certain exemptions as set forth in the regulations).

The Israeli Companies Law provides that a person is not qualified to serve as an external director if, as of the appointment date or at any
time during the two years preceding his or her appointment, that person or a relative, partner or employer of that person, any person to which that person is subordinate (whether directly or indirectly), or any entity under that persons
control, had any affiliation or business relationship with the company, any controlling shareholder or relative of a controlling shareholder or an entity that, as of the appointment date is, or at any time during the two years preceding that date
was, controlled by the company or by any entity controlling the company.

The term affiliation for that purpose includes (subject to
certain exemptions):



| |  |  | an employment relationship;
| | - |  | ---------------------------



| |  |  | a business or professional relationship maintained on a regular basis;
| | - |  | ----------------------------------------------------------------------



| |  |  | control; and
| | - |  | ------------



| |  |  | service as an office holder, excluding service as a director in a private company prior to the first offering of its shares to the public if such director was appointed as a director of the private company in order to
serve as an external director following the public offering.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Israeli Companies Law defines the term office
holder of a company to include a director, general manager, chief business manager, deputy general manager, vice general manager, other manager directly subordinate to the general manager or any other person assuming the responsibilities of
any of these positions other than the position of director, regardless of such persons title.

The following additional
qualifications apply to an external director:



| |  |  | a person may not be elected as an external director if he or she is a relative of a controlling shareholder;
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | if a company does not have a controlling shareholder or a holder of 25% or more of the voting power, then a person may not be elected as an external director if he or she or his or her relative, partner, employer or any
entity under his or her control has, as of the date of the persons election to serve as an external director, any affiliation with the then chairman of the board of directors, chief executive officer, a holder of 5% or more of the issued share
capital or voting power, or the most senior financial officer in the company;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a person may not serve as an external director if he or she or his or her relative, partner, employer, a person to whom he or she is subordinated or any entity under his or her control has business or professional
relations with those whom affiliation is prohibited as described above, and even if these relations are not on a regular basis (other than de minimis relations); and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | a person may not continue to serve as an external director if he or she accepts, during his or her tenure as an external director, direct or indirect compensation from the company for his or her role as a director,
other than amounts prescribed under the regulations promulgated under the Israeli Companies Law, indemnification, the companys undertaking to indemnify such person and insurance coverage.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Furthermore, no person may serve as an external director if that persons professional or other activities create, or may create, a
conflict of interest with that persons responsibilities as a director or otherwise interfere with that persons ability to serve as an external director. Following the termination of an external directors membership on a board of
directors, such former external director and his or her spouse and children may not be provided a direct or indirect benefit by the company, its controlling shareholder or any entity under its controlling shareholders control, including being
engaged to serve as an executive officer or director of the company or a company controlled by its controlling shareholder and cannot be employed by or provide professional services to the company for pay, either directly or indirectly, including
through a corporation controlled by that former external director, for a period of two years (which prohibition also applies to other relatives of the former external director (who are not his or her spouse or children) for a period of one year).

If at the time at which an external director is appointed all members of the board of directors that are not controlling shareholders or
their relatives are of the same gender, the external director must be of the other gender. A director of one company may not be appointed as an external director of another company if a director of the other company is acting as an external director
of the first company at such time.

Pursuant to the regulations promulgated under the Israeli Companies Law, a person may be appointed as
an external director only if he or she has professional qualifications or if he or she has accounting and financial expertise as defined in those regulations. In addition, at least one of the external directors must be determined by our board of
directors to have accounting and financial expertise and the board is required to determine the minimum number of board members that are required to possess accounting and financial expertise. In determining the number of directors required to have
such expertise, the members of our board of directors must consider, among other things, the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that both Yair Orgler and Noga Knaz, as
well as all other current board members, possess accounting and financial expertise and the requisite professional qualifications as such term is defined under the Israeli Companies Law.

Alternate Directors

Our articles of
association provide that any director may appoint, by written notice to us, an alternate director for himself or herself, provided that such person meets the qualifications of a director under the Israeli Companies Law and is approved by our board
of directors. A person may not act as an alternate director for more than one director, and a person serving as a director may not serve as an alternate director. Notwithstanding the foregoing, a member of the board of directors may be appointed as
an alternate member of any committee of our board of directors, provided that such alternate member is not already a member of such committee. Any alternate director shall have all of the rights and obligations of the director appointing him or her.

Audit Committee

Under the Israeli
Companies Law, the board of directors of a public company must appoint an audit committee. The audit committee must be comprised of at least three directors, including all of the external directors, and a majority of its members must be independent
directors. An independent director is an external director or a director that is appointed or classified as such, and that meets the qualifications of an external director (other than the professional qualifications/accounting and financial
expertise requirement) and the audit committee so approved and does not serve as a director of the company for more than nine (9) consecutive years (with any period of up to two years during which such person does not serve as a director not
being viewed as interrupting a nine-year period). For Israeli companies traded on certain foreign stock exchanges, including the NYSE, a director who qualifies as an independent director for the purposes of such directors membership in the
audit committee in accordance with the rules of such stock exchange in which it is traded, including the NYSE, is also deemed to be an independent director under the Israeli Companies Law. Such person must meet the non-affiliation requirements as to
relationships with the controlling shareholder (and any entity controlled by the controlling shareholder, other than the company and other entities controlled by the company) and must meet the nine-year requirement described above. Following the
nine-year period, a director of an Israeli company traded on such foreign stock exchanges may continue to be considered an unaffiliated director for unlimited additional periods of three-years each, provided the audit committee and the board of
directors of the company confirm that, in light of the directors expertise and special contribution to the work of the board of directors and its committees, the reelection for such additional period(s) is beneficial to the company.

The audit committee may not include the chairman of the board, any director employed by the company or that regularly provides services to the
company (other than as a board member), a controlling shareholder or any relative of the controlling shareholder, as each term is defined in the Israeli Companies Law. In addition, the audit committee may not



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include any director employed by the companys controlling shareholder or by a company controlled by such controlling shareholder, or who provides services to the companys controlling
shareholder or a company controlled by such controlling shareholder, on a regular basis, or a director whose main livelihood is based on the controlling shareholder. The chairman of the audit committee is required to be an external director.

The members of our audit committee are Haim Ben-Dor, Noga Knaz, Shaiy Pilpel, Yair Orgler, and Ronnie Bar-On. Our board of directors has
determined that each member of our audit committee meets the independence requirements set forth in the NYSE Listed Company Manual. In addition, Mr. Ben-Dor, Ms. Knaz, Dr. Orgler, Dr. Pilpel, and Mr. Bar-On are each
independent as such term is defined in Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as amended, or the Exchange Act. All members of the audit committee meet the requirements for financial literacy under the applicable rules and
regulations of the SEC and the NYSE. The rules of the SEC also require that we disclose in our annual reports whether at least one member of the audit committee is an audit committee financial expert. As of March 12, 2012 our board
of directors determined that Dr. Shaiy Pilpel qualifies as an audit committee financial expert, as defined by the rules of the SEC and has the requisite financial experience defined by the NYSE Listed Company Manual.

Our board of directors has adopted an audit committee charter that is consistent with the rules of the SEC and the NYSE Listed Company Manual.

Our audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving
our accounting, auditing, financial reporting and internal control functions by reviewing the services of our independent accountants and reviewing their reports regarding our accounting practices and systems of internal control over financial
reporting. Our audit committee also oversees the audit efforts of our independent accountants. Under the Israeli Companies Law, an audit committee is also required, among other things, to identify deficiencies in the administration of the company,
including by consulting with the internal auditor, and recommending remedial actions with respect to such deficiencies, is responsible for reviewing and approving certain related party transactions and is required to adopt procedures with respect to
processing of employee complaints in connection with deficiencies in the administration of the company, and the appropriate means of protection afforded to such employees. Under the Israeli Companies Law, the approval of the audit committee is
required for specified actions and transactions with office holders and controlling shareholders. However, the audit committee may not approve an action or a transaction with a controlling shareholder or with an office holder unless at the time of
approval the majority of the members of the audit committee are present, of whom a majority must be unaffiliated directors and at least one of whom must be an external director.

According to the Israeli Companies Regulation (Provisions and Conditions in the Matter of the Approval Process of Financial Statements), 2010,
the board of directors of an Israeli public company must approve the financial statements of the company after a financial statements review committee has submitted its recommendations to the board of directors in respect to certain matters relating
to the preparation of the financial statements as detailed in the regulation, and submitted such recommendations to the board a reasonable period prior to its meeting on the matter. The companys auditors are to be invited to all meetings of
the financial statements review committee, and the internal auditor is to receive notices of such meetings and be entitled to participate. The financial statements review committee must consist of at least three directors and a majority of its
members are required to be unaffiliated directors. The restrictions on who may not be a member of the audit committee, as described above, apply to membership in the financial statements review committee as well. All of the financial statements
review committee members are required to have the ability to read and understand financial statements, and at least one of the unaffiliated directors should have accounting and financial expertise (within the meaning of the Israeli
Companies Law). In addition, the chairman of the financial statements review committee is required to be an external director. An audit committee that meets these requirements may serve as a financial statements review committee. Our audit committee
also serves as our financial statements review committee.

Investment Committee

Our board of directors has established an investment committee. The investment committee reviews for approval investments of a magnitude that
the board of directors has determined is in excess of managements prerogative but do not require approval of the full board of directors. The current members of the investment committee are Chaim Katzman, Dor J. Segal and Yair Orgler.

Compensation Committee

Under the Israeli
Companies Law, the board of directors of a public company must appoint a compensation committee. The compensation committee must be comprised of at least three directors, including all of the external directors.

The compensation committee is subject to the same Israeli Companies Law restrictions as the audit committee with respect to committee
membership (as described under Audit Committee above).

Our compensation committee consists of Mr. Ben-Dor,
Ms. Knaz, Dr. Orgler, Dr. Pilpel, and Mr. Bar-On.



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Under the Israeli Companies Law, the roles of the compensation committee are:



| |  |  | recommending whether a compensation policy should continue in effect, if the then-current policy has a term of greater than three (3) years (approval of either a new compensation policy or the continuation of an
existing compensation policy at least every three years);
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | recommending to the board periodic updates to the compensation policy and assessing implementation of the compensation policy;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | approving compensation arrangements with office holders of the company. An office holder is defined in the Israeli Companies Law as any director, general manager, chief business manager, deputy general manager, vice
general manager, other manager directly subordinate to the general manager or any other person assuming the responsibilities of any of these positions regardless of that persons title. Each person listed in the table under Item
6Directors, Senior Management, and EmployeesDirectors and Senior Management is an office holder under the Israeli Companies Law; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | determining whether the compensation terms of the chief executive officer need not be brought to approval of the shareholders (under special circumstances).
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------

Compensation Policy

In
September 2013, further to an amendment to the Israeli Companies Law that was adopted in December 2012 and after receiving the approval of the Companys board of directors and its compensation committee, a general meeting of the Companys
shareholders approved a compensation policy for the Companys officers (the Compensation Policy). The Compensation Policy applies to the Companys president, its executive vice president, its vice-presidents and directors,
including directors who serve in another position in the Company (with the exception of the Companys chairman and Executive vice-chairman). Under the Compensation Policy, the compensation package to the Companys officers will include
three principal components, in varying proportion, specifically (a) salary and related components; (b) annual bonuses; and (c) long-term equity-based compensation, as follows:



| |  |  | Salary and related benefits: the fixed compensation will be set according to market terms for officers in similar positions in comparable companies, and will include social benefits and the customary- related benefits.
The Company may refund the amount needed to gross up the car and phone use benefits for tax purposes. For employment agreements with a term exceeding two years, the Company can link adjustments in the salary to the consumer price index in Israel.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Performance-based annual bonus: the annual bonus will be calculated based on the attainment of measureable targets for the Company, including FFO per share, NAV per share, leverage ratio (solo and consolidated),
performance of the Companys shares, and general and administrative expenses target. An amount, not to exceed 20% of the total annual bonus to an officer, will also be granted in the discretion of the compensation committee and the board of
directors. With respect to officers other than the president and/or a director of the Company, up to 50% of the bonus may be calculated based on measureable and qualitative targets decided for such officer (distinguished from the targets for the
Company itself). The annual bonus amounts are limited to a ceiling ranging between 7 and 12 monthly salaries, according to the officers seniority. The bonus amount which is based on the Company targets being met will be decided linearly,
between the minimum value and the maximum value, or target value, decided for each parameter, all subject to the precondition that the Company has attained at a weighted score of at least 80% in achieving targets for that year.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Long-term equity-based compensation: the equity-based compensation will include the allocation of securities or phantom securities to officers, at an annual economic value at the grant date that shall not exceed the
ceiling set forth in the Compensation Policy according to the rank of each officer. Half of the equity-based compensation will be granted as restricted share units, half of which will vest automatically over a period of no less than three years,
while the vesting of the other half will be contingent on the long-term yield of the Companys shares. The vesting period of the securities will be no less than three years and their exercise price will not fall below the average price of the
Companys shares on the specified stock exchange.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, the Compensation Policy sets forth provisions for the
term of the agreements with the officers and provisions for the officers rights on retirement, which include an advance notice period, an adaptation period, acceleration of the vesting of the equity-based compensation components, and the
option of granting a retirement grant in an amount that will not exceed twelve monthly salaries (for an officer who was employed by the Company for a period exceeding 5 years). Directors who do not hold another position in the Company will be
entitled to the remuneration provided for the external directors of the Company.

Nominating and Corporate Governance Committee

Our nominating and governance committee consists of Mr. Ben-Dor, Ms. Knaz, Dr. Orgler. Dr. Pilpel, and Mr. Bar-On.

The Nominating and Corporate Governance Committee identifies and recommends to the Board individuals qualified to serve as directors of
the Company and on committees of the Board; advises the Board with respect to the Board composition, procedures and committees; develops and recommends for the Board a set of corporate governance principles applicable to the Company; and oversees
the evaluation of the Board and the Companys management.



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Each of the members of our Nominating and Corporate Governance Committee is independent under the
NYSE Listed Company Manual.

Compensation of Directors and Officers

According to the Israeli Companies Law, the compensation of our directors and our chief executive officer has to be consistent with our
then-effective compensation policy, and requires the approval of our compensation committee, the subsequent approval of the board of directors and, unless exempted under the regulations promulgated under the Israeli Companies Law, the approval of
the shareholders at a general meeting (in the case of a director, if the compensation deviates from our then-effective compensation policy, or in the case of our chief executive officer, based on receipt of a special majority, as described below).
Unless exempted under the regulations promulgated under the Israeli Companies Law, where the director or chief executive officer is also a controlling shareholder, the requirements for approval of transactions with controlling shareholders apply, as
described below under Disclosure of Personal Interests of a Controlling Shareholder and Approval of Certain Transactions.

The
compensation of any other office holder (who is neither a director nor our chief executive officer), if consistent with our then-effective compensation policy, requires the approval of our compensation committee, followed by our board of directors.
Compensation of any such office holder that deviates from our then-effective compensation policy will additionally require shareholder approval, by a majority vote of the shares present and voting at a shareholders meeting, provided that either:
(i) such majority includes at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest in such compensation; or (ii) the total number of shares of non-controlling
shareholders and shareholders that do not have a personal interest in such compensation voting against the election of an external director does not exceed 2% of the aggregate voting rights in the company. The directors are entitled to be paid out
of the funds of the company their reasonable traveling, hotel and other expenses expended by them in attending board meetings and upholding their functions as directors of the company, all of which is to be determined by the board of directors.

External directors are entitled to remuneration subject to the provisions and limitations set forth in the regulations promulgated under the
Israeli Companies Law. As of the date of this annual report, we apply the same provisions and limitations applied to our external directors to the compensation of our non-external directors other than with respect to our chairman, deputy chairman
and executive vice chairman.

For our discussion of the date of expiration of the terms of our directors, see Item 6Directors,
Senior Management and EmployeesDirectors and Senior Management.

For our discussion of the details of our directors
service contracts, see Item 6Directors, Senior Management and EmployeesCompensationEmployment and Consultant Agreements.



|D. | Employees
|-- | ---------

As of December 31, 2014, we employed, through our various subsidiaries
and a jointly-controlled company, a total of 1,833 individuals. Of this number, 47 individuals were employed directly by Gazit-Globe and its wholly-owned subsidiaries.



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The following table provides an overview of the number of our employees at Gazit-Globe and each
of our subsidiaries and jointly controlled company as of December 31, 2014, 2013 and 2012:



|                               |  |                    |       |  |      |  |       |      |  |  |       | 
|------------------------------ |  | ------------------ | ----- |  | ---- |  | ----- | ---- |  |  | ----- | 
|                               |  | As of December 31, |      
|Entity                         |  | 2012               |       |  | 2013 |  |       | 2014 | 
|Gazit-Globe (including ProMed) |  |                    | 64    |  |      |  | 59    |      |  |  | 47    | 
|Equity One                     |  |                    | 177   |  |      |  | 168   |      |  |  | 155   | 
|First Capital                  |  |                    | 397   |  |      |  | 416   |      |  |  | 422   | 
|Citycon                        |  |                    | 129   |  |      |  | 127   |      |  |  | 151   | 
|Atrium                         |  |                    | 351   |  |      |  | 358   |      |  |  | 348   | 
|Gazit Germany                  |  |                    | 9     |  |      |  | 10    |      |  |  | 7     | 
|Gazit Development              |  |                    | 70    |  |      |  | 66    |      |  |  | 69    | 
|Dori Group                     |  |                    | 560   |  |      |  | 554   |      |  |  | 617   | 
|Gazit Brazil                   |  |                    | 35    |  |      |  | 17    |      |  |  | 17    | 
|                               |  |                    |       |  |      |  |       |      |  |  |       | 
|Total                          |  |                    | 1,792 |  |      |  | 1,775 |      |  |  | 1,833 | 
|                               |  |                    |       |  |      |  |       |      |  |  |       | 



|E. | Share Ownership
|-- | ---------------

The following table sets forth information regarding the beneficial
ownership of our outstanding ordinary shares as of April 10, 2015 by each of our directors and executive officers, individually, and all of our directors and executive officers as a group.

The beneficial ownership of ordinary shares is determined in accordance with the rules of the SEC and generally includes any ordinary shares
over which a person exercises sole or shared voting or investment power, or the right to receive the economic benefit of ownership. For purposes of the table below, we deem shares subject to options or warrants that are currently exercisable or
exercisable within 60 days of April 10, 2015, to be outstanding and to be beneficially owned by the person holding the options or warrants for the purposes of computing the percentage ownership of that person but we do not treat them as
outstanding for the purpose of computing the percentage ownership of any other person. The percentage of shares beneficially owned is based on the 178,425,111 ordinary shares outstanding as of April 10, 2015 (excluding treasury shares).



|                                                |  |                           |            |     |            |  |      |  
|----------------------------------------------- |  | ------------------------- | ---------- | --- | ---------- |  | ---- | -
|                                                |  | Shares Beneficially Owned |           
|                                                |  | Number                    |            |     | Percentage | 
|Directors and executive officers:               |  |                           |            |     |            |  |      |  
|Chaim Katzman                                   |  |                           | 89,615,571 | (1) |            |  | 50.2 | %
|Arie Mientkavich                                |  |                           | 155,884    | (2) |            |  | *    |  
|Dor J. Segal                                    |  |                           | 720,000    | (3) |            |  | *    |  
|Aharon Soffer                                   |  |                           | 214,665    | (4) |            |  | *    |  
|Gil Kotler                                      |  |                           | 72,645     | (5) |            |  | *    |  
|Yair Orgler                                     |  |                           |           |     |            |  | *    |  
|Haim Ben-Dor                                    |  |                           | 74,933     |     |            |  | *    |  
|Shaiy Pilpel                                    |  |                           |           |     |            |  | *    |  
|Noga Knaz                                       |  |                           |           |     |            |  | *    |  
|Gary Epstein                                    |  |                           |           |     |            |  |     |  
|Douglas Sesler                                  |  |                           |           |     |            |  |     |  
|Ronnie Bar-On                                   |  |                           |           |     |            |  |     |  
|Rachel Lavine                                   |  |                           |           |     |            |  |     |  
|All directors and executive officers as a group |  |                           | 90,853,698 | (6) |            |  | 50.9 | %



|* | Represents less than 1% of the issued and outstanding ordinary shares.
|- | ----------------------------------------------------------------------

|(1) | Consists of ordinary shares held by Norstar, of which Mr. Katzman is the controlling shareholder.
|--- | -------------------------------------------------------------------------------------------------

|(2) | Consists of 107,991 ordinary shares and options to purchase 47,893 ordinary shares exercisable within 60 days of April 10, 2015. Does not include options to purchase 95,784 ordinary shares, 10,544 restricted share
units, and 35,786 performance-based restricted share units not exercisable within 60 days of April 10, 2015.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Consists of Mr. Segals direct share holdings alone. Does not include the 89,615,571 ordinary shares held by Norstar, of which Mr. Segal and his spouse, Erica Ottosson, may be deemed beneficial owners.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(4) | Consists of 87,230 ordinary shares and options to purchase 127,435 ordinary shares exercisable within 60 days of April 10, 2015. Does not include options to purchase 254,871 ordinary shares, 28,474 restricted share
units, and 96,988 performance-based restricted share units not exercisable within 60 days of April 10, 2015.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Consists of 8,922 ordinary shares and options to purchase 63,723 ordinary shares exercisable within 60 days of April 10, 2015. Does not include options to purchase 31,861 ordinary shares, 4,460 restricted share
units, and 29,470 performance-based restricted share units not exercisable within 60 days of April 10, 2015.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Consists of 90,614,647 ordinary shares and options to purchase 239,051ordinary shares exercisable within 60 days of April 10, 2015. Does not include options to purchase 382,516 ordinary shares, 43,478 RSUs, and
162,244 PSUs not exercisable within 60 days of April 10, 2015.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Share Option Plans

In March 2002, we established, and our shareholders approved, a share compensation plan for our directors who do not hold other positions in
our company, which was amended in March 2007. The share compensation plan, as amended, provided that, at the beginning of each year of service, each grantee will be granted share options in an amount equal to the lower of (a) the number of
share options that at the date of issuance reflects a benefit in a total fair value of NIS 120,000 (based on the Black-Scholes model) and (b) 25,000 share options. In addition, the exercise period of the share options is from one to four years
from the date of grant. The grants were in accordance with section 102 of the Israeli Income Tax Ordinance (according to the capital gain alternative). Under this share compensation plan, Gazit-Globe issued 238,500 share options to its directors. In
November 2010, the board of directors of Gazit-Globe determined that Gazit-Globe would no longer grant options to directors under this plan.

We grant, from time to time, at our board of directors discretion, share options to our employees and officers and the employees and
officers of our wholly-owned subsidiaries, in the case of our officers, who are selected by the board of directors at its discretion, in accordance with an options plan adopted in 2005 and amended in 2007, or the Plan. The share options granted
under the Plan have been allotted to date generally under the following material terms: (i) each option entitles the optionee to purchase one ordinary share of our company and (ii) the exercise price of each stock option has been set
according to the average price of our shares on the TASE in the 30 trading days preceding the grant of the share options, is linked to the Israeli consumer price index and is subject to adjustments in the event of the issue of a stock dividend, a
rights issue or the distribution of a dividend. The share options granted under the Plan generally vest during the three or four years commencing from the date of the share options grant, and each optionee is entitled to exercise the share
options granted to him in three or four equal installments, starting from the end of the first year from the grant date. Should an optionee not exercise the share options which have become exercisable within 90 days from the end of his or her
employment with us or with one of our subsidiaries or related companies, such share options expire. The stock option agreements provide that in the event that the optionees employment is terminated by us, or by one of our subsidiaries,
including upon reaching the end of his or her employment term, under circumstances other than those that would legally entitle us, or our subsidiary, to terminate his or her employment without having to pay severance pay, the optionee is entitled to
an acceleration of the vesting period of the share options. The final expiry date for all the share options (in the event of their not having previously expired or been exercised) is at the end of four or five years from the share options
grant date. With regard to the Israeli employees included among the above optionees, the grant of the share options was made pursuant to the provisions of Section 102 of the Income Tax Ordinance, under the capital gains alternative, and their
share options have therefore been issued to a trustee acting on their behalf. Each of the optionees may also exercise the share options by way of cashless exercise, namely receiving the number of shares that reflects the value of the financial
benefit embodied in the share options.

In December 2011, our board of directors approved our 2011 Share Incentive Plan, pursuant to which
we may continue to grant share options and grant other share based awards to our employees and officers and the employees and officers of our subsidiaries. Our board of directors reserved 4,500,000 shares for awards to be issued under the new share
incentive plan. The terms of the individual share based awards are subject to the discretion of our compensation committee, which administers the new share incentive plan. In February 2013, our board of directors approved, following the approval of
the Compensation Committee, the allotment under the 2011 Share Incentive Plan of securities to Mr. Ballan, Mr. Kotler, to 4 other non-executive officers, and to 24 other employees, as shown in the charts below. In September and November
2013, additional grants of securities under the 2011 Share Incentive Plan were made to Mr. Mientkavich and Mr. Soffer, respectively.

Following are details of the grants in the last three years under the 2011 Share Incentive Plan:



|                  |  |                         |         |     |                               |  |        |                                |  |  |       | 
|----------------- |  | ----------------------- | ------- | --- | ----------------------------- |  | ------ | ------------------------------ |  |  | ----- | 
|Issuance Date     |  | Number of Share Options |         |     | Exercise Price perShare (NIS) |  |        | Fair Value atIssuance (NIS)(1) | 
|February 5, 2013  |  |                         | 522,203 | (2) |                               |  | 48.647 |                                |  |  | 13.34 | 
|September 3, 2013 |  |                         | 143,678 | (3) |                               |  | 46.92  |                                |  |  | 9.5   | 
|November 1 ,2013  |  |                         | 382,306 | (4) |                               |  | 47.11  |                                |  |  | 10.8  | 



|(1) | Calculated based on the binomial method.
|--- | ----------------------------------------



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|(2) | The share options will vest over a period of three years in three equal installments, starting from the end of the year following the grant date. Mr. Ballan and Mr. Kotler each received 95,584 share options.
Mr. Ballans share options vested upon the conclusion of his employment with the Company.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | The share options were granted to Mr. Mientkavich and will vest over a period of three years in three equal installments, starting from the end of the year following the grant date.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | The share options were granted to Mr. Soffer and will vest over a period of three years in three equal installments, starting from the end of the year following the grant date.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                  |  |                                 |        |     |                               |  |      | 
|----------------- |  | ------------------------------- | ------ | --- | ----------------------------- |  | ---- | 
|Issuance Date     |  | Number of RestrictedShare Units |        |     | Fair Valueat Issuance(NIS)(1) | 
|February 5, 2013  |  |                                 | 95,393 | (1) |                               |  | 47.6 | 
|September 3, 2013 |  |                                 | 15,816 | (2) |                               |  | 45.5 | 
|November 1, 2013  |  |                                 | 42,711 | (3) |                               |  | 48.3 | 



|(1) | The RSUs will vest over a period of three years in three equal installments, starting from the end of the year following the grant date. Mr. Ballan and Mr. Kotler each received 13,382 restricted share units.
Mr. Ballans RSUs vested upon the conclusion of his employment with the Company.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The RSUs were granted to Mr. Mientkavich and will vest over a period of three years in three equal installments, starting from the end of the year following the grant date.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | The RSUs were granted to Mr. Soffer and will vest over a period of three years in three equal installments, starting from the end of the year following the grant date.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                  |  |                                                  |         |     |                               |  |      | 
|----------------- |  | ------------------------------------------------ | ------- | --- | ----------------------------- |  | ---- | 
|Issuance Date     |  | Number ofPerformance-BasedRestricted Share Units |         |     | Fair Valueat Issuance(NIS)(1) | 
|February 5, 2013  |  |                                                  | 111,987 | (1) |                               |  | 21.6 | 
|September 3, 2013 |  |                                                  | 35,786  | (2) |                               |  | 20.1 | 
|November 1, 2013  |  |                                                  | 96,988  | (3) |                               |  | 21.3 | 



|(1) | The PSUs will vest in one installment at the end of three years following the grant date provided that the Companys share price has appreciated by at least 20%. Mr. Ballan and Mr. Kotler each received
29,470 performance-based restricted share units. Mr. Ballans PSUs expired upon the conclusion of his employment with the Company.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The PSUs were granted to Mr. Mientkavich and will vest in one installment at the end of three years following the grant date provided that the Companys share price has appreciated by at least 20%.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | The PSUs were granted to Mr. Soffer and will vest in one installment at the end of three years following the grant date provided that the Companys share price has appreciated by at least 20%.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of the date of this annual report, the total number of share options granted by Gazit-Globe to employees, directors and
officers of Gazit-Globe (and that had not yet been exercised or had not expired) are 1,230,716 share options, with an average adjusted exercise price of NIS 43.26.

In addition to the above, we entered into phantom share agreements between the years 2006 and 2013 with several employees of wholly-owned
subsidiaries of ours which were intended to have the economic effect of the grant of 185,104 share options and 25,234 RSUs (outstanding as of December 31, 2014).



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|ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
|------- | -------------------------------------------------



|A. | Major Shareholders
|-- | ------------------

As of April 10, 2015, our major shareholders were as follows:



|                                                 |  |                           |            |  |            |  |      |  
|------------------------------------------------ |  | ------------------------- | ---------- |  | ---------- |  | ---- | -
|                                                 |  | Shares Beneficially Owned |           
|                                                 |  | Number                    |            |  | Percentage | 
|Principal shareholders:                          |  |                           |            |  |            |  |      |  
|Norstar Holdings Inc. (1)                        |  |                           | 89,615,571 |  |            |  | 50.2 | %
|Migdal Insurance and Financial Holdings Ltd. (2) |  |                           | 9,574,395  |  |            |  | 6.5  | %
|Mawer Investment Management Ltd. (3)             |  |                           | 11,513,297 |  |            |  | 5.4  | %



|(1) | As of April 10, 2015, Chaim Katzman, holds 25.4% of the outstanding shares of Norstar, including through private entities owned by Mr. Katzman and members of his family, both directly and indirectly; First
U.S. Financial, LLC, or FUF, holds 18.2% of the outstanding shares of Norstar; Dor J. Segal holds 8.8% of the outstanding shares of Norstar and Erica Ottosson (Mr. Segals spouse) holds 5.8% of the outstanding shares of Norstar.
Mr. Katzman was granted an irrevocable proxy by FUF to vote, at his discretion, the shares of Norstar held by FUF. FUF is owned by Mr. Katzman, including through private entities owned by Mr. Katzman and members of his family, both
directly and indirectly (51.4%); Erica Ottosson (22.6%); and Martin Klein (26%). In addition, Mr. Katzman was granted an irrevocable proxy by Erica Ottosson to vote her shares of FUF stock with respect to all matters at FUF shareholder
meetings. On January 30, 2013, Mr. Katzman, together with related parties (collectively, the Katzman Group) and Mr. Segal, Ms. Ottosson, together with related parties (collectively, the Segal Group),
entered into a shareholders agreement with respect to their holdings in Norstar. During the past three years, Norstars holdings in our ordinary shares ranged from approximately 50% to 57% of our outstanding share capital. A substantial number
of the shares held by Norstar are pledged to financial institutions in Israel to secure revolving credit facilities and/or to secure indebtedness of Norstar. See also Item 3Key InformationRisks Associated with our Ordinary
SharesOur controlling shareholder has the ability to take actions that may conflict with the interests of other holders of our shares.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Based on the Schedule 13-G/A filed with the SEC by Psagot Investment House Ltd. on February 18, 2015. The address of Psagot Investment House Ltd. is 14 Ahad Ha-am Street, Tel-Aviv 65142, Israel. Psagot Investment
House Ltd. does not currently disclose itself as an interested party of the Company in Israel under Israeli securities laws and regulations.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Based on information provided by Mawer Investment Management Ltd. to the Company on March 31, 2015 pursuant to Israeli securities regulations. The address of Mawer Investment Management Ltd. is 900, 603  7th
Ave SW, Calgary, Alberta, Canada T2P 2T5.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our major shareholders do not have voting rights that are different from our
other shareholders. For additional information regarding the voting of our ordinary shares, please refer to Item 10.BMemorandum and Articles of Association.

As of December 31, 2014, we had 16 holders of record of our ordinary shares in the United States (including Depositary Trust Company, as
nominee for other holders of record). Such holders of record currently hold approximately 17.5% of our outstanding ordinary shares. These numbers are not representative of the number of beneficial holders of our shares, nor are they representative
of where such beneficial holders reside, since of the aforementioned 17.5% held by U.S. record holders, more than two-thirds (or approximately 13.1% of our total outstanding ordinary shares) are held by Norstar (a Panamanian company) through the
Depositary Trust Company. In addition, both the foregoing 13.1% of our outstanding ordinary shares held by Norstar through a U.S. record holder, and the remaining 37.1% of our outstanding ordinary shares held by Norstar through non-U.S. record
holders, are deemed beneficially held by our chairman, Chaim Katzman, who is a resident of the United States.



|B. | Related Party Transactions
|-- | --------------------------

Norstar

In September 2014, Gazit-Globe issued 2.4 million shares in a private placement at a price of US$ 13.25 per share, for an aggregate
of US$ 31.8 million (NIS 118 million), of which 1.7 million shares were issued to a third-party institutional investor and 0.7 million shares were issued to Norstar. In addition, Gazit-Globe issued 4.8 million warrants at



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an exercise price of US$ 13.00 per share, of which 3.4 million warrants were issued to the third-party
institutional investor and 1.4 million warrants were issued to Norstar. The exercise period for the warrants was through December 29, 2014 but they expired without exercise. See also Note 20(b) to our audited consolidated financial
statements included elsewhere in this Annual Report.

Equity One

In September 2014, we participated in a private placement by Equity One concurrent with a public equity offering in which it raised
approximately U.S.$ 88.9 million (NIS 257 million) and in which we purchased separately an additional 675,000 shares for approximately U.S.$ 15.7 million (NIS 58 million). In March 2015, we participated in an additional private placement
by Equity One concurrent with a public equity offering in which the latter raised approximately U.S.$ 105 million and in which we purchased separately an additional 600,000 shares for a total consideration of approximately $16.23 million. For
further information, please see Note 9(d) to our audited consolidated financial statements included elsewhere in this Annual Report.

First Capital

In September 2014, we participated in a public equity offering of First Capital, pursuant to which the latter issued approximately C$
100 million (NIS 323 million) and in which we acquired 883,000 shares in the offering for total consideration of C$ 16.8 million. For further information, please see Note 9(e) to our audited consolidated financial statements included elsewhere
in this Annual Report.

Gazit Development/Dori Group/Dori Construction

During the second quarter of 2014, Dori Construction discovered a material deviation in its estimates of anticipated revenues and costs of its
projects. In addition to causing Dori Construction to restate its financial statements, it also indicated that the latter suffered from a deficiency in its shareholders equity. As a result, the Company approved an investment framework to
strengthen the capital structure of Dori Group and Dori Construction. The framework included: (i) a capital injection in the amount of NIS 130 million by means of a private placement by Dori Group to Gazit Development; (ii) an offer
from Gazit Development to assign to Dori Group all the rights and obligations under the credit lines which Gazit Development granted to Dori Construction between February 2014 and June 2014, in the total amount of NIS 250 million, in return for
the issuance of a perpetual capital note by Dori Group to Gazit Development, in the par value amount of NIS 250 million; (iii) Dori Group undertook to Dori Construction that one half of the assigned credit lines would be converted into shares
of Dori Construction; (iv) Gazit Development undertook to grant to Dori Group a loan in the amount of NIS 70 subject to certain conditions that Gazit Development had the right to waive; and (v) Dori Group undertook to use the funds
obtained from the aforementioned steps to strengthen the capital structure, liquidity and cash flow of Dori Construction, including through the provision of liquidity for its ongoing needs.

In November 2014, the Company granted an additional credit facility to Gazit Development for NIS 50 million, which was in turn used by
the latter to grant a loan to Dori Group for Dori Constructions current operations. As of the first quarter of 2015, the entire NIS 50 million credit facility was utilized. In March 2015, the Company approved a NIS 90 million
increase in the aforementioned credit facility to an aggregate amount of NIS 140 million. For further information, please see Note 9(g) and Note 9(h) to our audited consolidated financial statements included elsewhere in this Annual Report.

Citycon

In May 2014, Citycon announced
its was undertaking a directed issuance to a wholly-owned subsidiary of the Canada Pension Plan Investment Board (CPPIB) for approximately Euro 206.4 million and that upon the completion of the directed issuance, Citycon would
undertake a rights offering to its existing shareholders. The latter was completed in July 2014 and Citycon raised an additional Euro 196.5 million (before transaction costs) of which Euro 87.6 million (NIS 411 million) came from
Gazit-Globes participation. As part of the transactions, Gazit-Globe and the subsidiary of CPPIB entered into a governance agreement that, among other things, committed each of the parties to certain understandings with respect to the election
of directors at shareholders meetings and includes a tag-along right for the subsidiary of CPPIB in the event of a sale of a certain number of shares by Gazit-Globe, and obligates both parties to work towards the application of best corporate
governance practices at Citycon. For further information, please see Note 9(f) to our audited consolidated financial statements included elsewhere in this Annual Report.



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Atrium

On January 22, 2015, Gazit-Globe entered into an agreement to purchase 52,069,622 ordinary shares of Atrium from an entity forming part of
a consortium managed by CPI CEE Management LLC (CPI), at a price of EUR 4.40 per share, for a total consideration of approximately EUR 229 million in an off-market transaction. Upon closing of the acquisition, Gazit-Globe
(through wholly-owned subsidiaries) holds 206,681,551ordinary shares of Atrium, representing approximately 55% of Atriums issued share capital and voting rights (54% on a fully diluted basis). In addition, pursuant to the transaction, the
Amended and Restated Cooperation and Voting Agreement between the Company (through a wholly-owned subsidiary) and CPI was cancelled and the rights conferred on CPI by virtue of the Amended and Restated Relationship agreement between the Company
(through a wholly-owned subsidiary), CPI and Atrium were terminated. As a result of the acquisition and in accordance with accepted accounting principles, Gazit-Globe became the sole controlling shareholder of Atrium and, commencing from its
financial statements for the first quarter of 2015, it will consolidate Atriums financial statements into its own financial statements. For further information, please see Note 9(c) to our audited consolidated financial statements included
elsewhere in this Annual Report.

See also generally Item 6Directors, Senior Management and EmployeesEmployment and
Consultant Agreements and Note 9 to our audited consolidated financial statements included elsewhere in this Annual report.



|C. | Interests of Experts and Counsel
|-- | --------------------------------

Not applicable.



|ITEM 8. | FINANCIAL INFORMATION
|------- | ---------------------



|A. | Consolidated Statements and Other Financial Information
|-- | -------------------------------------------------------

Consolidated Financial Statements

See Item 18.

Legal Proceedings

Atrium

As Atrium reported
in its annual financial reports for the year ending December 31, 2014, Atrium is involved in certain civil claims in Austria, in connection with alleged losses derived from share price fluctuation in 2007 and associated potential claims. It
should be noted, however, that in 2012, the Jersey Financial Service Commission reconfirmed its conclusions that there was no breach of Jersey Companies Laws by the Atrium due to or in connection with the aforementioned events and concluded its
investigation without any finding of wrong doing.

In addition, there are currently criminal investigations pending against
Mr. Julius Meinl and others relating to events that occurred in 2007 and earlier. In connection with this, a law firm representing various investors in Atrium, who had invested at the time of these events, has alleged that Atrium is liable for
various instances of fraud, breach of trust and infringements of the Austrian Stock Corporation Act and Austrian Capital Market Act arising from the same events. The public prosecutor has directed Atrium to reply to the allegations and has started a
criminal investigation against Atrium based on the Austrian Corporate Criminal Liability Act. It is uncertain whether this legislation, which came into force in 2006, is applicable to Atrium. Atrium believes that a finding of liability on its part
would be inappropriate and, accordingly intends to actively defend itself.

Dori Group and Dori Construction

In July and August 2014, a number of lawsuits were filed with the Economic Affairs Division of the Tel Aviv District Court requesting class
action certification against Dori Construction, Dori Group, their directors and officers and their auditors, as well as against Gazit Development and Gazit-Globe itself. The motions deal with damage allegedly caused to the shareholders of Dori
Construction and/or Dori Group, respectively, as a result of the publication of allegedly erroneous information by Dori Construction, including in its financial statements, and as a result of its alleged failure to report, at the required time,
material adverse information concerning the financial results and the financial position of Dori Construction and, in turn, Dori Group.

The basis for the claims in the aforementioned motions include provisions under the Israel Securities Law, 1968, specifically the inclusion of
erroneous details in the financial statements and deficient and erroneous reporting, a tort of negligence under the Israel Torts Laws, breaches of statutory duties, all with respect to the public reporting of Dori Construction. The Company itself
was named as a defendant on the basis of a claim that it, as the controlling shareholder,



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had breached its duties with respect to the public reporting of its subsidiaries. The amounts of the claims range from NIS 13 million to NIS 75 million (subject to quantification of the
exact damage in the course of the hearings), which are not material for the Company.

On November 9, 2014, the court ordered the
plaintiffs in the class actions to file a single unified motion (apart from certain, specific suits that were dismissed). On December 28, 2014, the amended unified motion was filed by the plaintiffs to certify lawsuits as a class action.
Currently, the deadline for the Company to file its response to the amended unified certification motion is May 7, 2015. The Company cannot asses the chance of the lawsuits success at this preliminary stage.

Other Legal Proceedings

Except for the actions described above, there is no litigation threatened against us or any of our properties, other than routine litigation
and administrative proceedings, including subcontractor and supplier claims relating to Dori Group and Dori Construction, arising in the ordinary course of business, which collectively are also not expected to have a material adverse effect on our
business, financial condition, and results of operations or cash flows. Please also see Note 25(k) and Note 26(d) to our audited consolidated financial statements included elsewhere in this Annual Report.

Dividend Policy

In the fourth quarter of
each year our board of directors determines, and we announce, the amount of the minimum dividend we intend to pay in the four quarters of the coming year. Payments of quarterly dividends are subject to the availability of adequate distributable
income at the relevant dates. Our board of directors may appropriate funds that would otherwise be used to pay dividends for other purposes or change the dividend policy at any time. The terms of our credit facilities and other indebtedness
currently do not restrict our ability to distribute dividends. Over the last three years we have also declared an annual dividend. In the years ended December 31, 2012, 2013, and 2014, we paid our shareholders cash dividends in the amount of
NIS 1.60 (U.S.$ 0.46), NIS 1.72 (U.S.$ 0.50), and NIS 1.80 (U.S.$ 0.46) per ordinary share, respectively, representing 49.5%, 50.9%, and 53.2% respectively, of our adjusted EPRA FFO for the applicable period, and have retained the remainder of
such income to fund our business.



|B. | Significant Changes
|-- | -------------------

None.



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|ITEM 9. | THE OFFER AND LISTING.
|------- | ----------------------



|A. | Offer and Listing Details
|-- | -------------------------

Our ordinary shares have been trading on the TASE since
January 1983 under the symbol GZT (since 2013), on the New York Stock Exchange under the symbol GZT since December 2011, and on the Toronto Stock Exchange under the symbol GZT since October 2013.

The following table sets forth, for the periods indicated, the reported high and low closing sale prices of our ordinary shares on the TASE in
NIS and U.S. dollars. The following table below contains translations of NIS amounts into U.S. dollars for amounts presented as of and for the year ended December 31, 2014. Translations were calculated based on the representative exchange rate
reported by the Bank of Israel.



|                           |  |                         |       |  |                         |  |       |      |  |  |       |  |  |  |       | 
|-------------------------- |  | ----------------------- | ----- |  | ----------------------- |  | ----- | ---- |  |  | ----- |  |  |  | ----- | 
|                           |  | NIS                     |       |  | U.S.$                   | 
|                           |  | Price PerOrdinary Share |       |  | Price PerOrdinary Share | 
|                           |  | High                    |       |  | Low                     |  |       | High |  |  | Low   | 
|Annual:                    |  |                         |       |  |                         |  |       |      |  |  |       |  |  |  |       | 
|2014                       |  |                         | 48.10 |  |                         |  | 43.60 |      |  |  | 12.37 |  |  |  | 11.21 | 
|2013                       |  |                         | 51.58 |  |                         |  | 43.87 |      |  |  | 13.26 |  |  |  | 11.28 | 
|2012                       |  |                         | 48.50 |  |                         |  | 35.60 |      |  |  | 12.47 |  |  |  | 9.15  | 
|2011                       |  |                         | 47.40 |  |                         |  | 31.39 |      |  |  | 12.19 |  |  |  | 8.07  | 
|2010                       |  |                         | 46.52 |  |                         |  | 32.31 |      |  |  | 11.96 |  |  |  | 8.31  | 
|Quarterly:                 |  |                         |       |  |                         |  |       |      |  |  |       |  |  |  |       | 
|First Quarter 2015         |  |                         | 52.53 |  |                         |  | 45.83 |      |  |  | 13.51 |  |  |  | 11.78 | 
|Fourth Quarter 2014        |  |                         | 46.90 |  |                         |  | 44.17 |      |  |  | 12.06 |  |  |  | 11.36 | 
|Third Quarter 2014         |  |                         | 47.54 |  |                         |  | 44.32 |      |  |  | 12.22 |  |  |  | 11.40 | 
|Second Quarter 2014        |  |                         | 48.10 |  |                         |  | 43.76 |      |  |  | 12.37 |  |  |  | 11.25 | 
|First Quarter 2014         |  |                         | 46.29 |  |                         |  | 43.60 |      |  |  | 11.90 |  |  |  | 11.21 | 
|Fourth Quarter 2013        |  |                         | 48.36 |  |                         |  | 45.25 |      |  |  | 12.44 |  |  |  | 11.64 | 
|Third Quarter 2013         |  |                         | 49.35 |  |                         |  | 43.87 |      |  |  | 12.69 |  |  |  | 11.28 | 
|Second Quarter 2013        |  |                         | 51.58 |  |                         |  | 46.01 |      |  |  | 13.26 |  |  |  | 11.83 | 
|First Quarter 2013         |  |                         | 50.50 |  |                         |  | 47.49 |      |  |  | 12.99 |  |  |  | 12.21 | 
|Most Recent Six Months(1): |  |                         |       |  |                         |  |       |      |  |  |       |  |  |  |       | 
|March 2015                 |  |                         | 52.53 |  |                         |  | 49.15 |      |  |  | 13.51 |  |  |  | 12.64 | 
|February 2015              |  |                         | 51.30 |  |                         |  | 48.91 |      |  |  | 13.19 |  |  |  | 12.58 | 
|January 2015               |  |                         | 49.85 |  |                         |  | 45.83 |      |  |  | 12.82 |  |  |  | 11.78 | 
|December 2014              |  |                         | 46.90 |  |                         |  | 44.17 |      |  |  | 12.06 |  |  |  | 11.36 | 
|November 2014              |  |                         | 46.80 |  |                         |  | 44.80 |      |  |  | 12.03 |  |  |  | 11.52 | 
|October 2014               |  |                         | 45.90 |  |                         |  | 44.38 |      |  |  | 11.80 |  |  |  | 11.41 | 



|(1) | For the period from April 1, 2015 through April 10, 2015, the high was NIS 52.30 (U.S.$ 13.45) and the low was NIS 50.94 (U.S.$ 13.45).
|--- | ---------------------------------------------------------------------------------------------------------------------------------------



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The following table sets forth, for the periods indicated, the reported high and low closing sale
prices of our ordinary shares on the New York Stock Exchange in U.S. dollars.



|                           |  |                         |       |  |     |  |       | 
|-------------------------- |  | ----------------------- | ----- |  | --- |  | ----- | 
|                           |  | U.S.$                   |      
|                           |  | Price PerOrdinary Share |      
|                           |  | High                    |       |  | Low | 
|Annual:                    |  |                         |       |  |     |  |       | 
|2014                       |  |                         | 13.81 |  |     |  | 11.29 | 
|2013                       |  |                         | 14.24 |  |     |  | 12.05 | 
|2012                       |  |                         | 13.18 |  |     |  | 9.00  | 
|2011 (since December 14th) |  |                         | 9.75  |  |     |  | 8.83  | 
|Quarterly:                 |  |                         |       |  |     |  |       | 
|First Quarter 2015         |  |                         | 13.31 |  |     |  | 11.48 | 
|Fourth Quarter 2014        |  |                         | 12.60 |  |     |  | 11.29 | 
|Third Quarter 2014         |  |                         | 13.79 |  |     |  | 12.42 | 
|Second Quarter 2014        |  |                         | 13.81 |  |     |  | 12.54 | 
|First Quarter 2014         |  |                         | 13.27 |  |     |  | 12.23 | 
|Fourth Quarter 2013        |  |                         | 13.83 |  |     |  | 12.83 | 
|Third Quarter 2013         |  |                         | 13.96 |  |     |  | 12.05 | 
|Second Quarter 2013        |  |                         | 14.24 |  |     |  | 12.76 | 
|First Quarter 2013         |  |                         | 13.78 |  |     |  | 12.77 | 
|Most Recent Six Months(1): |  |                         |       |  |     |  |       | 
|March 2015                 |  |                         | 13.31 |  |     |  | 12.05 | 
|February 2015              |  |                         | 13.19 |  |     |  | 12.61 | 
|January 2015               |  |                         | 12.61 |  |     |  | 11.48 | 
|December 2014              |  |                         | 11.89 |  |     |  | 11.29 | 
|November 2014              |  |                         | 12.22 |  |     |  | 11.63 | 
|October 2014               |  |                         | 12.60 |  |     |  | 11.79 | 



|(1) | For the period from April 1, 2015 through April 10, 2015, the high was U.S.$ 13.14 and the low was U.S.$ 12.73.
|--- | ---------------------------------------------------------------------------------------------------------------

The following table sets forth, for the periods indicated, the reported high and low closing sale prices of our ordinary shares on the Toronto
Stock Exchange in Canadian dollars and U.S. dollars. The following table below contains translations of Canadian dollar amounts into U.S. dollars for amounts presented as of and for the year ended December 31, 2014. Translations were calculated
based on the representative exchange rate reported by the Bank of Israel.



|                                         |  |                         |       |  |                         |  |       |      |  |  |       |  |  |  |       | 
|---------------------------------------- |  | ----------------------- | ----- |  | ----------------------- |  | ----- | ---- |  |  | ----- |  |  |  | ----- | 
|                                         |  | C$                      |       |  | U.S.$                   | 
|                                         |  | Price PerOrdinary Share |       |  | Price PerOrdinary Share | 
|                                         |  | High                    |       |  | Low                     |  |       | High |  |  | Low   | 
|Annual:                                  |  |                         |       |  |                         |  |       |      |  |  |       |  |  |  |       | 
|2014                                     |  |                         | 14.98 |  |                         |  | 12.86 |      |  |  | 12.94 |  |  |  | 11.11 | 
|2013 (since October 16th)                |  |                         | 14.55 |  |                         |  | 13.50 |      |  |  | 12.57 |  |  |  | 11.66 | 
|Quarterly:                               |  |                         |       |  |                         |  |       |      |  |  |       |  |  |  |       | 
|First Quarter 2015                       |  |                         | 16.53 |  |                         |  | 13.40 |      |  |  | 14.28 |  |  |  | 11.57 | 
|Fourth Quarter 2014                      |  |                         | 14.22 |  |                         |  | 12.86 |      |  |  | 12.28 |  |  |  | 11.11 | 
|Third Quarter 2014                       |  |                         | 14.75 |  |                         |  | 13.63 |      |  |  | 12.74 |  |  |  | 11.77 | 
|Second Quarter 2014                      |  |                         | 14.98 |  |                         |  | 13.74 |      |  |  | 12.94 |  |  |  | 11.87 | 
|First Quarter 2014                       |  |                         | 14.69 |  |                         |  | 13.75 |      |  |  | 12.69 |  |  |  | 11.87 | 
|Fourth Quarter 2013 (since October 16th) |  |                         | 14.55 |  |                         |  | 13.50 |      |  |  | 12.57 |  |  |  | 11.66 | 
|Most Recent Six Months(1):               |  |                         |       |  |                         |  |       |      |  |  |       |  |  |  |       | 
|March 2015                               |  |                         | 16.53 |  |                         |  | 15.40 |      |  |  | 14.28 |  |  |  | 13.37 | 
|February 2015                            |  |                         | 16.43 |  |                         |  | 15.34 |      |  |  | 14.19 |  |  |  | 13.25 | 
|January 2015                             |  |                         | 15.96 |  |                         |  | 13.40 |      |  |  | 13.78 |  |  |  | 11.57 | 
|December 2014                            |  |                         | 13.76 |  |                         |  | 12.86 |      |  |  | 11.88 |  |  |  | 11.11 | 
|November 2014                            |  |                         | 14.22 |  |                         |  | 12.94 |      |  |  | 12.28 |  |  |  | 11.18 | 
|October 2014                             |  |                         | 14.03 |  |                         |  | 13.29 |      |  |  | 12.12 |  |  |  | 11.48 | 



|(1) | For the period from April 1, 2015 through April 10, 2015, the high was C$ 16.52 (U.S.$ 14.27) and the low was C$ 15.95 (U.S. $ 13.77).
|--- | --------------------------------------------------------------------------------------------------------------------------------------



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|B. | Plan of Distribution
|-- | --------------------

Not applicable.



|C. | Markets
|-- | -------

See Offer and Listing details above.



|D. | Selling Shareholders
|-- | --------------------

Not applicable.



|E. | Dilution
|-- | --------

Not applicable.



|F. | Expenses of the Issue
|-- | ---------------------

Not applicable.



|ITEM 10. | ADDITIONAL INFORMATION.
|-------- | -----------------------



|A. | Share Capital
|-- | -------------

Not applicable.



|B. | Memorandum and Articles of Association.
|-- | ---------------------------------------

Registrar and Purpose

Our number with the Israeli Registrar of Companies is 520033234. Section 2 of our memorandum of association provides that our purpose
includes any lawful purpose.

Board of Directors

See Item 6Directors, Senior Management and EmployeesBoard Practices.

Borrowing Powers, Guarantees and Debentures

Our board of directors may from time to time, in its sole discretion, borrow or secure any amount or amounts of money for our purposes. Our
board of directors may procure or guarantee the settlement of any such amount or amounts in such manner and on such dates and under such terms as it shall deem fit and in particular by issuing security bonds, debentures, permanent or separate bonds,
series bonds or any mortgage, encumbrance or other security on all or any portion of our existing or future plant or property.

Approval of Related
Party Transactions Under Israeli Law

Fiduciary Duties of Directors and Executive Officers

The Israeli Companies Law codifies the fiduciary duties that office holders owe to a company.

An office holders fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act
with the level of care with which a reasonable office holder in the same position would have acted under the same circumstances. The duty of loyalty requires that an office holder act in good faith and in the best interests of the company. The duty
of care includes a duty to use reasonable means to obtain:



| |  |  | information on the appropriateness of a given action brought for his or her approval or performed by virtue of his or her position; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------



| |  |  | all other important information pertaining to these actions.
| | - |  | ------------------------------------------------------------

The duty of loyalty of an office
holder includes a duty to:



| |  |  | refrain from any conflict of interest between the performance of his or her duties to the company and his or her personal affairs;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



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| |  |  | 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 herself or others; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | disclose to the company any information or documents relating to the companys affairs which the office holder received as a result of his or her position as an office holder.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Disclosure of Personal Interests of an Office Holder and Approval of Certain Transactions

The Israeli Companies Law requires that an office holder promptly disclose to the board of directors any personal interest that he or she may
have and all related material information known to him or her concerning any existing or proposed transaction with the company. A personal interest includes an interest of any person in an act or transaction of a company, including a personal
interest of ones relative or of a corporate body in which such person or a relative of such person is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general
manager, but excluding a personal interest stemming solely from ones ownership of shares in the company. If it is determined that an office holder has a personal interest in a transaction, approval by the board of directors is required for the
transaction. Our articles of association do not provide for a different method of approval. No transaction that is not in favor of the companys interest may be approved by the board of directors. Approval first by the companys audit
committee and subsequently by the board of directors is required for an extraordinary transaction, meaning any transaction that is not in the ordinary course of business, not on market terms or that is likely to have a material impact on the
companys profitability, assets or liabilities. A director and any other office holder who has a personal interest in a transaction which is considered at a meeting of the board of directors or the audit committee may generally (unless it is
with respect to a transaction which is not an extraordinary transaction) not be present at such a meeting or vote on that matter unless a majority of the directors or members of the audit committee, as applicable, have a personal interest in the
matter. If a majority of the members of the audit committee or the board of directors has a personal interest in the approval of such a transaction then all of the directors may participate in deliberations of the audit committee or board of
directors, as applicable, with respect to such transaction and vote on the approval thereof and, in such case, shareholder approval is also required.

Pursuant to the Israeli Companies Law, all compensation arrangements, including insurance, indemnification or exculpation of, executive
officers or office holders who are not directors or our president require compensation committee approval and subsequent approval by the board of directors and, if deviating from our then-effective compensation policy, our shareholders, by special
majority. Compensation arrangements with directors, including compensation arrangements with directors in their capacities as executive officers, or with or our president, as well as insurance (unless exempted under the applicable regulations),
indemnification or exculpation of directors or our president, require the approval of the compensation committee, the board of directors and the companys shareholders, in that order. If the compensation arrangement of the office holder brought
for approval is an amendment of an existing arrangement, then only the approval of the compensation committee is required if the compensation committee determines that the amendment is not material in relation to the existing arrangement.

Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain Transactions

Pursuant to the Israeli Companies Law, the disclosure requirements regarding personal interests that apply to directors and executive officers
also apply to a controlling shareholder of a public company. A controlling shareholder is a shareholder who has the ability to direct the activities of a company, including a shareholder who owns 25% or more of the voting rights if no other
shareholder owns more than 50% of the voting rights. Two or more shareholders with a personal interest in the approval of the same transaction are deemed to be one shareholder.

Under the Israeli Companies Law, the disclosure requirements that apply to an office holder also apply to a controlling shareholder of a
public company. An extraordinary transaction between a public company and a controlling shareholder, or in which a controlling shareholder has a personal interest, and the terms of any compensation of a controlling shareholder who is an office
holder, require the approval of a companys audit committee or the compensation committee, as the case may be, the board of directors and shareholders meeting in that order. In addition, the shareholder approval must fulfill one of the
following requirements:



| |  |  | at least a majority of the voting rights in the company held by shareholders who have no personal interest in the transaction and who are present and voting at the general meeting, must be voted in favor of approving
the transaction (for this purpose, abstentions are disregarded); or
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the voting rights held by shareholders who have no personal interest in the transaction and who are present and voting at the general meeting, and who vote against the transaction, do not exceed 2% of the voting rights
in the company.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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To the extent that any such transaction with a controlling shareholder is for a period extending
beyond three years, approval is required once every three years, unless the audit committee determines that the duration of the transaction is reasonable given the circumstances related thereto. In certain cases provided in regulations promulgated
under the Israeli Companies Law, shareholder approval is not required.

Shareholder Duties

Pursuant to the Israeli Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other
shareholders and to refrain from abusing his or her power with respect to the company, including, among other things, in voting at a general meeting and at class shareholder meetings with respect to the following matters:



| |  |  | an amendment to the companys articles of association;
| | - |  | ------------------------------------------------------



| |  |  | an increase of the companys authorized share capital;
| | - |  | ------------------------------------------------------



| |  |  | a merger; or
| | - |  | ------------



| |  |  | interested party transactions that require shareholder approval.
| | - |  | ----------------------------------------------------------------

Pursuant to regulations
adopted under the Israeli Companies Law, a transaction with a controlling shareholder that would otherwise require approval of the shareholders is exempt from shareholder approval if the audit committee and the board of directors determine that the
transaction is on market terms and in the ordinary course of business and does not otherwise harm the company. Under these regulations, a shareholder holding at least 1% of the issued share capital of the company may require, within two weeks of the
publication of such determination, that despite such determination by the audit committee and the board of directors, such transaction will require shareholder approval under the same majority requirements that otherwise apply to such transactions.

In addition, a shareholder has a general duty to refrain from discriminating against other shareholders (which duty has not been
interpreted to date by the Israeli courts).

In addition, certain shareholders have a duty of fairness toward the company. These
shareholders include any controlling shareholder, any shareholder who knows that it has the power to determine the outcome of a shareholder vote and any shareholder who has the power to appoint or to prevent the appointment of an office holder of
the company or exercise any other rights available to it under the companys articles of association with respect to the company. The Israeli Companies Law does not define the substance of this duty of fairness, except to state that the
remedies generally available upon a breach of contract will also apply in the event of a breach of the duty to act with fairness.

Approval of Private Placements

Under the Israeli Companies Law, a significant private placement of securities requires approval by the board of directors and at a general
meeting by holders of a majority of the voting power held by the shareholders present at the meeting, in person or by proxy. A private placement is considered a significant private placement if it will cause a person to become a controlling
shareholder or if:



| |  |  | 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.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Transfer of Shares

Our ordinary shares that are fully paid for are issued in registered form and may be freely transferred under our articles of association
unless the transfer is restricted or prohibited by applicable law or the rules of a stock exchange on which the shares are traded. The ownership or voting of our ordinary shares by non-residents of Israel is not restricted in any way by our articles
of association or the laws of the State of Israel, except for ownership by nationals of some countries that are, or have been, enemies of the state of Israel.



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Shareholder Meetings

Under the Israeli Companies Law, we are required to convene an annual general meeting of our shareholders at least once every calendar year and
not more than 15 months following the preceding annual general meeting on such date and at such place as may be designated by our board of directors. All meetings other than the annual general meeting of shareholders are referred to as special
general meetings of shareholders. Our board of directors may convene a special general meeting as it deems fit and, in addition, our board is required to convene a special general meeting upon demand of any two directors or one quarter of the
members of our board of directors or upon the demand of one or more holders, in the aggregate, of either (a) 5% or more of our outstanding share capital and 1% of our voting power or (b) 5% or more of our voting power.

Pursuant to our articles of association and the Israeli Companies Law and the regulations promulgated thereunder, a notice of any annual or
special general meeting is required to be provided at least 14 days prior to the meeting provided that if voting at a particular general meeting may be by voting deed (under the circumstances described in Voting below), notice must
be provided at least 35 days prior to the meeting. Our articles of association provide that notice of a general meeting may be provided by publication rather than by delivery to shareholders of record. We intend to nevertheless distribute a notice
of general meeting by delivery to our shareholders of record. Shareholders entitled to participate and vote at general meetings are the shareholders of record on a date determined by our board of directors, which may be between four and 40 days
prior to the date of the meeting.

The agenda of a general meeting is to be determined by our board of directors and the general meeting
may only pass resolutions with respect to issues specified in such agenda. Pursuant to the Israeli Companies Law, one or more shareholders with at least 1% of the voting rights at the general meeting may request that the board of directors include a
matter in the agenda of a general meeting to be convened in the future, provided that it is appropriate to discuss such a matter in the general meeting.

Quorum

The quorum required for a general
meeting shall consist of at least two shareholders present in person or represented by proxy, who hold or represent in the aggregate at least 35% of the voting power in our company. A meeting adjourned for lack of a quorum shall be adjourned to the
same day in the following week at the same time and place or at any time and place as our board of directors shall designate in a notice to the shareholders.

If at the adjourned meeting a quorum is not present within half an hour of the time designated, then the quorum shall be deemed present if at
least two shareholders are present in person or represented by proxy, who hold or represent in the aggregate at least 30% of the voting power in our company.

The chairman of the general meeting may, by resolution of the meeting in which a quorum is present, adjourn such meeting or postpone the
adoption of a resolution with respect to any issue on the agenda of such meeting, from time to time and from place to place, and he shall be required to do so if the meeting has instructed him to do so. If such meeting has been adjourned by more
than 21 days, a notice of such adjourned meeting shall be given in accordance with the notice procedure required by the Israeli Companies Law and our articles of association. If the meeting has been adjourned by more than 21 days, but without
changing its agenda, then a notice of the new date shall be given as soon as possible, but no later than 72 hours prior to the adjourned meeting.

Resolutions

An ordinary resolution of a
general meeting is deemed adopted if it is approved by the holders of more than 50% of the voting rights represented at the meeting, in person or by proxy and voting on the resolution. A special resolution of a general meeting is deemed adopted if
it is approved by the holders of at least 75% of the voting rights represented at the meeting, in person or by proxy and voting on the resolution.

Provisions in Our Articles of Association Requiring a Supermajority Shareholder Vote

Amendments to any provision of our articles of association (other than to increase the authorized share capital) require the approval of 60% of
the ordinary shares represented at the general meeting, by person or by proxy, and voting on the resolution.

Approval of a merger of
Gazit-Globe requires the approval of a supermajority vote of 60% of the voting rights present and voting at the general meeting (in person or by proxy).

To the extent our company has different classes of shares in the future (there is currently only one class of equity securities and the
company is prohibited from having more than one class so long as the shares are listed on the TASE) changes to the determination of the rights of a class of securities would require the approval of a supermajority vote of 75% of the voting rights of
such class present and voting at the general meeting (in person or by proxy).



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Voting

Our articles of association provide that every shareholder present in person or by proxy shall have one vote per ordinary share held by such
shareholder eligible to vote.

In addition, Israeli law provides that a shareholder of a public company may vote in a general meeting or
in a meeting of a class of shares by means of a voting deed in which the shareholder indicates how such shareholder votes on resolutions relating to the following matters:



| |  |  | an appointment or removal of directors;
| | - |  | ---------------------------------------



| |  |  | an approval of transactions with office holders or interested or related parties;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | an approval of a merger;
| | - |  | ------------------------



| |  |  | any other matter in respect of which there is a provision in the articles of association providing that decisions of the general meeting may also be passed by voting deed;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the authorization of the chairman of the board of directors or his relative to fulfill the role of the general manager or to exercise his powers, and the authorization of the general manager or his relative to fulfill
the role of the chairman of the board of directors or to exercise his powers;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | scheme of arrangement (with court approval); and
| | - |  | ------------------------------------------------



| |  |  | other matters which may be prescribed by Israels Minister of Justice.
| | - |  | ----------------------------------------------------------------------

A voting deed is
a card made available to shareholders prior to a general meeting together with instructions regarding how to fill in and deliver the completed voting deed to us prior to the vote. The provision allowing the vote by voting deed does not apply where
the voting power of the controlling shareholder is sufficient to determine the vote. With respect to our company, since we have a controlling shareholder, in any of the matters listed above in which a separate vote of non-interested shareholders is
not required and a special majority of more than 50% is also not required, we are not required to provide for the use of voting deeds. The Israeli Companies Law provides that a shareholder, in exercising his or her rights and performing his or her
obligations toward the company and its other shareholders, must act in good faith and in a customary manner, and refrain from abusing his or her powers with respect to the company. This duty is required when voting at general meetings on matters
such as amendments to the articles of association, increasing the companys authorized share capital, mergers and approval of related party transactions. A shareholder must also refrain from oppression of other shareholders. In addition, any
controlling shareholder, any shareholder who knows that its vote can determine the outcome of a shareholder vote and any shareholder who, under the companys articles of association, can appoint or prevent the appointment of an office holder,
is required to act with fairness towards the company. The Israeli Companies Law does not describe the substance of this duty but provides that the remedies generally available upon a breach of contract will apply also in the event of a breach of the
duty to act with fairness. To date there is no binding case law that addresses this subject directly. Any voting agreement is also subject to observance of these duties.

Election of Directors

Under our articles
of association, the directors are appointed by the holders of a simple majority of our shares at a general meeting, subject to the special majority requirements for external directors described below. Removal of any director at a general meeting
shall be upon the vote of 75% of the shares of shareholders who are present and voting (in person or by proxy), except as provided by applicable law with respect to external directors. See also Item 6Directors, Senior Management and
EmployeesBoard Practices

Other than a person who has served as a director up to the date of the annual general meeting and/or
whose appointment as a director has been recommended to the general meeting by our board of directors, no director shall be appointed at the annual general meeting unless a shareholder or group of shareholders holding 1% or more of the voting rights
of our company wishing to propose him as a candidate submits to our office, at least ten days prior to the date of the notice of annual general meeting, a written document, signed by the shareholder, indicating that such shareholder is seeking to
nominate such candidate, together with a written consent of the proposed candidate to hold office as a director and his curriculum vitae and all other documents required under the Israeli Companies Law and related regulations with respect to
directors and their election that are applicable to our company at such time, including the rules of any exchange on which our shares are listed.



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Dividend and Liquidation Rights

We may declare a dividend to be paid to the holders of our ordinary shares in proportion to their respective shareholdings. Under the Israeli
Companies Law, dividend distributions are determined by the board of directors and do not require the approval of the shareholders of a company unless the companys articles of association provide otherwise. Our articles of association do not
require shareholder approval of a dividend distribution and provide that dividend distributions may be determined by our board of directors.

Pursuant to the Israeli Companies Law, the distribution amount is limited to the greater of retained earnings or earnings generated over the
previous two years, according to our then last reviewed or audited financial reports, provided that the date of the financial reports is not more than six months prior to the date of distribution, or we may distribute dividends with court approval.
In each case, we are only permitted to pay a dividend if there is no reasonable concern that payment of the dividend will prevent us from satisfying our existing and foreseeable obligations as they become due.

In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our ordinary
shares in proportion to their shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders of a class of shares with preferential rights that may be
authorized in the future.

Access to Corporate Records

Under the Israeli Companies Law, all of our shareholders generally have the right to review minutes of our general meetings, our shareholder
register, our articles of association and any document we are required by law to publicly file. Any shareholder who specifies the purpose of his or her request may request to review any document in our possession that relates to any action or
transaction with a related party which requires shareholder approval under the Israeli Companies Law. We may deny a request to review a document if we determine that the request was not made in good faith, that the document contains a trade secret
or a patent or that the disclosure of the document may otherwise harm or prejudice our interests.

Changes in Capital

Any increase in our authorized share capital must be approved by a majority of the voting rights represented at a general meeting and voting on
such change in the capital, in person or by proxy, which would make the terms of our memorandum of association consistent with the terms of our articles of association, which already provide for approval by a majority.

Our articles of association enable us to increase or reduce our authorized share capital. Any such change must be approved by a majority of
the voting rights represented at a general meeting and voting on such change in the capital, in person or by proxy. Unless otherwise resolved in such resolution approving the increase of our authorized share capital, the new shares shall be subject
to the same provisions as applicable to our ordinary shares.

Acquisitions Under Israeli Law

Full Tender Offer

A
person wishing to acquire shares of a public Israeli company and who could as a result hold over 90% of the target companys voting rights or of the target companys issued and outstanding share capital (or of a class thereof), is required
by the Israeli Companies Law to make a tender offer to all of the companys shareholders for the purchase of all of the issued and outstanding shares of the company (or the applicable class). If (a) the shareholders who do not accept the
offer hold less than 5% of the issued and outstanding share capital of the company (or the applicable class) and the shareholders who accept the offer constitute a majority of the offerees that do not have a personal interest in the acceptance of
the tender offer or (b) the shareholders who did not accept the tender offer hold less than 2% of the issued and outstanding share capital of the company (or of the applicable class), all of the shares that the acquirer offered to purchase will
be transferred to the acquirer by operation of law. A shareholder that had its shares so transferred may petition the court within six months from the date of acceptance of the full tender offer, whether or not such shareholder agreed to the tender,
to determine whether the tender offer was for less than fair value and whether the fair value should be paid as determined by the court. However, an offeror may provide in the offer that a shareholder who accepted the offer will not be entitled to
appraisal rights as described in the preceding sentence, as long as the offeror and the company disclosed the information required by law in connection with the tender offer. If (a) the shareholders who did not accept the tender offer hold 5%
or more of the issued and outstanding share capital of the company (or of the applicable class) or the shareholders who accept the offer constitute less than a majority of the offerees that do not have a personal interest in the acceptance of the
tender offer, or (b) the shareholders who did not accept the tender offer hold 2% or more of the issued and outstanding share capital of the company (or of the applicable class) the acquirer may not acquire shares of the company that will
increase its holdings to more than 90% of the companys issued and outstanding share capital (or of the applicable class) from shareholders who accepted the tender offer.



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Special Tender Offer

The Israeli Companies Law provides that an acquisition of shares of a public Israeli company must be made by means of a special tender offer if
as a result of the acquisition the purchaser could become a holder of 25% or more of the voting rights in the company, unless one of the exemptions in the Israeli Companies Law is met. This rule does not apply if there is already another holder of
at least 25% of the voting rights in the company. Similarly, the Israeli Companies Law provides that an acquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser could become a
holder of more than 45% of the voting rights in the company, if there is no other shareholder of the company who holds more than 45% of the voting rights in the company, unless one of the exemptions in the Israeli Companies Law is met.

A special tender offer must be extended to all shareholders of a company but the offeror is not required to purchase shares representing more
than 5% of the voting power attached to the companys outstanding shares, regardless of how many shares are tendered by shareholders. A special tender offer may be consummated only if (i) at least 5% of the voting power attached to the
companys outstanding shares will be acquired by the offeror and (ii) the number of shares tendered in the offer exceeds the number of shares whose holders objected to the offer (excluding, controlling shareholders and any person having a
personal interest in the acceptance of the tender offer).

If a special tender offer is accepted, then the purchaser or any person or
entity controlling it or under common control with the purchaser or such controlling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with the target company for
a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in the initial special tender offer.

Merger

The Israeli
Companies Law permits merger transactions if approved by each partys board of directors and, unless certain requirements described under the Israeli Companies Law are met, a majority of each partys shares voted on the proposed merger at
a general meeting called with at least 35 days prior notice. Notwithstanding the above, our articles of association provide that the approvals of board members constituting 75% of the members of the board eligible to vote and holders of 60% of
our ordinary shares present and eligible to vote at a general meeting are required to approve a merger.

For purposes of the shareholder
vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the shares represented at the shareholders meeting that are held by parties other than the other party to the merger, or by any person (or group of persons
acting in concert) who holds (or hold, as the case may be) 25% or more of the outstanding shares or the right to appoint 25% or more of the directors of the other party, vote against the merger. If the transaction would have been approved but for
the separate approval of each class of shares or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least 25% of the voting rights of a company, if the court
holds that the merger is fair and reasonable, taking into account the financial valuation of the entities being merged and the consideration offered to the shareholders.

Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there
exists a reasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties to the merger, and may further give instructions to secure the rights of creditors.

In addition, a merger may not be completed unless at least 50 days have passed from the date on which a proposal for approval of the merger
was filed by each party with the Israeli Registrar of Companies and 30 days have passed from the date on which the merger was approved by the shareholders of each party.

Disclosure of Shareholder Ownership

Our articles of association do not mandate a threshold at which shareholder ownership must be publicly disclosed. Such thresholds are
determined by applicable securities laws.



|C. | Material contracts
|-- | ------------------

See Item 6Directors, Senior Management and
EmployeesCompensationEmployment and Consultant Agreements, Item 7Major Shareholders and Related Party TransactionsRelated Party Transactions, and Item 5Operating and Financial Review and
ProspectsLiquidity and Capital ResourcesCredit Facilities and Indebtedness of Gazit-Globe and its Private Subsidiaries and Credit Facilities and other Indebtedness of Other Group Entities.



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|D. | Exchange controls
|-- | -----------------

There are currently no Israeli currency control restrictions on
payments of dividends or other distributions with respect to our ordinary shares or the proceeds from the sale of the shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding certain transactions.
However, legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.



|E. | Taxation
|-- | --------

The following is a summary of the current tax law applicable to companies
in Israel, with special reference to its effect on us and our subsidiaries. The following also contains a discussion of material Israeli tax consequences that may be applicable to our shareholders that are initial purchasers of ordinary shares
pursuant to the offering and that will hold such ordinary shares as capital assets.

The discussion is not intended, and should not be
construed, as legal or professional tax advice and is not exhaustive of all possible tax considerations. Holders of our ordinary shares should consult their own tax advisors as to the United States, Israeli or other tax consequences of the purchase,
ownership and disposition of ordinary shares, including, in particular, the effect of any foreign, state or local taxes.

General Corporate Tax
Structure

Generally, Israeli companies are subject to corporate tax. The Israeli corporate tax rate is 26.5% in 2014 compared to a tax
rate of 25% in 2013 and 2012. On July 30, 2013, the Israeli Knesset approved the nations economic plan for 2013-2014 (the Budget Law), which sought, among other things, to cause dividends distributed from the revaluation of
assets to be subject to Israeli capital gain tax at the level of the distributing company, effective only after the publication of relevant regulations.

Taxation of Non-Israeli Subsidiaries Held by an Israeli Parent Company

Non-Israeli subsidiaries of an Israeli parent company are generally subject to tax in their countries of residence under tax laws applicable to
them in such country. Such subsidiaries could also be subject to Israeli corporate income tax on their income if they are viewed as Israeli resident corporations. The Income Tax Ordinance defines an Israeli resident corporation as one that was
incorporated in Israel or is managed and controlled from Israel, such that if a non-Israeli corporation is managed and controlled from Israel, it would be subject to tax in Israel. In such case, double taxation could ensue, although the Ordinance
and the relevant tax treaty provide rules for provision of foreign tax credits in such situation. In addition, if the non-Israeli subsidiary were to be a resident of a country which has a double tax treaty in force with Israel, the provisions of
such tax treaty would normally provide rules for defining residency for purposes of applying the provisions of the tax treaty and provide further relief from double taxation.

In addition, under the Israeli CFC rules, undistributed passive profits of a controlled foreign corporation may be subject to Israeli taxation
under certain conditions.

Israeli Tax Considerations for Our Shareholders

Israeli law generally imposes a capital gains tax on the sale of any capital assets by residents of Israel, as defined for Israeli tax
purposes, and on the sale of assets located in Israel, including shares of Israeli companies, by both residents and non-residents of Israel unless a specific exemption is available or unless a tax treaty between Israel and the shareholders
country of residence provides otherwise. The Ordinance distinguishes between Real Capital Gain and Inflationary Surplus. The Inflationary Surplus is a portion of the total capital gain which is equivalent to the increase of
the relevant assets purchase price which is attributable to the increase in the Israeli consumer price index or, in certain circumstances, a foreign currency exchange rate, between the date of purchase and the date of sale. The Real Capital
Gain is the excess of the total capital gain over the Inflationary Surplus. In general, the sale of Gazit-Globes shares by a foreign investor may be tax exempt in Israel subject to the fulfillment of some conditions in the Israeli domestic tax
law.

Israeli Resident Individuals

Capital Gains

Israeli law
imposes capital gains tax on capital gains derived from the sale of securities and other capital assets, including ordinary shares. Generally, gains from sale of ordinary shares acquired prior to January 1, 2012 are subject to a 20% capital
gains tax for individuals. The tax rate is increased to 25% for sale of shares by an individual shareholder holding 10% or more of the means of control of the company at the time of sale or at any time during the preceding 12 month period (a
substantial shareholder). Shareholders which are corporations are subject to a 25% capital gains tax rate.



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Following enactment of the Tax Burden Law, starting January 1, 2012, the capital gains tax
rate applicable to individuals upon the sale of shares is the individuals marginal (income) tax rate. The tax rate, however, cannot exceed 25% (or 30% with respect to a substantial shareholder). With respect to corporate investors, the rate of
capital gains tax imposed on the sale of shares is equal to the corporate tax rate, which is 25% in 2012 and 2013 and 26.5% from January 1, 2014.

Individual shareholders dealing in securities in Israel are taxed at their marginal tax rates applicable to business income (up to 48% in 2013
and 2014).

Dividend Income

Following the enactment of the Tax Burden Law, starting January 1, 2012, the distribution of dividend income generated by other sources,
other than bonus shares (stock dividends), to Israeli residents who purchased our ordinary shares will generally be subject to income tax at a rate of 25% for individuals (30% for a substantial shareholder) and Israeli corporations will be exempt
from income tax provided the dividend was paid out of income generated in Israel.

Furthermore, beginning on January 1, 2013, an
additional tax liability at the rate of 2% was added to the applicable tax rate on the annual taxable income from any source of the individuals (whether any such individual is an Israeli resident or non-Israeli resident) exceeding NIS 811,560 (in
2013 and 2014) (hereinafter, the Excess Tax).

Israeli Resident Corporations

Capital Gains

Under
present Israeli tax legislation, the tax rate applicable to Real Capital Gain derived by Israeli resident corporations from the sale of shares of an Israeli company is the same as the general corporate income tax rate. As described above, the
corporate tax rate was 25% for the years 2013 and 2012, and 26.5% from 2014 onwards.

Dividend Income

Generally, Israeli resident corporations are exempt from Israeli corporate tax with respect to dividends received from Israeli resident
corporations where the income distributed by such corporations were subject to Israeli corporate income tax and such income was not subject to a special tax rate.

Non-Israeli Residents

Non-Israeli residents are subject to tax on income accrued or derived from Israeli sources. These include, inter alia, dividends, royalties and
interest, as well as other types of income (e.g., from provision of services in Israel). We are required to withhold income tax on such payments to non-residents. Israel presently has no estate or gift tax.

Capital Gains

Israeli
capital gains tax is imposed on the disposal of capital assets by a non-Israeli resident seller if such assets are either (i) located in Israel; (ii) the asset is located abroad and is mainly a right, directly or indirectly, to an asset or
to inventory, or it is indirect right for a right in real estate or to an asset in a real estate organization that is located in Israel, for the part of the consideration that is derived from the asset that is located in Israel;
(iii) the asset is a share or right for a share in a body of person, which is an Israeli resident; (vi) the asset is a right for a body of persons resident abroad that mainly entails a right, directly or indirectly, for an asset located in
Israel  for the part of the consideration that is derived from the asset which is located in Israel unless an income tax treaty between Israel and the sellers country of residence provides otherwise. As mentioned above, Real Capital Gain
derived by a company is generally subject to tax at the corporate income tax rate (25% in 2013, 26.5% for 2014 onwards) or, if derived by an individual, at the rate of 25% or 30%, from assets purchased on or after January 1, 2003. Individual
and corporate shareholders dealing in securities in Israel are taxed at the tax rates applicable to business income (a tax rate of 25% for a corporation in 2013 and a marginal tax rate of up to 48% for an individual in 2013). Notwithstanding the
foregoing, shareholders who are not Israeli residents (individuals and corporations) are generally exempt from Israeli capital gains tax on any gains derived from the sale, exchange or disposition of shares publicly traded on the Tel Aviv Stock
Exchange or on a recognized stock exchange outside of Israel, provided, among other things, that (i) such gains are not generated through a permanent establishment that the non-Israeli resident maintains in Israel, (ii) the shares were
purchased after being listed on a recognized stock exchange, and (iii) with respect to shares listed on a recognized stock exchange outside of Israel, such shareholders are not subject to the Inflationary Adjustment Law. However, non-Israeli
corporations will not be entitled to the foregoing exemptions if an Israeli resident (a) has a controlling interest of 25% or more in such non-Israeli corporation, or (b) is the beneficiary of or is entitled to 25% or more of the revenues
or profits of such non-Israeli corporation, whether directly or indirectly.

In addition, a sale of securities may be exempt from Israeli
capital gains tax under the provisions of an applicable income tax treaty. For example, under the Convention Between the Government of the United States of America and the Government of the State of Israel With Regard to Taxes on Income (the
U.S.-Israel Treaty), the sale, exchange or



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disposition of shares of an Israeli company by a shareholder who is a U.S. resident (for purposes of the U.S.-Israel Treaty) holding the shares as a capital asset is exempt from Israeli capital
gains tax unless either (i) the shareholder holds, directly or indirectly, shares representing 10% or more of the voting capital during any part of the 12-month period preceding such sale, exchange or disposition, (ii) the shareholder,
being an individual, has been present in Israel for a period or periods of 183 days or more in the aggregate during the applicable taxable year; or (iii) the capital gains arising from such sale are attributable to a permanent establishment of
the shareholder which is maintained in Israel. In either case, the sale, exchange or disposition of such shares would be subject to Israeli tax, to the extent applicable, however, under the U.S.-Israel Treaty, a U.S. resident would be permitted to
claim a credit for the Israeli tax against the U.S. federal income tax imposed with respect to the sale, exchange or disposition, subject to the limitations in U.S. laws applicable to foreign tax credits.

Payors of consideration for shares, including a purchaser, an Israeli stockbroker effectuating the transaction, or a financial institution
through which the sold securities are held, are required, subject to any of the foregoing exemptions and the demonstration of a shareholder regarding his, her or its foreign residency, to withhold tax upon the sale of publicly traded securities from
the consideration or from the Real Capital Gain derived from such sale, as applicable, at the rate of 25%.

Dividend Income

Non-Israeli residents (whether individuals or corporations) are generally subject to Israeli withholding tax on the receipt of dividends paid
for publicly traded shares, like our ordinary shares, at the rate of 25%, so long as the ordinary shares are registered with a Nominee Company, unless a reduced rate is provided under an applicable tax treaty.

For example, under the U.S.-Israel Treaty, the maximum rate of Israeli withholding tax on dividends paid to a U.S. resident (for purposes of
the U.S.-Israel Treaty) holder of our ordinary shares is 25%. However, generally, the maximum withholding tax rate on dividends that are paid to a U.S. corporation holding at least 10% or more of our outstanding voting capital from the start of the
tax year preceding the distribution of the dividend through (and including) the distribution of the dividend, is 12.5%, provided that no more than 25% of our gross income for such preceding year consists of certain types of dividends and interest.
U.S. residents who are subject to Israeli withholding tax on a dividend may be entitled to a credit for U.S. federal income tax purposes in the amount of the taxes withheld, subject to detailed rules contained in United States tax legislation.

A non-Israeli resident who receives dividends from which Israeli tax was withheld is generally exempt from the obligation to file tax returns
in Israel with respect to such income, provided that (i) such income was not generated from business conducted in Israel by the taxpayer for a period that exceeds 180 days in the tax year, and (ii) the taxpayer has no other taxable sources
of income in Israel with respect to which a tax return is required to be filed. Shareholders should consult with their tax advisor regarding their obligation to file tax return in Israel.

Payors of dividends on our ordinary shares, including an Israeli stockbroker effectuating the transaction, or a financial institution through
which the securities are held, are required, subject to any of the foregoing exemptions and the demonstration of a shareholder regarding his, her or its foreign residency, to withhold tax upon the distribution of dividend at the rate of 25%, so long
as the ordinary shares are registered with a Nominee Company (for corporations and individuals).

Material United States Federal Income Tax
Considerations

The following is a description of material United States federal income tax considerations relating to the ownership
and disposition of our ordinary shares. This description addresses only the United States federal income tax considerations relating to U.S. holders (as defined below) that are initial purchasers of our ordinary shares and that hold such ordinary
shares as capital assets. This description does not address tax considerations that may be relevant to particular holders in light of their individual circumstances, including, without limitation:



| |  |  | banks, financial institutions or insurance companies;
| | - |  | -----------------------------------------------------



| |  |  | real estate investment trusts, regulated investment companies or grantor trusts;
| | - |  | --------------------------------------------------------------------------------



| |  |  | dealers or traders in securities, commodities or currencies;
| | - |  | ------------------------------------------------------------



| |  |  | tax-exempt entities;
| | - |  | --------------------



| |  |  | certain former citizens or long-term residents of the United States;
| | - |  | --------------------------------------------------------------------



| |  |  | persons that received our shares as compensation for the performance of services;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | persons that will hold our shares as part of a hedging, integrated or conversion transaction or as a position in a straddle for United States federal income tax purposes;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | partnerships (including entities classified as partnerships for United States federal income tax purposes) or other pass-through entities, or holders that will hold our shares through such an entity;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | S-corporations;
| | - |  | ---------------



| |  |  | holders that acquire ordinary shares as a result of holding or owning our preferred shares;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | U.S. Holders (as defined below) whose functional currency is not the U.S. Dollar; or
| | - |  | --------------------------------------------------------------------------------------



| |  |  | holders that own directly, indirectly or through attribution 10.0% or more of the voting power or value of our shares.
| | - |  | ----------------------------------------------------------------------------------------------------------------------

Moreover, this description does not address the United States federal estate, gift or alternative minimum tax considerations, or any state,
local or foreign tax considerations, relating to the acquisition, ownership and disposition of our ordinary shares.

This description is
based on the Code, existing, proposed and temporary United States Treasury Regulations and judicial and administrative interpretations thereof, in each case as in effect and available on the date hereof. All of the foregoing are subject to change,
which change could apply retroactively and could affect the tax consequences described below. There can be no assurances that the U.S. Internal Revenue Service will not take a different position concerning the tax consequences of the ownership and
disposition of our ordinary shares or that such a position could not be sustained.

For purposes of this description, a U.S.
Holder is a beneficial owner of our ordinary shares that, for United States federal income tax purposes, is:



| |  |  | a citizen or resident of the United States;
| | - |  | -------------------------------------------



| |  |  | a corporation (or other entity treated as a corporation for United States federal income tax purposes) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an estate the income of which is subject to United States federal income taxation regardless of its source; or
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | a trust if such trust has validly elected to be treated as a United States person for United States federal income tax purposes or if (1) a court within the United States is able to exercise primary supervision
over its administration and (2) one or more United States persons have the authority to control all of the substantial decisions of such trust.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

A Non-U.S. Holder is a beneficial owner of our ordinary shares that is neither a U.S. Holder nor a partnership (or other entity
treated as a partnership for United States federal income tax purposes).

If a partnership (or any other entity treated as a partnership
for United States federal income tax purposes) holds our ordinary shares, the tax treatment of a partner in such partnership will generally depend on the status of the partner and the activities of the partnership. Such a partner or partnership
should consult its tax advisor as to its tax consequences.

You should consult your tax advisor with respect to the United States
federal, state, local and foreign tax consequences of acquiring, owning and disposing of our ordinary shares.

Distributions

Subject to the discussion below under Passive foreign investment company considerations, if you are a U.S. Holder, the gross amount
of any cash distribution made to you with respect to your ordinary shares, before reduction for any Israeli taxes withheld therefrom, generally will be includible in your income as dividend income to the extent such distribution is paid out of our
current or accumulated earnings and profits as determined under United States federal income tax principles. Subject to the discussion below under Passive foreign investment company considerations, non-corporate U.S. Holders may qualify
for the lower rates of taxation with respect to dividends on ordinary shares applicable to long term capital gains (i.e., gains from the sale of capital assets held for more than one year) , provided that (a) you have held the ordinary shares
for at least 61 days during the 121-day period beginning on the date which is 60 days before the ex-dividend date with respect to such dividends, (b) you are not under an obligation, pursuant to a short sale or otherwise, to make payments
related to such dividends with respect to positions in substantially similar or related property, and (c) such dividends are received from a qualified foreign corporation for United States federal income tax purposes. A non-United
States corporation (other than a corporation that is classified as a passive foreign investment company for the taxable year in which the dividend is paid or the preceding taxable year) generally will be considered to be a qualified foreign
corporation (a) if it is eligible for the benefits of a comprehensive tax treaty with the United States which the Secretary of



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Treasury of the United States determines is satisfactory for purposes of this provision and which includes an exchange of information program, or (b) with respect to any dividend it pays on
stock which is readily tradable on an established securities market in the United States. Our ordinary shares are listed on the New York Stock Exchange, which is an established securities market in the United States, and therefore we believe that we
will constitute a qualified foreign corporation for United States federal income tax purposes with respect to dividends on our ordinary shares. Dividends on our ordinary shares will not be eligible for the dividends received deduction
generally allowed to corporate U.S. Holders. Subject to the discussion below under Passive foreign investment company considerations, to the extent that the amount of any distribution by us exceeds our current and accumulated earnings
and profits as determined under United States federal income tax principles, it will be treated first as a tax free return of your adjusted tax basis (as defined below) in your ordinary shares and thereafter as capital gain. We do not expect to
maintain calculations of our earnings and profits under United States federal income tax principles and, therefore, if you are a U.S. Holder you should expect that the entire amount of any distribution generally will be reported as dividend income
to you.

If you are a U.S. Holder, Israeli tax withheld on dividends paid to you with respect to your ordinary shares may be deducted from
your taxable income or credited against your United States federal income tax liability. The rules relating to eligibility for such deductions or credits, however, are complex, and you should consult your tax advisor to determine whether and to what
extent you will be entitled to such credits or deductions. Subject to the discussion below, our dividends generally will be treated as foreign source income, which may be relevant in calculating your foreign tax credit limitation. Subject to certain
exceptions, a portion of our dividends will be treated as U.S. source income for United States foreign tax credit purposes, in proportion to our U.S. source earnings and profits, if United States persons own, directly or indirectly, 50% or more of
the voting power or value of our shares. To the extent any portion of our dividends is treated as U.S. source income pursuant to this rule, the ability of a U.S. Holder to claim a foreign tax credit for any Israeli withholding taxes payable in
respect of our dividends may be limited depending on your individual circumstances. We do not expect to maintain calculations of our earnings and profits under United States federal income tax principles and, therefore, if we are subject to the
sourcing rule described above, U.S. Holders should expect that the entire amount of our dividends will be treated as U.S. source income for United States foreign tax credit purposes. U.S. Holders, however, who qualify for benefits of the U.S.-Israel
Treaty may elect to treat any dividend income otherwise subject to the sourcing rule described above as foreign source income pursuant to Articles 4(1) and 26(1) of the U.S.-Israel Treaty, though such income will be treated as a separate class of
income subject to its own foreign tax credit limitations. You should consult your tax advisor to determine the impact of, and any exception available to, the special sourcing rule described in this paragraph, and the availability and impact of the
U.S.-Israel Treaty election described above. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends that we distribute generally should constitute
passive category income, or, in the case of certain U.S. Holders, general category income, and in the case of the election described above, its own separate class of income. A foreign tax credit for foreign taxes imposed on
distributions may be denied if you have not held your ordinary shares for at least 16 days during the 31 day period beginning on the date which is 15 days before the ex-dividend date with respect to such dividends or if you are under an obligation,
pursuant to a short sale or otherwise, to make payments related to such dividends with respect to positions in substantially similar or related property.

The amount of a distribution will equal the U.S. dollar value of the NIS received, calculated by reference to the exchange rate in effect on
the date that distribution is received, whether or not a U.S. Holder in fact converts any NIS received into U.S. dollars at that time. If the NIS are converted into U.S. dollars on the date of receipt, a U.S. Holder generally will not be required to
recognize foreign currency gain or loss in respect of the distribution. A U.S. Holder may have foreign currency gain or loss if the NIS are converted into U.S. dollars after the date of receipt, depending on the exchange rate at the time of
conversion. Any gains or losses resulting from the conversion of NIS into U.S. dollars generally will be treated as ordinary income or loss, as the case may be, and generally will be treated as U.S. source.

Subject to the discussion below under Backup withholding tax and information reporting requirements, if you are a Non-U.S. Holder,
you generally will not be subject to United States federal income (or withholding) tax on dividends received by you on your ordinary shares, unless you conduct a trade or business in the United States and such income is effectively connected with
that trade or business (or, if required by an applicable income tax treaty, the dividends are attributable to a permanent establishment or fixed base that such holder maintains in the United States).

Sale, exchange or other disposition of ordinary shares

Subject to the discussion below under Passive foreign investment company considerations, if you are a U.S. Holder, you generally
will recognize gain or loss on the sale, exchange or other disposition of your ordinary shares equal to the difference between the amount realized on such sale (or its U.S. dollar equivalent, determined by reference to the spot rate of exchange on
the date of disposition, if the amount realized is denominated in a foreign currency), exchange or other disposition and your adjusted tax basis in your ordinary shares, and such gain or loss will be capital gain or loss. The adjusted tax basis in
an ordinary share generally will be equal to the cost of such ordinary share. If you are a non-corporate U.S. Holder, capital gain from the sale, exchange or other disposition of ordinary shares is eligible for a preferential rate of taxation
applicable to capital gains, if your holding period for such ordinary shares exceeds one year (i.e., such gain is long-term capital gain) on the date of such sale, exchange or other disposition. The deductibility of capital losses for United States
federal income tax purposes is subject to limitations under the Code. Any such gain or loss that a U.S. Holder recognizes generally will be treated as U.S. source income or loss for foreign tax credit limitation purposes.



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Subject to the discussion below under Backup withholding tax and information reporting
requirements, if you are a Non-U.S. Holder, you generally will not be subject to United States federal income or withholding tax on any gain realized on the sale or exchange of such ordinary shares unless:



| |  |  | such gain is effectively connected with your conduct of a trade or business in the United States (or, if required by an applicable income tax treaty, the gain is attributable to a permanent establishment or fixed base
that such holder maintains in the United States); or
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | you are an individual and have been present in the United States for 183 days or more in the taxable year of such sale or exchange and certain other conditions are met.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Passive foreign investment company considerations

If we were to be classified as a passive foreign investment company, or PFIC, in any taxable year, a U.S. Holder would be subject
to special rules generally intended to reduce or eliminate any benefits from the deferral of U.S. federal income tax that a U.S. Holder could derive from investing in a non-U.S. company that does not distribute all of its earnings on a current
basis.

A non-United States corporation will be classified as a PFIC, for United States federal income tax purposes in any taxable year in
which, after applying certain look-through rules, either



| |  |  | at least 75% of its gross income is passive income; or
| | - |  | --------------------------------------------------------



| |  |  | at least 50% of the average value of its gross assets is attributable to assets that produce passive income or are held for the production of passive income.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

Passive income for this purpose generally includes dividends, interest, royalties, rents, gains from commodities and securities transactions,
the excess of gains over losses from the disposition of assets which produce passive income, and includes amounts derived by reason of the temporary investment of funds raised in offerings of our ordinary shares. If a non-United States corporation
owns at least 25% by value of the stock of another corporation, the non-United States corporation is treated for purposes of the PFIC tests as owning its proportionate share of the assets of the other corporation and as receiving directly its
proportionate share of the other corporations income. If we are classified as a PFIC in any year with respect to which a U.S. Holder owns our ordinary shares, we will continue to be treated as a PFIC with respect to such U.S. Holder in all
succeeding years during which the U.S. Holder owns our ordinary shares, regardless of whether we continue to meet the tests described above.

We engaged a nationally recognized tax advisor (a member of an international accounting organization) to assist in our analysis of our PFIC
status for 2014. Based on the advisors advice and assessment, and our analysis regarding the composition of our gross assets (including valuing tangible and intangible assets based on the market value of our shares), the source and amounts of
our gross income, and the nature of our business, we believe we were not a PFIC for the taxable year ending December 31, 2014. However, we must determine our PFIC status annually based on tests which are factual in nature, and our status in
future years will depend on our income, assets and activities in those years. While we intend to manage our business so as to avoid PFIC status, to the extent consistent with our other business goals, we cannot predict whether our business plans
will allow us to avoid PFIC status. In addition, because the market price of our ordinary shares is likely to fluctuate and because that market price may affect the determination of whether we will be considered a PFIC, there can be no assurance
that we will not be considered a PFIC for any taxable year.

If we were a PFIC, and you are a U.S. Holder, then unless you make one of the
elections described below, a special tax regime will apply to both (a) any excess distribution by us to you (generally, your ratable portion of distributions in any year which are greater than 125% of the average annual distribution
received by you in the shorter of the three preceding years or your holding period for our ordinary shares) and (b) any gain realized on the sale or other disposition of the ordinary shares. Under this regime, any excess distribution and
realized gain will be treated as ordinary income and will be subject to tax as if (a) the excess distribution or gain had been realized ratably over your holding period, (b) the amount deemed realized in each year had been subject to tax
in each year of that holding period at the highest marginal rate for such year (other than income allocated to the current period or any taxable period before we became a PFIC, which would be subject to tax at the U.S. Holders regular ordinary
income rate for the current year and would not be subject to the interest change discussed below), and (c) the interest charge generally applicable to underpayments of tax had been imposed on the taxes deemed to have been payable in those
years. In addition, dividend distributions made to you will not qualify for the lower rates of taxation applicable to long-term capital gains discussed above under Distributions.



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Certain elections may be available to U.S. Holders of shares that may serve to alleviate some of
the adverse tax consequences of PFIC status described above. For example, if we agreed to provide the necessary information, you could avoid the interest charge imposed by the PFIC rules by making a qualified electing fund (a QEF)
election, in which case you generally would be required to include in income on a current basis your pro rata share of our ordinary earnings as ordinary income and your pro rata share of our net capital gains as capital gain. However, we do not
expect to provide to U.S. Holders the information needed to report income and gain pursuant to a QEF election, and we make no undertaking to provide such information in the event that we are a PFIC.

Under an alternative tax regime, you may also avoid certain adverse tax consequences relating to PFIC status discussed above by making a
mark-to-market election with respect to your ordinary shares annually, provided that the shares are marketable. Shares will be marketable if they are regularly traded on certain United States stock exchanges (including the NYSE) or on
certain non-United States stock exchanges. For these purposes, the shares will generally be considered regularly traded during any calendar year during which they are traded, other than in negligible quantities, on at least 15 days during each
calendar quarter.

If you choose to make a mark-to-market election, you would recognize as ordinary income or loss each year in which we
are a PFIC an amount equal to the difference as of the close of the taxable year between the fair market value of your ordinary shares and your adjusted tax basis in your ordinary shares. Such recognition of gain or loss will cause an increase or
decrease, respectively, in the adjusted tax basis in your ordinary shares. Such losses would be allowed only to the extent of net mark-to-market gain previously included by you under the election for prior taxable years. If the mark-to-market
election were made, then the PFIC rules described above relating to excess distributions and realized gains would not apply for periods covered by the election. If you do not make a mark-to-market election for the first taxable year in which we are
a PFIC during your holding period of our ordinary shares, you would be subject to interest charges with respect to the inclusion of ordinary income attributable to each taxable year in which we were a PFIC during your holding period before the
effective date of such election.

If we are a PFIC, a holder of ordinary shares that is a U.S. Holder may have to file United States
Internal Revenue Service Form 8621 for each tax year in which the U.S. Holder owns the ordinary shares. Recently enacted legislation (the Reporting Legislation) provides that all United States persons who are shareholders of a PFIC must
file an annual information return. The Reporting Legislation does not describe what information will be required to be included in the additional annual filing, but rather grants the Secretary of the United States Treasury authority to decide what
information must be included in such annual filing.

You should consult your tax adviser concerning the United States federal income tax
consequences of purchasing, holding, and disposing of our ordinary shares if we are or become classified as a PFIC, including the possibility of making a mark-to-market election, the unavailability of the QEF election, and your annual PFIC filing
requirements, if any.

Additional tax on investment income

In addition to the income taxes described above, U.S. Holders that are individuals, estates or trusts and whose income exceeds certain
thresholds will be subject to a 3.8% Medicare contribution tax on net investment income, which includes dividends and capital gains from the sale or exchange of our ordinary shares.

Backup withholding tax and information reporting requirements

United States backup withholding tax and information reporting requirements may apply to certain payments to certain holders of stock.
Information reporting generally will apply to payments of dividends on, and to proceeds from the sale or redemption of, our ordinary shares made within the United States, or by a United States payor or United States middleman, to a holder of our
ordinary shares, other than an exempt recipient (including a payee that is not a United States person that provides an appropriate certification and certain other persons). A payor will be required to withhold backup withholding tax from any
payments of dividends on, or the proceeds from the sale or redemption of, ordinary shares within the United States, or by a United States payor or United States middleman, to a holder, other than an exempt recipient, if such holder fails to furnish
its correct taxpayer identification number or otherwise fails to comply with, or establish an exemption from, such backup withholding tax requirements. Any amounts withheld under the backup withholding rules will be allowed as a credit against the
beneficial owners United States federal income tax liability, if any, and any excess amounts withheld under the backup withholding rules may be refunded, provided that the required information is timely furnished to the Internal Revenue
Service.

Recent legislation

Certain
U.S. Holders who are individuals to report information relating to an interest in specified foreign financial assets, including shares issued by a non-U.S. corporation, for any year in which the aggregate value of all specified foreign
financial assets exceeds $ 50,000, subject to certain exceptions (including an exception for ordinary shares held in custodial accounts maintained with a United States financial institution) penalties may be imposed for a failure to disclose such
information. U.S. Holders are urged to consult their tax advisers regarding the effect, if any, of the recent U.S. federal income tax legislation on their ownership and disposition of ordinary shares.



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The above description is not intended to constitute a complete analysis of all tax
consequences relating to acquisition, ownership and disposition of our ordinary shares. You should consult your tax advisor concerning the tax consequences of your particular situation.



|F. | Dividends and paying agents
|-- | ---------------------------

Not applicable.



|G. | Statements by experts
|-- | ---------------------

Not applicable.



|H. | Documents on display
|-- | --------------------

We file annual and special reports and other information with the
SEC. You may inspect and copy such material at the public reference facilities maintained by the SEC, 100 F Street, N.E., Washington, D.C. 20549. You may also obtain copies of such material from the SEC at prescribed rates by writing to the Public
Reference Section of the SEC, 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room.

The SEC maintains an Internet website at http://www.sec.gov that contains reports, proxy statements, information statements and other material
that are filed through the SECs Electronic Data Gathering, Analysis and Retrieval (EDGAR) system. All of the Companys EDGAR filings as well as additional special filings can be found on the System for Electronic Document
Analysis and Retrieval (SEDAR) operated by the Canadian Securities Administrators.

In addition, we file annual and special
reports and other information with the Israeli Securities Authority through its fair disclosure electronic system called MAGNA. You may review these filings on the website of the MAGNA system operated by the Israeli Securities Authority at
www.magna.isa.gov.il or on the website of the TASE at www.tase.co.il.

Our ordinary shares are quoted on the TASE, the NYSE, and the TSX.
Information about us is also available on our website at http://www.gazit-globe.com. Such information on our website is not part of this annual report.



|I. | Subsidiary Information
|-- | ----------------------

Not applicable.



|ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
|-------- | -----------------------------------------------------------

Market risk is the adverse
effect on the value of assets and liabilities that results from a change in the applicable market resulting from a variety of factors such as perceived risk, interest rate changes, inflation and overall general economic changes. We are exposed to
various financial market risks, primarily from changes in foreign exchange rates, interest rates, changes to the Israeli CPI and inflation and market prices in respect of securities we hold, mortgages, debentures and swaps. Our comprehensive risk
management policy focuses on activities that seek to reduce the possible adverse effects of market risk on our financial performance. We have used, and we expect to continue to use, derivative financial instruments to manage these risks in some
cases. The following is additional information about the market risks we are exposed to and how we manage these risks:

Foreign currency risk

We conduct business in a large number of countries and, as a result, we are exposed to foreign currency fluctuations. The significant majority
of our rental income (assuming full consolidation of jointly controlled companies) is generated in U.S. dollars, Canadian dollars and Euros. For the year ended December 31, 2014, 32.0% of our rental income was earned in Canadian dollars, 31.4%
in Euros, 21.6% in U.S. dollars, 7.4% in Swedish Krona and 3.3% in NIS. Our income from development and construction of residential projects activity is primarily generated in NIS (NIS 303 million of gross loss during 2014). In addition,
Gazit-Globes reporting and functional currency is the New Israeli Shekel and the reporting and functional currency is separately determined for each of our subsidiaries. When a subsidiarys functional currency differs from our reporting
currency, the financial statements of such subsidiary are translated to NIS so that they can be included in our financial statements. As a result, fluctuations of the currencies in which we conduct business relative to the NIS impact our results of
operations and the impact may be material. Changes in the exchange rates will also affect the fair value of derivative financial instruments (primarily cross-currency swaps) that provide economic hedging but do not meet the criteria for hedge
accounting. The resulting change in the fair value of these instruments is carried to the



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statement of income under the finance income or expenses line item, as applicable. In addition, our equity has a currency exposure to the US dollar, Canadian dollar and Euro. An increase in the
exchange rate of other foreign currencies would increase our equity in an investment, while a decrease in their exchange rates would decrease our equity in such investment. Our goal is to maintain as close an economic correlation as possible between
the currency in which our assets are acquired and the currency in which the liabilities to finance the acquisition of those assets are taken out, in order to maintain our equity in the currencies of the various markets we operate in, and in similar
proportions to the proportion of the assets in the various currencies to the total assets.

The following table presents information about
the changes in the exchange rates of the principal currencies that impact our results of operations:



|              |  |                                      |      |   |                    |  |      |                     |  |  |      |  
|------------- |  | ------------------------------------ | ---- | - | ------------------ |  | ---- | ------------------- |  |  | ---- | -
|              |  | Average Exchange Rates During Period |     
|              |  | U.S.$ Against NIS (%)                |      |   | C$ Against NIS (%) |  |      | EUR Against NIS (%) | 
|2014 vs. 2013 |  |                                      | (0.9 | ) |                    |  | (7.7 | )                   |  |  | (1.0 | )
|2013 vs. 2012 |  |                                      | (6.4 | ) |                    |  | (9.1 | )                   |  |  | (3.2 | )
|2012 vs. 2011 |  |                                      | 7.8  |   |                    |  | 6.6  |                     |  |  | (0.5 | )

Assuming a 10% decrease in the U.S. dollar relative to the NIS and assuming no other change, our net operating
income would have decreased by NIS 106 million in 2014. Assuming a 10% decrease in the Canadian dollar relative to the NIS and assuming no other change, our net operating income would have decreased by NIS 132 million in 2014. Assuming a
10% decrease in the Euro relative to the NIS and assuming no other change, our net operating income would have decreased by NIS 140 million in 2014.

From time to time we enter into hedging transactions to reduce exposure to fluctuations in the exchange rates of foreign currencies. As of
December 31, 2014, we had the following foreign currency hedge portfolio:



|                    |  |                    |  |                                  |        |  |                         |  |             |                            |  |  |     | 
|------------------- |  | ------------------ |  | -------------------------------- | ------ |  | ----------------------- |  | ----------- | -------------------------- |  |  | --- | 
|Transaction Type    |  | Currency           |  | NotionalAmounts (NISin millions) |        |  | AverageDuration inYears |  |             | Fair Value(NIS inmillions) | 
|Cross-currency swap |  | EUR-NIS            |  |                                  | 3,204  |  |                         |  | 6           |                            |  |  | 131 | 
|Cross-currency swap |  | U.S.$-NIS          |  |                                  | 808    |  |                         |  | 5           |                            |  |  | 5   | 
|Cross-currency swap |  | C$-NIS             |  |                                  | 914    |  |                         |  | 6           |                            |  |  | 62  | 
|Cross-currency swap |  | BRL-NIS            |  |                                  | 273    |  |                         |  | 3           |                            |  |  | 54  | 
|Cross-currency swap |  | Swedish Krona-Euro |  |                                  | 709    |  |                         |  | 6           |                            |  |  | 3   | 
|Forward contracts   |  | Various currencies |  |                                  | 4,586  |  |                         |  | Less than 1 |                            |  |  | 3   | 
|                    |  |                    |  |                                  |        |  |                         |  |             |                            |  |  |     | 
|Total               |  |                    |  |                                  | 10,494 |  |                         |  |             |                            |  |  | 258 | 
|                    |  |                    |  |                                  |        |  |                         |  |             |                            |  |  |     | 

These foreign currency hedge transactions may also include interest exchange features. For further information
refer to Note 37d to our audited consolidated financial statements included elsewhere in this Annual report and for the impact of changes in interest yields, foreign currency exchanges and the Israeli CPI on the fair value of our hedging
transactions, refer to the sensitivity analysis in Note 37g to our audited consolidated financial statements included elsewhere in this Annual report.

Consumer Price Index/Inflation Risk

We
have borrowed from banks and issued debentures with repayment provisions linked to changes in the Consumer Price Index in Israel. We also have deposits and have made loans which are linked to changes in the CPI. We have an excess of Israeli
CPI-linked liabilities over Israeli CPI-linked assets (mainly in respect of outstanding debentures). As a result, an increase in inflation would have the effect of increasing our finance expenses, leading to lower reported earnings and
shareholders equity. The extent of this effect on our financial statements would be dependent on the rate of inflation in Israel. Part of our cross-currency swap transactions hedge (economically) this exposure. For further details, refer to
Notes 37f and 37g to our audited consolidated financial statements included elsewhere in this Annual report.

Assuming an increase of 1%
in the Israeli CPI, our pre-tax equity would have decreased and, assuming a decrease of 1% in the CPI, our pre-tax equity would have increased, by NIS 100 million and NIS 103 million as of December 31, 2014 and December 31, 2013,
respectively. Including the partial offset impact of our cross currency swaps, our pre-tax income would decrease/increase as of the same dates by NIS 60 million and NIS 56 million, respectively.

Most of our leases contain provisions designed to partially mitigate any adverse impact of inflation. Although inflation has been low in
recent periods and has had a minimal impact on our performance, there is more recent data suggesting that inflation may be a greater concern in the future given economic conditions and governmental fiscal policy. Most of our leases require the
tenant to pay its share of operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing our exposure to increases in costs and operating expenses resulting from inflation. Some of our leases also include
clauses enabling us to receive percentage rents based on a tenants gross sales above predetermined levels, which sales generally increase as prices rise, or escalation clauses which are typically related to increases during 2014 and 2013 in
the Consumer Price Index or similar inflation indices.



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Credit risk

The financial strength of our customers affects our results. We are not exposed to significant concentration of credit risks. We regularly
evaluate the quality of our customers and the scope of credit extended to our customers. Accordingly, we provide an allowance for doubtful accounts based on the credit risk in respect of certain customers. Cash and deposits are maintained with major
financial institutions. Our management estimates that the risk that these parties will fail to meet their obligations is remote, since they are financially sound.

Interest rate risk

Our interest rate
risk arises primarily from long-term liabilities under our credit facilities. Liabilities with variable interest rates expose us to interest rate risk in respect of cash flow and liabilities bearing fixed interest rates expose us to interest rate
risk in respect of fair value. From time to time and according to market conditions, we enter into interest rate swaps in which we exchange variable interest with fixed interest and, vice-versa, to hedge our liabilities against changes in interest
rate. As of December 31, 2014, we had the following interest rate hedge portfolio:



|                                   |  |               |  |                                |     |  |                    |  |          |                 |  |  |                          |  |  |                            |      |  |  |  |     |  
|---------------------------------- |  | ------------- |  | ------------------------------ | --- |  | ------------------ |  | -------- | --------------- |  |  | ------------------------ |  |  | -------------------------- | ---- |  |  |  | --- | -
|Transaction Type                   |  | Denomination  |  | NotionalAmount(NIS inmillions) |     |  | InterestReceivable |  |          | InterestPayable |  |  | AverageEffectiveDuration |  |  | Fair Value(NIS inmillions) |     
|Interest rate swaps fixed/variable |  | U.S.$         |  |                                | 972 |  |                    |  | variable |                 |  |  | fixed                    |  |  |                            | 4.1  |  |  |  | (1  | )
|Interest rate swaps fixed/variable |  | C$            |  |                                | 250 |  |                    |  | variable |                 |  |  | fixed                    |  |  |                            | 0.04 |  |  |  | 1   |  
|Interest rate swaps fixed/variable |  | Swedish Krona |  |                                | 275 |  |                    |  | variable |                 |  |  | fixed                    |  |  |                            | 2.9  |  |  |  | (25 | )

As of December 31, 2014 and 2013, 91.4% and 90% of our interest bearing liabilities, respectively (88.6%
and 80% excluding interest rate swaps, respectively), were at fixed interest rates.

The following table presents information about the
impact a 1% absolute increase in interest rates would have on pre-tax income (loss) for the year:



|                                                                               |  |                                                           |     |   |             |  |     |            |  |  |              |   |  |  |    |  
|------------------------------------------------------------------------------ |  | --------------------------------------------------------- | --- | - | ----------- |  | --- | ---------- |  |  | ------------ | - |  |  | -- | -
|                                                                               |  | Sensitivity Analysis for Liabilities in Variable Interest |    
|Impact on Pre-Tax Income (Loss)
for the Year of a 1% Increase in Interest Rate |  | U.S.$Interest                                             |     |   | C$ Interest |  |     |  Interest |  |  | NIS Interest |  
|                                                                               |  | NIS in millions                                           |    
|December 31, 2014                                                              |  |                                                           | (48 | ) |             |  | (10 | )          |  |  | (18          | ) |  |  | (3 | )
|December 31, 2013                                                              |  |                                                           | (22 | ) |             |  | (7  | )          |  |  | (23          | ) |  |  | (3 | )



|                                |  |                                                                                               |    |  |    |  |    |     |  |  |     |   |  |  |     |  
|------------------------------- |  | --------------------------------------------------------------------------------------------- | -- |  | -- |  | -- | --- |  |  | --- | - |  |  | --- | -
|                                |  | Sensitivity Analysis for Fair Value of Derivatives Absolute changes in Consumer Price 
Index |   
|Effect on Pre-Tax Income (Loss) |  | 2%                                                                                            |    |  | 1% |  |    | -1% |  |  | -2% |  
|                                |  | NIS in millions                                                                               |   
|December 31, 2014               |  |                                                                                               | 81 |  |    |  | 40 |     |  |  | (41 | ) |  |  | (83 | )
|December 31, 2013               |  |                                                                                               | 94 |  |    |  | 47 |     |  |  | (47 | ) |  |  | (95 | )

The following tables present information about the impact a 2%/1% absolute increase/decrease in interest rates
would have on our pre-tax income and pre-tax equity:



|                                     |  |                                                                                       |      |   |    |  |      |     |  |  |      |   |  |  |      |  
|------------------------------------ |  | ------------------------------------------------------------------------------------- | ---- | - | -- |  | ---- | --- |  |  | ---- | - |  |  | ---- | -
|                                     |  | Sensitivity Analysis for Fair Value of DerivativesAbsolute changes in Interest Rates |     
|Effect on Pre-Tax Income (Loss)      |  | 2%                                                                                    |      |   | 1% |  |      | -1% |  |  | -2%  |  
|                                     |  | NIS in millions                                                                       |     
|December 31, 2014                    |  |                                                                                       |      |   |    |  |      |     |  |  |      |   |  |  |      |  
|Change in interest on               |  |                                                                                       | 257  |   |    |  | 135  |     |  |  | (129 | ) |  |  | (129 | )
|Change in interest on U.S.$          |  |                                                                                       | 48   |   |    |  | 25   |     |  |  | (26  | ) |  |  | (49  | )
|Change in interest on C$             |  |                                                                                       | 88   |   |    |  | 46   |     |  |  | (51  | ) |  |  | (101 | )
|Change in interest on Brazilian Real |  |                                                                                       | 13   |   |    |  | 7    |     |  |  | (6   | ) |  |  | (12  | )
|Change in nominal interest on NIS    |  |                                                                                       | (138 | ) |    |  | (71  | )   |  |  | 68   |   |  |  | 109  |  
|Change in real interest on NIS       |  |                                                                                       | (459 | ) |    |  | (238 | )   |  |  | 252  |   |  |  | 527  |  



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|                                            |  |                                                                                       |    |  |    |  |    |     |  |  |     |   |  |  |     |  
|------------------------------------------- |  | ------------------------------------------------------------------------------------- | -- |  | -- |  | -- | --- |  |  | --- | - |  |  | --- | -
|                                            |  | Sensitivity Analysis for Fair Value of DerivativesAbsolute changes in Interest Rates |   
|Effect on Pre-Tax Equity (Accounting Hedge) |  | 2%                                                                                    |    |  | 1% |  |    | -1% |  |  | -2% |  
|                                            |  | NIS in millions                                                                       |   
|December 31, 2014                           |  |                                                                                       |    |  |    |  |    |     |  |  |     |   |  |  |     |  
|Change in interest on U.S.$                 |  |                                                                                       | 66 |  |    |  | 34 |     |  |  | (37 | ) |  |  | (59 | )
|Change in interest on C$                    |  |                                                                                       | 60 |  |    |  | 32 |     |  |  | (34 | ) |  |  | (71 | )
|Change in interest on Swedish Krona         |  |                                                                                       | 15 |  |    |  | 8  |     |  |  | (3  | ) |  |  | (3  | )

The above sensitivity analyses refer to a potential increase in the relevant variables at rates that the
Company deems appropriate. The same is true for a decrease in same percentage which would impact profit or loss by the same amounts in the opposite direction, unless otherwise indicated. The sensitivity analyses for changes in interest rates were
performed on the balance as of the reporting date of long-term liabilities with variable interest. Cash and cash equivalents, including financial assets that are deposited or maintained for less than one year, were not included in the analyses of
exposure to changes in interest.

Price risk

We have investments in marketable financial instruments traded on securities exchanges, such as shares, participation certificates in mutual
funds and debentures, which are classified as available-for-sale financial assets or as financial assets measured at fair value through profit or loss, with respect to which we are exposed to risks associated with fluctuations in market prices on
stock exchanges. The carrying amount of these investments as of December 31, 2014 and December 31, 2013 was NIS 299 million (U.S.$ 76.9 million) and NIS 220 million, respectively. This exposure is not hedged.



|ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
|-------- | ------------------------------------------------------

Not applicable.

PART II



|ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
|-------- | -----------------------------------------------

None.



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

On
January 12, 2012, we amended our articles of association, which modified the rights of holders of our ordinary shares as follows:



| |  |  | The maximum number of directors on our board of directors was increased to eleven;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | The board of directors is now divided into three classes and one-third of the directors (other than external directors) are elected by our shareholders for a term of three years each and shall replace the members of the
class of directors whose term ended in such year;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Amendments to any provision of our articles of association (other than to increase the authorized share capital) require the approval of 60% of the ordinary shares represented at the general meeting, by person or by
proxy, and voting on the resolution; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Other than a person who has served as a director up to the date of the annual general meeting and/or whose appointment as a director has been recommended to the general meeting by our board of directors, no director
shall be appointed at the annual general meeting unless a shareholder or group of shareholders holding 1% or more of the voting rights of our company wishing to propose him as a candidate submits to our office, at least ten days prior to the date of
the notice of annual general meeting, a written document with certain specified information regarding the candidate.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|E. | Use of proceeds
|-- | ---------------

Not applicable.



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|ITEM 15. | CONTROLS AND PROCEDURES.
|-------- | ------------------------

Disclosure Controls and Procedures

Our President and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange
Act Rule 13a-15(e)) as of the end of the period covered by this annual report, have concluded that, as of such date, our disclosure controls and procedures were effective to ensure that the information required in the reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SECs rules and forms, and such information is accumulated and communicated to our management, including our President and Chief
Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Managements Annual Report on Internal Control over
Financial Reporting

The Companys management is responsible for establishing and maintaining adequate internal control over
financial reporting. Our internal control system was designed to provide reasonable assurance to the Companys management regarding the reliability of financial reporting and the preparation and fair presentation of our published consolidated
financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.

The Companys management assessed the effectiveness of the Companys internal control over financial reporting as
of December 31, 2014. In making this assessment, it used the criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (COSO). Based on
such assessment, management has concluded that, as of December 31, 2014, our internal control over financial reporting is effective based on those criteria.

The effectiveness of the Companys internal control over financial reporting as of December 31, 2014 has been audited by the
Companys independent registered public accounting firm, Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global, and their report dated as of March 23, 2015 herein expresses an unqualified opinion on the
Companys internal control over financial reporting.

Attestation Report of the Registered Public Accounting Firm

The Companys internal control over financial reporting as of December 31, 2014 has been audited by Kost Forer Gabbay &
Kasierer, an independent registered public accounting firm in Israel and a member of Ernst & Young Global, as stated in their report which is included under Item 18Financial Statements on page F-3 of this annual report.

Changes in Internal Control over Financial Reporting

During the period covered by this Annual Report, the management of U. Dori Construction Ltd. (Dori Construction) discovered a
material weakness in the process of income recognition and costs and revenues estimation in construction projects, derived from a material deviation from its existing estimates of anticipated costs and revenues in various construction
projects (Deviation in Estimates), which caused an adjustment in the Companys financial statements by means of a restatement for the year ending December 31, 2013 and for the three-month period ending March 31, 2014. The
material weakness was first reported in August and September 2014 with respect to the financial statements for the year ending December 31, 2013 and interim periods thereafter. During the year ending December 31, 2014, Dori Construction
implemented remedial internal control procedures to address the previously identified material weakness. These procedures included:



| |  |  | The appointment of a special committee of Dori Constructions board of directors with extensive powers to supervise the process of examining estimates of costs and revenues and to clarify the reasons for the
original Deviation in Estimates.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The appointment of an external engineering inspector to examine the methods by which Dori Construction samples its projects as well as the reasonableness of the assumptions on which its estimates for those projects were
based.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | The appointment of an external independent examiner to study the causes for the Deviation in Estimates and the reasons for the failure to discover them earlier. The examiner recommended actions and processes required to
assist in remediating the material weakness and prevent its recurrence. The external examiner has issued his report to Dori Construction which the latter subsequently publicly reported.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The replacement of officeholders in Dori Constructions senior management and the addition of new personnel in its finance department.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The replacement of members of the budgetary-control department as well as the restructuring of the department through the appointment of a new budgetary control manager, two additional examiners, and the hiring of a
specialist consultant.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Improving the functioning of the tenders department through the involvement of operational officers in the project pricing processes including in the review of the process for prior projects.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Updating, adjusting and adding new procedures for the process of preparing project estimates.
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | Increasing site visits and supervision of projects with the participation of senior operating, finance and budgetary control personnel.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------

After the completion of the testing of the design and operating effectiveness of these new procedures, Dori Constructions management, in
its annual report for the year ending December 31, 2014, under the supervision of its audit committee and board of directors, reached the conclusion that the previously identified material weakness had been remediated. As a result, after
reviewing all the measures taken and the procedures adopted by Dori Construction, the Companys management, under the supervision of the Companys audit committee and board of directors, reached the conclusion that in light of the
aforementioned remediation, the Companys internal control over financial reporting is now effective.

Except for the items described
above, there have been no changes in the Companys internal control over financial reporting that occurred during the period covered by this Annual Report that have materially affected, or is reasonably likely to materially affect, the
Companys internal control over financial reporting.



|ITEM 16. | [RESERVED]
|-------- | ----------



|ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT.
|--------- | ---------------------------------

Our board of directors has determined that
Dr. Shaiy Pilpel qualifies as an audit committee financial expert, as defined by the rules of the SEC and has the requisite financial experience defined by the NYSE Listed Company Manual. In addition, Dr. Pilpel is independent as such term
is defined in Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as amended and the New York Stock Exchange Corporate Governance Standards.



|ITEM 16B. | CODE OF ETHICS.
|--------- | ---------------

The Company has adopted a code of business conduct applicable to its
executive officers, directors and all other employees. A copy of the code is delivered to every employee of Gazit-Globe Ltd. and all of its private subsidiaries, and is available to investors and others on the Companys website at
http://www.gazit-globe.com or by contacting the Companys investor relations department. Any waivers of this code for executive officers or directors will be disclosed through the filing of a Form 6-K or on the Companys website. The
Company has also implemented a training program for new and existing employees concerning the code of business conduct.



|ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES.
|--------- | ---------------------------------------

Policy on Pre-approval of Audit and Non-Audit Services of
Independent Auditors

Our audit committee is responsible for the oversight of its independent auditors work. The audit
committees policy is to pre-approve all audit and non-audit services provided by Ernst & Young, an independent registered public accounting firm. These services may include audit services, audit-related services, tax services and
other services, as further described below. The audit committee sets forth the basis for its pre-approval in detail, listing the particular services or categories of services which are pre-approved. Additional services may be pre-approved by the
audit committee on an individual basis. Once services have been pre-approved, management must notify the audit committee prior to Ernst & Young commencing a new service. Ernst & Young and management then report to the audit
committee on a periodic basis regarding the extent of services actually provided in accordance with the applicable pre-approval, and regarding the fees for the services performed. Such fees for 2014 and 2013 were pre-approved by the audit committee
in accordance with these procedures.



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Principal Accountant Fees and Services.

The Company paid the following fees for professional services rendered by Ernst & Young, an independent registered public accounting
firm, for the years ended December 31, 2014 and 2013:



|                   |  |                      |       |  |      |   |       | 
|------------------ |  | -------------------- | ----- |  | ---- | - | ----- | 
|                   |  | 2014                 |       |  | 2013 |  
|                   |  | (U.S.$ in thousands) |      
|Audit Fees         |  | $                    | 4,006 |  |      | $ | 4,408 | 
|Audit-Related Fees |  |                      | 417   |  |      |   | 891   | 
|Tax Fees           |  |                      | 542   |  |      |   | 910   | 
|                   |  |                      |       |  |      |   |       | 
|Total              |  | $                    | 4,965 |  |      | $ | 6,209 | 
|                   |  |                      |       |  |      |   |       | 

The audit fees for the years ended December 31, 2014 and 2013 were for professional services rendered for
the audit of the Companys annual consolidated financial statements, the audit of the effectiveness of internal controls over financial reporting as required by the U.S. SEC as of December 31, 2014, and the Israeli Securities Regulations
as of December 31, 2014 and 2013, the review of consolidated quarterly financial statements, statutory audits of its subsidiaries, issuance of consents and assistance with the review of documents filed with the Israeli Securities Authority and
the SEC.

The audit-related fees for the years ended December 31, 2014 and 2013 were for services in respect of accounting
consultations, attest services that are not required by statute or regulation, consultations concerning financial accounting and reporting standards, and fees billed for assurance and related services regarding our initial public offering in the
United States.

Tax fees for the years ended December 31, 2014 and 2013 were for services related to tax compliance, including the
preparation of tax returns and claims for a refund, tax planning and tax advice, including assistance with tax audits and appeals, and assistance with respect to requests for rulings from tax authorities.



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

Not applicable.



|ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.
|--------- | -----------------------------------------------------------------------

None.



|ITEM 16F. | CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT.
|--------- | ---------------------------------------------

None.



|ITEM 16G. | CORPORATE GOVERNANCE.
|--------- | ---------------------

Except as otherwise indicated, the Company is in compliance with
corporate governance standards as currently applicable to us under Israeli, U.S., SEC and NYSE laws and regulations. Under the NYSE rules, as a foreign private issuer, we may elect to follow certain corporate governance practices permitted under the
Israeli Companies Law in lieu of compliance with corresponding corporate governance requirements otherwise imposed by the NYSE rules for U.S. domestic issuers. We currently follow the provisions of the Israeli Companies Law, rather than the NYSE
Listed Company Manual, solely with respect to approval of share issuances to officers, directors and 5% securityholders. In addition, we are not currently obligated to follow additional corporate governance practices promulgated by the TSX provided
that no more than 25% of the trading volume in our common stock over any six-month period occurs on the TSX and another stock exchange is providing review of the action in question.

Under the NYSE Listed Company Manual, shareholder approval is required prior to the issuance of more than one percent of the number of shares
or voting power of the company to a director, officer or 5% securityholder of the company, or a related party, or certain companies, entities or persons with relationships with the related party. The NYSE Listed Company Manual also provides that if
the related party involved in the transaction is classified as such solely because such person is a 5% securityholder, and if the issuance relates to a sale of stock for cash at a price at least as great as each of the book and market value of the
issuers common stock, then shareholder approval will not be required unless the number of shares exceeds either five percent of the number of shares or voting power of the company. We currently expect to use this



135



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exception to enable us to raise capital from time to time from Norstar, our controlling shareholder, on market terms approved by our board and audit committee, consistent with our past practice.
In the future, we may also use this exception in other circumstances, in which Israeli law may, but not necessarily will, require shareholder approval in addition to approval by our board and audit committee.

Under Israeli law an issuance of shares to a controlling shareholder or an issuance of shares pursuant to a transaction in which a controlling
shareholder has a personal interest requires approval by the audit committee and the board of directors and then approval at the general meeting of shareholders which meets the requirements described above for extraordinary transactions with
controlling shareholders under Additional InformationMemorandum and articles of associationDisclosure of Personal Interests of Controlling Shareholders and Approval of Certain Transactions; provided, that if the audit
committee and board of directors determine that the transaction is on market terms and in the ordinary course of business and does not otherwise harm the company, shareholder approval will not be required if shareholders holding at least 1% of the
shares do not object within 14 days after the announcement of the transaction.

If a director or an executive officer is a party to an
issuance of securities, approval of the board of directors is sufficient, unless the issuance is an extraordinary transaction, in which case it would also require approval of the audit committee, or if it is part of compensation for the officer or
director, in which case it would require approval of the audit committee and with respect to a director, approval of a general meeting of shareholders. As indicated above, a significant private placement would require approval of the board of
directors and then approval at a general meeting of shareholders.



|ITEM 16H. | MINE SAFETY DISCLOSURE
|--------- | ----------------------

Not applicable.

PART III



|ITEM 17. | FINANCIAL STATEMENTS
|-------- | --------------------

We have responded to Item 18 in lieu of this item.

PART III



|ITEM 18. | FINANCIAL STATEMENTS
|-------- | --------------------

The financial statements required by this item are found at the
end of this annual report, beginning on page F-1. The financial statements of Atrium are also provided pursuant to Rule 3-09 of Regulation S-X.



|                                                                                              |  |      
|--------------------------------------------------------------------------------------------- |  | -----
|                                                                                              |  | Page 
|Reports of Independent Registered Public Accounting Firm                                      |  | F-2  
|Consolidated Statements of Financial Position                                                 |  | F-4  
|Consolidated Statements of Income                                                             |  | F-6  
|Consolidated Statements of Comprehensive Income                                               |  | F-7  
|Consolidated Statements of Changes in Equity                                                  |  | F-8  
|Consolidated Statements of Cash Flow                                                          |  | F-12 
|Notes to Consolidated Financial Statements                                                    |  | F-15 
|Appendix A to Consolidated Financial Statements - List of Major Group Investees               |  | F-115
|Appendix B to Consolidated Financial Statements - Schedule III of rule 5-04 of regulation S-X |  | F-116
|Reports of the other Auditor                                                                  |  | F-118



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|ITEM 19. | EXHIBITS
|-------- | --------



|     |  |                                                                                                                                                                                                                                                                                                                                           
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|No.  |  | Description                                                                                                                                                                                                                                                                                                                               
|     | 
|1.1  |  | Articles of Association of the Registrant, as amended (incorporated by reference to Exhibit 1.1 to our Annual Report on Form 20-F that was filed with the SEC on April 22, 2013)
¥                                                                                                                                                        
|     | 
|1.2  |  | Memorandum of Association of the Registrant, as amended (incorporated by reference to Exhibit 1.2 to our Annual Report on Form 20-F that was filed with the SEC on April 22, 2013)
¥                                                                                                                                                      
|     | 
|4.1  |  | Transaction Agreement among Atrium European Real Estate, Gazit Midas Limited and CPI CEE Management LLC, dated September 2, 2009 (incorporated by reference to Exhibit 10.1 to Registration No. 333-178320)                                                                                                                               
|     | 
|4.2  |  | Amended and Restated Relationship Agreement among Atrium European Real Estate, Gazit Midas Limited and CPI CEE Management LLC, dated September 2, 2009 (incorporated by reference to Exhibit 10.2 to Registration No.
333-178320)                                                                                                         
|     | 
|4.3  |  | Equityholders Agreement among Equity One, Inc., Capital Shopping Centres Group PLC, Liberty International Holdings Limited, the registrant, MGN (USA) Inc., Gazit (1995), Inc., MGN America, LLC, Silver Maple (2001), Inc. and Ficus,
Inc., dated May 23, 2010 (incorporated by reference to Exhibit 10.3 to Registration No. 333-178320)
|     | 
|4.4  |  | Amendment No. 1 among Equity One, Inc., Capital Shopping Centres Group PLC, Liberty International Holdings Limited, the registrant, MGN (USA) Inc., Gazit (1995), Inc., MGN America, LLC, Silver Maple (2001), Inc., Ficus, Inc. and
Gazit First Generation LLC (incorporated by reference to Exhibit 10.4 to Registration No. 333-178320)
|     | 
|4.5  |  | Intercompany Agreement among the registrant, MGN (USA) Inc., Gazit (1995), Inc., MGN America, LLC, Silver Maple (2001), Inc., and Ficus, Inc, dated as of May 23, 2010 (incorporated by reference to Exhibit 10.5 to Registration No.
333-178320)                                                                                         
|     | 
|4.6  |  | 2011 Shareholders Agreement among Alony Hetz Properties & Investments, Ltd., A.H. Canada Holdings Ltd., the registrant, Gazit Canada Inc., and Gazit 2003 Inc., dated January 9, 2011 (incorporated by reference to Exhibit
10.6 to Registration No. 333-178320)                                                                         
|     | 
|4.7  |  | Amended and Restated Facility Agreement between the registrant, Bank Hapoalim B.M., Israel Discount Bank Ltd and Union Bank of Israel Ltd., dated December 31, 2013 (incorporated by reference to Exhibit 99.2 to the Current Report on
Form 6-K that was furnished to the SEC on January 2, 2014) +                                      
|     | 
|4.8  |  | Amending Agreement, dated January 21, 2015, between registrant, Bank Hapoalim B.M., Israel Discount Bank Ltd., and Union Bank of Israel Ltd. (incorporated by reference to Exhibit 99.2 to the Current Report on Form 6-K that was
furnished to the SEC on January 26, 2015)                                                              
|     | 
|4.9  |  | Credit Facility Agreement between the registrant and Israel Discount Bank Ltd., dated May 17, 2010, and amendment thereto (incorporated by reference to Exhibit 10.8 to Registration No. 333-178320) +                                                                                                                                    
|     | 
|4.10 |  | Amendment No. 2 to the Credit Facility Agreement between the registrant and Israel Discount Bank Ltd., dated June 28, 2012 (incorporated by reference to Exhibit 4.9 to our Annual Report on Form 20-F that was filed with the SEC on
April 22, 2013) +                                                                                   
|     | 
|4.11 |  | Amendment No. 3 to the Credit Facility Agreement between the registrant and Israel Discount Bank Ltd., dated November 30, 2014 (incorporated by reference to Exhibit 99.2 to the Current Report on Form 6-K that was furnished to the
SEC on December 3, 2014) +                                                                          
|     | 
|4.12 |  | Facility Agreement between the registrant and Bank Hapoalim, B.M., dated July 13, 2010, and amendments thereto (incorporated by reference to Exhibit 10.9 to Registration No. 333-178320) +                                                                                                                                               
|     | 
|4.13 |  | Facility Agreement between Gazit Canada Inc. and Bank Hapoalim, B.M., dated July 13, 2010, and amendments thereto (incorporated by reference to Exhibit 10.10 to Registration No. 333-178320) +                                                                                                                                           
|     | 
|4.14 |  | Third Amendment to the Facility Agreement between the registrant and Bank Hapoalim, B.M., dated December 31, 2012 and the addendum dated thereto January 13, 2013 (incorporated by reference to Exhibit 99.1 to the Current Report on
Form 6-K that was furnished to the SEC on March 13, 2013) +                                         
|     | 
|4.15 |  | Third Amendment to the Facility Agreement between Gazit Canada Inc. and Bank Hapoalim, B.M., dated December 31, 2012 and the addendum dated thereto January 13, 2013 (incorporated by reference to Exhibit 99.2 to the Current Report on
Form 6-K that was furnished to the SEC on March 13, 2013) +                                      
|     | 
|4.16 |  | Amending Agreement to Additional Conditions for Granting Credits between the registrant and Bank Leumi le-Israel B.M., dated April 17, 2011 and Amended and Restated Additional Conditions for Granting Credits, dated June 21, 2011
(incorporated by reference to Exhibit 10.11 to Registration No. 333-178320) +                        
|     | 
|4.17 |  | Amending Agreement to Additional Conditions for Granting Credits between the registrant and Bank Leumi le-Israel B.M., dated March 19, 2013 (incorporated by reference to Exhibit 4.15 to our Annual Report on Form 20-F that was filed
with the SEC on April 22, 2013) +                                                                 
|     | 
|4.18 |  | Amended and Restated Loan Agreement among Gazit First Generation LLC, the registrant and Bank Leumi USA, dated March 19, 2013 (incorporated by reference to Exhibit 4.16 to our Annual Report on Form 20-F that was filed with the SEC
on April 22, 2013) +                                                                               



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|     |  |                                                                                                                                                                                                                                                                                                                                                                        
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|No.  |  | Description                                                                                                                                                                                                                                                                                                                                                            
|     | 
|4.19 |  | Private Allotment Agreement between the registrant and Gazit Inc. (now known as Norstar Holdings Inc.) with respect to the private placement dated October 15, 2009 (incorporated by reference to Exhibit 10.13 to Registration No.
333-178320)                                                                                                                        
|     | 
|4.20 |  | Amended and Restated Co-operation and Voting Agreement between Gazit Midas Limited and CPI CEE Management LLC, dated September 2, 2009 (incorporated by reference to Exhibit 10.14 to Registration No. 333-178320)                                                                                                                                                     
|     | 
|4.21 |  | Master Agreement, comprised of an amendment to a Management Agreement, an amendment to a Non-Compete Agreement, and a Registration Rights Agreement between the registrant, Norstar Israel Ltd., and Norstar Holdings Inc., dated
February 1, 2012 (incorporated by reference to Exhibit 4.15 to our Annual Report on Form 20-F filed with the SEC on April 27, 2012) ¥
|     | 
|4.22 |  | Arrangement Agreement, by and among the registrant, First Capital Realty Inc., Gazit America Inc., dated June 20, 2012 (incorporated by reference to Exhibit 4.22 to our Annual Report on Form 20-F that was filed with the SEC on April
22, 2013)                                                                                                                     
|     | 
|4.23 |  | Governance Agreement, by and between the registrant and CPP Investment Board European Holdings S.à r.l with respect to Citycon Oyj., dated May 12, 2014 (incorporated by reference to Exhibit 99.1 to the Current Report on Form
6-K that was furnished to the SEC on June 10, 2014)                                                                                   
|     | 
|8.1  |  | List of subsidiaries of the Registrant                                                                                                                                                                                                                                                                                                                                 
|     | 
|10.1 |  | Consent of Kost Forer Gabbay & Kasierer                                                                                                                                                                                                                                                                                                                                
|     | 
|10.2 |  | Consent of KPMG Channel Islands Limited                                                                                                                                                                                                                                                                                                                                
|     | 
|12.1 |  | Certificate of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                 
|     | 
|12.2 |  | Certificate of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                 
|     | 
|13.1 |  | Certificate of Chief Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                      
|     | 
|13.2 |  | Certificate of Chief Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of
2002                                                                                                                                                                                                                                      



|¥ | English translation of original Hebrew document.
|- | ------------------------------------------------

|+ | Portions of these exhibits have been omitted pursuant to a request for confidential treatment. The omitted portions have been filed with the Commission.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------

Signatures

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report on its behalf.

GAZIT-GLOBE LTD.



By:

/s/Aharon SofferName: Aharon Soffer Title:
President


Date: April 22, 2015



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GAZIT-GLOBE LTD.

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2014

INDEX



|                                                                                              |  |      |         | 
|--------------------------------------------------------------------------------------------- |  | ---- | ------- | 
|                                                                                              |  | Page |        
|Reports of Independent Registered Public Accounting Firm                                      |  |      | F - 2   | 
|                                                                                              | 
|Consolidated Statements of Financial Position                                                 |  |      | F - 4   | 
|                                                                                              | 
|Consolidated Statements of Income                                                             |  |      | F - 6   | 
|                                                                                              | 
|Consolidated Statements of Comprehensive Income                                               |  |      | F - 7   | 
|                                                                                              | 
|Consolidated Statements of Changes in Equity                                                  |  |      | F - 8   | 
|                                                                                              | 
|Consolidated Statements of Cash Flow                                                          |  |      | F - 12  | 
|                                                                                              | 
|Notes to Consolidated Financial Statements                                                    |  |      | F - 15  | 
|                                                                                              | 
|Appendix A to Consolidated Financial Statements - List of Major Group Investees               |  |      | F - 115 | 
|                                                                                              | 
|Appendix B to Consolidated Financial Statements - Schedule III of rule 5-04 of regulation
S-X |  |      | F - 116 | 
|                                                                                              | 
|Reports of other Auditor                                                                      |  |      | F - 118 | 



F-1



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##### Table of Contents

|     |  |                                                                      |  |                                                |  | 
|---- |  | -------------------------------------------------------------------- |  | ---------------------------------------------- |  | 
|LOGO |  | Kost Forer Gabbay & Kasierer
3 Aminadav St. Tel-Aviv 6706703, Israel |  | Tel: +972-3-6232525 Fax: +972-3-5622555
ey.com |  | 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of Gazit Globe LTD.

We have audited the accompanying consolidated statements of financial position of Gazit Globe, Ltd. (the Company) and subsidiaries
as of December 31, 2014 and 2013 and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2014. Our audits also included the
financial statement schedule of investment property information (the schedule). These financial statements and schedule are the responsibility of the Companys management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

We did not audit the financial statements of a certain jointly controlled company
accounted for using the equity method. The investment in this jointly controlled company amounted to NIS 4,098 million and NIS 4,312 million as of December, 31, 2014 and 2013, respectively, and the Companys share in its earnings
(losses) amounted to NIS (111) million, NIS 132 million and NIS 165 million for the years ended December 31, 2014, 2013 and 2012, respectively. The financial statements of this company were audited by other auditors, whose report
has been furnished to us, and our opinion, insofar as it relates to amounts included for this company, is based on the report of the other auditors.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.

In our opinion, based on our audits and the report of the other auditors, the consolidated financial statements
referred to above present fairly, in all material respects, the consolidated statements of financial position of the Company and subsidiaries as of December 31, 2014 and 2013 and the related consolidated statements of income, comprehensive
income, changes in equity and cash flows for each of the three years in the period ended December 31, 2014, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also, in our
opinion, based on our audits, the schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company and
subsidiaries internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013
framework) and our report dated March 23, 2015 expressed an unqualified opinion thereon.



|                                |  |                                                              
|------------------------------- |  | -------------------------------------------------------------
|Tel-Aviv, Israel
March 23, 2015 |  | KOST FORER GABBAY & KASIERER
A Member of Ernst & Young Global



F-2



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##### Table of Contents

|     |  |                                                                      |  |                                                |  | 
|---- |  | -------------------------------------------------------------------- |  | ---------------------------------------------- |  | 
|LOGO |  | Kost Forer Gabbay & Kasierer
3 Aminadav St. Tel-Aviv 6706703, Israel |  | Tel: +972-3-6232525 Fax: +972-3-5622555
ey.com |  | 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of Gazit Globe LTD.

We have audited Gazit Globe, Ltd. (the Company) and subsidiaries internal control over financial reporting as of
December 31, 2014, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). The Companys
management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying managements report on internal
control over financial reporting. Our responsibility is to express an opinion on the Companys internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A companys internal control
over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts
and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the companys assets that could have a material effect on the financial statements.

Because of its inherent
limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company and
subsidiaries maintained in all material respects, effective internal control over financial reporting as of December 31, 2014, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated
statements of financial position of the Company and subsidiaries as of December 31, 2014 and 2013, the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the three years in the period
ended December 31, 2014 and the financial statement schedule of investment property information and our report dated March 23, 2015 expressed an unqualified opinion thereon based on our audits and the report of the other auditors.



|                                |  |                                                              
|------------------------------- |  | -------------------------------------------------------------
|Tel-Aviv, Israel March 23, 2015 |  | KOST FORER GABBAY & KASIERER
A Member of Ernst & Young Global



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##### Table of Contents

GAZIT-GLOBE LTD.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION





|                                               |  |      |  |                                    |        |  |              |      |        |  |  |  |        | 
|---------------------------------------------- |  | ---- |  | ---------------------------------- | ------ |  | ------------ | ---- | ------ |  |  |  | ------ | 
|                                               |  |      |  | Conveniencetranslation(Note 2d(1)) |        |  |              |      |        |  | 
|                                               |  |      |  | December 31,2014                   |        |  | December 31, |     
|                                               |  |      |  |                                    | 2014   |  |              | 2013 |       
|                                               |  | Note |  | U.S. dollars                       |        |  | NIS          |     
|                                               |  |      |  | In millions                        |       
|ASSETS                                         |  |      |  |                                    |        |  |              |      |        |  |  |  |        | 
|CURRENT ASSETS                                 |  |      |  |                                    |        |  |              |      |        |  |  |  |        | 
|Cash and cash equivalents                      |  | 3    |  |                                    | 167    |  |              |      | 650    |  |  |  | 1,018  | 
|Short-term investments and loans               |  | 4a   |  |                                    | 95     |  |              |      | 368    |  |  |  | 504    | 
|Marketable securities                          |  | 4b   |  |                                    | 77     |  |              |      | 299    |  |  |  | 100    | 
|Financial derivatives                          |  | 37d  |  |                                    | 23     |  |              |      | 90     |  |  |  | 39     | 
|Trade receivables                              |  | 5    |  |                                    | 138    |  |              |      | 536    |  |  |  | 689    | 
|Other accounts receivable                      |  | 6    |  |                                    | 78     |  |              |      | 303    |  |  |  | 302    | 
|Inventory of buildings and apartments for sale |  | 7    |  |                                    | 152    |  |              |      | 588    |  |  |  | 692    | 
|Income taxes receivable                        |  |      |  |                                    | 4      |  |              |      | 14     |  |  |  | 19     | 
|                                               |  |      |  |                                    |        |  |              |      |        |  |  |  |        | 
|                                               |  |      |  |                                    | 734    |  |              |      | 2,848  |  |  |  | 3,363  | 
|Assets classified as held for sale             |  | 8    |  |                                    | 269    |  |              |      | 1,046  |  |  |  | 611    | 
|                                               |  |      |  |                                    |        |  |              |      |        |  |  |  |        | 
|                                               |  |      |  |                                    | 1,003  |  |              |      | 3,894  |  |  |  | 3,974  | 
|                                               |  |      |  |                                    |        |  |              |      |        |  |  |  |        | 
|NON-CURRENT ASSETS                             |  |      |  |                                    |        |  |              |      |        |  |  |  |        | 
|Equity-accounted investees                     |  | 9    |  |                                    | 1,598  |  |              |      | 6,213  |  |  |  | 5,907  | 
|Other investments, loans and receivables       |  | 10   |  |                                    | 145    |  |              |      | 564    |  |  |  | 659    | 
|Available-for-sale financial assets            |  | 11   |  |                                    | 98     |  |              |      | 383    |  |  |  | 435    | 
|Financial derivatives                          |  | 37d  |  |                                    | 73     |  |              |      | 288    |  |  |  | 769    | 
|Investment property                            |  | 12   |  |                                    | 14,565 |  |              |      | 56,646 |  |  |  | 53,309 | 
|Investment property under development          |  | 13   |  |                                    | 422    |  |              |      | 1,642  |  |  |  | 2,479  | 
|Non-current inventory                          |  | 7    |  |                                    | 1      |  |              |      | 2      |  |  |  | 23     | 
|Fixed assets, net                              |  | 14   |  |                                    | 44     |  |              |      | 171    |  |  |  | 160    | 
|Intangible assets, net                         |  | 15   |  |                                    | 26     |  |              |      | 103    |  |  |  | 106    | 
|Deferred taxes                                 |  | 25m  |  |                                    | 20     |  |              |      | 78     |  |  |  | 106    | 
|                                               |  |      |  |                                    |        |  |              |      |        |  |  |  |        | 
|                                               |  |      |  |                                    | 16,992 |  |              |      | 66,090 |  |  |  | 63,953 | 
|                                               |  |      |  |                                    |        |  |              |      |        |  |  |  |        | 
|                                               |  |      |  |                                    | 17,995 |  |              |      | 69,984 |  |  |  | 67,927 | 
|                                               |  |      |  |                                    |        |  |              |      |        |  |  |  |        | 

The accompanying notes are an integral part of these consolidated financial statements.



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##### Table of Contents

GAZIT-GLOBE LTD.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION





|                                                              |  |      |  |                                    |        |   |              |      |        |   |  |  |        |  
|------------------------------------------------------------- |  | ---- |  | ---------------------------------- | ------ | - | ------------ | ---- | ------ | - |  |  | ------ | -
|                                                              |  |      |  | Conveniencetranslation(Note 2d(1)) |        |   |              |      |        |   | 
|                                                              |  |      |  | December 31,2014                   |        |   | December 31, |     
|                                                              |  |      |  |                                    | 2014   |   |              | 2013 |       
|                                                              |  | Note |  | U.S. dollars                       |        |   | NIS          |     
|                                                              |  |      |  | In millions                        |       
|LIABILITIES AND EQUITY                                        |  |      |  |                                    |        |   |              |      |        |   |  |  |        |  
|CURRENT LIABILITIES                                           |  |      |  |                                    |        |   |              |      |        |   |  |  |        |  
|Credit from banks and others                                  |  | 16   |  |                                    | 142    |   |              |      | 553    |   |  |  | 257    |  
|Current maturities of non-current liabilities                 |  | 17   |  |                                    | 697    |   |              |      | 2,711  |   |  |  | 2,914  |  
|Financial derivatives                                         |  | 37d  |  |                                    | 15     |   |              |      | 59     |   |  |  | 32     |  
|Trade payables                                                |  | 18   |  |                                    | 232    |   |              |      | 900    |   |  |  | 940    |  
|Other accounts payable                                        |  | 19   |  |                                    | 325    |   |              |      | 1,262  |   |  |  | 1,272  |  
|Advances from customers and buyers of apartments              |  | 7    |  |                                    | 78     |   |              |      | 304    |   |  |  | 267    |  
|Income taxes payable                                          |  |      |  |                                    | 19     |   |              |      | 74     |   |  |  | 32     |  
|                                                              |  |      |  |                                    |        |   |              |      |        |   |  |  |        |  
|                                                              |  |      |  |                                    | 1,508  |   |              |      | 5,863  |   |  |  | 5,714  |  
|Liabilities attributed to assets held for sale                |  | 8    |  |                                    | 28     |   |              |      | 110    |   |  |  | 73     |  
|                                                              |  |      |  |                                    |        |   |              |      |        |   |  |  |        |  
|                                                              |  |      |  |                                    | 1,536  |   |              |      | 5,973  |   |  |  | 5,787  |  
|                                                              |  |      |  |                                    |        |   |              |      |        |   |  |  |        |  
|NON-CURRENT LIABILITIES                                       |  |      |  |                                    |        |   |              |      |        |   |  |  |        |  
|Debentures                                                    |  | 20   |  |                                    | 6,283  |   |              |      | 24,433 |   |  |  | 22,231 |  
|Convertible debentures                                        |  | 21   |  |                                    | 322    |   |              |      | 1,254  |   |  |  | 1,221  |  
|Interest-bearing loans from financial institutions and others |  | 22   |  |                                    | 2,199  |   |              |      | 8,552  |   |  |  | 12,692 |  
|Financial derivatives                                         |  | 37d  |  |                                    | 24     |   |              |      | 94     |   |  |  | 169    |  
|Other financial liabilities                                   |  | 23   |  |                                    | 49     |   |              |      | 190    |   |  |  | 198    |  
|Deferred taxes                                                |  | 25m  |  |                                    | 930    |   |              |      | 3,618  |   |  |  | 3,276  |  
|                                                              |  |      |  |                                    |        |   |              |      |        |   |  |  |        |  
|                                                              |  |      |  |                                    | 9,807  |   |              |      | 38,141 |   |  |  | 39,787 |  
|                                                              |  |      |  |                                    |        |   |              |      |        |   |  |  |        |  
|EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY          |  | 27   |  |                                    |        |   |              |      |        |   |  |  |        |  
|Share capital                                                 |  |      |  |                                    | 60     |   |              |      | 232    |   |  |  | 229    |  
|Share premium                                                 |  |      |  |                                    | 1,134  |   |              |      | 4,411  |   |  |  | 4,288  |  
|Retained earnings                                             |  |      |  |                                    | 1,264  |   |              |      | 4,915  |   |  |  | 5,160  |  
|Foreign currency translation reserve                          |  |      |  |                                    | (422   | ) |              |      | (1,641 | ) |  |  | (2,000 | )
|Other reserves                                                |  |      |  |                                    | 32     |   |              |      | 127    |   |  |  | 146    |  
|Loans granted to purchase shares of the Companys shares *)   |  |      |  |                                    |       |   |              |      |       |   |  |  |       |  
|Treasury shares                                               |  |      |  |                                    | (5     | ) |              |      | (21    | ) |  |  | (21    | )
|                                                              |  |      |  |                                    |        |   |              |      |        |   |  |  |        |  
|                                                              |  |      |  |                                    | 2,063  |   |              |      | 8,023  |   |  |  | 7,802  |  
|Non-controlling interests                                     |  | 27i  |  |                                    | 4,589  |   |              |      | 17,847 |   |  |  | 14,551 |  
|                                                              |  |      |  |                                    |        |   |              |      |        |   |  |  |        |  
|Total equity                                                  |  |      |  |                                    | 6,652  |   |              |      | 25,870 |   |  |  | 22,353 |  
|                                                              |  |      |  |                                    |        |   |              |      |        |   |  |  |        |  
|                                                              |  |      |  |                                    | 17,995 |   |              |      | 69,984 |   |  |  | 67,927 |  
|                                                              |  |      |  |                                    |        |   |              |      |        |   |  |  |        |  



|*) | Represents an amount of less than NIS 1 million.
|-- | ------------------------------------------------



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##### Table of Contents

GAZIT-GLOBE LTD.

CONSOLIDATED STATEMENTS OF INCOME





|                                                                                        |  |                                          |  |                                    |       |   |                        |      |        |   |      |  |        |   |  |  |        |  
|--------------------------------------------------------------------------------------- |  | ---------------------------------------- |  | ---------------------------------- | ----- | - | ---------------------- | ---- | ------ | - | ---- |  | ------ | - |  |  | ------ | -
|                                                                                        |  |                                          |  | Conveniencetranslation(Note 2d(1)) |       |   |                        |      |        |   |      |  |        |  
|                                                                                        |  |                                          |  | Year endedDecember 31,2014         |       |   | Year endedDecember 31, |     
|                                                                                        |  |                                          |  |                                    | 2014  |   |                        | 2013 |        |   | 2012 | 
|                                                                                        |  | Note                                     |  | U.S. dollars                       |       |   | NIS                    |     
|                                                                                        |  | (In millions, except for per share data) | 
|Rental income                                                                           |  | 30                                       |  |                                    | 1,263 |   |                        |      | 4,913  |   |      |  | 5,146  |   |  |  | 5,249  |  
|Property operating expenses                                                             |  | 31                                       |  |                                    | 407   |   |                        |      | 1,584  |   |      |  | 1,689  |   |  |  | 1,705  |  
|                                                                                        |  |                                          |  |                                    |       |   |                        |      |        |   |      |  |        |   |  |  |        |  
|Net operating rental income                                                             |  |                                          |  |                                    | 856   |   |                        |      | 3,329  |   |      |  | 3,457  |   |  |  | 3,544  |  
|                                                                                        |  |                                          |  |                                    |       |   |                        |      |        |   |      |  |        |   |  |  |        |  
|Revenues from sale of buildings, land and construction works performed                  |  | 32                                       |  |                                    | 349   |   |                        |      | 1,357  |   |      |  | 1,672  |   |  |  | 1,760  |  
|Cost of buildings sold, land and construction works performed                           |  | 32                                       |  |                                    | 427   |   |                        |      | 1,660  |   |      |  | 1,688  |   |  |  | 1,720  |  
|                                                                                        |  |                                          |  |                                    |       |   |                        |      |        |   |      |  |        |   |  |  |        |  
|Gross profit (loss) from sale of buildings, land and construction works performed       |  |                                          |  |                                    | (78   | ) |                        |      | (303   | ) |      |  | (16    | ) |  |  | 40     |  
|                                                                                        |  |                                          |  |                                    |       |   |                        |      |        |   |      |  |        |   |  |  |        |  
|Total gross profit                                                                      |  |                                          |  |                                    | 778   |   |                        |      | 3,026  |   |      |  | 3,441  |   |  |  | 3,584  |  
|                                                                                        |  |                                          |  |                                    |       |   |                        |      |        |   |      |  |        |   |  |  |        |  
|Fair value gain from investment property and investment property under development, net |  |                                          |  |                                    | 271   |   |                        |      | 1,053  |   |      |  | 962    |   |  |  | 1,938  |  
|General and administrative expenses                                                     |  | 33                                       |  |                                    | (159  | ) |                        |      | (619   | ) |      |  | (610   | ) |  |  | (673   | )
|Other income                                                                            |  | 34a                                      |  |                                    | 14    |   |                        |      | 55     |   |      |  | 218    |   |  |  | 164    |  
|Other expenses                                                                          |  | 34b                                      |  |                                    | (21   | ) |                        |      | (81    | ) |      |  | (74    | ) |  |  | (47    | )
|Companys share in earnings of equity-accounted investees, net                          |  | 9b                                       |  |                                    | 3     |   |                        |      | 12     |   |      |  | 149    |   |  |  | 299    |  
|                                                                                        |  |                                          |  |                                    |       |   |                        |      |        |   |      |  |        |   |  |  |        |  
|Operating income                                                                        |  |                                          |  |                                    | 886   |   |                        |      | 3,446  |   |      |  | 4,086  |   |  |  | 5,265  |  
|Finance expenses                                                                        |  | 35a                                      |  |                                    | (544  | ) |                        |      | (2,115 | ) |      |  | (2,185 | ) |  |  | (2,214 | )
|Finance income                                                                          |  | 35b                                      |  |                                    | 40    |   |                        |      | 157    |   |      |  | 549    |   |  |  | 120    |  
|                                                                                        |  |                                          |  |                                    |       |   |                        |      |        |   |      |  |        |   |  |  |        |  
|Income before taxes on income                                                           |  |                                          |  |                                    | 382   |   |                        |      | 1,488  |   |      |  | 2,450  |   |  |  | 3,171  |  
|Taxes on income                                                                         |  | 25n                                      |  |                                    | 104   |   |                        |      | 405    |   |      |  | 265    |   |  |  | 758    |  
|                                                                                        |  |                                          |  |                                    |       |   |                        |      |        |   |      |  |        |   |  |  |        |  
|Net income                                                                              |  |                                          |  |                                    | 278   |   |                        |      | 1,083  |   |      |  | 2,185  |   |  |  | 2,413  |  
|                                                                                        |  |                                          |  |                                    |       |   |                        |      |        |   |      |  |        |   |  |  |        |  
|Attributable to:                                                                        |  |                                          |  |                                    |       |   |                        |      |        |   |      |  |        |   |  |  |        |  
|Equity holders of the Company                                                           |  |                                          |  |                                    | 19    |   |                        |      | 73     |   |      |  | 927    |   |  |  | 901    |  
|Non-controlling interests                                                               |  |                                          |  |                                    | 259   |   |                        |      | 1,010  |   |      |  | 1,258  |   |  |  | 1,512  |  
|                                                                                        |  |                                          |  |                                    |       |   |                        |      |        |   |      |  |        |   |  |  |        |  
|                                                                                        |  |                                          |  |                                    | 278   |   |                        |      | 1,083  |   |      |  | 2,185  |   |  |  | 2,413  |  
|                                                                                        |  |                                          |  |                                    |       |   |                        |      |        |   |      |  |        |   |  |  |        |  
|Net earnings per share attributable to equity holders of the Company:                   |  | 36                                       |  |                                    |       |   |                        |      |        |   |      |  |        |   |  |  |        |  
|Basic net earnings                                                                      |  |                                          |  |                                    | 0.11  |   |                        |      | 0.41   |   |      |  | 5.41   |   |  |  | 5.46   |  
|                                                                                        |  |                                          |  |                                    |       |   |                        |      |        |   |      |  |        |   |  |  |        |  
|Diluted net earnings                                                                    |  |                                          |  |                                    | 0.10  |   |                        |      | 0.39   |   |      |  | 5.35   |   |  |  | 5.25   |  
|                                                                                        |  |                                          |  |                                    |       |   |                        |      |        |   |      |  |        |   |  |  |        |  

The accompanying notes are an integral part of these consolidated financial statements.



F-6



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##### Table of Contents

GAZIT-GLOBE LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME





|                                                                                                      |  |                                    |      |   |                         |      |       |   |      |  |        |   |  |  |       |  
|----------------------------------------------------------------------------------------------------- |  | ---------------------------------- | ---- | - | ----------------------- | ---- | ----- | - | ---- |  | ------ | - |  |  | ----- | -
|                                                                                                      |  | Conveniencetranslation(Note 2d(1)) |      |   |                         |     
|                                                                                                      |  | Year endedDecember 31,2014         |      |   | Year ended December 31, |     
|                                                                                                      |  |                                    | 2014 |   |                         | 2013 |       |   | 2012 | 
|                                                                                                      |  | U.S. dollars                       |      |   | NIS                     |     
|                                                                                                      |  | In millions                        |     
|Net income                                                                                            |  |                                    | 278  |   |                         |      | 1,083 |   |      |  | 2,185  |   |  |  | 2,413 |  
|                                                                                                      |  |                                    |      |   |                         |      |       |   |      |  |        |   |  |  |       |  
|Other comprehensive income (loss) (net of tax effect *):                                              |  |                                    |      |   |                         |      |       |   |      |  |        |   |  |  |       |  
|Items that are or will be reclassified to profit or loss:                                             |  |                                    |      |   |                         |      |       |   |      |  |        |   |  |  |       |  
|                                                                                                      |  |                                    |      |  
|Exchange differences on translation of foreign operations (1)                                         |  |                                    | 295  |   |                         |      | 1,148 |   |      |  | (2,443 | ) |  |  | (416  | )
|Realization of exchange differences on translation of equity-accounted foreign operations             |  |                                    |     |   |                         |      |      |   |      |  |       |   |  |  | 3     |  
|Net gains (losses) on cash flow hedges (1)                                                            |  |                                    | 12   |   |                         |      | 46    |   |      |  | 239    |   |  |  | (100  | )
|                                                                                                      |  |                                    |      |  
|Net gains (losses) on available-for-sale financial assets                                             |  |                                    | 10   |   |                         |      | 36    |   |      |  | (4     | ) |  |  | 37    |  
|                                                                                                      |  |                                    |      |   |                         |      |       |   |      |  |        |   |  |  |       |  
|                                                                                                      |  |                                    | 317  |   |                         |      | 1,230 |   |      |  | (2,208 | ) |  |  | (476  | )
|Items not to be reclassified to profit or loss:                                                       |  |                                    |      |   |                         |      |       |   |      |  |        |   |  |  |       |  
|                                                                                                      |  |                                    |      |  
|Gain on revaluation of fixed assets in joint venture                                                  |  |                                    |     |   |                         |      |      |   |      |  | (6     | ) |  |  | 10    |  
|                                                                                                      |  |                                    |      |   |                         |      |       |   |      |  |        |   |  |  |       |  
|Total other comprehensive income (loss)                                                               |  |                                    | 317  |   |                         |      | 1,230 |   |      |  | (2,214 | ) |  |  | (466  | )
|                                                                                                      |  |                                    |      |   |                         |      |       |   |      |  |        |   |  |  |       |  
|Total comprehensive income (loss)                                                                     |  |                                    | 595  |   |                         |      | 2,313 |   |      |  | (29    | ) |  |  | 1,947 |  
|                                                                                                      |  |                                    |      |   |                         |      |       |   |      |  |        |   |  |  |       |  
|Attributable to:                                                                                      |  |                                    |      |   |                         |      |       |   |      |  |        |   |  |  |       |  
|Equity holders of the Company (2)                                                                     |  |                                    | 115  |   |                         |      | 445   |   |      |  | (46    | ) |  |  | 715   |  
|Non-controlling interests                                                                             |  |                                    | 480  |   |                         |      | 1,868 |   |      |  | 17     |   |  |  | 1,232 |  
|                                                                                                      |  |                                    |      |   |                         |      |       |   |      |  |        |   |  |  |       |  
|                                                                                                      |  |                                    | 595  |   |                         |      | 2,313 |   |      |  | (29    | ) |  |  | 1,947 |  
|                                                                                                      |  |                                    |      |   |                         |      |       |   |      |  |        |   |  |  |       |  
|(1)    Includes Groups share in other comprehensive loss of investees according to the equity method |  |                                    | (9   | ) |                         |      | (34   | ) |      |  | (19    | ) |  |  | (3    | )
|                                                                                                      |  |                                    |      |   |                         |      |       |   |      |  |        |   |  |  |       |  
|(1)    Breakdown of total comprehensive income attributable to equity holders of the Company          |  |                                    |      |   |                         |      |       |   |      |  |        |   |  |  |       |  
|Net income                                                                                            |  |                                    | 19   |   |                         |      | 73    |   |      |  | 927    |   |  |  | 901   |  
|Exchange differences on translation of foreign operations                                             |  |                                    | 79   |   |                         |      | 307   |   |      |  | (1,087 | ) |  |  | (189  | )
|Realization of exchange differences on translation of equity-accounted foreign operations             |  |                                    |     |   |                         |      |      |   |      |  |       |   |  |  | 2     |  
|Net gains (losses) on cash flow hedges                                                                |  |                                    | 7    |   |                         |      | 29    |   |      |  | 123    |   |  |  | (48   | )
|Net gains (losses) on available-for-sale financial assets                                             |  |                                    | 10   |   |                         |      | 36    |   |      |  | (3     | ) |  |  | 39    |  
|                                                                                                      |  |                                    |      |  
|Gain (loss) on revaluation of fixed assets in joint venture                                           |  |                                    |     |   |                         |      |      |   |      |  | (6     | ) |  |  | 10    |  
|                                                                                                      |  |                                    |      |   |                         |      |       |   |      |  |        |   |  |  |       |  
|                                                                                                      |  |                                    | 115  |   |                         |      | 445   |   |      |  | (46    | ) |  |  | 715   |  
|                                                                                                      |  |                                    |      |   |                         |      |       |   |      |  |        |   |  |  |       |  



|*) | For further details regarding other comprehensive income and related tax impact, see Note 27e
|-- | ---------------------------------------------------------------------------------------------

The
accompanying notes are an integral part of these consolidated financial statements.



F-7



---

##### Table of Contents

GAZIT-GLOBE LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY





|                                                                                                              |  |                                                        |     |  |              |  |       |                  |  |  |                                   |   |  |                   |      |   |                              |  |     |                |  |  |       |  |  |                          |    |   |             |  |       |   |  |  |       |   |  |  |       |  
|------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------ | --- |  | ------------ |  | ----- | ---------------- |  |  | --------------------------------- | - |  | ----------------- | ---- | - | ---------------------------- |  | --- | -------------- |  |  | ----- |  |  | ------------------------ | -- | - | ----------- |  | ----- | - |  |  | ----- | - |  |  | ----- | -
|                                                                                                              |  | Equity attributable to equity holders of the Company   |     |  |              |  |       |                  | 
|                                                                                                              |  | Sharecapital                                           |     |  | Sharepremium |  |       | Retainedearnings |  |  | Foreigncurrencytranslationreserve |   |  | Otherreserves **) |      |   | Loansgrantedtopurchaseshares |  |     | Treasuryshares |  |  | Total |  |  | Non-controllinginterests |    |   | Totalequity | 
|                                                                                                              |  | Convenience translation into U.S. dollars (Note 2d(1)) |    
|                                                                                                              |  | In millions                                            |    
|Balance as of January 1, 2014                                                                                 |  |                                                        | 59  |  |              |  | 1,103 |                  |  |  | 1,327                             |   |  |                   | (515 | ) |                              |  | 37  |                |  |  | *)   |  |  |                          | (5 | ) |             |  | 2,006 |   |  |  | 3,742 |   |  |  | 5,748 |  
|Net income                                                                                                    |  |                                                        |    |  |              |  |      |                  |  |  | 19                                |   |  |                   |     |   |                              |  |    |                |  |  |      |  |  |                          |   |   |             |  | 19    |   |  |  | 260   |   |  |  | 278   |  
|Other comprehensive income                                                                                    |  |                                                        |    |  |              |  |      |                  |  |  |                                  |   |  |                   | 79   |   |                              |  | 17  |                |  |  |      |  |  |                          |   |   |             |  | 96    |   |  |  | 221   |   |  |  | 317   |  
|                                                                                                              |  |                                                        |     |  |              |  |       |                  |  |  |                                   |   |  |                   |      |   |                              |  |     |                |  |  |       |  |  |                          |    |   |             |  |       |   |  |  |       |   |  |  |       |  
|Total comprehensive income                                                                                    |  |                                                        |    |  |              |  |      |                  |  |  | 19                                |   |  |                   | 79   |   |                              |  | 17  |                |  |  |      |  |  |                          |   |   |             |  | 115   |   |  |  | 480   |   |  |  | 595   |  
|Issue of shares net of issuance expenses                                                                      |  |                                                        | 1   |  |              |  | 29    |                  |  |  |                                  |   |  |                   |     |   |                              |  |    |                |  |  |      |  |  |                          |   |   |             |  | 30    |   |  |  |      |   |  |  | 30    |  
|Exercise expiration and forfeite of share options into Companys shares                                       |  |                                                        | *) |  |              |  | 2     |                  |  |  |                                  |   |  |                   |     |   |                              |  | (2  | )              |  |  |      |  |  |                          |   |   |             |  | *)   |   |  |  |      |   |  |  |      |  
|Revaluation of loans to purchase shares                                                                       |  |                                                        |    |  |              |  |      |                  |  |  | *)                               |   |  |                   |     |   |                              |  |    |                |  |  | *)   |  |  |                          |   |   |             |  |      |   |  |  |      |   |  |  |      |  
|Cost of share-based payment                                                                                   |  |                                                        |    |  |              |  |      |                  |  |  |                                  |   |  |                   |     |   |                              |  | 2   |                |  |  |      |  |  |                          |   |   |             |  | 2     |   |  |  | 10    |   |  |  | 12    |  
|charging the non-controlling interests share in equity deficit of subsidiary to equity holders of the Company |  |                                                        |    |  |              |  |      |                  |  |  |                                  |   |  |                   |     |   |                              |  | (21 | )              |  |  |      |  |  |                          |   |   |             |  | (21   | ) |  |  | 21    |   |  |  |      |  
|Dividend paid                                                                                                 |  |                                                        |    |  |              |  |      |                  |  |  | (82                               | ) |  |                   |     |   |                              |  |    |                |  |  |      |  |  |                          |   |   |             |  | (82   | ) |  |  |      |   |  |  | (82   | )
|Capital issuance to non-controlling interests                                                                 |  |                                                        |    |  |              |  |      |                  |  |  |                                  |   |  |                   | 15   |   |                              |  | (2  | )              |  |  |      |  |  |                          |   |   |             |  | 13    |   |  |  | 611   |   |  |  | 624   |  
|Acquisition of non-controlling interests                                                                      |  |                                                        |    |  |              |  |      |                  |  |  |                                  |   |  |                   | (1   | ) |                              |  | 1   |                |  |  |      |  |  |                          |   |   |             |  |      |   |  |  | (83   | ) |  |  | (83   | )
|Issue, redemption and                                                                                         |  |                                                        |     |  |              |  |       |                  |  |  |                                   |   |  |                   |      |   |                              |  |     |                |  |  |       |  |  |                          |    |   |             |  |       |   |  |  |       |   |  |  |       |  
|Dividend to non-controlling interests                                                                         |  |                                                        |    |  |              |  |      |                  |  |  |                                  |   |  |                   |     |   |                              |  |    |                |  |  |      |  |  |                          |   |   |             |  |      |   |  |  | (192  | ) |  |  | (192  | )
|                                                                                                              |  |                                                        |     |  |              |  |       |                  |  |  |                                   |   |  |                   |      |   |                              |  |     |                |  |  |       |  |  |                          |    |   |             |  |       |   |  |  |       |   |  |  |       |  
|Balance as of December 31, 2014                                                                               |  |                                                        | 60  |  |              |  | 1,134 |                  |  |  | 1,264                             |   |  |                   | (422 | ) |                              |  | 32  |                |  |  | *)   |  |  |                          | (5 | ) |             |  | 2,063 |   |  |  | 4,589 |   |  |  | 6,652 |  
|                                                                                                              |  |                                                        |     |  |              |  |       |                  |  |  |                                   |   |  |                   |      |   |                              |  |     |                |  |  |       |  |  |                          |    |   |             |  |       |   |  |  |       |   |  |  |       |  



|*) | Represents an amount of less than U.S.$ 1 million.
|-- | --------------------------------------------------

|**) | For additional details regarding other reserves, see Note 27e.
|--- | --------------------------------------------------------------

The accompanying notes are an integral part of
these consolidated financial statements





F-8



---

##### Table of Contents

GAZIT-GLOBE LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY





|                                                                                                             |  |                                                      |      |  |              |  |       |                  |  |  |                                   |   |  |                   |        |   |                               |  |     |                |  |  |       |  |  |                          |     |   |             |  |       |   |  |  |        |   |  |  |        |  
|------------------------------------------------------------------------------------------------------------ |  | ---------------------------------------------------- | ---- |  | ------------ |  | ----- | ---------------- |  |  | --------------------------------- | - |  | ----------------- | ------ | - | ----------------------------- |  | --- | -------------- |  |  | ----- |  |  | ------------------------ | --- | - | ----------- |  | ----- | - |  |  | ------ | - |  |  | ------ | -
|                                                                                                             |  | Equity attributable to equity holders of the Company |      |  |              |  |       |                  | 
|                                                                                                             |  | Sharecapital                                         |      |  | Sharepremium |  |       | Retainedearnings |  |  | Foreigncurrencytranslationreserve |   |  | Otherreserves **) |        |   | Loansgranted topurchaseshares |  |     | Treasuryshares |  |  | Total |  |  | Non-controllinginterests |     |   | Totalequity | 
|                                                                                                             |  | NIS in millions                                      |     
|Balance as of January 1, 2014                                                                                |  |                                                      | 229  |  |              |  | 4,288 |                  |  |  | 5,160                             |   |  |                   | (2,000 | ) |                               |  | 146 |                |  |  | *)   |  |  |                          | (21 | ) |             |  | 7,802 |   |  |  | 14,551 |   |  |  | 22,353 |  
|Net income                                                                                                   |  |                                                      |     |  |              |  |      |                  |  |  | 73                                |   |  |                   |       |   |                               |  |    |                |  |  |      |  |  |                          |    |   |             |  | 73    |   |  |  | 1,010  |   |  |  | 1,083  |  
|Other comprehensive income                                                                                   |  |                                                      |     |  |              |  |      |                  |  |  |                                  |   |  |                   | 307    |   |                               |  | 65  |                |  |  |      |  |  |                          |    |   |             |  | 372   |   |  |  | 858    |   |  |  | 1,230  |  
|                                                                                                             |  |                                                      |      |  |              |  |       |                  |  |  |                                   |   |  |                   |        |   |                               |  |     |                |  |  |       |  |  |                          |     |   |             |  |       |   |  |  |        |   |  |  |        |  
|Total comprehensive income                                                                                   |  |                                                      |     |  |              |  |      |                  |  |  | 73                                |   |  |                   | 307    |   |                               |  | 65  |                |  |  |      |  |  |                          |    |   |             |  | 445   |   |  |  | 1,868  |   |  |  | 2,313  |  
|Issue of shares net of issuance expenses                                                                     |  |                                                      | 3    |  |              |  | 113   |                  |  |  |                                  |   |  |                   |       |   |                               |  |    |                |  |  |      |  |  |                          |    |   |             |  | 116   |   |  |  |       |   |  |  | 116    |  
|Exercise of share expiration and forfeite of share options into Companys shares                             |  |                                                      | *)  |  |              |  | 10    |                  |  |  |                                  |   |  |                   |       |   |                               |  | (10 | )              |  |  |      |  |  |                          |    |   |             |  | *)   |   |  |  |       |   |  |  | *)    |  
|Revaluation of loans to purchase shares                                                                      |  |                                                      |     |  |              |  |      |                  |  |  | *)                               |   |  |                   |       |   |                               |  |    |                |  |  | *)   |  |  |                          |    |   |             |  |      |   |  |  |       |   |  |  |       |  
|Cost of share-based payment                                                                                  |  |                                                      |     |  |              |  |      |                  |  |  |                                  |   |  |                   |       |   |                               |  | 9   |                |  |  |      |  |  |                          |    |   |             |  | 9     |   |  |  | 40     |   |  |  | 49     |  
|Dividend paid                                                                                                |  |                                                      |     |  |              |  |      |                  |  |  | (318                              | ) |  |                   |       |   |                               |  |    |                |  |  |      |  |  |                          |    |   |             |  | (318  | ) |  |  |       |   |  |  | (318   | )
|charging the non-controlling interest share in equity deficit of subsidiary to equity holders of the company |  |                                                      |     |  |              |  |      |                  |  |  |                                  |   |  |                   |       |   |                               |  | (79 | )              |  |  |      |  |  |                          |    |   |             |  | (79   | ) |  |  | 79     |   |  |  |       |  
|Capital issuance to non-controlling interests                                                                |  |                                                      |     |  |              |  |      |                  |  |  |                                  |   |  |                   | 58     |   |                               |  | (7  | )              |  |  |      |  |  |                          |    |   |             |  | 51    |   |  |  | 2,378  |   |  |  | 2,429  |  
|Acquisition of non-controlling interests                                                                     |  |                                                      |     |  |              |  |      |                  |  |  |                                  |   |  |                   | (6     | ) |                               |  | 3   |                |  |  |      |  |  |                          |    |   |             |  | (3    | ) |  |  | (322   | ) |  |  | (325   | )
|Dividend to non-controlling interests                                                                        |  |                                                      |     |  |              |  |      |                  |  |  |                                  |   |  |                   |       |   |                               |  |    |                |  |  |      |  |  |                          |    |   |             |  |      |   |  |  | (747   | ) |  |  | (747   | )
|                                                                                                             |  |                                                      |      |  |              |  |       |                  |  |  |                                   |   |  |                   |        |   |                               |  |     |                |  |  |       |  |  |                          |     |   |             |  |       |   |  |  |        |   |  |  |        |  
|Balance as of December 31, 2014                                                                              |  |                                                      | 232  |  |              |  | 4,411 |                  |  |  | 4,915                             |   |  |                   | (1,641 | ) |                               |  | 127 |                |  |  | *)   |  |  |                          | (21 | ) |             |  | 8,023 |   |  |  | 17,847 |   |  |  | 25,870 |  
|                                                                                                             |  |                                                      |      |  |              |  |       |                  |  |  |                                   |   |  |                   |        |   |                               |  |     |                |  |  |       |  |  |                          |     |   |             |  |       |   |  |  |        |   |  |  |        |  



|*) | Represents an amount of less than NIS 1 million.
|-- | ------------------------------------------------

|**) | For additional details regarding other reserves, see Note 27e.
|--- | --------------------------------------------------------------

The accompanying notes are an integral part of
these consolidated financial statements



F-9



---

##### Table of Contents

GAZIT-GLOBE LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY





|                                                               |  |                                                      |      |  |              |  |       |                  |  |  |                                   |   |  |                   |        |   |                               |  |     |                |  |  |       |  |  |                          |     |   |             |  |       |   |  |  |        |   |  |  |        |  
|-------------------------------------------------------------- |  | ---------------------------------------------------- | ---- |  | ------------ |  | ----- | ---------------- |  |  | --------------------------------- | - |  | ----------------- | ------ | - | ----------------------------- |  | --- | -------------- |  |  | ----- |  |  | ------------------------ | --- | - | ----------- |  | ----- | - |  |  | ------ | - |  |  | ------ | -
|                                                               |  | Equity attributable to equity holders of the Company |      |  |              |  |       |                  | 
|                                                               |  | Sharecapital                                         |      |  | Sharepremium |  |       | Retainedearnings |  |  | Foreigncurrencytranslationreserve |   |  | Otherreserves **) |        |   | Loansgranted topurchaseshares |  |     | Treasuryshares |  |  | Total |  |  | Non-controllinginterests |     |   | Totalequity | 
|                                                               |  | NIS in millions                                      |     
|Balance as of January 1, 2013                                  |  |                                                      | 219  |  |              |  | 3,805 |                  |  |  | 4,531                             |   |  |                   | (913   | ) |                               |  | 60  |                |  |  | *)   |  |  |                          | (21 | ) |             |  | 7,681 |   |  |  | 14,616 |   |  |  | 22,297 |  
|Net income                                                     |  |                                                      |     |  |              |  |      |                  |  |  | 927                               |   |  |                   |       |   |                               |  |    |                |  |  |      |  |  |                          |    |   |             |  | 927   |   |  |  | 1,258  |   |  |  | 2,185  |  
|Other comprehensive income (loss)                              |  |                                                      |     |  |              |  |      |                  |  |  |                                  |   |  |                   | (1,087 | ) |                               |  | 114 |                |  |  |      |  |  |                          |    |   |             |  | (973  | ) |  |  | (1,241 | ) |  |  | (2,214 | )
|                                                               |  |                                                      |      |  |              |  |       |                  |  |  |                                   |   |  |                   |        |   |                               |  |     |                |  |  |       |  |  |                          |     |   |             |  |       |   |  |  |        |   |  |  |        |  
|Total comprehensive income (loss)                              |  |                                                      |     |  |              |  |      |                  |  |  | 927                               |   |  |                   | (1,087 | ) |                               |  | 114 |                |  |  |      |  |  |                          |    |   |             |  | (46   | ) |  |  | 17     |   |  |  | (29    | )
|Issue of shares net of issuance expenses                       |  |                                                      | 10   |  |              |  | 479   |                  |  |  |                                  |   |  |                   |       |   |                               |  |    |                |  |  |      |  |  |                          |    |   |             |  | 489   |   |  |  |       |   |  |  | 489    |  
|Exercise of share options issued by the Company                |  |                                                      | (*  |  |              |  | 4     |                  |  |  |                                  |   |  |                   |       |   |                               |  | (4  | )              |  |  |      |  |  |                          |    |   |             |  | (*   |   |  |  |       |   |  |  | (*    |  
|Revaluation of loans to purchase shares                        |  |                                                      |     |  |              |  |      |                  |  |  | (*                               |   |  |                   |       |   |                               |  |    |                |  |  | (*   |  |  |                          |    |   |             |  |      |   |  |  |       |   |  |  |       |  
|Repayment of loans to purchase shares                          |  |                                                      |     |  |              |  |      |                  |  |  |                                  |   |  |                   |       |   |                               |  |    |                |  |  | (*   |  |  |                          |    |   |             |  | (*   |   |  |  |       |   |  |  | (*    |  
|Cost of share-based payment                                    |  |                                                      |     |  |              |  |      |                  |  |  |                                  |   |  |                   |       |   |                               |  | 10  |                |  |  |      |  |  |                          |    |   |             |  | 10    |   |  |  | 21     |   |  |  | 31     |  
|Dividend paid                                                  |  |                                                      |     |  |              |  |      |                  |  |  | (298                              | ) |  |                   |       |   |                               |  |    |                |  |  |      |  |  |                          |    |   |             |  | (298  | ) |  |  |       |   |  |  | (298   | )
|Capital issuance to non-controlling interests                  |  |                                                      |     |  |              |  |      |                  |  |  |                                  |   |  |                   |       |   |                               |  | (30 | )              |  |  |      |  |  |                          |    |   |             |  | (30   | ) |  |  | 626    |   |  |  | 596    |  
|Acquisition of non-controlling interests                       |  |                                                      |     |  |              |  |      |                  |  |  |                                  |   |  |                   |       |   |                               |  | (4  | )              |  |  |      |  |  |                          |    |   |             |  | (4    | ) |  |  | (33    | ) |  |  | (37    | )
|Issue, and re-purchase of convertible debentures in subsidiary |  |                                                      |     |  |              |  |      |                  |  |  |                                  |   |  |                   |       |   |                               |  |    |                |  |  |      |  |  |                          |    |   |             |  |      |   |  |  | (8     | ) |  |  | (8     | )
|Dividend to non-controlling interests                          |  |                                                      |     |  |              |  |      |                  |  |  |                                  |   |  |                   |       |   |                               |  |    |                |  |  |      |  |  |                          |    |   |             |  |      |   |  |  | (688   | ) |  |  | (688   | )
|                                                               |  |                                                      |      |  |              |  |       |                  |  |  |                                   |   |  |                   |        |   |                               |  |     |                |  |  |       |  |  |                          |     |   |             |  |       |   |  |  |        |   |  |  |        |  
|Balance as of December 31, 2013                                |  |                                                      | 229  |  |              |  | 4,288 |                  |  |  | 5,160                             |   |  |                   | (2,000 | ) |                               |  | 146 |                |  |  | *)   |  |  |                          | (21 | ) |             |  | 7,802 |   |  |  | 14,551 |   |  |  | 22,353 |  
|                                                               |  |                                                      |      |  |              |  |       |                  |  |  |                                   |   |  |                   |        |   |                               |  |     |                |  |  |       |  |  |                          |     |   |             |  |       |   |  |  |        |   |  |  |        |  



|*) | Represents an amount of less than NIS 1 million.
|-- | ------------------------------------------------

|**) | For additional details regarding other reserves, see Note 27e.
|--- | --------------------------------------------------------------

The accompanying notes are an integral part of
these consolidated financial statements



F-10



---

##### Table of Contents

GAZIT-GLOBE LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY





|                                                                   |  |                                                      |     |  |              |  |       |                  |  |  |                                   |   |  |                   |      |   |                               |  |      |                |  |  |       |  |  |                          |     |   |             |  |       |   |  |  |        |   |  |  |        |  
|------------------------------------------------------------------ |  | ---------------------------------------------------- | --- |  | ------------ |  | ----- | ---------------- |  |  | --------------------------------- | - |  | ----------------- | ---- | - | ----------------------------- |  | ---- | -------------- |  |  | ----- |  |  | ------------------------ | --- | - | ----------- |  | ----- | - |  |  | ------ | - |  |  | ------ | -
|                                                                   |  | Equity attributable to equity holders of the Company |     |  |              |  |       |                  | 
|                                                                   |  | Sharecapital                                         |     |  | Sharepremium |  |       | Retainedearnings |  |  | Foreigncurrencytranslationreserve |   |  | Otherreserves **) |      |   | Loansgranted topurchaseshares |  |      | Treasuryshares |  |  | Total |  |  | Non-controllinginterests |     |   | Totalequity | 
|                                                                   |  | NIS in millions                                      |    
|Balance as of January 1, 2012                                      |  |                                                      | 218 |  |              |  | 3,787 |                  |  |  | 3,792                             |   |  |                   | (726 | ) |                               |  | 149  |                |  |  |      |  |  |                          | (21 | ) |             |  | 7,199 |   |  |  | 12,197 |   |  |  | 19,396 |  
|Net income                                                         |  |                                                      |    |  |              |  |      |                  |  |  | 901                               |   |  |                   |     |   |                               |  |     |                |  |  |      |  |  |                          |    |   |             |  | 901   |   |  |  | 1,512  |   |  |  | 2,413  |  
|Other comprehensive income (loss)                                  |  |                                                      |    |  |              |  |      |                  |  |  |                                  |   |  |                   | (187 | ) |                               |  | 1    |                |  |  |      |  |  |                          |    |   |             |  | (186  | ) |  |  | (280   | ) |  |  | (466   | )
|                                                                   |  |                                                      |     |  |              |  |       |                  |  |  |                                   |   |  |                   |      |   |                               |  |      |                |  |  |       |  |  |                          |     |   |             |  |       |   |  |  |        |   |  |  |        |  
|Total comprehensive income (loss)                                  |  |                                                      |    |  |              |  |      |                  |  |  | 901                               |   |  |                   | (187 | ) |                               |  | 1    |                |  |  |      |  |  |                          |    |   |             |  | 715   |   |  |  | 1,232  |   |  |  | 1,947  |  
|Exercise of share options into Companys shares                    |  |                                                      | 1   |  |              |  | 18    |                  |  |  |                                  |   |  |                   |     |   |                               |  | (16  | )              |  |  |      |  |  |                          |    |   |             |  | 3     |   |  |  |       |   |  |  | 3      |  
|Revaluation of loans to purchase shares                            |  |                                                      |    |  |              |  |      |                  |  |  | *)                               |   |  |                   |     |   |                               |  |     |                |  |  | *)   |  |  |                          |    |   |             |  |      |   |  |  |       |   |  |  |       |  
|Repayment of loans to purchase shares                              |  |                                                      |    |  |              |  |      |                  |  |  |                                  |   |  |                   |     |   |                               |  |     |                |  |  | *)   |  |  |                          |    |   |             |  | *)   |   |  |  |       |   |  |  | *)    |  
|Realization of fixed asset revaluation reserve in joint venture    |  |                                                      |    |  |              |  |      |                  |  |  | 102                               |   |  |                   |     |   |                               |  | (102 | )              |  |  |      |  |  |                          |    |   |             |  |      |   |  |  |       |   |  |  |       |  
|Cost of share-based payment                                        |  |                                                      |    |  |              |  |      |                  |  |  |                                  |   |  |                   |     |   |                               |  | 4    |                |  |  |      |  |  |                          |    |   |             |  | 4     |   |  |  | 43     |   |  |  | 47     |  
|Dividend paid                                                      |  |                                                      |    |  |              |  |      |                  |  |  | (264                              | ) |  |                   |     |   |                               |  |     |                |  |  |      |  |  |                          |    |   |             |  | (264  | ) |  |  |       |   |  |  | (264   | )
|Capital issuance to non-controlling interests                      |  |                                                      |    |  |              |  |      |                  |  |  |                                  |   |  |                   |     |   |                               |  | 125  |                |  |  |      |  |  |                          |    |   |             |  | 125   |   |  |  | 2,099  |   |  |  | 2,224  |  
|Acquisition of non-controlling interests                           |  |                                                      |    |  |              |  |      |                  |  |  |                                  |   |  |                   |     |   |                               |  | (101 | )              |  |  |      |  |  |                          |    |   |             |  | (101  | ) |  |  | (268   | ) |  |  | (369   | )
|Conversion and re-purchase of convertible debentures in subsidiary |  |                                                      |    |  |              |  |      |                  |  |  |                                  |   |  |                   |     |   |                               |  |     |                |  |  |      |  |  |                          |    |   |             |  |      |   |  |  | (12    | ) |  |  | (12    | )
|Dividend to non-controlling interests                              |  |                                                      |    |  |              |  |      |                  |  |  |                                  |   |  |                   |     |   |                               |  |     |                |  |  |      |  |  |                          |    |   |             |  |      |   |  |  | (675   | ) |  |  | (675   | )
|                                                                   |  |                                                      |     |  |              |  |       |                  |  |  |                                   |   |  |                   |      |   |                               |  |      |                |  |  |       |  |  |                          |     |   |             |  |       |   |  |  |        |   |  |  |        |  
|Balance as of December 31, 2012                                    |  |                                                      | 219 |  |              |  | 3,805 |                  |  |  | 4,531                             |   |  |                   | (913 | ) |                               |  | 60   |                |  |  |      |  |  |                          | (21 | ) |             |  | 7,681 |   |  |  | 14,616 |   |  |  | 22,297 |  
|                                                                   |  |                                                      |     |  |              |  |       |                  |  |  |                                   |   |  |                   |      |   |                               |  |      |                |  |  |       |  |  |                          |     |   |             |  |       |   |  |  |        |   |  |  |        |  



|*) | Represents an amount of less than NIS 1 million.
|-- | ------------------------------------------------

|**) | For additional details regarding other reserves, see Note 27e.
|--- | --------------------------------------------------------------

The accompanying notes are an integral part of
these consolidated financial statements



F-11



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##### Table of Contents

GAZIT-GLOBE LTD.

CONSOLIDATED STATEMENTS OF CASH FLOW





|                                                                                                                    |  |                                    |      |   |                         |      |        |   |      |  |        |   |  |  |        |  
|------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------- | ---- | - | ----------------------- | ---- | ------ | - | ---- |  | ------ | - |  |  | ------ | -
|                                                                                                                    |  | Conveniencetranslation(Note 2d(1)) |      |   |                         |      |        |   |      |  |        |  
|                                                                                                                    |  | Year endedDecember 31,2014         |      |   | Year ended December 31, |     
|                                                                                                                    |  |                                    | 2014 |   |                         | 2013 |        |   | 2012 | 
|                                                                                                                    |  | U.S. dollars                       |      |   | NIS                     |     
|                                                                                                                    |  | (In millions)                      |     
|Cash flows from operating activities:                                                                               |  |                                    |      |   |                         |      |        |   |      |  |        |   |  |  |        |  
|Net income                                                                                                          |  |                                    | 278  |   |                         |      | 1,083  |   |      |  | 2,185  |   |  |  | 2,413  |  
|                                                                                                                    |  |                                    |      |   |                         |      |        |   |      |  |        |   |  |  |        |  
|Adjustments required to present net cash provided by operating activities:                                          |  |                                    |      |   |                         |      |        |   |      |  |        |   |  |  |        |  
|Adjustments to the profit or loss items:                                                                            |  |                                    |      |   |                         |      |        |   |      |  |        |   |  |  |        |  
|Finance expenses, net                                                                                               |  |                                    | 504  |   |                         |      | 1,958  |   |      |  | 1,636  |   |  |  | 2,094  |  
|Companys share in earnings of equity-accounted investees, net                                                      |  |                                    | (3   | ) |                         |      | (12    | ) |      |  | (149   | ) |  |  | (299   | )
|Fair value gain from investment property and investment property under development, net                             |  |                                    | (271 | ) |                         |      | (1,053 | ) |      |  | (962   | ) |  |  | (1,938 | )
|Depreciation and amortization                                                                                       |  |                                    | 8    |   |                         |      | 32     |   |      |  | 34     |   |  |  | 34     |  
|Taxes on income                                                                                                     |  |                                    | 104  |   |                         |      | 405    |   |      |  | 265    |   |  |  | 758    |  
|Impairment loss of other assets                                                                                     |  |                                    | 4    |   |                         |      | 15     |   |      |  | 2      |   |  |  | 7      |  
|Capital loss, net                                                                                                   |  |                                    | 16   |   |                         |      | 65     |   |      |  | 53     |   |  |  | 5      |  
|Change in employee benefit liability                                                                                |  |                                    |     |   |                         |      |       |   |      |  |       |   |  |  | (2     | )
|Loss from decrease in holding interest and disposal of investees, net                                               |  |                                    |     |   |                         |      | 1      |   |      |  | 11     |   |  |  |       |  
|Gain from bargain purchase (Note 34b)                                                                               |  |                                    | (12  | ) |                         |      | (47    | ) |      |  | (198   | ) |  |  | (134   | )
|Cost of share-based payment                                                                                         |  |                                    | 12   |   |                         |      | 45     |   |      |  | 41     |   |  |  | 47     |  
|                                                                                                                    |  |                                    |      |   |                         |      |        |   |      |  |        |   |  |  |        |  
|                                                                                                                    |  |                                    | 362  |   |                         |      | 1,409  |   |      |  | 733    |   |  |  | 572    |  
|                                                                                                                    |  |                                    |      |   |                         |      |        |   |      |  |        |   |  |  |        |  
|Decrease (Increase) in trade receivables and other accounts receivable                                              |  |                                    | 39   |   |                         |      | 151    |   |      |  | (138   | ) |  |  | (40    | )
|Decrease (increase) in inventories of buildings and land less advances from customers and buyers of apartments, net |  |                                    | 9    |   |                         |      | 37     |   |      |  | (13    | ) |  |  | 57     |  
|Decrease in trade and other accounts payable                                                                        |  |                                    | (38  | ) |                         |      | (148   | ) |      |  | (54    | ) |  |  | (104   | )
|Increase in tenants security deposits, net                                                                         |  |                                    | 4    |   |                         |      | 14     |   |      |  | 8      |   |  |  | 4      |  
|                                                                                                                    |  |                                    |      |   |                         |      |        |   |      |  |        |   |  |  |        |  
|                                                                                                                    |  |                                    | 14   |   |                         |      | 54     |   |      |  | (197   | ) |  |  | (83    | )
|                                                                                                                    |  |                                    |      |   |                         |      |        |   |      |  |        |   |  |  |        |  
|Net cash provided by operating activities before interest, dividend and taxes                                       |  |                                    | 654  |   |                         |      | 2,546  |   |      |  | 2,721  |   |  |  | 2,902  |  
|                                                                                                                    |  |                                    |      |   |                         |      |        |   |      |  |        |   |  |  |        |  
|Cash received and paid during the year for:                                                                         |  |                                    |      |   |                         |      |        |   |      |  |        |   |  |  |        |  
|Interest paid                                                                                                       |  |                                    | (487 | ) |                         |      | (1,892 | ) |      |  | (1,843 | ) |  |  | (1,964 | )
|Interest received (Note 37d)                                                                                        |  |                                    | 50   |   |                         |      | 193    |   |      |  | 218    |   |  |  | 54     |  
|Dividend received                                                                                                   |  |                                    | 60   |   |                         |      | 233    |   |      |  | 155    |   |  |  | 395    |  
|Taxes paid                                                                                                          |  |                                    | (14  | ) |                         |      | (56    | ) |      |  | (69    | ) |  |  | (44    | )
|Tax refund received                                                                                                 |  |                                    | 1    |   |                         |      | 2      |   |      |  | 7      |   |  |  | 25     |  
|                                                                                                                    |  |                                    |      |   |                         |      |        |   |      |  |        |   |  |  |        |  
|                                                                                                                    |  |                                    | (390 | ) |                         |      | (1,520 | ) |      |  | (1,532 | ) |  |  | (1,534 | )
|                                                                                                                    |  |                                    |      |   |                         |      |        |   |      |  |        |   |  |  |        |  
|Net cash provided by operating activities                                                                           |  |                                    | 264  |   |                         |      | 1,026  |   |      |  | 1,189  |   |  |  | 1,368  |  
|                                                                                                                    |  |                                    |      |   |                         |      |        |   |      |  |        |   |  |  |        |  

The accompanying notes are an integral part of these consolidated financial statements.



F-12



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##### Table of Contents

GAZIT-GLOBE LTD.

CONSOLIDATED STATEMENTS OF CASH FLOW





|                                                                        |  |                                    |        |   |                        |      |        |   |      |  |        |   |  |  |        |  
|----------------------------------------------------------------------- |  | ---------------------------------- | ------ | - | ---------------------- | ---- | ------ | - | ---- |  | ------ | - |  |  | ------ | -
|                                                                        |  | Conveniencetranslation(Note 2d(1)) |        |   |                        |      |        |   |      |  |        |  
|                                                                        |  | Year endedDecember 31,2014         |        |   | Year endedDecember 31, |     
|                                                                        |  |                                    | 2014   |   |                        | 2013 |        |   | 2012 | 
|                                                                        |  | U.S. dollars                       |        |   | NIS                    |     
|                                                                        |  | (In millions)                      |       
|Cash flows from investing activities:                                   |  |                                    |        |   |                        |      |        |   |      |  |        |   |  |  |        |  
|Investment return and proceeds from sale of investee                    |  |                                    | 8      |   |                        |      | 33     |   |      |  | 54     |   |  |  | 12     |  
|Investment in and loans to investees                                    |  |                                    | (81    | ) |                        |      | (313   | ) |      |  | (1,275 | ) |  |  | (266   | )
|Acquisition, construction and development of investment property        |  |                                    | (842   | ) |                        |      | (3,273 | ) |      |  | (2,994 | ) |  |  | (5,667 | )
|Investments in fixed assets                                             |  |                                    | (6     | ) |                        |      | (23    | ) |      |  | (50    | ) |  |  | (49    | )
|Proceeds from sale of investment property                               |  |                                    | 681    |   |                        |      | 2,651  |   |      |  | 2,136  |   |  |  | 1,482  |  
|Proceeds from sale of fixed assets                                      |  |                                    | 1      |   |                        |      | 3      |   |      |  | 38     |   |  |  |       |  
|Grant of long-term loans                                                |  |                                    | (14    | ) |                        |      | (56    | ) |      |  | (181   | ) |  |  | (583   | )
|Collection of long-term loans                                           |  |                                    | 58     |   |                        |      | 226    |   |      |  | 329    |   |  |  | 79     |  
|Short-term investments, net                                             |  |                                    | (2     | ) |                        |      | (9     | ) |      |  | (30    | ) |  |  | (20    | )
|Investment in financial assets                                          |  |                                    | (70    | ) |                        |      | (274   | ) |      |  | (345   | ) |  |  | (743   | )
|Proceeds from sale of financial assets                                  |  |                                    | 69     |   |                        |      | 267    |   |      |  | 110    |   |  |  | 1,134  |  
|                                                                        |  |                                    |        |   |                        |      |        |   |      |  |        |   |  |  |        |  
|Net cash used in investing activities                                   |  |                                    | (197   | ) |                        |      | (768   | ) |      |  | (2,208 | ) |  |  | (4,621 | )
|                                                                        |  |                                    |        |   |                        |      |        |   |      |  |        |   |  |  |        |  
|Cash flows from financing activities:                                   |  |                                    |        |   |                        |      |        |   |      |  |        |   |  |  |        |  
|Issue of shares net of issue expenses                                   |  |                                    | 30     |   |                        |      | 118    |   |      |  | 489    |   |  |  |       |  
|Repayment of loans granted for purchase of Companys shares             |  |                                    |       |   |                        |      |       |   |      |  |   (*  |   |  |  |   (*  |  
|Exercise of share options into Companys shares                         |  |                                    |   (*  |   |                        |      |   (*  |   |      |  |   (*  |   |  |  | 3      |  
|Capital issuance to non-controlling interests, net                      |  |                                    | 608    |   |                        |      | 2,365  |   |      |  | 536    |   |  |  | 1,832  |  
|Acquisition of non-controlling interests                                |  |                                    | (83    | ) |                        |      | (325   | ) |      |  | (102   | ) |  |  | (263   | )
|Dividend paid to equity holders of the Company                          |  |                                    | (82    | ) |                        |      | (318   | ) |      |  | (298   | ) |  |  | (264   | )
|Dividend paid to non-controlling interests                              |  |                                    | (190   | ) |                        |      | (739   | ) |      |  | (698   | ) |  |  | (653   | )
|Receipt of long-term loans                                              |  |                                    | 414    |   |                        |      | 1,608  |   |      |  | 1,429  |   |  |  | 6,140  |  
|Repayment of long-term loans                                            |  |                                    | (1,608 | ) |                        |      | (6,253 | ) |      |  | (4,820 | ) |  |  | (6,042 | )
|Repayment of long-term credit facilities from banks, net                |  |                                    | (67    | ) |                        |      | (261   | ) |      |  | (1,084 | ) |  |  | (169   | )
|Short-term credit from banks and others, net                            |  |                                    | 97     |   |                        |      | 377    |   |      |  | (83    | ) |  |  | (85    | )
|Repayment and early redemption of debentures and convertible debentures |  |                                    | (330   | ) |                        |      | (1,284 | ) |      |  | (1,366 | ) |  |  | (3,177 | )
|Issue of debentures and convertible debentures                          |  |                                    | 969    |   |                        |      | 3,768  |   |      |  | 6,033  |   |  |  | 6,168  |  
|Unwinding of hedging transactions (Note 37d)                            |  |                                    | 62     |   |                        |      | 243    |   |      |  | 392    |   |  |  |       |  
|                                                                        |  |                                    |        |   |                        |      |        |   |      |  |        |   |  |  |        |  
|Net cash provided by (used in) financing activities                     |  |                                    | (180   | ) |                        |      | (701   | ) |      |  | 428    |   |  |  | 3,490  |  
|                                                                        |  |                                    |        |   |                        |      |        |   |      |  |        |   |  |  |        |  
|Exchange differences on balances of cash and cash equivalents           |  |                                    | 19     |   |                        |      | 75     |   |      |  | (74    | ) |  |  | (93    | )
|                                                                        |  |                                    |        |   |                        |      |        |   |      |  |        |   |  |  |        |  
|Increase (decrease) in cash and cash equivalents                        |  |                                    | (95    | ) |                        |      | (368   | ) |      |  | (665   | ) |  |  | 144    |  
|Cash and cash equivalents at the beginning of the year                  |  |                                    | 262    |   |                        |      | 1,018  |   |      |  | 1,683  |   |  |  | 1,539  |  
|                                                                        |  |                                    |        |   |                        |      |        |   |      |  |        |   |  |  |        |  
|Cash and cash equivalents at the end of the year                        |  |                                    | 167    |   |                        |      | 650    |   |      |  | 1,018  |   |  |  | 1,683  |  
|                                                                        |  |                                    |        |   |                        |      |        |   |      |  |        |   |  |  |        |  



|*) | Represents an amount of less than NIS 1 million.
|-- | ------------------------------------------------

The accompanying notes are an integral part of these
consolidated financial statements.



F-13



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##### Table of Contents

GAZIT-GLOBE LTD.

CONSOLIDATED STATEMENTS OF CASH FLOW





|                                                                          |  |                                    |    |                                    |      |  |                        |      |  |  |      |  |  |  |     |  |  | 
|------------------------------------------------------------------------- |  | ---------------------------------- | -- | ---------------------------------- | ---- |  | ---------------------- | ---- |  |  | ---- |  |  |  | --- |  |  | 
|                                                                          |  |                                    |    | Conveniencetranslation(Note 2d(1)) |      |  |                        |      |  |  |      |  |  | 
|                                                                          |  |                                    |    | Year endedDecember 31,2014         |      |  | Year endedDecember 31, |     
|                                                                          |  |                                    |    |                                    | 2014 |  |                        | 2013 |  |  | 2012 | 
|                                                                          |  |                                    |    | U.S. dollars                       |      |  | NIS                    |     
|                                                                          |  |                                    |    | (In millions)                      |     
|(a)                                                                       |  | Significant non-cash transactions: |    |                                    |     |  |                        |      |  |  |      |  |  |  |     |  |  | 
|Conversion of convertible debentures into subsidiarys shares             |  |                                    | 17 |                                    |      |  | 66                     |      |  |  | 67   |  |  |  | 321 | 
|                                                                          |  |                                    |    |                                    |      |  |                        |      |  |  |      |  |  |  |     |  |  | 
|Acquisition of subsidiarys shares for issuance of shares by subsidiaries |  |                                    |   |                                    |      |  |                       |      |  |  |     |  |  |  | 106 | 
|                                                                          |  |                                    |    |                                    |      |  |                        |      |  |  |      |  |  |  |     |  |  | 
|Dividend payable to non-controlling interests                             |  |                                    | 22 |                                    |      |  | 85                     |      |  |  | 77   |  |  |  | 87  | 
|                                                                          |  |                                    |    |                                    |      |  |                        |      |  |  |      |  |  |  |     |  |  | 

The accompanying notes are an integral part of these consolidated financial statements.



F-14



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 1:- GENERAL



| | a. | The Company and its business activities
| | -- | ---------------------------------------

The Company, through its investees (the
Group), is the owner, operator and developer of income producing properties in North America, Europe, Israel and Brazil and focuses mainly on the supermarket-anchored shopping center sector in urban growth markets. In addition, the Group
operates in the development and construction sector primarily of residential projects in Israel and in Central-Eastern Europe and in other activities in similar fields.

The Companys securities are listed for trading on the Tel-Aviv Stock Exchange (TASE), the New York Stock Exchange (NYSE) and the Toronto
Stock Exchange (TSX) all under the ticker GZT.



| | b. | Definitions in these financial statements
| | -- | -----------------------------------------



|                             |  |  |   |  |  |                                                                                                                                                                                                                                                                                                                    
|---------------------------- |  |  | - |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|The Company                  |  |  | - |  |  | Gazit-Globe Ltd.                                                                                                                                                                                                                                                                                                   
|                             |  | 
|The parent   company         |  |  | - |  |  | Norstar Holdings Inc. (Norstar) directly and through its wholly-owned subsidiary (collectively, Norstar Group).                                                                                                                                                                                                
|                             |  | 
|Subsidiaries                 |  |  | - |  |  | Companies that are controlled (including de facto control) by the Company (as defined in IFRS 10) and whose accounts are consolidated with those of the Company.                                                                                                                                                   
|                             |  | 
|Joint ventures               |  |  | - |  |  | Companies owned by a number of entities that have a contractual arrangement for joint control, and whose accounts are accounted for using the equity method.                                                                                                                                                       
|                             |  | 
|Joint operations             |  |  | - |  |  | Companies owned by a number of entities that have a contractual arrangement for the rights to the assets and obligations for the liabilities relating to the arrangement and are presented in the Companys financial reports
according its share in the arrangements assets and liabilities, income and expenses.
|                             |  | 
|Jointly controlled  entities |  |  | - |  |  | Joint ventures and joint operation.                                                                                                                                                                                                                                                                                
|                             |  | 
|Associates                   |  |  | - |  |  | Companies over which the Company has significant influence (as defined in IAS 28) and that are not subsidiaries or joint ventures or joint operations in which the Companys account for the investment in the financial
statements using the equity method.                                                       
|                             |  | 
|Investees                    |  |  | - |  |  | Subsidiaries, jointly controlled entities and associates                                                                                                                                                                                                                                                           
|                             |  | 
|The Group                    |  |  | - |  |  | The Company, its subsidiaries and jointly-controlled entities listed in the appendix to the financial statements                                                                                                                                                                                                   
|                             |  | 
|Related parties              |  |  | - |  |  | As defined in IAS 24 (Revised).                                                                                                                                                                                                                                                                                    



F-15



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 1: | - GENERAL (Cont.)
|------- | -----------------



|                   |  |  |   |  |  |                                                                
|------------------ |  |  | - |  |  | ---------------------------------------------------------------
|EQY                |  |  | - |  |  | Equity Once Inc., consolidated entity.                         
|                   |  | 
|FCR                |  |  | - |  |  | First Capital Reality Inc., consolidated entity.               
|                   |  | 
|CTY                |  |  | - |  |  | Citycon Oyj, consolidated entity.                              
|                   |  | 
|ATR                |  |  | - |  |  | Atrium European Real Estate Limited, jointly controlled entity.
|                   |  | 
|The reporting date |  |  | - |  |  | December 31, 2014.                                             



| | c. | The Companys financial statements as of December 31, 2014 were approved by the Companys board of directors on March 23, 2015.
| | -- | -------------------------------------------------------------------------------------------------------------------------------

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES



| | a. | Basis of presentation of the financial statements
| | -- | -------------------------------------------------

The consolidated financial statements
of the Group have been prepared on a cost basis, except for investment property, investment property under development, and certain financial instruments including derivative instruments that are measured at fair value.

The Company presents profit or loss items using the function of expense method.

The basis of preparation of the financial statements

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board (IASB).

Consistent accounting policy

The accounting policy in the financial statements is consistent in all periods presented, except as described below:

Changes in accounting policy due to application of new standards

Amendments to IAS 36, Impairment of Assets

In May 2013, the IASB published amendments to IAS 36, Impairment of Assets (the Amendments) dealing with disclosure requirements
with regard to fair value less costs of disposal of assets. The Amendments include additional disclosure requirements regarding the recoverable amount and the fair value.

The Amendments are effective prospectively beginning from January 1, 2014. The initial adoption of the Amendments had no material impact
on the Companys financial statement.

International Financial Reporting Clarification No. 21 (IFRIC 21), Levies

In May 2013, the IASB published International Financial Reporting Clarification No. 21 (IFRIC 21 (the Interpretation)
regarding levies that are imposed by a government through legislation. Pursuant to the Interpretation, an obligation for the payment of a levy will only be recognized upon the occurrence of the event creating the payment obligation. The
Interpretation is effective from January 1, 2014. The initial adoption of the Interpretation, had no material impact on the Companys financial statements.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





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



| | b. | Significant accounting judgments, estimates and assumptions used in the preparation of the financial statements
| | -- | ---------------------------------------------------------------------------------------------------------------

The preparation of the Groups consolidated financial statements requires management to exercise judgments and make estimates and
assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, in the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes
that require a material adjustment to the carrying amount of the assets or liabilities affected in future periods.

Judgments

In the process of applying the significant accounting policies, the Group has applied its judgment and has considered the following issues
which have the most significant effect on the amounts recognized in the financial statements:



|                                                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                         
|------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Topic                                                                           |  | Main Considerations                                                                                                                                                                                                                                                                                                                                                                                       |  | Reference/Possible Effect                                                                                                                                               
|                                                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                          
|Existence of effective control                                                  |  |     Materiality of percentage of voting rights relative to the holdings of
the other holders of voting rights     Degree to which the other holdings are
diversified     Voting patterns at prior meetings of shareholders                                                                                                                                                                             |  | Consolidation of financial statements or application of the equity method and relevant measurement impact refer to Note 2c and Note 9d, e and f                        
|                                                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                          
|Leasing of investment property                                                  |  | Classification as a finance lease or as an operating lease in accordance with the transfer of risks and rewards criteria with respect to the leased property                                                                                                                                                                                                                                              |  | Recording the investment as property and the income as rental income or recording it as a financial investment and interest income  refer to Note 2t                   
|                                                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                          
|Acquisitions of subsidiaries that are not business combinations                 |  | Analysis of the transaction in light of the definition of a business in IFRS 3, in order to decide whether the transaction constitutes a business combination or asset acquisition                                                                                                                                                                                                                      |  | Recording the acquisition consideration as an investment in an asset, or recording an investment in net identifiable assets, including deferred taxes  refer to Note 2o
|                                                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                          
|Reliable measurement of the fair value of investment property under development |  |     Is the property under development located in a developed and liquid
market?     Is there a reliable estimate of the construction costs?
    Relevant regulatory consent for the utilization of the land rights been obtained, does
an applicable zoning and city plan exist and have building permits been received?
    Have a major percentage of the leasable areas been preleased to tenants? |  | Measurement of investment property under construction at cost or at fair value  refer to Note 13                                                                       
|                                                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                          
|Reporting income on a net basis or on a gross basis                             |  | Who primarily bears the risks and rewards arising from the transaction?                                                                                                                                                                                                                                                                                                                                   |  | Reporting rental income on a gross or net basis  refer to Note 2z                                                                                                      



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





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



The key assumptions made in the financial statements concerning uncertainties at the balance
sheet date and the critical estimates calculated by the Group that may cause a material adjustment to the carrying amounts of assets and liabilities in the next financial year are discussed below:



|                                                                                   |  |                                                                                                                                                                                                                                                                                 |  |                                                                                                                                                        
|---------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------
|Topic                                                                              |  | Estimates and Main Assumptions                                                                                                                                                                                                                                                  |  | Reference/Possible Effect                                                                                                                              
|Valuation of investment property and investment property under development         |  | The required yields on the Groups properties, future rental rates, occupancy rates, lease renewal rates, the probability of leasing out vacant plots and the date thereof, property operating expenses, the financial strength of
the tenants and required capital expenditure |  | Determination of the fair value of investment property vis-à-vis the fair value gains (losses) in the statement of income - refer to Note 12 andNote 13
|Impairment of equity-accounted investees                                           |  | The anticipated cash flows and the appropriate capitalization rate for measuring the recoverable amount with the addition of certain adjustments                                                                                                                                |  | Determination whether to record an impairment - refer to Note 2u2 and Note 9c5                                                                         
|Bargain purchase gain                                                              |  | Identifying the assets and liabilities, net that were acquired in the transaction and their reliable measurement in order to reflect the figures of the acquired company                                                                                                        |  | Determination of the goodwill or the bargain purchase gain arising from the acquisition - refer to Note 9c and Note 34a                                
|Recording of deferred tax assets                                                   |  | Expectation of future taxable income considering the timing, the amount of the expected taxable income and the tax planning strategy                                                                                                                                            |  | Note 2w and Note 25m                                                                                                                                   
|Determination of fair value of nonmarketable financial derivatives (swap contract) |  | Discounting the future cash flows by interbank yield curve, with adjustments for the inter-currency liquidity spreads, inflation expectations and the credit risk of the parties                                                                                                |  | Revaluation of financial derivatives in profit or loss or in other comprehensive income  refer to Note 37b                                            
|Determination of the fair value of share-based compensation transactions           |  | Use of a standard options pricing model based on the share price and the exercise price data and on assumptions regarding expected volatility, expected duration and expected dividend                                                                                          |  | Recording of salary expenses against capital reserve  refer to Note 2x and Note 28                                                                    
|Revenue recognition from construction contracts                                    |  | Estimation of percentage of completion including estimations regarding collection ability, project costs and total revenues                                                                                                                                                     |  | Timing and amounts of revenue recognition and costs recognized, refer to Note 2z                                                                       



| | c. | Consolidated financial statements
| | -- | ---------------------------------

The consolidated financial statements include the
financial statements of the Company as well as the entities that are controlled by the Company (subsidiaries). Control exists when the Company has power over the investee, exposure, or rights, to variable returns from its involvement with the
investee and the ability to use its power over the investee to affect the amount of the investors returns. In assessing control, potential voting right are only considered if they are substantive. Financial statements are consolidated from the
date control is obtained until the date that control ceases.

Consolidation due to effective control

The Group consolidates certain subsidiaries on the basis of effective control in accordance with IFRS 10.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





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



Below is the aspects reviewed by the Group which, when evaluating the overall circumstances,
may evidence the existence of effective control:



| | 1. | Holding a significant voting interest (even if less than half of the voting rights).
| | -- | ------------------------------------------------------------------------------------



| | 2. | Wide diversity of public holdings of the remaining shares conferring voting rights.
| | -- | -----------------------------------------------------------------------------------



| | 3. | The Group has the majority of the participating voting power (quorum) according to historical records of the general meetings of shareholders and voting agreements with other shareholders, granting it in fact the right
to appoint the majority of the board members.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | The absence of other single entity beside the Group that holds a significant portion of the investees shares.
| | -- | --------------------------------------------------------------------------------------------------------------



| | 5. | The ability to establish policies and guide operations by appointing the investees senior management (CEO, Chairman of the Board).
| | -- | -----------------------------------------------------------------------------------------------------------------------------------



| | 6. | The minority shareholders have no participating rights or other preferential rights, excluding standard protective rights.
| | -- | --------------------------------------------------------------------------------------------------------------------------

Based on the above criteria and the following circumstances:



| | 1. | The Group has consolidated in its financial statements due to effective control the accounts of CTY, inter alia, due to its holding of a significant voting interest of 42.8% in CTY at the reporting date, the wide
diversity of the public holdings of the remaining shares, restriction on other shareholders to hold above 30% of CTYs shares without issuing tender offer, the Group has ownership of a majority of the voting power that participates in the
general meetings, enabling inter alia its ability to appoint the majority of the directors and indirectly, the senior management of CTY. In addition the Group has a voting agreement with of other shareholders, refer to Note 26a3.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | The Group has consolidated in its financial statements due to effective control the accounts of EQY, inter alia, due to a significant holding interest and voting rights of 43.3% in EQY at the reporting date, wide
diversity of public holdings of the remaining shares, restriction on other shareholders from holding above a certain interest in EQY, the Group has ownership of a majority of the participating voting power in the general meetings enabling inter alia
its ability to appoint the majority of directors and indirectly, the senior management of EQY. In addition, the Group has voting agreement with other shareholders, refer to Note 9d6.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | The Group has consolidated in its financial statements due to effective control the accounts of FCR, inter alia, due to a significant holding interest and voting rights of 44.0% in FCR at the reporting date, wide
diversity of public holdings of the remaining shares, the Group has ownership of a majority of the participating voting power in the general meetings enabling inter alia its ability to appoint the majority of directors and indirectly, the senior
management of FCR. In addition, the Group has a voting agreement with other shareholders, see Note 26a 6.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Non-controlling
interests represent the equity in subsidiaries that are not attributable, directly or indirectly, to the parent company. Profit or loss and each component of other comprehensive income are attributed to the Company and non-controlling interests.
Losses are attributed to non-controlling interests even if the non-controlling interests balance reported in the consolidated statement of financial position is negative.

In cases where the Company provides loans and/or guarantees for a subsidiarys debts in excess of its percentage interest therein, the
Company recognizes its equity in the comprehensive income/loss of the subsidiary in accordance with the percentage interest in the subsidiary. This notwithstanding, in the Statement of Changes in Equity, the Company makes a reattribution
of the losses generated, so that the non-controlling interests are not presented at an amount that is less than the amount of financing to which they have committed.

When the Group acquires non-controlling interests the difference between the consideration and the carrying amount of the acquired interest is
recorded as a reduction or increase in equity under transactions with non-controlling interests. Upon disposal of rights in a subsidiary that does not result in a loss of control, an increase or decrease in equity is recognized as the difference
between the consideration received by the Group and the carrying amount of the non controlling interests in the subsidiary adjusted for the disposal of goodwill in the subsidiary, if any, and amounts recognized in



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (Cont)



other comprehensive income, if any. Transaction costs in respect of transactions with non-controlling interests are also recorded in equity.

Significant intragroup balances and transactions and gains or losses resulting from intragroup transactions are eliminated in full in the
consolidated financial statements.

The financial statements of the Company and of the consolidated investees are prepared as of the same
dates and periods. The accounting policies in the financial statements of those investees are applied consistently and uniformly with the policy applied in the financial statements of the Company.



| | d. | Functional and foreign currencies
| | -- | ---------------------------------



| | 1. | Functional and presentation currency
| | -- | ------------------------------------

The presentation currency of the financial
statements is the NIS.

For the convenience of the reader, the reported NIS amounts as of December 31, 2014 have been translated into
U.S. dollars, at the representative rate of exchange on December 31, 2014 (U.S.$ 1 = NIS 3.889). The U.S. dollar amounts presented in these financial statements should not be construed as representing amounts that are receivable or payable in
dollars or convertible into U.S. dollars, unless otherwise indicated. The U.S. dollar amounts were rounded to whole numbers of convenience.

The functional currency, which is the currency that best reflects the economic environment in which the Company operates and conducts its
transactions, is determined separately for each Group entity, including entities accounted for using the equity method, and is used to measure its financial position and operating results. The functional currency of the Company is the NIS.

When an Investees functional currency differs from the functional currency of the Company, that Investee represents a foreign operation
whose financial statements are translated so that they can be included in the consolidated financial statements as follows:



| | a) | Assets and liabilities for each balance sheet item presented (including goodwill and purchase adjustments) are translated at the closing rate as of the reporting date.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) | Income and expenses for each period presented in the income statement are translated at average exchange rates for the presented periods; however, if exchange rates fluctuate significantly, income and expenses are
translated at the exchange rates at the date of the transactions.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c) | Share capital and capital reserves are translated at the exchange rate prevailing at the date of incurrence.
| | -- | ------------------------------------------------------------------------------------------------------------



| | d) | Retained earnings are translated based on the opening balance translated at the exchange rate at that date and other relevant transactions during the period are translated as described in b) and c) above.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | e) | Exchange differences are recognized in other comprehensive income (loss).
| | -- | -------------------------------------------------------------------------

On partial disposal
of a subsidiary that includes a foreign operation that does not leads to loss of control, the Group re-attributes the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income to the
non-controlling interests in that foreign operation. In addition, upon disposal of a foreign operation that leads to loss of control of a subsidiary, the cumulative amount of the exchange differences relating to that foreign operation, recognized in
other comprehensive income, is transferred to the income statement. Intra-group loans for which settlement is neither planned nor likely to occur in the foreseeable future are, in substance, a part of the investment in that foreign operation and are
accounted for as part of the investment and the exchange differences arising from these loans are recognized in other comprehensive income (loss).



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (Cont)



| | 2. | Transactions in foreign currency
| | -- | --------------------------------

Transactions denominated in foreign currency are
recorded on initial recognition at the exchange rate at the date of the transaction. After initial recognition, monetary assets and liabilities denominated in foreign currency are translated at each reporting date into the functional currency at the
exchange rate at that date. Exchange differences, other than those capitalized to qualifying assets or recorded in other comprehensive income, are recognized in the income statement. Non-monetary assets and liabilities measured at cost are
translated at the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currency and measured at fair value are translated into the functional currency using the exchange rate prevailing at the date
when the fair value was determined.



| | 3. | Index-linked monetary items
| | -- | ---------------------------

Monetary assets and liabilities linked to the changes in
the Israeli Consumer Price Index (Israeli CPI) are adjusted at the relevant index at each reporting date according to the terms of the agreement. Linkage differences arising from the adjustment, as above, other than those capitalized to
qualifying assets, are recognized in profit or loss.



| | e. | The operating cycle
| | -- | -------------------

The Group has two operating cycles. The average operating cycle of
construction and sale of buildings and apartments activity is three years. The operating cycle of the investment property and of the construction works activities is one year (see Note 7). Accordingly, the assets and liabilities directly
attributable to this activity are classified in the statement of financial position as current assets and liabilities based on the operating cycle.



| | f. | Cash equivalents
| | -- | ----------------

Cash equivalents are highly liquid investments, including short-term
bank deposits which are not restricted by liens, whose original term to maturity is up to three months from the investment date.



| | g. | Short-term deposits
| | -- | -------------------

Short-term bank deposits are deposits with maturities of more than
three months from investment and do not meet the definition of cash equivalents. Deposits are presented in accordance with their terms of deposit.



| | h. | Allowance for doubtful accounts
| | -- | -------------------------------

The allowance for doubtful accounts is determined in
respect of specific debts whose collection, in the opinion of Groups management, is doubtful. Impaired trade receivables are derecognized when they are assessed as uncollectible.



| | i. | Inventory of buildings and apartments for sale
| | -- | ----------------------------------------------

Cost of inventory of buildings and
apartments for sale includes direct identifiable costs with respect to acquisition cost of land, such as purchase tax, fees and levies as well as construction costs. The Company also capitalizes to the cost of inventory of buildings and apartments
for sale borrowing costs incurred from the period when the Company commences development activities.

Inventory of buildings and apartments
for sale is measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less estimated costs of completion and the estimated selling costs.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (Cont)



Inventory under construction is measure on cost basis. The cost includes borrowing costs that
apply to financing the project until its completion, planning and designing costs, indirect construction cost that were allocated and other related costs.

Inventories of land include acquisitions by the Group in an exchange transaction in which in consideration for the land, the vendor is provided
units in the completed project. Such land is measured at fair value and a corresponding liability is recognized for construction services.

Inventories of land include acquisitions by the Group in a transaction where the Group undertakes to pay cash based on the selling price of the
units in the completed project. Such land is measured upon initial recognition by reference to the fair value of the property and the financial liability in respect of the expected future payments. In subsequent periods, the financial liability is
adjusted based on the revised expected cash outflows. The changes in the fair value of the liability are recorded as project costs.



| | j. | Receivables from construction contracts
| | -- | ---------------------------------------

Income receivable from construction contracts
is separately calculated for each construction contract and presented in the statement of financial position at the aggregate amount of total costs incurred and total recognized profits less total recognized losses and progress billings. Progress
billings are amounts billed for work performed up to the reporting date, whether settled or not settled. The financial asset, receivables for construction contracts, is reviewed for impairment and derecognition as discussed below regarding
impairment of financial assets presented at amortized cost and the derecognition of financial assets, respectively.

Costs of projects
based on construction contracts are recognized at cost that includes identifiable direct costs and shared indirect costs. Shared indirect costs are allocated between the projects using a relevant basis.

When the amounts received for a particular project exceed total costs incurred with the addition of the total profits recognized and net or the
total losses recognized, the net amounts received will be presented as a liability for customer advances.



| | k. | Financial instruments
| | -- | ---------------------

All financial assets are recognized initially at fair value plus,
in the case of investments not at fair value through profit or loss, directly attributable transaction costs.



| | 1. | Financial assets at fair value through profit or loss
| | -- | -----------------------------------------------------

Financial assets that are
measured at fair value through profit or loss comprise of financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss.

Financial assets held for trading include derivatives that are not designated as hedging instruments.

These derivatives are measured at fair value with changes in fair value recognized in the income statement. The Group assesses whether
embedded derivatives are required to be separated from host contracts when the Group first becomes party to the contract. Reassessment is only required if there is a change in the terms of the contract that significantly modifies the cash flows from
the contract.



| | 2. | Loans and receivables and investments held to maturity
| | -- | ------------------------------------------------------

The Group has loans and
receivables that are financial assets (non-derivative) with fixed or determinable payments that are not quoted in an active market. Investments held to maturity are financial assets (non-derivative) with fixed or determinable payments in which the
Group has the intention and ability to hold to maturity. After initial recognition, loans and receivables and investments held to maturity (the investments) are measured based on their terms at amortized cost using the effective interest
method taking into account directly attributable



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (Cont)



transaction costs. Short-term receivables (such as trade and other receivables) are measured based on their terms, normally at face value. Gains and losses are recognized in profit or loss when
the investments are derecognized or impaired, as well as through the systematic amortization process. As for recognition of interest income, see y below.



| | 3. | Available-for-sale financial assets
| | -- | -----------------------------------

Available-for-sale financial assets are
non-derivative financial assets that are designated as available-for-sale or are not classified in any of the preceding categories. After initial recognition, available-for-sale financial assets are measured at fair value. Gains or losses from fair
value adjustments, except for exchange differences and interest that relate to monetary debt instruments and dividend that relates to equity instrument that are carried to profit or loss, are recognized in other comprehensive income (loss). When the
investment is disposed of or in case of impairment, the equity reserve in other comprehensive income (loss) is reclassified to profit or loss, presented under Decrease in value of financial investments, or under loss from sale of
marketable securities, as applicable. As for recognition of interest income on debt instruments and dividends earned on equity instruments, see z below.



| | 4. | Offsetting financial instruments
| | -- | --------------------------------

Financial assets and financial liabilities are
offset, and the net amount is presented in the statement of financial position, provided there is a legally enforceable right to offset the recognized amounts, and there is an intention either to settle on a net basis or to realize the asset and
settle the liability simultaneously. The right to offset needs to be legally enforceable not just during the normal course of business but also in the event of bankruptcy or insolvency of one the parties. In order for the right to offset to be
currently available, it cannot be contingent on a future event, nor can there be periods during which it will not apply or events that will cause its expiration.



| | 5. | Financial liabilities measured at amortized cost
| | -- | ------------------------------------------------

Interest-bearing loans and borrowings
are initially recognized at fair value less directly attributable transaction costs (such as loan raising costs). After initial recognition, loans, including debentures, are measured based on their terms at amortized cost using the effective
interest method taking into account directly attributed transaction costs. Short-term credit is disclosed according to it terms, usually in its nominal value.



| | 6. | Compound financial instruments
| | -- | ------------------------------

Convertible debentures that were issued in the issuing
companys functional currency which are unlinked to certain index and not stated in foreign currency and which contain both an equity component in respect of conversion options and a liability component, are separated into an equity component
(net of the tax effect) and a liability component. Each component is presented separately net of the respective transaction costs. This separation is calculated by determining the liability component first based on the fair value of an equivalent
non-convertible liability. The value of the equity component is determined as the residual value. For convertible debentures that were issued by subsidiaries, the equity component is included within non-controlling interests.

The liability component is accounted for after initial recognition as described above in respect of financial liabilities measured at
amortized cost and presented in the statement of financial position as a current or non-current liability based on the settlement date in cash.



| | 7. | Issue of a bundle of securities
| | -- | -------------------------------

The issue of a bundle of securities involves the
allocation of the proceeds received (before issue expenses) to the components of the securities issued in the bundle based on the following hierarchy: fair value is initially determined for derivatives and the financial instruments measured at fair
value at each reporting period, then the fair value is determined for financial



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (Cont)



liabilities that are measured at each reporting period at amortized cost, while the proceeds allocated in respect of equity instruments are determined as a residual value. Direct issue costs are
allocated to each component pro rata to the amounts determined for each component. Allocation of proceeds between components in the same level of hierarchy is based on relative fair value of those components.



| | 8. | Treasury shares
| | -- | ---------------

Company shares held by the Company are recognized at cost and deducted
from equity. Any purchase, sale, issue or cancellation of treasury shares is recognized directly in equity.



| | 9. | Derecognition of financial assets
| | -- | ---------------------------------

A financial asset is derecognized when the
contractual rights to the cash flows from the financial asset expire or the company has transferred its contractual rights to receive cash flows from the financial asset or assumes an obligation to pay the cash flows in full without material delay
to a third party and has transferred substantially all the risks and rewards of the asset, or has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.



| | 10. | Derecognition of financial liabilities
| | --- | --------------------------------------

A financial liability is derecognized when it
is extinguished, meaning, when the obligation is discharged, cancelled or expires. A financial liability is extinguished when the debtor (the Group):



| |  |  | discharges the liability by paying in cash, other financial assets, goods or services; or
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | is legally released from the liability.
| | - |  | ---------------------------------------

Where an existing financial liability is exchanged
with another liability from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is accounted for as an extinguishment of the original liability and the
recognition of a new liability. The difference between the carrying amount of the above liabilities is recognized in the profit or loss. If the exchange or modification is immaterial, it is accounted for as a change in the terms of the original
liability and no gain or loss is recognized from the exchange. When determining whether an exchange transaction of a debt instrument constitutes material change, the Group takes into consideration quantitative as well as qualitative criteria.



| | l. | Impairment of financial assets
| | -- | ------------------------------

The Group assesses at each reporting date whether there
is any objective evidence that the following financial asset or group of financial assets is impaired.



| | 1. | Financial assets carried at amortized cost
| | -- | ------------------------------------------

There is objective evidence of impairment
of debt instruments, loans and receivables measured at amortized cost as a result of one or more events that has occurred after the initial recognition of the asset and that loss event has a negative impact on the estimated future cash flows. The
amount of the loss carried to profit or loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not yet been incurred) discounted at
the original effective interest rate. If the financial asset bears a variable interest rate, the discount rate is the current effective interest rate. In subsequent periods, the amount of the impairment loss is reversed if the recovery of the asset
can be related objectively to an event occurring after the impairment was recognized.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





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



The amount of the reversal, as abovementioned, is recognized as profit or loss up to the
amount of any previous impairment.



| | 2. | Available-for-sale financial assets
| | -- | -----------------------------------

For equity instruments classified as
available-for-sale financial assets, the objective evidence includes, inter alia, a significant or prolonged decline in the fair value of the asset below its cost. The examination of a significant or prolonged impairment depends on the circumstances
at each balance sheet date. The examination considers historical volatility in fair value and the existence of a continuous decline in fair value. Where there is evidence of impairment, the cumulative loss is reclassified from other comprehensive
income to profit or loss. In subsequent periods, reversal of impairment loss is recognized as other comprehensive income.



| | m. | Financial derivatives and hedge accounting
| | -- | ------------------------------------------

In line with its risk management policy,
the Group occasionally enters into derivative contracts such as cross-currency swaps of principle and interest (swap), currency forward contracts and Interest Rate Swaps (IRS) to hedge its risks associated with changes in
interest rates and currency exchange fluctuations. Such financial derivatives are presented as current or non-current based on their maturity dates.

After initial recognition, derivatives are measured at fair value. Any gains or losses arising from changes in fair value on derivatives that
do not qualify for hedge accounting are carried to profit or loss.

At the inception of certain hedge transactions, the Group formally
designated the hedge relationship in order to apply hedge accounting. The hedge effectiveness is assessed regularly at each reporting period. Hedges that meet the criteria for hedge accounting are accounted for as follows:

Cash flow hedges

The
effective portion of the gain or loss on the hedging instrument is recognized in other comprehensive income, while any ineffective portion is recognized immediately in profit or loss. Amounts recognized as other comprehensive income are reclassified
to profit or loss when the hedged transaction affects profit or loss, or when a forecasted transaction or firm commitment is no longer expected to occur.

If the hedging instrument expires or is sold, terminated or exercised, or if its designation as a hedge is revoked, amounts previously
recognized as other comprehensive income remain in other comprehensive income until the forecasted transaction or the firm commitment occurs.

On unwinding hedging transactions, whether or not they are designated as an accounting hedge, when the transaction includes a hedge of cash
flows with respect to principal and interest, the cash flows received are classified in the statement of cash flow under financing activity, in respect of the cash flows representing the hedge of the principal component, and under operating
activity, in respect of the cash flows representing the hedge of the interest component. With regard to unwinding of cross-currency swap hedging transactions during 2014, refer to Note 37d.

Hedges of a net investment in a foreign operation

Hedges of a net investment in a foreign operation, including a hedge of a monetary item that is accounted for as part of the net investment,
are accounted for similar to cash flow hedges. Upon disposal of foreign operation, the cumulative translation difference in comprehensive income is reclassified to profit or loss.



| | n. | Fair value measurement
| | -- | ----------------------

Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair measurement is based on the assumption that the transaction takes place in the principal market of the asset or the liability, or, in
the absence of a principal market, in the most advantageous market. The fair value of an asset or a



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



liability is measured using the assumption that market participants will assume, at the time of pricing the asset or the liability, that market participants act in their economic best interest.

The fair value of financial instruments that are traded in active markets is determined by reference to quoted market prices at each
reporting date. For investments where there is no active market, fair value is determined using appropriate valuation techniques. Such techniques include using recent arms length market transactions; reference to the current market value of
another instrument that is substantially the same; a discounted cash flow analysis or other valuation models. Further details are provided in Note 37b.

Fair value measurement of a non-financial asset takes into account the ability of a market participant to generate economic benefits through
making the highest and best use of the asset or by selling it to another market participant who will make the highest and best use of it.

The Group uses valuation techniques appropriate in the circumstances and for which sufficient data is available to measure fair value,
maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

All assets and liabilities that are
measured at fair value or whose fair value is disclosed are divided into categories within a fair value hierarchy, based on the lowest level input that is significant to the entire fair value measurement:



| |  |          |  |                                                                                                                    
| |  | -------- |  | -------------------------------------------------------------------------------------------------------------------
| |  | Level 1: |  | Prices quoted (un-adjusted) on active markets of similar assets and liabilities.                                   
| |  | Level 2: |  | Data other than quoted prices included in level 1, which may be directly or indirectly observed.                   
| |  | Level 3: |  | Data not based on observable market information (valuation techniques not involving use of observable market data).

For additional information regarding the fair value of assets and liabilities measured at fair value or that
their fair value is disclosed, refer to Note 37b and c.



| | o. | Business combinations and goodwill
| | -- | ----------------------------------

Business combinations are accounted for by applying
the acquisition method. Under this method, the assets and liabilities of the acquired business are identified at fair value on the acquisition date. The cost of the acquisition is the aggregate fair value of the assets acquired, liabilities assumed
and equity rights issued by the acquirer on the date of acquisition. In respect of each business combinations, non-controlling interests are measured either at fair value on the acquisition date or at the relative share of the non-controlling
interests in the acquirees net identifiable assets. The Direct acquisition costs are recognized immediately as an expense in profit or loss.

In a business combination achieved in stages, equity rights in the acquiree that had been previously held by the acquirer prior to obtaining
control are measured at the acquisition date at fair value and are included in the acquisition consideration by recognizing the gain or loss resulting from the fair value measurement. In addition, amounts previously recorded in other comprehensive
income are reclassified to profit and loss.

Goodwill is initially measured at cost which represents the excess acquisition consideration
and non-controlling interests over the net identifiable assets acquired and liabilities assumed as measured on the acquisition date. If the excess is negative, the difference is recorded as a gain from bargain purchase in profit and loss upon
acquisition.

Acquisitions of subsidiaries that are not business combinations

Upon the acquisition of subsidiaries and operations that do not constitute a business, the acquisition consideration is only allocated between
the acquired identifiable assets and liabilities based on their relative fair values on the acquisition date without attributing any amount to goodwill or to deferred taxes, whereby the non-controlling interests, if any, participate at their
relative share of the fair value of the net identifiable assets on the acquisition date. Directly attributed costs are recognized as part of the acquisition cost.



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



| | p. | Investments in associates and joint ventures
| | -- | --------------------------------------------

The investment in associates or joint
ventures is accounted for using the equity method. Under the equity method, the investment in associates or joint ventures is accounted for in the financial statements at cost plus changes in the Groups share of net assets, including other
comprehensive income (loss), of the associates or joint ventures. The equity method is applied until the loss of significant influence or joint control or classification of the investment as non-current asset held-for-sale.

The Group continues to apply the equity method in cases which the associate become a joint venture and vice versa. The Company applies the
provision of IFRS 5 with regards to the investment or part of the investment in associate or Joint venture that is classified as held for sale. The remaining of the investment not classified as held for sale, is still measured according to the
equity method.

Goodwill relating to the acquisition of associates or joint ventures and to the increase in holding interest is initially
measured as the difference between the acquisition cost and the Groups share in the net fair value of the associates or joint ventures net identifiable assets. After initial recognition, goodwill is measured at cost less, if applicable,
any accumulated impairment loss and is not systematically amortized. Goodwill is examined for impairment as part of the investment in the associate or joint ventures as a whole. In case the acquisition cost is lower than the net fair value of the
associated net identified assets the difference is recognized as a gain from bargain purchase in profit or loss.

Profits and losses
resulting from transactions between the Group and associates or joint ventures are eliminated to the extent of the interest in the investees.

The financial statements of the Company and of the associates or joint ventures are prepared as of the same dates and periods. The accounting
policy in the financial statements of the associates and joint ventures has been applied consistently and uniformly with the policy applied in the financial statements of the Group.



| | q. | Investment property
| | -- | -------------------

An investment property is property (land or a building or both)
held by the owner or by the lessee under a finance lease to earn rentals or for capital appreciation or both rather than for use in the production or supply of goods or services, for administrative purposes or sale in the ordinary course of
business.

Investment property is measured initially at cost, including costs directly attributable to the acquisition. After initial
recognition, investment property is measured at fair value which reflects market conditions at the balance sheet date. Gains or losses arising from changes in fair value of investment property are recognized in profit or loss when they arise.
Investment property is not systematically depreciated.

Investment property under development, designated for future use as investment
property, is also measured at fair value, provided that fair value can be reliably measured. However, when fair value is not reliably determinable, such property is measured at cost, less any impairment losses, if any, until either development is
completed, or its fair value becomes reliably determinable, whichever is earlier. The cost of investment property under development includes the cost of land, construction costs, borrowing costs used to finance construction, direct incremental
planning and development costs and leasing costs.

In order to determine the fair value of investment property, the Group uses valuations
performed mainly by accredited independent appraisers who hold a recognized and relevant professional qualification and by the Groups managements that have extensive professional knowledge. For further details refer to Notes 12 and 13.



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



Investment properties are derecognized on disposal or when the investment property is
permanently withdrawn from use and no future economic benefits are expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss in the period of the disposal.



| | r. | Fixed assets
| | -- | ------------

Items of fixed assets are measured at cost with the addition of direct
acquisition costs, less accumulated depreciation and accumulated impairment losses, if any, and excluding day-to-day servicing expenses.

Depreciation is calculated for every significant item separately on a straight-line basis over the useful life of the assets at annual rates as
follows:



|                                                 |  |   |       |            
|------------------------------------------------ |  | - | ----- | -----------
|                                                 |  | % |      
|Buildings                                        |  |   | 2     |            
|Motor vehicles                                   |  |   | 15    |            
|Equipment                                        |  |   | 2.5-5 | (mainly 5%)
|Computers, office furniture and office equipment |  |   | 6-33  |            

Leasehold improvements are depreciated on a straight-line basis over the shorter of the lease term (including
the extension option held by the Group and intended to be exercised) and the expected useful life of the improvement.

The useful life and
the residual value of an asset are reviewed at least once at each year-end and the changes, if any, are accounted for prospectively as a change in accounting estimate.

Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is
derecognized.



| | s. | Intangible assets
| | -- | -----------------

Intangible assets acquired in a business combination are recognized
at fair value at the acquisition date. Intangible assets, that according to managements assessment, have a finite useful life are amortized over their useful life using the straight-line method (refer to Note 15) and reviewed for impairment
whenever there is an indication that the intangible assets may be impaired. The useful life and residual value are reviewed at least once a year.



| | t. | Leases
| | -- | ------

The tests for classifying leases as finance or operating leases depend on the
substance of the agreements and are made at the inception of the lease in accordance with the principles set out in IAS 17.

Operating
leases - the Group as lessee

Lease agreements are classified as an operating lease if they do not transfer substantially all the risks
and rewards incidental to ownership of the leased asset. Lease payments are recognized as an expense in profit or loss on a straight-line basis over the lease term.

Finance leases - the Group as lessee

Finance leases transfer to the Group substantially all the risks and benefits incidental to ownership of the leased asset. At the commencement
of the lease term, the leased assets are measured at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. The liability for lease payments is presented at its present value and the lease payments are
apportioned between finance charges and a reduction of the lease liability using the effective interest method. The leased asset is amortized over the shorter of its useful life or the lease period.



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



Operating leases - the Group as lessor

Lease agreements where the Group does not transfer substantially all the risks and rewards incidental to ownership of the leased asset are
classified as operating leases. Initial direct costs incurred in respect of the lease agreement are added to the carrying amount of the leased asset and recognized as an expense in parallel with the lease income (regarding investment property - as
part of the fair value adjustments).

Finance leases - the Group as lessor

A lease is classified as a finance lease where all the risks and rewards incident to ownership of the asset are transferred to the lessee. The
leased asset is derecognized as a financial asset, Receivables with respect to finance lease, at an amount equal to the present value of the lease payments. Subsequent to the initial recognition, lease payments are allocated between
finance income and settlement of the receivables with respect to the lease.



| | u. | Impairment of non-financial assets
| | -- | ----------------------------------

The Company examines the need to recognize an
impairment of non-financial assets whenever events or changes in circumstances indicate that their carrying amount is not recoverable. If the carrying amount of non-financial assets exceeds their recoverable amount, the carrying amount is reduced to
their recoverable amount. The recoverable amount is the higher of fair value less costs to sell and value in use. In measuring value in use, the estimated net operating future cash flows are discounted using a pre-tax discount rate that reflects the
risks specific to the asset. Impairment loss is recognized in profit or loss.

An impairment loss of an asset, other than goodwill, is
reversed only if there have been changes in the estimates used to determine the assets recoverable amount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower of the
carrying amount that would have been determined (less depreciation) had no impairment loss been recognized for the asset in prior periods and its recoverable amount. A reversal of an impairment loss of an asset measured at cost is recognized as
income in profit or loss.

The following criteria are applied in assessing impairment for the following specific assets:



| | 1. | Goodwill in respect of subsidiaries
| | -- | -----------------------------------

For the purpose of impairment testing, goodwill
acquired in a business combination is allocated, at acquisition date, to each of the cash generating units that are expected to benefit from the synergies of the combination.

The Group reviews goodwill for impairment once a year on December 31, or more frequently, if events or changes in circumstances indicate
that impairment has occurred.

Impairment test for goodwill is carried out by determining the recoverable amount of the cash-generating
unit (or group of cash-generating units) to which the goodwill belongs. In certain circumstances for impairment test of goodwill, the recoverable amount is adjusted for the difference between the carrying amount of recognized deferred tax liability
and its fair value. If the recoverable amount of the cash-generating unit (or group of cash generating units), to which goodwill has been allocated, is lower than its carrying amount, an impairment loss is recognized and attributed first to reduce
the carrying amount of goodwill. Impairment losses recognized for goodwill cannot be reversed in subsequent periods. For additional information, refer to Note 15.



| | 2. | Investments in associates and joint ventures
| | -- | --------------------------------------------

After application of the equity method of
accounting, the Group examines whether it is necessary to recognize any additional impairment loss with respect to investments in the associates or joint ventures. The recoverable amount is the higher of fair value and value in use which is
determined based on the estimated net cash flows to be generated by the associate or



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



joint venture. Impairment loss, as above, is not attributed specifically to goodwill. Therefore, it may be reversed in full in subsequent periods, up to the recognized impairment loss, if the
recoverable amount of the investment increases. For additional information, refer to Note 9c.



| | v. | Non-current assets classified as held for sale
| | -- | ----------------------------------------------

A non-current asset or a group of assets
(disposal group) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. For this to be the case, the assets must be available for immediate sale in their
present condition, the Group must be committed to sell, there is a plan to locate a buyer and it is highly probable that a sale will be completed within one year from the date of classification. The depreciation of the assets ceases upon initial
classification date, and they are presented separately in the statement of financial position as current assets, and measured at the lower of their carrying amount and fair value less costs to sell.

Investment property measured at fair value and classified as held for sale, as above, continues to be measured at fair value and presented
separately in the statement of financial position as assets classified as held for sale.



| | w. | Taxes on income
| | -- | ---------------

The tax results in respect of current or deferred taxes are recognized
as profit or loss except to the extent that the tax arises from items which are recognized in other comprehensive income or directly in equity.



| | 1. | Current taxes
| | -- | -------------

The current tax liability is measured using the tax rates and tax laws
that have been enacted or substantively enacted by the reporting date as well as adjustments required in connection with the tax liability in respect of previous years.



| | 2. | Deferred taxes
| | -- | --------------

Deferred tax assets and liabilities are measured at the tax rates that
are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date.

Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is not probable that the related tax benefit will be
realized. Similarly, temporary differences for which deferred tax assets have not been recognized are reviewed, and deferred tax assets are recognized to the extent that their utilization has become probable. Any resulting reduction or reversal is
recognized in profit or loss.

Nevertheless, deferred taxes are recognized for distribution of earnings by a subsidiary which qualifies as
a REIT for tax purposes, due to the REITs policy to distribute most of its taxable income to its shareholders. The abovementioned deferred taxes are recognized based on the Groups interests in the REIT (further details are provided in
Note 25b).

In situations where the Group holds single asset entities and where the manner in which the Group expects to realize the
investment is by selling the shares of the single asset entity rather than by disposing of the asset itself, the Group recognizes deferred taxes both in relation to the temporary inside differences arising from the gap between the tax basis of the
asset and its book value and, if relevant, also in relation to the temporary outside differences arising from the gap between the tax basis of the shares of the single asset entity and the share of the Group that holds the net assets of the single
asset entity in the consolidated financial statements.



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



Taxes that would apply in the event of the sale of investments in subsidiaries have not been
taken into account in recognizing deferred taxes, as long as the realization of the investments is not expected in the foreseeable future. Also, deferred taxes with respect to distribution of earnings by investee companies as dividend are not been
taken into account in recognizing deferred taxes, since dividend distribution does not involve additional tax liability and, since it is the Groups policy not to initiate dividend distributions that trigger additional tax liability. For the
impact of the concentration Law on deferred taxes, refer to Note 2A.

Deferred taxes are offset if there is a legally enforceable right to
set off a current tax asset against a current tax liability and the deferred taxes relate to the same taxpayer and the same taxation authority.



| | x. | Share-based payment transactions
| | -- | --------------------------------

The Groups employees and officers are entitled
to remuneration in the form of share-based payment transactions as consideration for equity instruments (equity-settled transactions) and certain employees and officers are entitled to cash-settled benefits based on the increase in the
Companys share price (cash-settled transactions).

Equity-settled transactions

The cost of equity-settled transactions with employees and officers is measured at the fair value of the equity instruments granted at grant
date. The fair value is determined using a standard pricing model.

The cost of equity-settled transactions is recognized in profit or
loss, together with a corresponding increase in equity, during the period in which the service conditions are satisfied (the vesting period), ending on the date on which the relevant employees become fully entitled to the award. In cases
where the vesting period was not completed, due to reasons other than market conditions, the cumulative expense recognized is recorded as income.

If the Group modifies the conditions on which equity-settled instruments are granted, the expense that is recognized is the same expense as if
no modification occurred. Cancellation of a grant is accounted for as if it had vested on the date of cancellation, and any expense not yet recognized for the grant is immediately recognized. However, if the cancelled grant is replaced by a new
grant and is intended to be a replacement grant, the cancelled and new grants are accounted for together as a modification of the original grant, as described above.

Cash-settled transactions

The cost of cash-settled transactions is measured at fair value based on the expected cash amount the Group is required to pay on settlement.
The fair value is recognized as an expense over the vesting period and a corresponding liability is recognized. The liability is remeasured at fair value at each reporting date until settled with any changes in fair value recognized in profit and
loss.



| | y. | Employee benefit liabilities
| | -- | ----------------------------

The Group has several employee benefit plans:



| | 1. | Short-term employee benefits
| | -- | ----------------------------

Short-term employee benefits are benefits that are
expected to be settled in full within 12 month after the reporting date in which the employees provide the relevant services. Those benefits include salaries, paid annual leave, paid sick leave, recreation and social security contributions and are
recognized as expenses as the services are rendered. A liability in respect of a cash bonus or a profit-sharing plan is recognized when the Group has a legal or constructive obligation to make such payment as a result of past service rendered by an
employee and a reliable estimate of the amount can be made.



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



| | 2. | Post employment benefits
| | -- | ------------------------

The plans are normally financed by contributions to insurance
companies and classified as defined contribution plans or as defined benefit plans.

The Group companies have defined contribution plans
under which the Group pays fixed contributions and will have no legal or constructive obligation to pay further contributions if the fund does not have sufficient amounts to pay all employee benefits relating to employee service in the current and
prior periods. Contributions in the defined contribution plan in respect of severance pay or compensation are recognized as an expense when due to be contributed to the plan simultaneously with receiving the employees services and no
additional provision is required in the financial statements.

The Group also operates a defined benefit plan in respect of severance pay
pursuant to the severance pay laws in the relevant countries of operation. According to these laws, employees are entitled in certain circumstances to severance pay upon dismissal or retirement. If applicable, the liability in the financial
statements is estimated based on an actuarial assumption, refer to Note 24.



| | z. | Revenue recognition
| | -- | -------------------

Revenues are recognized in the income statement when the revenues
can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the Group and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Rental income

Rental
income under an operating lease is recognized on a straight-line basis over the lease term. Rental income, where there is a fixed and known increase in rental fees over the term of the contract, is recognized as revenues on a straight-line average
basis as an integral part of total rental income over the lease period. Similarly, lease incentives granted to tenants, in cases where the tenants are the primary beneficiary of such incentives, are considered as an integral part of total rental
income and recognized on a straight-line average basis over the lease term as a reduction of revenues.

Revenues from sale of real
estate and residential apartments

Revenues from sale of real estate and residential apartments are recognized when the principal risks
and rewards of ownership have been passed to the buyer. Revenues are recognized when significant uncertainties regarding the collection of the consideration no longer exist, the related costs are known and there is no continuing managerial
involvement with the real estate or residential apartment delivered. These criteria are usually met once a significant portion of construction has been completed, the residential apartment has been delivered to the buyer and the buyer has fully paid
the consideration for the apartment. As for the land, the criteria are usually met once the possession in the land is transferred.

Revenues from construction contracts

Revenues from construction contracts are recognized by the percentage of completion method when all the following conditions are satisfied: the
revenues are known or can be estimated reliably, collection is probable, costs related to performing the work are determinable or can be reasonably determined, there is no substantial uncertainty regarding the Groups ability (as the
contractor) to complete the contract and meet the contractual terms and the percentage of completion can be estimated reliably. The percentage of completion is determined based on the proportion of costs incurred to date to the estimated total
costs. If not all the criteria for recognition of revenue from construction contracts are met, then revenue is recognized only to the extent of costs whose recoverability is probable (zero profit margin presentation).

An expected loss on a contract is recognized immediately irrespective of the stage of completion and classified within cost of revenues.



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



| | aa. | Earnings per share
| | --- | ------------------

Earnings per share are calculated by dividing the net income
attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the period. Basic earnings per share only include shares that were actually outstanding during the period. Potential ordinary shares
are only included in the computation of diluted earnings per share when their conversion decreases earnings per share, or increases loss per share, from continuing operations. Furthermore, potential ordinary shares that are converted during the
period are included in diluted earnings per share only until the conversion date and from that date in basic earnings per share. The Companys share of earnings of investees is included based on the basic and diluted earnings per share of the
investees multiplied by the number of shares held by the Company, as applicable.



| | bb. | Provisions
| | --- | ----------

A provision in accordance with IAS 37 is recognized when the Group has a
present legal or constructive obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the
obligation.



| | cc. | Borrowing costs in respect of qualifying assets
| | --- | -----------------------------------------------

A qualifying asset is an asset that
necessarily takes a substantial period of time to be prepared for its intended use or sale, including investment property under development or redevelopment and inventories of buildings and apartments for sale that require a substantial period of
time to bring them to a saleable condition. The Group capitalizes borrowing costs that are attributable to the acquisition and development of qualifying assets.

As for investment property under development, measurement of these assets at fair value does not include the amount of borrowing costs incurred
during their development period. The Group presents financing costs in profit or loss net of borrowing costs that had been capitalized on such assets before measuring them at fair value.

The capitalization of borrowing costs commences when expenditures in respect of the asset are being incurred, borrowing costs are being
incurred and the activities to prepare the asset are in progress and ceases when substantially all the activities to prepare the qualifying asset for its intended use or sale are complete. The amount of borrowing costs capitalized in the reporting
period includes specific borrowing costs and general borrowing costs based on a weighted capitalization rate.



| | dd. | Operating segments
| | --- | ------------------

An operating segment is a component of the Group that meets the
following three criteria:



| | 1. | It is engaged in business activities from which it may earn revenues and incur expenses, including revenues and expenses relating to intragroup transactions;
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | Its operating results are regularly reviewed by the Groups chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance; and
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | Separate financial information of the segment is available.
| | -- | -----------------------------------------------------------



| | ee. | Disclosure of new IFRSs in the period prior to their adoption
| | --- | --------------------------------------------------------------

IFRS 15,
Revenue from Contracts with Customers

The Standard introduces the following five-step model that applies to revenue from
contracts with customers:

Step 1: Identify the contract with a customer, including reference to contract consolidation and accounting for
contract modifications.

Step 2: Identify the distinct performance obligations in the contract.



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



Step 3: Determine the transaction price, including reference to variable consideration,
financing components that are significant to the contract, non-cash consideration and any consideration payable to the customer.

Step 4:
Allocate the transaction price to the separate performance obligations on a relative stand-alone selling price basis using observable information, if it is available, or by making estimates and assessments.

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation over time or at a point in time.

The Amendment will be adopted retrospectively from the financial statements for annual periods beginning on January 1, 2017 or thereafter.
Earlier application is permitted.

The Company is evaluating the potential effect of the adoption of IFRS 15 but at this stage is unable to
assess their effect, if any, on the financial statements.

IFRS 9, Financial Instruments

In July 2014, the IASB published the full and final text of IFRS 9 Financial Instruments, which replaces IAS 39 Financial
Instruments: Recognition and Measurement. IFRS 9 (the Standard) focuses primarily on the classification and measurement of financial assets and applies to all the financial assets in the scope of IAS 39.

The Standard prescribes that, at initial recognition, all the financial assets are to be measured at fair value. In subsequent periods, debt
instruments are to be measured at amortized cost only if the two following cumulative conditions are met:



| |  |  | The asset is held within a business model whose objective is to hold assets in order to collect the contractual cash flows arising therefrom.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In accordance with the contractual terms of the financial asset, the company is entitled, on specified dates, to receive cash flows that are solely payments of principal and interest on the principal amount outstanding.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The subsequent measurement of all other debt instruments and other financial assets will be at fair value. The Standard
makes a distinction between debt instruments to be measured at fair value through profit or loss and debt instruments to be measured at fair value through other comprehensive income.

Financial assets that are equity instruments are to be measured in subsequent periods at fair value, with the value changes recognized in
profit or loss or in other comprehensive income (loss), as elected by the company for each individual instrument. When dealing with equity instruments that are held for trading, it is mandatory for such instruments to be measured at fair value
through profit or loss. With regard to derecognition and financial liabilities, the Standard prescribes the same provisions as are required under the provisions of IAS 39 with regard to derecognition and financial liabilities for which the fair
value option has not been elected.

Pursuant to the Standard, the amount of the change in the fair value of liabilities  attributable
to changes in the credit risk  will be presented in other comprehensive income. The whole of the remaining amount of the change in the fair value will be presented in profit or loss.

The Standard includes new hedge accounting requirements.

The Standard is effective for periods beginning on or after January 1, 2018, with early adoption permitted. The Company is studying the
potential effects of the Standard, but is unable, at this stage, to assess its effect, if any, on the financial statements.



F-34



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





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



Amendment to IAS 40, Investment Property

The amendment clarifies that, at the time of determining whether an acquired investment property is an asset or a business (with regard to the
existence of a business combination), no reliance is to be placed on the ancillary services characteristic referred to in IAS 40; instead, use should be made of the criteria for the existence of a business referred to in IFRS 3 (section
B7 - Inputs, outputs and processes). The ancillary services characteristic is intended only to differentiate between investment property and property used by its owners.

The amendment is effective prospectively for annual periods beginning on or after July 1, 2014. In the Companys opinion, the
amendment is not expected to have a material effect on the financial statements.



|NOTE 2A: | - LEGISLATION IMPACT ON THE FINANCIAL STATEMENTS
|-------- | ------------------------------------------------

The Law to Promote Competition and
Reduce Concentration

In December 2013, the Law to Promote Competition and Reduce Concentration, 2013 (the Concentration
Law) was published in the official records of the State of Israel. The Concentration Law aims to reduce the concentration level in the Israeli economy through three major actions: (a) imposing structural limitations and corporate
governance rules on interests held in the form of a pyramid structure; (b) separation between interests in a significant real activity and a significant financial activity; (c) imposing limitations on the allocation of state assets. In the
Companys opinion the impact of the new legislation on the financial statements as of December 31, 2014, specifically of deferred taxes in account of investees that are included in the Law initiation is not material. The Company is
included in the list of real and significant companies that was published by the Committee of reduce concentration through December 2014.



F-35



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 3: - CASH AND CASH EQUIVALENTS



| | a. | Composition
| | -- | -----------



|                                       |  |                 |     |  |      |  |       | 
|-------------------------------------- |  | --------------- | --- |  | ---- |  | ----- | 
|                                       |  | December 31     |    
|                                       |  | 2014            |     |  | 2013 | 
|                                       |  | NIS in millions |    
|Cash in banks and on hand              |  |                 | 543 |  |      |  | 476   | 
|Cash equivalents - short-term deposits |  |                 | 107 |  |      |  | 542   | 
|                                       |  |                 |     |  |      |  |       | 
|                                       |  |                 | 650 |  |      |  | 1,018 | 
|                                       |  |                 |     |  |      |  |       | 



| | b. | Part of the cash in banks bears floating interest based on daily bank deposits rates (as of the reporting date  up to 0.5%).
| | -- | -----------------------------------------------------------------------------------------------------------------------------



| | c. | Deposits earn annual interest at the rate of 0.01% - 0.35%, based on their respective term.
| | -- | -------------------------------------------------------------------------------------------



| | d. | As for the linkage basis of cash and cash equivalents, refer to Note 37.
| | -- | ------------------------------------------------------------------------

NOTE 4a: - SHORT-TERM INVESTMENTS AND LOANS



| | a. | Composition
| | -- | -----------



|                                            |  |                 |     |  |      |  |     | 
|------------------------------------------- |  | --------------- | --- |  | ---- |  | --- | 
|                                            |  | December 31     |    
|                                            |  | 2014            |     |  | 2013 | 
|                                            |  | NIS in millions |    
|Loans:                                      |  |                 |     |  |      |  |     | 
|Current maturities of long-term loans       |  |                 | 1   |  |      |  | 57  | 
|Loans (1)                                   |  |                 | 156 |  |      |  | 161 | 
|                                            |  |                 |     |  |      |  |     | 
|                                            |  |                 | 157 |  |      |  | 218 | 
|                                            |  |                 |     |  |      |  |     | 
|Deposits:                                   |  |                 |     |  |      |  |     | 
|Escrow designated for property acquisitions |  |                 |    |  |      |  | 37  | 
|Restricted cash in banks (2)                |  |                 | 151 |  |      |  | 152 | 
|Bank deposits (3)                           |  |                 | 17  |  |      |  | 45  | 
|Purchase contract deposits and others (4)   |  |                 | 43  |  |      |  | 52  | 
|                                            |  |                 |     |  |      |  |     | 
|                                            |  |                 | 211 |  |      |  | 286 | 
|                                            |  |                 |     |  |      |  |     | 
|                                            |  |                 | 368 |  |      |  | 504 | 
|                                            |  |                 |     |  |      |  |     | 



F-36



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 4a:- SHORT-TERM INVESTMENTS AND LOANS (Cont.)



| | (1) | Loans granted by FCR, secured by properties, bear an average annual interest rate of 9.6% and payable in 2015.
| | --- | --------------------------------------------------------------------------------------------------------------



| | (2) | Includes restricted cash in banks that is pledged with respect to residential projects, at an amount of NIS 105 million, and bear an annual interest rate of 0.01%-0.29% and restricted cash in FCR at amount of NIS
46 million.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | Includes bank deposits that bear an annual interest rate of up to 0.05% based on the respective term of the deposits.
| | --- | ---------------------------------------------------------------------------------------------------------------------



| | (4) | Includes NIS 25 million restricted cash which bear an annual interest rate of up to 0.35% for indemnification relating sale of properties.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------



| | b. | As for the linkage basis of short-term investments and loans, refer to Note 37.
| | -- | -------------------------------------------------------------------------------

NOTE 4b:- MARKETABLE SECURITIES



|                                             |  |                 |     |  |      |  |     | 
|-------------------------------------------- |  | --------------- | --- |  | ---- |  | --- | 
|                                             |  | December 31     |    
|                                             |  | 2014            |     |  | 2013 | 
|Fair value through profit or loss securities |  | NIS in millions |    
|Shares                                       |  |                 | 103 |  |      |  | 69  | 
|Debentures                                   |  |                 | 9   |  |      |  | 22  | 
|                                             |  |                 | 112 |  |      |  | 91  | 
|                                             |  |                 |     |  |      |  |     | 
|Securities available for sale (Note 11)      |  |                 | 187 |  |      |  | 9   | 
|                                             |  |                 |     |  |      |  |     | 
|                                             |  |                 | 299 |  |      |  | 100 | 
|                                             |  |                 |     |  |      |  |     | 

NOTE 5:- TRADE RECEIVABLES



| | a. | Composition
| | -- | -----------



|                                               |  |                 |        |  |      |  |       | 
|---------------------------------------------- |  | --------------- | ------ |  | ---- |  | ----- | 
|                                               |  | December 31     |       
|                                               |  | 2014            |        |  | 2013 | 
|                                               |  | NIS in millions |       
|Open accounts, net (see e below)               |  |                 | 182    |  |      |  | 192   | 
|Checks receivable                              |  |                 | 10     |  |      |  | 11    | 
|Receivables for construction contracts (1)     |  |                 | 344    |  |      |  | 486   | 
|                                               |  |                 |        |  |      |  |       | 
|Total                                          |  |                 | 536    |  |      |  | 689   | 
|                                               |  |                 |        |  |      |  |       | 
|(1)    Receivables for construction contracts: |  |                 |        |  |      |  |       | 
|Costs incurred plus recognized profits         |  |                 | 4,895  |  |      |  | 3,864 | 
|Less - progress billings                       |  |                 | 4,480  |  |      |  | 3,378 | 
|                                               |  |                 |        |  |      |  |       | 
|                                               |  |                 | *) 415 |  |      |  | 486   | 
|                                               |  |                 |        |  |      |  |       | 



|*) | Includes NIS 71 million long term receivables for construction contracts. Refer to Note 10.
|-- | -------------------------------------------------------------------------------------------



F-37



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 5: | - TRADE RECEIVABLES (Cont.)
|------- | ---------------------------



| | b. | Trade receivables do not bear interest. As for the linkage basis of trade receivables, refer to Note 37.
| | -- | --------------------------------------------------------------------------------------------------------



| | c. | In 2014 and 2013, the Group had no major tenant which contributed more than 10% to the total rental income.
| | -- | -----------------------------------------------------------------------------------------------------------



| | d. | There are no significant past due and impaired receivables except those that have been included in the provision for doubtful accounts. The balances of receivables for construction contracts represent amounts not yet
due as of the reporting date.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | e. | Movement in allowance for doubtful accounts:
| | -- | --------------------------------------------



|                             |  |                 |     |   |      |  |     |  
|---------------------------- |  | --------------- | --- | - | ---- |  | --- | -
|                             |  | December 31     |    
|                             |  | 2014            |     |   | 2013 | 
|                             |  | NIS in millions |    
|At the beginning of the year |  |                 | 46  |   |      |  | 45  |  
|Charge for the year          |  |                 | 17  |   |      |  | 26  |  
|Write down of accounts       |  |                 | (14 | ) |      |  | (21 | )
|Translation differences      |  |                 | (1  | ) |      |  | (4  | )
|                             |  |                 |     |   |      |  |     |  
|At the end of the year       |  |                 | 48  |   |      |  | 46  |  
|                             |  |                 |     |   |      |  |     |  

NOTE 6:- OTHER ACCOUNTS RECEIVABLE



| | a. | Composition
| | -- | -----------



|                                        |  |                 |     |  |      |  |     | 
|--------------------------------------- |  | --------------- | --- |  | ---- |  | --- | 
|                                        |  | December 31     |    
|                                        |  | 2014            |     |  | 2013 | 
|                                        |  | NIS in millions |    
|Government institutions *)              |  |                 | 104 |  |      |  | 57  | 
|Prepaid expenses                        |  |                 | 96  |  |      |  | 89  | 
|Receivables from sale of real estate    |  |                 | 6   |  |      |  | 4   | 
|Finance lease receivable                |  |                 | 5   |  |      |  | 17  | 
|Interest receivable from joint ventures |  |                 | 30  |  |      |  | 30  | 
|Advances to suppliers                   |  |                 | 6   |  |      |  | 5   | 
|Co- owners in investees                 |  |                 | 10  |  |      |  | 13  | 
|Others                                  |  |                 | 46  |  |      |  | 87  | 
|                                        |  |                 |     |  |      |  |     | 
|                                        |  |                 | 303 |  |      |  | 302 | 
|                                        |  |                 |     |  |      |  |     | 



|*) | Primarily consists of prepaid property taxes and indirect taxes receivable as well as tax receivable of NIS 60 million relates to environmental remediation plan in the state of New York.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | As for the linkage basis of other accounts receivable, refer to Note 37.
| | -- | ------------------------------------------------------------------------



F-38



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 7: | - INVENTORY OF BUILDINGS AND APARTMENTS FOR SALE
|------- | ------------------------------------------------



| | a. | Inventory comprises land and buildings under construction which, in part, are constructed with partners.
| | -- | --------------------------------------------------------------------------------------------------------

Balances of inventory of buildings and advances by primary countries are as follows:



|                                                     |  |                         |     |  |                                            |  |     |      |  |  |      |  |  |  |     | 
|---------------------------------------------------- |  | ----------------------- | --- |  | ------------------------------------------ |  | --- | ---- |  |  | ---- |  |  |  | --- | 
|                                                     |  | Inventory ofbuildings*) |     |  | Advances fromcustomers andapartment buyers | 
|                                                     |  | December 31             |    
|                                                     |  | 2014                    |     |  | 2013                                       |  |     | 2014 |  |  | 2013 | 
|                                                     |  | NIS in millions         |    
|Apartments under construction in Israel and Slovakia |  |                         | 575 |  |                                            |  | 622 |      |  |  | 304  |  |  |  | 267 | 
|Apartments under construction in Canada              |  |                         | 13  |  |                                            |  | 70  |      |  |  |     |  |  |  |    | 
|                                                     |  |                         |     |  |                                            |  |     |      |  |  |      |  |  |  |     | 
|Total                                                |  |                         | 588 |  |                                            |  | 692 |      |  |  | 304  |  |  |  | 267 | 
|                                                     |  |                         |     |  |                                            |  |     |      |  |  |      |  |  |  |     | 



|*) | As of the reporting date, NIS 11 million represents completed apartments (in 2013- NIS 21 million).
|-- | ---------------------------------------------------------------------------------------------------



| | b. | Expected settlement of current inventory and advances from customers:
| | -- | ---------------------------------------------------------------------



|                    |  |                       |     |  |                                            |  |     |      |  |  |      |  |  |  |     | 
|------------------- |  | --------------------- | --- |  | ------------------------------------------ |  | --- | ---- |  |  | ---- |  |  |  | --- | 
|                    |  | Inventoryof buildings |     |  | Advances fromcustomers andapartment buyers | 
|                    |  | December 31           |    
|                    |  | 2014                  |     |  | 2013                                       |  |     | 2014 |  |  | 2013 | 
|                    |  | NIS in millions       |    
|Within 12 months    |  |                       | 385 |  |                                            |  | 396 |      |  |  | 275  |  |  |  | 235 | 
|More than 12 months |  |                       | 203 |  |                                            |  | 296 |      |  |  | 29   |  |  |  | 32  | 
|                    |  |                       |     |  |                                            |  |     |      |  |  |      |  |  |  |     | 
|                    |  |                       | 588 |  |                                            |  | 692 |      |  |  | 304  |  |  |  | 267 | 
|                    |  |                       |     |  |                                            |  |     |      |  |  |      |  |  |  |     | 



| | c. | Write down of inventory:
| | -- | ------------------------

There was NIS 37 million inventory write down in 2014 (in 2013
the write down amounted to NIS 19 million).



| | d. | Details on sale contracts signed by the Group (100%)
| | -- | ----------------------------------------------------

During 2014, the Group signed 98
sale contracts (126 sale contracts during 2013), with total consideration estimated at NIS 192 million (NIS 195 million during 2013).

In addition, until December 31, 2014, the Group signed 513 sale contracts on a cumulative basis, with total consideration estimated at
NIS 787 million.



| | e. | Cost of inventory includes capitalized borrowing costs during 2014 and 2013 in the amount of NIS 5 million and NIS 10 million, respectively.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------



| | f. | Non-current inventory in Israel comprises mainly land plots. As of December 31, 2014 and 2013 the non-current inventory balance totals NIS 2 million and NIS 23 million, respectively. As of the reporting
date the Group act to rezone the land for residential purposes.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | g. | As for charges, refer to Note 29.
| | -- | ---------------------------------



F-39



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 8: - ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR SALE



| | a. | Composition of assets held for sale:
| | -- | ------------------------------------



|                       |  |                 |       |  |      |  |     | 
|---------------------- |  | --------------- | ----- |  | ---- |  | --- | 
|                       |  | December 31     |      
|                       |  | 2014            |       |  | 2013 | 
|                       |  | NIS in millions |      
|Investment property *) |  |                 | 948   |  |      |  | 548 | 
|Land                   |  |                 | 98    |  |      |  | 63  | 
|                       |  |                 |       |  |      |  |     | 
|                       |  |                 | 1,046 |  |      |  | 611 | 
|                       |  |                 |       |  |      |  |     | 



|*) | Balance of assets held for sale is mainly comprised of income producing properties in FCR that are not core properties.
|-- | -----------------------------------------------------------------------------------------------------------------------



| | b. | Liabilities attributed to held for sale assets primarily consist of mortgage loans payable.
| | -- | -------------------------------------------------------------------------------------------

NOTE 9: -
INVESTMENTS IN INVESTEES



| | a. | Composition of the investment in entities accounted for by the equity method (including purchase accounting adjustments)
| | -- | ------------------------------------------------------------------------------------------------------------------------



|                                    |  |                 |       |  |      |  |       | 
|----------------------------------- |  | --------------- | ----- |  | ---- |  | ----- | 
|                                    |  | December 31     |      
|                                    |  | 2014            |       |  | 2013 | 
|                                    |  | NIS in millions |      
|Joint venture - ATR (see section c) |  |                 | 4,079 |  |      |  | 4,277 | 
|Other Joint ventures (1)            |  |                 | 1,153 |  |      |  | 835   | 
|Associates                          |  |                 | 103   |  |      |  | 52    | 
|                                    |  |                 |       |  |      |  |       | 
|                                    |  |                 | 5,335 |  |      |  | 5,164 | 
|Loans (2)                           |  |                 | 878   |  |      |  | 743   | 
|                                    |  |                 |       |  |      |  |       | 
|                                    |  |                 | 6,213 |  |      |  | 5,907 | 
|                                    |  |                 |       |  |      |  |       | 



| | (1) | Includes, inter alia, joint ventures that manage, operate and develop income producing properties, and as of the reporting date includes NIS 195 million in Sweden (2013- NIS 162 million), NIS 465 million in
Canada (2013- NIS 125 million) NIS 216 million in United States (2013- NIS 258 million), and NIS 195 million investment in Ronson Europe N.V (2013- NIS 209 million).
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | Includes NIS 209 million of which 100 million linked to the Israeli CPI bear interest rate of 8.5% and NIS 63 million are not linked and bear interest rate of 3.23%. Maturity dates of the aforementioned
loans have yet to be determined. In addition loans of  142 million (NIS 669 million) of which  105 million bears a fixed annual interest rate of 6% and mature on January 2023. The remaining loans bear a variable annual interest
rate of 1.3% that designated for development project.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-40



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 9: - INVESTMENTS IN INVESTEES (Cont.)



| | b. | Groups share in the results of equity-accounted investees including amortization of fair value adjustment (based on the interest therein during the period):
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------

Joint ventures



|                                        |  |                        |     |   |      |  |     |      |  |  |     | 
|--------------------------------------- |  | ---------------------- | --- | - | ---- |  | --- | ---- |  |  | --- | 
|                                        |  | Year ended December 31 |    
|                                        |  | 2014                   |     |   | 2013 |  |     | 2012 | 
|                                        |  | NIS in millions        |    
|Net income (loss) - ATR (see section c) |  |                        | (98 | ) |      |  | 127 |      |  |  | 159 | 
|Net income (other than ATR)             |  |                        | 101 |   |      |  | 21  |      |  |  | 87  | 
|Other comprehensive income (loss)       |  |                        | (38 | ) |      |  | (26 | )    |  |  | 10  | 
|                                        |  |                        |     |   |      |  |     |      |  |  |     | 
|Comprehensive income (loss)             |  |                        | (35 | ) |      |  | 122 |      |  |  | 256 | 
|                                        |  |                        |     |   |      |  |     |      |  |  |     | 

Associates



|                           |  |                        |    |  |      |  |   |      |  |  |    | 
|-------------------------- |  | ---------------------- | -- |  | ---- |  | - | ---- |  |  | -- | 
|                           |  | Year ended December 31 |   
|                           |  | 2014                   |    |  | 2013 |  |   | 2012 | 
|                           |  | NIS in millions        |   
|Net income                 |  |                        | 9  |  |      |  | 1 |      |  |  | 53 | 
|Other comprehensive income |  |                        | 4  |  |      |  | 1 |      |  |  |   | 
|                           |  |                        |    |  |      |  |   |      |  |  |    | 
|Comprehensive income       |  |                        | 13 |  |      |  | 2 |      |  |  | 53 | 
|                           |  |                        |    |  |      |  |   |      |  |  |    | 

Additional information regarding investees:



| | c. | Investment in ATR (a jointly controlled entity)
| | -- | -----------------------------------------------



| | 1. | As of December 31, 2014, the Company owns 41.2% interest in ATRs share capital and voting rights (40.8% on a fully diluted basis). ATRs shares are listed for trading on the Vienna Stock Exchange and on
the Euronext Stock Exchange in Amsterdam. As of December 31, 2014, the market price of ATR share was  4.09 and ATR has approximately 375.5 million shares outstanding.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company measures its investment in ATR in its financial statements according to the equity method due to joint control over ATR, pursuant
to a shareholders agreement with CPI European Fund (CPI), a member of Apollo Global Real Estate Management L.P. To the best of the Companys knowledge, CPI owns, as of December 31, 2014, about 52.1 million shares of
ATR, representing 13.9% of the share capital and voting rights of ATR, see also Note 26a(3).

In January 2015 a wholly owned subsidiary of
the Company purchased from CPI approximately 52 million ATR shares that represented, to the best knowledge of the Company, all of its ATRs shares. Following this purchase the Company holds 55% of ATR shares and obtained control over ATR
and will initially consolidate ATR accounts starting from the first quarter of 2015. For additional details refer to Note 40a.



| | 2. | Summarized financial information of ATR (100%)
| | -- | ----------------------------------------------

Summarized statement of financial
position -



|                                                           |  |                 |        |   |      |  |        |  
|---------------------------------------------------------- |  | --------------- | ------ | - | ---- |  | ------ | -
|                                                           |  | December 31     |       
|                                                           |  | 2014            |        |   | 2013 | 
|                                                           |  | NIS in millions |       
|Cash and cash equivalents                                  |  |                 | 1,984  |   |      |  | 1,431  |  
|Other current assets (excluding cash and cash equivalents) |  |                 | 533    |   |      |  | 238    |  
|Non-current assets *)                                      |  |                 | 13,768 |   |      |  | 14,288 |  
|Current financial liabilities                              |  |                 | (159   | ) |      |  | (26    | )
|Other current liabilities                                  |  |                 | (391   | ) |      |  | (394   | )
|Non-current liabilities *)                                 |  |                 | (5,783 | ) |      |  | (4,729 | )
|                                                           |  |                 |        |   |      |  |        |  
|Net assets                                                 |  |                 | 9,952  |   |      |  | 10,808 |  
|                                                           |  |                 |        |   |      |  |        |  



|*) | Including fair value adjustments upon acquisition (see section 3 below).
|-- | ------------------------------------------------------------------------



F-41



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 9: | - INVESTMENTS IN INVESTEES (Cont.)
|------- | ----------------------------------



Summarized statements of the comprehensive income -



|                                            |  |                        |       |   |      |  |       |      |  |  |       |  
|------------------------------------------- |  | ---------------------- | ----- | - | ---- |  | ----- | ---- |  |  | ----- | -
|                                            |  | Year ended December 31 |      
|                                            |  | 2014                   |       |   | 2013 |  |       | 2012 | 
|                                            |  | NIS in millions        |      
|Revenues                                    |  |                        | 1,372 |   |      |  | 1,345 |      |  |  | 1,324 |  
|Finance expenses, net                       |  |                        | 133   |   |      |  | 206   |      |  |  | 118   |  
|Taxes on income                             |  |                        | 99    |   |      |  | 71    |      |  |  | 99    |  
|Net income (loss) *)                        |  |                        | (256  | ) |      |  | 365   |      |  |  | 475   |  
|Other comprehensive loss                    |  |                        | (57   | ) |      |  | (34   | )    |  |  | (41   | )
|                                            |  |                        |       |   |      |  |       |      |  |  |       |  
|Total comprehensive income (loss)           |  |                        | (313  | ) |      |  | 331   |      |  |  | 434   |  
|                                            |  |                        |       |   |      |  |       |      |  |  |       |  
|Dividends received from ATR                 |  |                        | 171   |   |      |  | 139   |      |  |  | 107   |  
|                                            |  |                        |       |   |      |  |       |      |  |  |       |  
|Includes fair value adjustment amortization |  |                        | (18   | ) |      |  | (1    | )    |  |  | 5     |  
|                                            |  |                        |       |   |      |  |       |      |  |  |       |  



|*) | includes fair value adjustment amortization.
|-- | --------------------------------------------



| | 3. | Reconciliation of summarized net assets of ATR to the Groups investment in ATR
| | -- | -------------------------------------------------------------------------------



|                                                        |  |                 |       |   |      |  |        |  
|------------------------------------------------------- |  | --------------- | ----- | - | ---- |  | ------ | -
|                                                        |  | December 31     |      
|                                                        |  | 2014            |       |   | 2013 | 
|                                                        |  | NIS in millions |      
|Net assets (see above)                                  |  |                 | 9,952 |   |      |  | 10,808 |  
|Non-controlling interests in ATRs financial statements |  |                 | (17   | ) |      |  | (17    | )
|Fair value adjustments upon acquisition                 |  |                 | 19    |   |      |  | 34     |  
|                                                        |  |                 |       |   |      |  |        |  
|Adjusted net assets                                     |  |                 | 9,954 |   |      |  | 10,825 |  
|Interest in ATR                                         |  |                 | 41.2  | % |      |  | 39.8   | %
|                                                        |  |                 |       |   |      |  |        |  
|Share in ATRs net assets                               |  |                 | 4,098 |   |      |  | 4,311  |  
|Fair value adjustments upon acquisition                 |  |                 | (19   | ) |      |  | (34    | )
|                                                        |  |                 |       |   |      |  |        |  
|Carrying amount in the financial statements             |  |                 | 4,079 |   |      |  | 4,277  |  
|                                                        |  |                 |       |   |      |  |        |  
|Market value of the investment in ATR shares            |  |                 | 2,988 |   |      |  | 2,985  |  
|                                                        |  |                 |       |   |      |  |        |  



| | 4. | The outstanding share options of ATR as of December 31, 2014
| | -- | ------------------------------------------------------------



|                                                    |  |                              |      |  |                |  |           |                                |  |  |       | 
|--------------------------------------------------- |  | ---------------------------- | ---- |  | -------------- |  | --------- | ------------------------------ |  |  | ----- | 
|Series                                              |  | Averageexercisepricepershare |      |  | Expirationdate |  |           | Number ofoptions (inthousands) | 
|Options to employees and officers (2009-2013 plans) |  |                             | 3.89 |  |                |  | 2015-2024 |                                |  |  | 4,964 | 



|*) | As of December 31, 2014, 3,151 thousand share options are fully vested; These options includes share options granted to the Chairman of the Board, see Note 38c, and 1,533 thousand share options were
granted to a Companys director that serves as an officer in ATR.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. | Additional information about the investment in ATR:
| | -- | ---------------------------------------------------

ATR is the owner, manager and developer
of investment property, mainly shopping centers and other retail properties in countries in Central and Eastern Europe, primarily in Poland, the Czech Republic, Russia and Slovakia. The fair value of investment property (100%) in ATRs
financial statements as of December 31, 2014 amounted to  2,591 million (NIS 12.2 billion) and  365 million (NIS 1.7 billion) of lands for future development. The average yield implied in the valuations of ATRs
properties as of December 31, 2014 and 2013 was 8.0% and 8.2%, respectively.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 9: | - INVESTMENTS IN INVESTEES (Cont.)
|------- | ----------------------------------



During 2014, the Company purchased approximately 5.3 million ATR shares in
consideration for  20.7 million (NIS 98 million) in the stock exchange. As a result of the transaction, the Companys interest in ATR increased to 41.2%. Since the Company remained in joint control over ATR, the Company recognized a
gain from bargain purchase at an amount of NIS 47 million presented in other income line item.

In October 2014, ATR issued to the
public  350 million par value (NIS 1,627 million) unsecured debentures that bear an annaul interest rate of 3.625% and are payable in one installment in October 2022.

As for lawsuits filed against ATR, refer to Note 26d.

In light of the gap between the market value of the investment in ATR and its value in the financial statements, as presented in section 1
above, the Company engaged an independent appraiser to examine the recoverable amount of the investment in ATR, which had been calculated on the basis of the value in use in accordance with IAS 36. The value in use of the investment in ATR was
calculated on the basis of ATRs equity with various adjustments, such as deduction for of corporate costs, adjustment of deferred taxes and finance liabilities to fair value, premium to scale and others. Pursuant to the aforesaid examination
it was determined that, there has been no impairment of the investment in ATR.



| | d. | Investment in EQY (a subsidiary)
| | -- | --------------------------------



| | 1. | As of December 31, 2014, the Company owns a 43.3% interest in EQYs share capital and a 43.3% interest in EQYs voting rights (39.4% on a fully diluted basis including the convertible units granted to
LIH, see 6 below). EQYs shares are listed for trading on the New York Stock Exchange. As of December 31, 2014 the market price of EQYs share was U.S.$ 25.36 and EQY has approximately 124.3 million shares outstanding.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company consolidates EQY in its financial statements, although its ownership interest in EQY is less than 50%, due to
effective control over EQY, see Note 2c.



F-43



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 9: | - INVESTMENTS IN INVESTEES (Cont.)
|------- | ----------------------------------



| | 2. | Summarized financial information of EQY according to IFRS:
| | -- | ----------------------------------------------------------

Summarized statements of
financial position 



|                              |  |                 |        |   |      |  |        |  
|----------------------------- |  | --------------- | ------ | - | ---- |  | ------ | -
|                              |  | December 31     |       
|                              |  | 2014            |        |   | 2013 | 
|                              |  | NIS in millions |       
|Current assets                |  |                 | 249    |   |      |  | 269    |  
|Non-current assets *)         |  |                 | 16,459 |   |      |  | 14,078 |  
|Current liabilities           |  |                 | (746   | ) |      |  | (263   | )
|Non-current liabilities *)    |  |                 | (4,998 | ) |      |  | (5,492 | )
|                              |  |                 |        |   |      |  |        |  
|Net assets                    |  |                 | 10,964 |   |      |  | 8,592  |  
|                              |  |                 |        |   |      |  |        |  
|Allocated to:                 |  |                 |        |   |      |  |        |  
|Equity holders of the Company |  |                 | 4,282  |   |      |  | 3,413  |  
|Non-controlling interests     |  |                 | 6,682  |   |      |  | 5,179  |  
|                              |  |                 |        |   |      |  |        |  
|                              |  |                 | 10,964 |   |      |  | 8,592  |  
|                              |  |                 |        |   |      |  |        |  



|*) | Includes goodwill and adjustment for deferred tax liability.
|-- | ------------------------------------------------------------

Summarized statements of
comprehensive income 



|                                            |  |                        |       |   |      |  |       |      |  |  |       |  
|------------------------------------------- |  | ---------------------- | ----- | - | ---- |  | ----- | ---- |  |  | ----- | -
|                                            |  | Year ended December 31 |      
|                                            |  | 2014                   |       |   | 2013 |  |       | 2012 | 
|                                            |  | NIS in millions        |      
|Revenues                                    |  |                        | 1,188 |   |      |  | 1,210 |      |  |  | 1,261 |  
|Net income *)                               |  |                        | 1,005 |   |      |  | 1,075 |      |  |  | 748   |  
|                                            |  |                        |       |   |      |  |       |      |  |  |       |  
|Other comprehensive income (loss)           |  |                        | (13   | ) |      |  | 37    |      |  |  | (25   | )
|                                            |  |                        |       |   |      |  |       |      |  |  |       |  
|Total comprehensive income                  |  |                        | 992   |   |      |  | 1,112 |      |  |  | 723   |  
|                                            |  |                        |       |   |      |  |       |      |  |  |       |  
|Allocated to:                               |  |                        |       |   |      |  |       |      |  |  |       |  
|Equity holders of the Company               |  |                        | 588   |   |      |  | 505   |      |  |  | 321   |  
|Non-controlling interest                    |  |                        | 404   |   |      |  | 607   |      |  |  | 402   |  
|                                            |  |                        |       |   |      |  |       |      |  |  |       |  
|                                            |  |                        | 992   |   |      |  | 1,112 |      |  |  | 723   |  
|                                            |  |                        |       |   |      |  |       |      |  |  |       |  
|Dividends paid to non-controlling interests |  |                        | 254   |   |      |  | 246   |      |  |  | 251   |  
|                                            |  |                        |       |   |      |  |       |      |  |  |       |  



|*) | Includes adjustments for deferred tax expenses, see Note 25b.
|-- | -------------------------------------------------------------

Summarized cash flows
statements 



|                                                 |  |                        |      |   |      |  |      |      |  |  |        |  
|------------------------------------------------ |  | ---------------------- | ---- | - | ---- |  | ---- | ---- |  |  | ------ | -
|                                                 |  | Year ended December 31 |     
|                                                 |  | 2014                   |      |   | 2013 |  |      | 2012 | 
|                                                 |  | NIS in millions        |     
|Cash flows from operating activities             |  |                        | 539  |   |      |  | 484  |      |  |  | 589    |  
|Cash flows from investing activities             |  |                        | 72   |   |      |  | 440  |      |  |  | (1,249 | )
|Cash flows from financing activities             |  |                        | (604 | ) |      |  | (930 | )    |  |  | 721    |  
|                                                 |  |                        |      |   |      |  |      |      |  |  |        |  
|Increase (decrease) in cash and cash equivalents |  |                        | 7    |   |      |  | (6   | )    |  |  | 61     |  
|                                                 |  |                        |      |   |      |  |      |      |  |  |        |  



| | 3. | Share options of EQY outstanding as of December 31, 2014
| | -- | --------------------------------------------------------



|                                     |  |                                |       |  |                |  |           |                                        |  |  |       | 
|------------------------------------ |  | ------------------------------ | ----- |  | -------------- |  | --------- | -------------------------------------- |  |  | ----- | 
|Series                               |  | Averageexercise priceper share |       |  | Expirationdate |  |           | Number ofexercisableshares inthousands | 
|Options to employees and officers *) |  | $                              | 22.37 |  |                |  | 2015-2024 |                                        |  |  | 1,208 | 



|*) | Includes 250 thousand options that are unvested.
|-- | ------------------------------------------------



F-44



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 9: | - INVESTMENTS IN INVESTEES (Cont.)
|------- | ----------------------------------



| | 4. | EQY has issued restricted shares to directors, officers and employees with various restriction periods (Units) (including to the Chairman of the Board and the Executive Vice Chairman of the Board, see Note 38c). As of
the reporting date, the share capital of EQY includes 180 thousand Units that are unvested. These Units bear voting rights and are entitled to receive dividends.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. | In September 2014, EQY completed a public offering in United States of approximately 3.8 million shares, for U.S.$ 23.3 per share, for a total consideration of U.S.$ 88.9 million (NIS 257 million). EQY
has granted to the Offerings underwriters an option, to acquire from it at the Offering price, up to an additional 574 thousand shares. This option expired after a period of 30 days from the date of closing the Offering.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, EQY issued in a private placement to a wholly owned subsidiary of the Company 675 thousands shares in
consideration for U.S.$ 15.7 million (NIS 58 million). As a result of the Offering, the Companys interest in EQY decreased from 45.0% to 43.9%, and the Company recognized an equity increase in an amount of NIS 45 million, which was
recognized in other reserves. For details regarding EQYs share issuance after the reporting date, refer to Note 40e.



| | 6. | In 2011 EQY completed the acquisition of C&C US No. 1 Inc. (CapCo) through a joint venture (the Joint Venture) with Liberty International Holdings Limited (LIH), a subsidiary
of Intu Properties Plc, formerly known as Capital Shopping Centers Group Plc. Under the agreement provision, LIH contributed all of CapCos outstanding share capital to the Joint Venture in return, inter alia, for the allocation of
11.4 million units in the Joint Venture (Units), granting LIH, a 22% interest in the Joint Venture, which can be converted by LIH into 11.4 million shares of EQYs common stock (subject to certain adjustments) or into
cash, at EQYs sole discretion. The Units do not confer voting rights in EQY but do participate in dividend distributions. The Group and LIH have entered into a shareholders agreement, whereby the Group will support the appointment of one
director chosen by LIH, while LIH will support the appointment of the rest of the directors by the Group, subject to the fulfillment of certain conditions; said agreement also prescribes rules for the transferability of shares between the parties (a
first offer right and a tag along right).
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | e. | Investment in FCR (a subsidiary)
| | -- | --------------------------------



| | 1. | As of December 31, 2014, the Company owns 44.0% interest in FCRs share capital and voting rights (40.3% on a fully diluted basis). FCRs shares are listed for trading on the TSX. As of December 31,
2014 the market price of FCRs share was C$ 18.66 and FCR has approximately 216.4 million shares outstanding.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company consolidates FCR in its financial statements, although its interest in FCRs potential voting rights is less than 50%, due to
effective control over FCR, as stated in Note 2c.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 9: | - INVESTMENTS IN INVESTEES (Cont.)
|------- | ----------------------------------



| | 2. | Summarized financial information of FCR
| | -- | ---------------------------------------

Summarized statements of financial position -



|                              |  |                 |         |   |      |  |         |  
|----------------------------- |  | --------------- | ------- | - | ---- |  | ------- | -
|                              |  | December 31     |        
|                              |  | 2014            |         |   | 2013 | 
|                              |  | NIS in millions |        
|Current assets                |  |                 | 1,173   |   |      |  | 1,111   |  
|Non-current assets *)         |  |                 | 25,427  |   |      |  | 23,723  |  
|Current liabilities           |  |                 | (1,659  | ) |      |  | (2,009  | )
|Non-current liabilities       |  |                 | (13,154 | ) |      |  | (11,940 | )
|                              |  |                 |         |   |      |  |         |  
|Net assets                    |  |                 | 11,787  |   |      |  | 10,885  |  
|                              |  |                 |         |   |      |  |         |  
|Allocated to:                 |  |                 |         |   |      |  |         |  
|Equity holders of the company |  |                 | 5,121   |   |      |  | 4,899   |  
|Non-controlling interests     |  |                 | 6,666   |   |      |  | 5,986   |  
|                              |  |                 |         |   |      |  |         |  
|                              |  |                 | 11,787  |   |      |  | 10,885  |  
|                              |  |                 |         |   |      |  |         |  



|*) | Includes goodwill.
|-- | ------------------

Summarized statements of comprehensive income -



|                                            |  |                        |       |   |      |  |       |      |  |  |       |  
|------------------------------------------- |  | ---------------------- | ----- | - | ---- |  | ----- | ---- |  |  | ----- | -
|                                            |  | Year ended December 31 |      
|                                            |  | 2014                   |       |   | 2013 |  |       | 2012 | 
|                                            |  | NIS in millions        |      
|Revenues                                    |  |                        | 2,103 |   |      |  | 2,319 |      |  |  | 2,237 |  
|Net income                                  |  |                        | 642   |   |      |  | 756   |      |  |  | 1,517 |  
|                                            |  |                        |       |   |      |  |       |      |  |  |       |  
|Other comprehensive income (loss)           |  |                        | (28   | ) |      |  | 13    |      |  |  | (7    | )
|                                            |  |                        |       |   |      |  |       |      |  |  |       |  
|Total comprehensive income                  |  |                        | 614   |   |      |  | 769   |      |  |  | 1,510 |  
|                                            |  |                        |       |   |      |  |       |      |  |  |       |  
|Allocated to:                               |  |                        |       |   |      |  |       |      |  |  |       |  
|Equity holders of the Company               |  |                        | 272   |   |      |  | 349   |      |  |  | 727   |  
|Non-controlling interests                   |  |                        | 342   |   |      |  | 420   |      |  |  | 783   |  
|                                            |  |                        |       |   |      |  |       |      |  |  |       |  
|                                            |  |                        | 614   |   |      |  | 769   |      |  |  | 1,510 |  
|                                            |  |                        |       |   |      |  |       |      |  |  |       |  
|Dividends paid to non-controlling interests |  |                        | 325   |   |      |  | 335   |      |  |  | 320   |  
|                                            |  |                        |       |   |      |  |       |      |  |  |       |  

Summarized statements of cash flows -



|                                                 |  |                        |        |   |      |  |        |      |  |  |        |  
|------------------------------------------------ |  | ---------------------- | ------ | - | ---- |  | ------ | ---- |  |  | ------ | -
|                                                 |  | Year ended December 31 |       
|                                                 |  | 2014                   |        |   | 2013 |  |        | 2012 | 
|                                                 |  | NIS in millions        |       
|Cash flows from operating activities             |  |                        | 865    |   |      |  | 728    |      |  |  | 706    |  
|Cash flows from investing activities             |  |                        | (1,037 | ) |      |  | (1,188 | )    |  |  | (1,721 | )
|Cash flows from financing activities             |  |                        | 213    |   |      |  | 253    |      |  |  | 1,275  |  
|                                                 |  |                        |        |   |      |  |        |      |  |  |        |  
|Increase (decrease) in cash and cash equivalents |  |                        | 41     |   |      |  | (207   | )    |  |  | 260    |  
|                                                 |  |                        |        |   |      |  |        |      |  |  |        |  



| | 3. | FCRs share options outstanding as of December 31, 2014
| | -- | -------------------------------------------------------



|                                                  |  |                                |       |  |                |  |           |                                        |  |  |       | 
|------------------------------------------------- |  | ------------------------------ | ----- |  | -------------- |  | --------- | -------------------------------------- |  |  | ----- | 
|Series                                            |  | Averageexercise priceper share |       |  | Expirationdate |  |           | Number ofexercisableshares inthousands | 
|Share options to employees and officers in FCR *) |  | C$                             | 16.89 |  |                |  | 2015-2024 |                                        |  |  | 4,956 | 



|*) | Includes all of the share options granted to employees and officers of FCR, and the Executive Vice Chairman of the Board (see Notes 38c). These options are exercisable to 1,988 thousand shares.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 9: | - INVESTMENTS IN INVESTEES (Cont.)
|------- | ----------------------------------



| | 4. | FCR operates plans for granting restricted share units (RSU) and deferred shares units (DSU) to officers and directors (units), which are convertible for no consideration into ordinary shares of FCR. As of
the reporting date, 1,193 thousand units are available to be granted (regarding units that were granted to related parties, see Notes 38c). As of the reporting date, 780 thousand share units that were granted are unvested.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. | On 2014 FCR completed a public offering in Canada of approximately 5.25 million shares, for C$ 19.06 per share, for a total consideration of C$ 100 million (NIS 323 million). The Company acquired
883 thousand shares of the aforesaid shares for total consideration of C$ 16.8 million (NIS 55 million). In addition, FCR has granted to the Offerings underwriters an option to acquire at the Offering price, additional
787.5 thousand shares. This option expired after a period of 30 days from the date of closing the Offering .As a result of the Offering, the Companys interest in FCR decreased from to 44.8% to 44.2%, and the Company recognized an equity
increase in an amount of NIS 11 million, which was recognized in other reserves.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | f. | Investment in CTY (a subsidiary)
| | -- | --------------------------------



| | 1. | As of December 31, 2014, the Company owns 42.8% interest in CTYs share capital and voting rights (42.4% on a fully diluted basis). CTYs shares are listed for trading on the Helsinki Stock Exchange,
Finland (OMX). As of December 31, 2014 the market price of CTY share was  2.58 and CTY has 593.3 million shares outstanding.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company consolidates CTY in its financial statements, although its ownership interest in CTY is less than 50%, due to effective control
over CTY, as stated in Note 2c.



| | 2. | Summarized IFRS financial information of CTY
| | -- | --------------------------------------------

Summarized statements of financial
position -



|                              |  |                 |        |   |      |  |        |  
|----------------------------- |  | --------------- | ------ | - | ---- |  | ------ | -
|                              |  | December 31     |       
|                              |  | 2014            |        |   | 2013 | 
|                              |  | NIS in millions |       
|Current assets                |  |                 | 340    |   |      |  | 367    |  
|Non-current assets *)         |  |                 | 14,015 |   |      |  | 13,854 |  
|Current liabilities           |  |                 | (727   | ) |      |  | (1,108 | )
|Non-current liabilities       |  |                 | (5,815 | ) |      |  | (6,994 | )
|                              |  |                 |        |   |      |  |        |  
|Net assets                    |  |                 | 7,813  |   |      |  | 6,119  |  
|                              |  |                 |        |   |      |  |        |  
|Allocated to:                 |  |                 |        |   |      |  |        |  
|Equity holders of the company |  |                 | 3,338  |   |      |  | 2,891  |  
|Non-controlling interests     |  |                 | 4,475  |   |      |  | 3,228  |  
|                              |  |                 |        |   |      |  |        |  
|                              |  |                 | 7,813  |   |      |  | 6,119  |  
|                              |  |                 |        |   |      |  |        |  



|*) | Includes goodwill.
|-- | ------------------



F-47



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 9: | - INVESTMENTS IN INVESTEES (Cont.)
|------- | ----------------------------------



Summarized statements of comprehensive income -



|                                            |  |                        |       |  |      |  |       |      |  |  |       |  
|------------------------------------------- |  | ---------------------- | ----- |  | ---- |  | ----- | ---- |  |  | ----- | -
|                                            |  | Year ended December 31 |      
|                                            |  | 2014                   |       |  | 2013 |  |       | 2012 | 
|                                            |  | NIS in millions        |      
|Revenues                                    |  |                        | 1,165 |  |      |  | 1,193 |      |  |  | 1,185 |  
|Net income                                  |  |                        | 426   |  |      |  | 491   |      |  |  | 351   |  
|                                            |  |                        |       |  |      |  |       |      |  |  |       |  
|Other comprehensive income (loss)           |  |                        | 28    |  |      |  | 162   |      |  |  | (56   | )
|                                            |  |                        |       |  |      |  |       |      |  |  |       |  
|Total comprehensive income                  |  |                        | 454   |  |      |  | 653   |      |  |  | 295   |  
|                                            |  |                        |       |  |      |  |       |      |  |  |       |  
|Allocated to:                               |  |                        |       |  |      |  |       |      |  |  |       |  
|Equity holders of the Company               |  |                        | 196   |  |      |  | 322   |      |  |  | 142   |  
|Non-controlling interests                   |  |                        | 258   |  |      |  | 331   |      |  |  | 153   |  
|                                            |  |                        |       |  |      |  |       |      |  |  |       |  
|                                            |  |                        | 454   |  |      |  | 653   |      |  |  | 295   |  
|                                            |  |                        |       |  |      |  |       |      |  |  |       |  
|Dividends paid to non-controlling interests |  |                        | 162   |  |      |  | 116   |      |  |  | 107   |  
|                                            |  |                        |       |  |      |  |       |      |  |  |       |  

Summarized cash flow statements -



|                                                              |  |                        |      |   |      |  |      |      |  |  |      |  
|------------------------------------------------------------- |  | ---------------------- | ---- | - | ---- |  | ---- | ---- |  |  | ---- | -
|                                                              |  | Year ended December 31 |     
|                                                              |  | 2014                   |      |   | 2013 |  |      | 2012 | 
|                                                              |  | NIS in millions        |     
|Cash flows from operating activities                          |  |                        | 313  |   |      |  | 272  |      |  |  | 305  |  
|Cash flows from investing activities                          |  |                        | (482 | ) |      |  | (808 | )    |  |  | (520 | )
|Cash flows from financing activities                          |  |                        | 157  |   |      |  | 477  |      |  |  | 11   |  
|Exchange differences on balances of cash and cash equivalents |  |                        | (4   | ) |      |  | (3   | )    |  |  | 4    |  
|                                                              |  |                        |      |   |      |  |      |      |  |  |      |  
|Decrease in cash and cash equivalents                         |  |                        | (16  | ) |      |  | (62  | )    |  |  | (200 | )
|                                                              |  |                        |      |   |      |  |      |      |  |  |      |  



| | 3. | The share options of CTY outstanding as of December 31, 2014
| | -- | ------------------------------------------------------------



|                                                   |  |                                  |      |  |                |  |      |                                          |  |  |       | 
|-------------------------------------------------- |  | -------------------------------- | ---- |  | -------------- |  | ---- | ---------------------------------------- |  |  | ----- | 
|Series                                             |  | Averageexercise priceper share*) |      |  | Expirationdate |  |      | Number ofexercisableshares inthousands*) | 
|Options to plan employees and officers (2011 plan) |  |                                 | 2.68 |  |                |  | 2018 |                                          |  |  | 8,316 | 



|*) | The exercise price and exchange ratio are adjusted for right issue, dividend distribution and return of equity. As of the reporting date, 4,728 share options that are exercisable into 6,357 shares are not vested.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | In June 9, 2014, CTY completed a private offering of approximately 77.9 million shares (that constitute 15% of CTYs shares after the offering), for approximately  206.4 million (at 
2.65 per share), to CPP Investment Board European Holdings S.àr.l (CPPIBEH), a wholly-owned subsidiary of the Canada Pension Plan Investment Board, (the Private Offering).
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In July, 2014 CTY completed a rights issuance to its shareholders of approximately 74.2 million shares at a price of  2.65 per
share, for an aggregate amount of approximately  196.5 million (the Rights Issuance). The Company purchased as part of the Right Issuance approximately 33.0 million shares in consideration for  87.6 million
(NIS 411 million).

Following the closing of the Private Offering and the rights issuance, the Companys interest in CTY
decreased to 42.2%. Since the Company remained in effective control over CTY, the Company recognized an equity decrease at an amount of NIS 13 million that was recognized in capital reserves.



F-48



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 9: | - INVESTMENTS IN INVESTEES (Cont.)
|------- | ----------------------------------



| | 5. | During October 2014, the Company purchased 3.5 million CTY shares in consideration for  8.8 million (NIS 42 million) in the stock exchange. As a result of the purchase, the Companys interest in CTY
increased to 42.8% and the Company recognized an equity increase at an amount of NIS 3 million which was recognized in capital reserves.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | g. | Investment in U. Dori Ltd. (Dori Group)
| | -- | -----------------------------------------

Dori Group, a public company listed
on the Tel-Aviv Stock Exchange and primarily engaged in the construction and development (as an initiator and as a contractor) primarily of residential projects in Israel and in Central-Eastern Europe, inter alia, through 59.7% interest in the
shares of U. Dori construction Ltd. (Dori Construction) a public company listed for trade on the Tel Aviv Stock Exchange. Dori Group also holds indirectly 11.25% of Dorad Energy Ltd. that operates a private power station for the
production of electricity.

As of December 31, 2014, Gazit Israel (Pituach) Ltd. (Gazit Development) holds 84.9% of the share capital
of Dori Group and consolidates Dori Group in its financial statements. The Companys share of Gazit Developments ownership of Dori Group is 71.9%. The market price of Dori Group share as of the reporting date was NIS 0.32. The number
of Dori Groups outstanding shares as of the reporting date is 234.5 million.

As part of the process of preparing the financial
statements of Dori Construction for the second quarter of 2014 indications of a material deviation in the estimates of anticipated revenues and costs of the projects of Dori Construction were found and were amended by a restatement process which was
reported in the Companys financial statement of 2013 that were republished on September 19, 2014.

As of the reporting date Dori
Construction has a capital deficiency attributable to its equity holders of NIS 272 million.

In August, 2014 the board of directors of the
Company approved to grant a loan to Gazit Development up to NIS 200 million for presenting a scheme for investment in Doris Group equity. On September 28, 2014 Gazit Development completed the scheme for investment in Dori Group that
was approved by the general meeting of Dori Group and included:



| | a. | The issuance of equity in the amount of NIS 130 million by means of a private placement of Dori Group shares to Gazit Development, whereby, following the allocation, Gazit Developments holding interest
(directly and indirectly) in Dori Group amounted to 85% of Dori Groups share capital.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | The assignment to Dori Group of the credit lines that Gazit Development had granted to Dori Construction between February 2014 and June 2014 in the total amount of NIS 250 million (the Assigned Credit
Lines), in return for the issuance of a perpetual capital note by Dori Group to Gazit Development, with a par value amount of NIS 250 million. The capital note bears interest, which will only be payable if Dori Group should decide to
distribute a dividend. Up to one half of the capital note will be convertible into shares of Dori Group, under certain conditions.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. | Dori Group undertook to offer Dori Construction that one half of the Assigned Credit Lines will be converted into shares of Dori Construction.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------



| | d. | Gazit Development will grant Dori Group a loan in the amount of NIS 70 million, which may only be drawn on if and insofar as Dori Group will close a purchase offer for the debentures (Series A) of Dori
Construction, in any manner; Gazit Development may waive the said condition at its sole discretion. As of the reporting date, the aforementioned loan was not drawn.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | e. | Dori Group undertook to use the funds, which it will obtain from the private placement and the drawdown of loans from the credit facility, mainly to strengthen the capital structure, the liquidity and the cash flow of
Dori Construction, including the provision of liquid means to Dori Construction for its current needs.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In November 2014, the
Company granted a credit facility to Gazit Development in amounts of NIS 50 million for the purpose of granting a loan to Dori Group to be used for Dori Constructions current operations. As of the reporting date, NIS 25 million of
the aforementioned credit facility was utilized by Gazit Development and as of the date of approval of the financial statement NIS 50 million was utilized. In March 2015, the Companys board of directors approved the increase of the
aforementioned credit facility by NIS 90 million to total amount of NIS 140 million.



F-49



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 9: | - INVESTMENTS IN INVESTEES (Cont.)
|------- | ----------------------------------



| | h. | Supplementary information for other operating subsidiaries owned by the Company:
| | -- | --------------------------------------------------------------------------------



|                                          |  |                         |         |  |                                            |  |       |                          |  |  |       |  |  |  |       | 
|----------------------------------------- |  | ----------------------- | ------- |  | ------------------------------------------ |  | ----- | ------------------------ |  |  | ----- |  |  |  | ----- | 
|December 31, 2014                         |  | Country ofincorporation |         |  | Holding stake inequity and invoting rights |  |       | Investmentcarryingamount |  |  | Loans | 
|                                          |  |                         |         |  | %                                          |  |       | NIS in millions          | 
|ProMed Properties Inc.                    |  |                         | USA     |  |                                            |  | 100   |                          |  |  | 139   |  |  |  |      | 
|Gazit Germany Beteilingungs GmbH & Co. KG |  |                         | Germany |  |                                            |  | 100   |                          |  |  | 175   |  |  |  |      | 
|Gazit Globe Israel (Development) Ltd. *)  |  |                         | Israel  |  |                                            |  | 84.65 |                          |  |  | 420   |  |  |  | 1,728 | 
|Gazit Brazil Ltd.                         |  |                         | Brazil  |  |                                            |  | 100   |                          |  |  | 882   |  |  |  |      | 



|                                          |  |                         |         |  |                                            |  |      |                          |  |  |       |  |  |  |       | 
|----------------------------------------- |  | ----------------------- | ------- |  | ------------------------------------------ |  | ---- | ------------------------ |  |  | ----- |  |  |  | ----- | 
|December 31, 2013                         |  | Country ofincorporation |         |  | Holding stake inequity and invoting rights |  |      | Investmentcarryingamount |  |  | Loans | 
|                                          |  |                         |         |  | %                                          |  |      | NIS in millions          | 
|ProMed Properties Inc.                    |  |                         | USA     |  |                                            |  | 100  |                          |  |  | 703   |  |  |  |      | 
|Gazit Germany Beteilingungs GmbH & Co. KG |  |                         | Germany |  |                                            |  | 100  |                          |  |  | 261   |  |  |  |      | 
|Gazit Globe Israel (Development) Ltd.     |  |                         | Israel  |  |                                            |  | 82.5 |                          |  |  | 559   |  |  |  | 1,741 | 
|Gazit Brazil Ltd.                         |  |                         | Brazil  |  |                                            |  | 100  |                          |  |  | 435   |  |  |  |      | 



| | *) | In November 2014, Gazit Development allocated 1.7 million warrants that are convertible into shares of Gazit Development, for no consideration, by means of a rights offering. The warrants are exercisable over three
years from the date of their issuance, at an exercise price of NIS 18.29 per share, which bears interest at a rate of 6.7%, linked to the CPI and subject to adjustments. The Company exercised all the warrants allocated to it immediately after
the allocation in a total amount of NIS 23.5 million, against a reduction in the outstanding loans granted to Gazit Development by the Company and the non controlling interests exercised approximately 232 thousands warrants for consideration of
NIS 4 million. There was no material change in the holding interest in Gazit Development and there was no material change in the Companys shareholders equity due to this rights issuance and warrants exercise.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In August 2014, Gazit Development allocated 3.0 million warrants that are convertible into shares of Gazit Development, for no
consideration, by means of a rights issuance. The warrants are exercisable over three years from the issuance, at an exercise price of NIS 21.34 per share, which bears interest at a rate of 6.7%, linked to the CPI and subject to adjustments.
The Company exercised all of the warrants allocated to it immediately after the allocation in a total consideration amount of NIS 48.4 million, against a reduction in the outstanding loans granted to Gazit Development by the Company, and
increased its interests in Gazit Development to a total of 84.65% of Gazit Developments share capital (75% on a fully diluted basis). There was no material change in the Companys shareholders equity due this rights issuance.



| | i. | The applicable laws in some of the investees jurisdictions contain customary terms regarding payments of dividends, interest and other distributions to equity holders by such investee. These
conditions include, inter alia, a requirement that the investee have sufficient accumulated earnings or that certain solvency requirements are met before a distribution can be made. As of December 31, 2014 the Group does not consider any of
these customary conditions to be a significant restriction.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | j. | For pledging of part of the shares of investees to secure Group liabilities, refer to Note 29.
| | -- | ----------------------------------------------------------------------------------------------



F-50



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 10:- OTHER INVESTMENTS, LOANS AND RECEIVABLES



| | a. | Composition
| | -- | -----------



|                                               |  |                 |     |  |      |  |     | 
|---------------------------------------------- |  | --------------- | --- |  | ---- |  | --- | 
|                                               |  | December 31     |    
|                                               |  | 2014            |     |  | 2013 | 
|                                               |  | NIS in millions |    
|Loan held to maturity                          |  |                 |    |  |      |  | 268 | 
|Loans to co-owners in development projects (1) |  |                 | 312 |  |      |  | 225 | 
|Finance lease receivable                       |  |                 | 86  |  |      |  | 81  | 
|Receivables for construction contracts (2)     |  |                 | 71  |  |      |  |    | 
|Other non-current deposits (3)                 |  |                 | 40  |  |      |  | 50  | 
|Governmental institutions                      |  |                 | 29  |  |      |  | 79  | 
|Tenants and Others                             |  |                 | 27  |  |      |  | 13  | 
|                                               |  |                 |     |  |      |  |     | 
|                                               |  |                 | 565 |  |      |  | 721 | 
|Less - current maturities                      |  |                 | 1   |  |      |  | 57  | 
|                                               |  |                 |     |  |      |  |     | 
|                                               |  |                 | 564 |  |      |  | 659 | 
|                                               |  |                 |     |  |      |  |     | 



|(1) | Includes Loans and mortgages amounted to C$ 92 million (NIS 309 million) provided by FCR that are secured by interests in investment properties or shares of entities owning investment properties. The loans
bear an average annual effective interest rate of 5.9% which mature in the years 2015-2025.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes civil construction works for an electric station project in the area of Ashkelon in relation to Dorad Energy Ltd. that is in legal process which the Group expect to collect.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Includes a non-interest bearing deposit of approximately U.S.$ 5 million (approximately NIS 19 million), used to secure aircraft lease payments by a subsidiary (refer to Note 26a(4)) and deposits to
ensure mortgages payments and others that bear annual interest rate of up to 0.05%.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | Maturity dates
| | -- | --------------



|                                    |  |                 |     |  |      |  |     | 
|----------------------------------- |  | --------------- | --- |  | ---- |  | --- | 
|                                    |  | December 31     |    
|                                    |  | 2014            |     |  | 2013 | 
|                                    |  | NIS in millions |    
|Year 1 - current maturities         |  |                 | 1   |  |      |  | 57  | 
|Year 1  used for asset acquisition |  |                 |    |  |      |  | 214 | 
|Year 2                              |  |                 | 69  |  |      |  | 91  | 
|Year 3                              |  |                 | 205 |  |      |  | 53  | 
|Year 4                              |  |                 | 1   |  |      |  | 106 | 
|Year 5                              |  |                 | 99  |  |      |  | 3   | 
|Year 6 and thereafter               |  |                 | 189 |  |      |  | 189 | 
|Undetermined                        |  |                 | 1   |  |      |  | 3   | 
|                                    |  |                 |     |  |      |  |     | 
|                                    |  |                 | 565 |  |      |  | 716 | 
|                                    |  |                 |     |  |      |  |     | 



| | c. | As for the linkage basis of other investments, loans and receivable, refer to Note 37.
| | -- | --------------------------------------------------------------------------------------



F-51



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 11:- AVAILABLE-FOR-SALE FINANCIAL ASSETS



| |  | Composition
| |  | -----------



|                                                |  |                 |     |  |      |  |     | 
|----------------------------------------------- |  | --------------- | --- |  | ---- |  | --- | 
|                                                |  | December 31     |    
|                                                |  | 2014            |     |  | 2013 | 
|                                                |  | NIS in millions |    
|Securities traded in Europe                     |  |                 | 180 |  |      |  | 120 | 
|Shares traded in the U.S. and Canada            |  |                 | 7   |  |      |  | 9   | 
|Participating units in private equity funds (1) |  |                 | 383 |  |      |  | 315 | 
|                                                |  |                 |     |  |      |  |     | 
|                                                |  |                 | 570 |  |      |  | 444 | 
|                                                |  |                 |     |  |      |  |     | 
|Classified within current assets                |  |                 | 7   |  |      |  | 9   | 
|Classified within non-current assets            |  |                 | 383 |  |      |  | 435 | 
|                                                |  |                 |     |  |      |  |     | 
|                                                |  |                 | 570 |  |      |  | 444 | 
|                                                |  |                 |     |  |      |  |     | 



| | (1) | In August 2007, the Company entered into an investment agreement with HIREF International LLC, an Indian real estate investment fund registered in Mauritius (the Fund). The Fund was established at the
initiative and under the management of the Housing Development Finance Corporation Limited (HDFC) group, one of the largest financial institutions in India in which the subsidiary is one of four anchor investors in the Fund. According to
the Funds articles of incorporation and investment agreements, the Fund will invest, directly and indirectly, in real estate companies that operate in the development and construction sectors, as well as in other synergistic fields. The Fund
investment commitments amounts to of U.S.$ 750 million and the Company portion is approximately U.S.$ 110 million. The Fund has a term of nine years, with two one-year optional term extensions. As of December 31, 2014, the
Companys outstanding investment commitment amounted to approximately U.S.$ 15 million (approximately NIS 57 million). As of December 31, 2014 approximately U.S.$ 17 million (NIS 65 million) were paid cumulatively to the Company
resulting from projects realization by the Fund).
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of December 31, 2014, the Fund has investment agreements for 12
projects with a total investment of U.S.$ 507 million and as of the reporting date it was fully invested.

The fair value of the
investments is derived from the Funds Net Asset Value as presented in the Funds financial statements prepared according to IFRS, and amounts to NIS 356 million and NIS 303 million as of December 31, 2014 and 2013,
respectively. The exposure of the investments fair value to market inputs results from the currency exchange of Indian Rupi and U.S. dollar. An increase of 5% in the exchange rate will decrease the investment fair value in NIS 17 million,
and vice versa.



F-52



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 12:- INVESTMENT PROPERTY



| | a. | Movement
| | -- | --------



|                                                         |  |                 |        |   |        |  |        |  
|-------------------------------------------------------- |  | --------------- | ------ | - | ------ |  | ------ | -
|                                                         |  | December 31     |       
|                                                         |  | 2014            |        |   | *)2013 | 
|                                                         |  | NIS in millions |       
|Balance as of January 1                                  |  |                 | 53,857 |   |        |  | 56,903 |  
|Acquisitions and capital expenditures                    |  |                 | 2,790  |   |        |  | 2,479  |  
|Transfer from investment property under development, net |  |                 | 1,114  |   |        |  | 367    |  
|Dispositions                                             |  |                 | (3,298 | ) |        |  | (2,155 | )
|Valuation gains, net                                     |  |                 | 1,021  |   |        |  | 992    |  
|Foreign exchange differences                             |  |                 | 2,110  |   |        |  | (4,729 | )
|                                                         |  |                 |        |   |        |  |        |  
|Balance as of December 31                                |  |                 | 57,594 |   |        |  | 53,857 |  
|                                                         |  |                 |        |   |        |  |        |  
|Composition:                                             |  |                 |        |   |        |  |        |  
|Investment property                                      |  |                 | 56,646 |   |        |  | 53,309 |  
|Assets classified as held for sale (Note 8)              |  |                 | 948    |   |        |  | 548    |  
|                                                         |  |                 |        |   |        |  |        |  
|                                                         |  |                 | 57,594 |   |        |  | 53,857 |  
|                                                         |  |                 |        |   |        |  |        |  



|*) | Reclassified to match the current presentation method.
|-- | ------------------------------------------------------



| | b. | Investment properties primarily consist of shopping centers, other retail sites and medical office buildings, including properties under redevelopment. Investment properties are stated at fair value, which has been
determined based on valuations performed by external independent appraisers with recognized professional expertise and vast experience as to the location and category of the property being valued (43.7% as of December 31, 2014 and 53.3% during
2014 - in fair value terms) as well as by the Companys management and internal professional appraisers. As of the reporting date fair value has been determined based on market conditions, with reference to recent observable real estate
transactions involving properties in similar condition and location, as well as using valuations techniques such as the Direct Income Capitalization Method and the Discounted Cash Flow Method (DCF), in accordance with International
Valuation Standards (IVS), as set out by the International Valuation Standards Committee (IVSC) or in accordance with the Royal Institution of Charted Surveyors (the RICS) Valuation standards (the Red Book) published by the
RICS, in addition to the local rules of valuation in the territories in which the Group operates. The valuations of properties that were appraised by income method or discounted cash flows are based on the estimated future cash flows generated by
the property from current lease contracts, taking into account the inherent risk of the cash flow as well as by using estimations for potential rent contracts. In determining the propertys fair values the appraisers used discount rates based
on the nature and designation of the property, its location and the quality of the occupying tenants.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The investment
properties are measured at level 3 according to the fair value hierarchy. In 2014, there were no transfers of investment property from level 3 and to level 3.



F-53



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 12:- INVESTMENT PROPERTY (Cont.)



| | c. | Following are the average capitalization rates and the average monthly market rent per square meter implied in the valuations of the Groups properties in its principal areas of operations:
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                               |  |       |      |  |        |  |     |                           |  |  |        |  |  |  |       | 
|-------------------------------------------------------------- |  | ----- | ---- |  | ------ |  | --- | ------------------------- |  |  | ------ |  |  |  | ----- | 
|                                                               |  | USA   |      |  | Canada |  |     | Northernand WesternEurope |  |  | Israel | 
|Average cap rates                                              |  | %     |     
|December 31, 2014                                              |  |       | 6.1  |  |        |  | 5.8 |                           |  |  | 6.1    |  |  |  | 7.2   | 
|December 31, 2013                                              |  |       | 6.5  |  |        |  | 5.9 |                           |  |  | 6.3    |  |  |  | 7.5   | 
|                                                               |  |       |      | 
|Monthly average market rent per square meters (including fees) |  | U.S.$ |      |  | C$     |  |     | EUR                       |  |  | NIS    | 
|December 31, 2014                                              |  |       | 19.5 |  |        |  |    |                           |  |  | 24.5   |  |  |  | 130.0 | 
|December 31, 2013                                              |  |       | 17.8 |  |        |  |    |                           |  |  | 24.5   |  |  |  | 130.0 | 

The valuation of the Groups investment properties in Canada is mainly through the income method,
therefore the impact of the change in monthly average market rent per square meter is minor and not disclosed above.

Market rent includes
management fees, excluding the U.S.$ information, in which it is customary to refer to base rent as the relevant market input.

Following
is the sensitivity analysis of the fair value of investment properties (effect on pre-tax income (loss)) for the main parameters that were used in the investment properties valuations in its principal areas of operations:



|                                                    |  |                 |      |   |        |  |       |                           |  |  |        |   |  |  |     |  
|--------------------------------------------------- |  | --------------- | ---- | - | ------ |  | ----- | ------------------------- |  |  | ------ | - |  |  | --- | -
|                                                    |  | USA             |      |   | Canada |  |       | Northern andWesternEurope |  |  | Israel |  
|December 31, 2014                                   |  | NIS in millions |     
|Increase of 25 basis points in capitalization rate  |  |                 | (617 | ) |        |  | (956  | )                         |  |  | (512   | ) |  |  | (81 | )
|Decrease of 25 basis point in capitalization rate   |  |                 | 670  |   |        |  | 1,042 |                           |  |  | 555    |   |  |  | 86  |  
|Increase of 5% in net operating rental income (NOI) |  |                 | 821  |   |        |  | 1,156 |                           |  |  | 649    |   |  |  | 120 |  
|Increase of 5% in average market rent               |  |                 | 967  |   |        |  |      |                           |  |  | 945    |   |  |  | 134 |  



| | d. | Investment properties under lease
| | -- | ---------------------------------

The Group has 14 properties with aggregate fair value
of NIS 2.3 billion held under an operating lease (2013 - 15 properties valued at NIS 2.3 billion) and 12 properties with aggregate fair value of NIS 2.2 billion held under a finance lease
(2013 - 10 properties valued at NIS 2.0 billion).

As for liabilities relating to
lease agreements of investment property, refer to Note 23.



| | e. | As for charges, refer to Note 29.
| | -- | ---------------------------------



F-54



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 13:- INVESTMENT PROPERTY UNDER DEVELOPMENT



| | a. | Movement and composition
| | -- | ------------------------



|                                      |  |                 |        |   |         |  |       |  
|------------------------------------- |  | --------------- | ------ | - | ------- |  | ----- | -
|                                      |  | December 31     |       
|                                      |  | 2014            |        |   | *) 2013 | 
|                                      |  | NIS in millions |       
|Balance as of January 1               |  |                 | 2,542  |   |         |  | 2,850 |  
|Acquisitions and development costs    |  |                 | 536    |   |         |  | 597   |  
|Transfers to investment property, net |  |                 | (1,114 | ) |         |  | (367  | )
|Transfer from inventory               |  |                 | 81     |   |         |  |      |  
|Dispositions                          |  |                 | (367   | ) |         |  | (135  | )
|Valuation gains (losses), net         |  |                 | 32     |   |         |  | (30   | )
|Foreign exchange differences          |  |                 | 30     |   |         |  | (373  | )
|                                      |  |                 |        |   |         |  |       |  
|Balance as of December 31             |  |                 | 1,740  |   |         |  | 2,542 |  
|                                      |  |                 |        |   |         |  |       |  
|Composition:                          |  |                 |        |   |         |  |       |  
|Lands held for sale (note 8)          |  |                 | 98     |   |         |  | 63    |  
|Land for future development           |  |                 | 579    |   |         |  | 968   |  
|Investment property under development |  |                 | 1,063  |   |         |  | 1,511 |  
|                                      |  |                 |        |   |         |  |       |  
|                                      |  |                 | 1,740  |   |         |  | 2,542 |  
|                                      |  |                 |        |   |         |  |       |  



|*) | Reclassified to match the current presentation method.
|-- | ------------------------------------------------------



| | b. | The fair value of investment property under development that includes shopping centers and other retail sites is determined based on market conditions, using the Residual Method based upon DCF. The fair value is
determined by the Groups management and the external independent appraisers with recognized professional expertise and vast experience as to the location and category of the property being valued, excluding properties at an amount of NIS
676 million that are measured at Cost basis. The estimated fair value is based on the expected future cash flows from the completed project using yields adjusted to reflect the relevant development risks, including construction risk and lease
up risk, that are higher than the current yields of similar completed property. The remaining estimated costs for completion are deducted from the estimated value of the completed project, as above. All estimates are based on local market conditions
existing at the reporting date.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Lands for future development are measured at fair value, using primarily the Comparative
Method (82.0% in fair value terms), i.e. based on comparison data for similar properties in the vicinity with similar uses, applying necessary adjustments (for location, size, etc.), and in cases where comparison transactions are not available,
using the Residual Method as above, based on market yields adjusted as applicable.

The investment property under development and lands are
measured at level 3 according to the fair value hierarchy. In 2014 there were no transfers of investment property under development and lands from level 3 and to level 3.

As of December 31, 2014, the fair value of approximately 45.2% of the investment property under development and lands has been assessed by
independent.

External appraisers (approximately 63.2% during 2014), and the remainder was performed internally using standard valuation
techniques, inter alia, based on market inputs received from the independent appraisers.



F-55



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 13:- INVESTMENT PROPERTY UNDER DEVELOPMENT (Cont.)



| | c. | During 2014, the Group capitalized to property under development borrowing costs amounting to NIS 119 million (in 2013 - NIS 95 million) and direct incremental costs, including payroll expenses, amounting to
NIS 21 million (in 2013 - NIS 21 million).
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | d. | Below is a sensitivity analysis of the fair value of investment property under development, excluding projects and lands that were appraised by either Comparative Method or carried at Cost (impact on pre-tax income
(loss)):
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                            |  |                 |   |  |        |  |     |                           |  |  |        |   |  |  |    |  
|------------------------------------------- |  | --------------- | - |  | ------ |  | --- | ------------------------- |  |  | ------ | - |  |  | -- | -
|                                            |  | USA             |   |  | Canada |  |     | Northern andWesternEurope |  |  | Israel |  
|December 31, 2014                           |  | NIS in millions |  
|Increase of 5% in expected project cost     |  |                 |  |  |        |  | (28 | )                         |  |  | (4     | ) |  |  | (4 | )
|Increase of 5% in expected NOI              |  |                 |  |  |        |  |    |                           |  |  | 17     |   |  |  | 6  |  
|Increase of 25 basis points in the cap rate |  |                 |  |  |        |  |    |                           |  |  | (12    | ) |  |  | (3 | )
|Decrease of 25 basis points in the cap rate |  |                 |  |  |        |  |    |                           |  |  | 13     |   |  |  | 4  |  



| | e. | As of December 31, 2014, the group owns 6 land plots (2013-7 land plots) with a total value of NIS 386 million (2013 - NIS 259 million).
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------



| | f. | As for charges, refer to Note 29.
| | -- | ---------------------------------

NOTE 14:- FIXED ASSETS, NET



| | a. | Composition
| | -- | -----------



|                                                              |  |                 |     |  |      |  |     | 
|------------------------------------------------------------- |  | --------------- | --- |  | ---- |  | --- | 
|                                                              |  | December 31     |    
|                                                              |  | 2014            |     |  | 2013 | 
|                                                              |  | NIS in millions |    
|Buildings                                                     |  |                 | 31  |  |      |  | 41  | 
|Construction equipment                                        |  |                 | 38  |  |      |  | 44  | 
|Other (mainly lease hold improvement, computers and software) |  |                 | 102 |  |      |  | 75  | 
|                                                              |  |                 |     |  |      |  |     | 
|                                                              |  |                 | 171 |  |      |  | 160 | 
|                                                              |  |                 |     |  |      |  |     | 



| | b. | Regarding depreciation expenses recognized in profit or loss, refer to Note 32c and 33.
| | -- | ---------------------------------------------------------------------------------------



| | c. | As for charges, refer to Note 29.
| | -- | ---------------------------------



F-56



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 15:- GOODWILL AND OTHER INTANGIBLE ASSETS

Composition



|             |  |                 |     |  |      |  |     | 
|------------ |  | --------------- | --- |  | ---- |  | --- | 
|             |  | December 31     |    
|             |  | 2014            |     |  | 2013 | 
|             |  | NIS in millions |    
|Goodwill (1) |  |                 | 97  |  |      |  | 90  | 
|Other (2)    |  |                 | 6   |  |      |  | 16  | 
|             |  |                 |     |  |      |  |     | 
|             |  |                 | 103 |  |      |  | 106 | 
|             |  |                 |     |  |      |  |     | 



|(1) | Goodwill has been predominantly recognized due to the acquisition of non-controlling interests in FCR and EQY, and through the Groups participation in share offerings, and business combination in EQY. The goodwill
was allocated to the cash generating units and for each, the recoverable amount was determined as of the reporting date. In respect of FCR and EQY the recoverable amount is determined based on the market price of the shares.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The carrying amount of goodwill by cash-generating units:



|                  |  |                 |    |  |     |  |   |     |  |  |       |  |  |  |    | 
|----------------- |  | --------------- | -- |  | --- |  | - | --- |  |  | ----- |  |  |  | -- | 
|                  |  | EQY             |    |  | CTY |  |   | FCR |  |  | Total | 
|                  |  | NIS in millions |   
|December 31, 2014 |  |                 | 53 |  |     |  | 5 |     |  |  | 39    |  |  |  | 97 | 
|                  |  |                 |    |  |     |  |   |     |  |  |       |  |  |  |    | 
|December 31, 2013 |  |                 | 47 |  |     |  | 5 |     |  |  | 38    |  |  |  | 90 | 
|                  |  |                 |    |  |     |  |   |     |  |  |       |  |  |  |    | 



| | (2) | In 2013 included brand name that was amortized on a straight line basis over 10 years. In 2014 the brand name was fully impaired at amount of NIS 10 million.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 16:- CREDIT FROM BANKS AND OTHERS



| | a. | Composition
| | -- | -----------



|                                               |  |                 |  |                             |      |  |                 |      |     |  |  |  |     | 
|---------------------------------------------- |  | --------------- |  | --------------------------- | ---- |  | --------------- | ---- | --- |  |  |  | --- | 
|                                               |  |                 |  | Weightedaverageinterestrate |      |  |                 |      |     |  | 
|                                               |  |                 |  | December2014                |      |  | December 31     |     
|                                               |  |                 |  |                             | 2014 |  |                 | 2013 |    
|                                               |  | Denomination    |  | %                           |      |  | NIS in millions |     
|Credit from banks:                             |  | CPI Linked NIS  |  |                             | 3.9  |  |                 |      | 3   |  |  |  | 85  | 
|                                               |  | Unlinked NIS *) |  |                             | 3.3  |  |                 |      | 215 |  |  |  | 79  | 
|                                               |  | U.S. $          |  |                             |     |  |                 |      |    |  |  |  | 3   | 
|Credit from financial institutions and others: |  |  *)            |  |                             | 0.6  |  |                 |      | 323 |  |  |  | 4   | 
|                                               |  | C$              |  |                             | 1.0  |  |                 |      | 12  |  |  |  | 86  | 
|                                               |  |                 |  |                             |      |  |                 |      |     |  |  |  |     | 
|Total short-term credit                        |  |                 |  |                             |      |  |                 |      | 553 |  |  |  | 257 | 
|                                               |  |                 |  |                             |      |  |                 |      |     |  |  |  |     | 



|*) | Floating interest.
|-- | ------------------



|b. | As for charges, see Note 29.
|-- | ----------------------------



F-57



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 17:- CURRENT MATURITIES OF NON-CURRENT LIABILITIES

Composition



|                                              |  |              |                 |  |             |  |       |      |  |  |       | 
|--------------------------------------------- |  | ------------ | --------------- |  | ----------- |  | ----- | ---- |  |  | ----- | 
|                                              |  |              |                 |  | December 31 | 
|                                              |  | Refer toNote |                 |  | 2014        |  |       | 2013 | 
|                                              |  |              | NIS in millions | 
|Current maturities of debentures              |  |              | 20              |  |             |  | 1,605 |      |  |  | 839   | 
|Current maturities of non-current liabilities |  |              | 22              |  |             |  | 1,106 |      |  |  | 2,075 | 
|                                              |  |              |                 |  |             |  |       |      |  |  |       | 
|                                              |  |              |                 |  |             |  | 2,711 |      |  |  | 2,914 | 
|                                              |  |              |                 |  |             |  |       |      |  |  |       | 

NOTE 18:- TRADE PAYABLES



| | a. | Composition
| | -- | -----------



|                                   |  |                 |     |  |      |  |     | 
|---------------------------------- |  | --------------- | --- |  | ---- |  | --- | 
|                                   |  | December 31     |    
|                                   |  | 2014            |     |  | 2013 | 
|                                   |  | NIS in millions |    
|Open accounts and accrued expenses |  |                 | 831 |  |      |  | 790 | 
|Checks payable                     |  |                 | 69  |  |      |  | 150 | 
|                                   |  |                 |     |  |      |  |     | 
|                                   |  |                 | 900 |  |      |  | 940 | 
|                                   |  |                 |     |  |      |  |     | 



| | b. | Trade payables do not bear interest. As for linkage basis of trade payables, see Note 37.
| | -- | -----------------------------------------------------------------------------------------

NOTE 19:-
OTHER ACCOUNTS PAYABLE



| | a. | Composition
| | -- | -----------



|                                              |  |                 |       |  |      |  |       | 
|--------------------------------------------- |  | --------------- | ----- |  | ---- |  | ----- | 
|                                              |  | December 31     |      
|                                              |  | 2014            |       |  | 2013 | 
|                                              |  | NIS in millions |      
|Interest payable                              |  |                 | 427   |  |      |  | 405   | 
|Government institutions                       |  |                 | 91    |  |      |  | 84    | 
|Deferred income and deposits from tenants     |  |                 | 177   |  |      |  | 166   | 
|Employees                                     |  |                 | 58    |  |      |  | 58    | 
|Dividend payable to non-controlling interests |  |                 | 85    |  |      |  | 77    | 
|Payables for real estate transactions         |  |                 | 120   |  |      |  | 149   | 
|Warranty and loss provision                   |  |                 | 75    |  |      |  | 38    | 
|Commitment to purchase marketable securities  |  |                 | 42    |  |      |  | 26    | 
|Accrued expenses                              |  |                 | 130   |  |      |  | 97    | 
|Other payables                                |  |                 | 57    |  |      |  | 172   | 
|                                              |  |                 |       |  |      |  |       | 
|                                              |  |                 | 1,262 |  |      |  | 1,272 | 
|                                              |  |                 |       |  |      |  |       | 



| | b. | As for linkage basis of other accounts payable, see Note 37.
| | -- | ------------------------------------------------------------



F-58



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 20:- DEBENTURES



| | a. | Composition
| | -- | -----------



|                                                      |  |      |    |  |              |             |                           |  |       |                     |  |  |                       |  |  |                 |      |  |  |  |        |  |  |  |        | 
|----------------------------------------------------- |  | ---- | -- |  | ------------ | ----------- | ------------------------- |  | ----- | ------------------- |  |  | --------------------- |  |  | --------------- | ---- |  |  |  | ------ |  |  |  | ------ | 
|                                                      |  |      |    |  |              |             | Outstandingparvalueamount |  |       | NominalInterestrate |  |  | Effectiveinterestrate |  |  | Carrying amount |     
|                                                      |  |      |    |  |              |             |                           |  |       | December 31         | 
|                                                      |  |      |    |  |              |             |                           |  |       | 2014                |  |  | 2013                  | 
|                                                      |  | item |    |  | Denomination |             | NIS inmillions            |  |       | %                   |  |  | %                     |  |  | NIS in millions |     
|The Company:                                          |  |      |    |  |              |             |                           |  |       |                     |  |  |                       |  |  |                 |      |  |  |  |        |  |  |  |        | 
|Debentures (series A)                                 |  |      |    |  |              | U.S.$       |                           |  | 164   |                     |  |  | 6.50                  |  |  |                 | 6.18 |  |  |  | 132    |  |  |  | 158    | 
|Debentures (series B)                                 |  |      |    |  |              |  **)       |                           |  | 114   |                     |  |  | 2.17                  |  |  |                 | 2.27 |  |  |  | 98     |  |  |  | 149    | 
|Debentures (series C) *)                              |  |      |    |  |              | Israeli CPI |                           |  | 766   |                     |  |  | 4.95                  |  |  |                 | 4.88 |  |  |  | 954    |  |  |  | 1,115  | 
|Debentures (series D) *)                              |  |      |    |  |              | Israeli CPI |                           |  | 2,069 |                     |  |  | 5.10                  |  |  |                 | 5.02 |  |  |  | 2,463  |  |  |  | 2,466  | 
|Debentures (series E) *)                              |  |      |    |  |              | NIS **)     |                           |  | 556   |                     |  |  | 0.95                  |  |  |                 | 1.45 |  |  |  | 548    |  |  |  | 545    | 
|Debentures (series F) *)                              |  |      |    |  |              | NIS         |                           |  | 570   |                     |  |  | 6.40                  |  |  |                 | 6.73 |  |  |  | 567    |  |  |  | 565    | 
|Debentures (series I) *)                              |  |      |    |  |              | Israeli CPI |                           |  | 1,223 |                     |  |  | 5.30                  |  |  |                 | 5.58 |  |  |  | 1,441  |  |  |  | 1,444  | 
|Debentures (series J)                                 |  |      | b4 |  |              | Israeli CPI |                           |  | 727   |                     |  |  | 6.50                  |  |  |                 | 5.76 |  |  |  | 847    |  |  |  | 861    | 
|Debentures (series K)*)                               |  |      | b1 |  |              | Israeli CPI |                           |  | 2,653 |                     |  |  | 5.35                  |  |  |                 | 4.35 |  |  |  | 2,937  |  |  |  | 2,961  | 
|Debentures (Series L) *)                              |  |      | b2 |  |              | Israeli CPI |                           |  | 865   |                     |  |  | 4.00                  |  |  |                 | 3.82 |  |  |  | 881    |  |  |  | 446    | 
|Non-listed debentures of a wholly owned subsidiary *) |  |      |    |  |              | Israeli CPI |                           |  | 17    |                     |  |  | 4.57                  |  |  |                 | 4.98 |  |  |  | 20     |  |  |  | 40     | 
|Consolidated companies:                               |  |      |    |  |              |             |                           |  |       |                     |  |  |                       |  |  |                 |      |  |  |  |        |  |  |  |        | 
|EQY debentures                                        |  |      |    |  |              | U.S.$       |                           |  | 2,843 |                     |  |  | 5.02                  |  |  |                 | 5.07 |  |  |  | 2,831  |  |  |  | 2,522  | 
|FCR debentures                                        |  |      | c  |  |              | C$          |                           |  | 7,255 |                     |  |  | 4.71                  |  |  |                 | 4.81 |  |  |  | 7,218  |  |  |  | 6,079  | 
|CTY debentures                                        |  |      | d  |  |              |            |                           |  | 4,670 |                     |  |  | 3.38                  |  |  |                 | 3.54 |  |  |  | 4,619  |  |  |  | 3,137  | 
|Dori Group debentures                                 |  |      |    |  |              | NIS **)     |                           |  | 67    |                     |  |  | 5.12                  |  |  |                 | 5.97 |  |  |  | 66     |  |  |  | 100    | 
|Dori Construction debentures                          |  |      | e1 |  |              | Israeli CPI |                           |  | 331   |                     |  |  | 5.53                  |  |  |                 | 5.21 |  |  |  | 335    |  |  |  | 389    | 
|Dori Group debentures                                 |  |      | e2 |  |              | Israeli CPI |                           |  | 79    |                     |  |  | 5.00                  |  |  |                 | 4.69 |  |  |  | 81     |  |  |  | 93     | 
|                                                      |  |      |    |  |              |             |                           |  |       |                     |  |  |                       |  |  |                 |      |  |  |  |        |  |  |  |        | 
|                                                      |  |      |    |  |              |             |                           |  |       |                     |  |  |                       |  |  |                 |      |  |  |  | 26,038 |  |  |  | 23,070 | 
|Less - current maturities of debentures               |  |      |    |  |              |             |                           |  |       |                     |  |  |                       |  |  |                 |      |  |  |  | 1,605  |  |  |  | 839    | 
|                                                      |  |      |    |  |              |             |                           |  |       |                     |  |  |                       |  |  |                 |      |  |  |  |        |  |  |  |        | 
|                                                      |  |      |    |  |              |             |                           |  |       |                     |  |  |                       |  |  |                 |      |  |  |  | 24,433 |  |  |  | 22,231 | 
|                                                      |  |      |    |  |              |             |                           |  |       |                     |  |  |                       |  |  |                 |      |  |  |  |        |  |  |  |        | 



|*) | As for cross - currency swap transactions entered in respect of part of the debentures, see Note 37d.
|-- | -----------------------------------------------------------------------------------------------------

|**) | Floating interest.
|--- | ------------------

Maturity dates



|                          |  |                   |       |  |        |  |       |        |  |  |        |  |  |        |       |  |                     |  |       |       |  |  |        |  |  |  |        | 
|------------------------- |  | ----------------- | ----- |  | ------ |  | ----- | ------ |  |  | ------ |  |  | ------ | ----- |  | ------------------- |  | ----- | ----- |  |  | ------ |  |  |  | ------ | 
|                          |  | December 31, 2014 |      
|                          |  | Year1             |       |  | Year 2 |  |       | Year 3 |  |  | Year 4 |  |  | Year 5 |       |  | Year 6andthereafter |  |       | Total | 
|Denomination              |  | NIS in millions   |      
|NIS                       |  |                   | 349   |  |        |  | 284   |        |  |  | 548    |  |  |        |      |  |                     |  |      |       |  |  |       |  |  |  | 1,181  | 
|NIS linked to Israeli CPI |  |                   | 747   |  |        |  | 657   |        |  |  | 233    |  |  |        | 1,438 |  |                     |  | 1,573 |       |  |  | 5,311  |  |  |  | 9,959  | 
|U.S.$                     |  |                   | 460   |  |        |  | 453   |        |  |  | 893    |  |  |        |      |  |                     |  |      |       |  |  | 1,157  |  |  |  | 2,963  | 
|C$                        |  |                   |      |  |        |  |      |        |  |  | 840    |  |  |        | 504   |  |                     |  | 504   |       |  |  | 5,370  |  |  |  | 7,218  | 
|                         |  |                   | 49    |  |        |  | 49    |        |  |  | 652    |  |  |        |      |  |                     |  |      |       |  |  | 3,967  |  |  |  | 4,717  | 
|                          |  |                   |       |  |        |  |       |        |  |  |        |  |  |        |       |  |                     |  |       |       |  |  |        |  |  |  |        | 
|                          |  |                   | 1,605 |  |        |  | 1,443 |        |  |  | 3,166  |  |  |        | 1,942 |  |                     |  | 2,077 |       |  |  | 15,805 |  |  |  | 26,038 | 
|                          |  |                   |       |  |        |  |       |        |  |  |        |  |  |        |       |  |                     |  |       |       |  |  |        |  |  |  |        | 



F-59



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 20:- DEBENTURES (Cont.)



| | b. | Additional information on the Companys debentures
| | -- | --------------------------------------------------



| | 1. | In April 2014 the Company issued to the public NIS 414 million par value unsecured debentures (series L), by way of an expansion of a listed series for net consideration of NIS 445 million with an effective
annual interest rate of 3.45%.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As part of the issuance of debentures (series L), the Company has agreed to comply with the
following covenants: maintain minimum shareholders equity (excluding non-controlling interests) of U.S.$ 650 million during every four consecutive quarters; Ratio of net financial debt to total assets of less than 80% during every four
consecutive quarters; credit rating (Israeli scale) in the last of the said four quarters shall be not less than BBB- by S&P Maalot and Baa3 by Midroog: Absence of change of control; In addition, any event in which the Company will be required
to immediately redeem its listed debenture in an amount no less of the greater of (i) NIS 200 million, and (ii) 10.0% of its shareholders equity (excluding non-controlling interests), would trigger immediate redemption. As of
the reporting date, the Company is in compliance with the above covenants.

The parent company purchased, as part of the issuance, NIS
27 million par value unsecured debentures (series L) in consideration for NIS 29 million.



| | 2. | The Company has outstanding debentures (series K), in which the Company has agreed to comply with the following covenants: maintain minimum shareholders equity (net of non-controlling interests) of U.S.$ 500
million during four consecutive quarters; ratio of net interest-bearing debt to total assets not to exceed 80% during four consecutive quarters; credit rating of its debentures in the last of the four abovementioned quarters higher than S&P
Maalots BBB- rating and Midroogs Baa3 rating; and the absence of change in control. In addition, any event in which the Company will be required to immediately redeem its listed debentures in an amount of at least the greater of:
(i) NIS 300 million and (ii) 12.5% of shareholders equity (net of non-controlling interests) would trigger immediate redemption. As of the reporting rate, the Company is in compliance with the above covenants.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | On August 14, 2014 S&P Maalot reaffirmed the credit rating of all of the outstanding debentures of the Company at ilAA-, with a stable outlook.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------

On October 19, 2014 Midroog reaffirmed the credit rating of all of the outstanding debentures of the Company at Aa3, with stable outlook.



| | 4. | For a charge recorded to secure repayment of debentures (series J), see Note 29b.
| | -- | ---------------------------------------------------------------------------------



| | c. | FCR debentures
| | -- | --------------



| | 1. | In 2014 FCR issued to the public in Canada C$ 210 million par value (NIS 694 million) unsecured debentures (series S). The debentures bear a fixed annual interest rate of 4.32% and payable in one installment on
July 31, 2025.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

FCR used the aforesaid proceeds of the offering, inter alia, to early redeem its C$ 100 million
(NIS 330 million) debentures (series F) that bore an annual interest rate of 5.32% and were originally redeemable in October 2014.



| | 2. | In 2014 FCR issued to the public in Canada C$ 300 million par value (NIS 965 million) unsecured debentures (series R), by way of an expansion of a listed series. The debentures bear a fixed annual interest rate of
4.79% and are payable in one installment in August 30, 2024.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-60



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 20: | - DEBENTURES (Cont.)
|-------- | --------------------



| | d. | CTY debentures
| | -- | --------------



| | 1. | In October 2014, CTY issued to the public  350 million par value (NIS 1,627 million) unsecured debentures that bear an annual interest rate of 2.5% and mature on October 1, 2024.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Within the framework of the debenture offering, CTY committed to maintain a ratio of total debt to total assets and a ratio of secured debt to
total assets that will not exceed 65% and 25%, respectively. In addition, change of control as defined in the debentures agreement will entitle the holders the right of early redemption of the debentures. As of the Reporting Date, CTY is in
compliance with these covenants.

CTY used the aforesaid proceeds of the offering, inter alia, to early redeem bank loans and unwinding of
hedge transactions for interest risks. Following the unwinding, the Group reclassified  13 million (NIS 62 million) from other comprehensive income for finance expense in profit or loss.



| | 2. | In July 2014, S&P upgraded CTYs long-term credit rating from BBB- to BBB, with a stable outlook.
| | -- | -------------------------------------------------------------------------------------------------

In July 2014, Moodys upgraded CTYs long-term credit rating from Baa3 to Baa2, with a stable outlook.



| | e. | Dori Group debentures
| | -- | ---------------------



| | 1. | Within the framework of debentures (series G), Dori Group committed to comply with the following covenants: equity of not less than NIS 200 million in the three preceding quarters and a ratio of financial debt to
CAP (financial debt plus equity) that will not exceed 75%. It was also stipulated that, in the event of a credit rating downgrade, the interest rate would be raised by up to 1% in prescribed stages. Moreover, Dori Group committed not to register a
floating charge on its properties in favor of a third party and not to expand the debenture series (Series G), other than under the circumstances specified in the trust deed. As of the reporting date Dori Group is in compliance with these covenants.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | Within the framework of debentures, Dori Construction committed to comply with the following covenants: the ratio of net financial debt to EBITDA is not to exceed 8, with the provision that equity is not to fall below
NIS 100 million; and the ratio of equity to total assets is not to be less than 12%, with the provision that equity is not to fall below NIS 120 million. Moreover, Dori Construction committed not to register a floating charge on its
properties in favor of a third party and not to expand the debenture series, other than under the circumstances specified in the trust deed.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of December 31, 2014, Dori Construction is not in compliance with the financial ratios prescribed in the trust deed of its debentures
and, as a precaution, with respect to breach and remedy periods of financial ratios according to the trust deed, as a result the holders of the said debentures might claim for a cause for an immediate redemption. Respectively, Dori Construction
classified its debenture as a current liability.



F-61



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 21:- CONVERTIBLE DEBENTURES



| | a. | Composition
| | -- | -----------



|                           |  |              |  |  |                            |      |       |                     |      |  |                       |   |  |                           |      |   |  |  |       |  |  |  |       | 
|-------------------------- |  | ------------ |  |  | -------------------------- | ---- | ----- | ------------------- | ---- |  | --------------------- | - |  | ------------------------- | ---- | - |  |  | ----- |  |  |  | ----- | 
|                           |  |              |  |  | Outstandingpar valueamount |      |       | NominalInterestrate |      |  | Effectiveinterestrate |   |  | CarryingamountDecember 31 |     
|                           |  |              |  |  |                            | 2014 |       |                     | 2013 | 
|                           |  | Denomination |  |  | NISin millions             |      |       | %                   |      |  | %                     |   |  | NISin millions            |     
|FCR (series D,E,F,G,H,I,J) |  | C$           |  |  |                            |      | 1,304 |                     |      |  | 5.08                  | % |  |                           | 6.35 | % |  |  | 1,254 |  |  |  | 1,221 | 
|                           |  |              |  |  |                            |      |       |                     |      |  |                       |   |  |                           |      |   |  |  |       |  |  |  |       | 



|*) | Weighted average interest rate.
|-- | -------------------------------



| | b. | Additional information
| | -- | ----------------------

Below is information about the outstanding series of FCR
unsecured convertible debentures, as of December 31, 2014:



|                  |  |   |  |                     |      |  |                       |    |      |                          |             |  |                            |  |  |                      |       |  |  |  |      | 
|----------------- |  | - |  | ------------------- | ---- |  | --------------------- | -- | ---- | ------------------------ | ----------- |  | -------------------------- |  |  | -------------------- | ----- |  |  |  | ---- | 
|                  |  |   |  | NominalInterestrate |      |  | Effectiveinterestrate |    |      | Conversionprice pershare |             |  | Outstandingpar valueamount |  |  | Year offinalmaturity |      
|Issue date
series |  | % |  |                     | %    |  |                       | C$ |      |                          | C$ millions |  |                            |  | 
|2009              |  | D |  |                     | 5.70 |  |                       |    | 6.88 |                          |             |  | 18.75                      |  |  |                      | 42.90 |  |  |  | 2017 | 
|2011              |  | E |  |                     | 5.40 |  |                       |    | 6.90 |                          |             |  | 22.62                      |  |  |                      | 56.60 |  |  |  | 2019 | 
|2011              |  | F |  |                     | 5.25 |  |                       |    | 6.07 |                          |             |  | 23.77                      |  |  |                      | 56.60 |  |  |  | 2019 | 
|2011              |  | G |  |                     | 5.25 |  |                       |    | 6.66 |                          |             |  | 23.25                      |  |  |                      | 49.90 |  |  |  | 2018 | 
|2012              |  | H |  |                     | 4.95 |  |                       |    | 6.51 |                          |             |  | 23.75                      |  |  |                      | 72.60 |  |  |  | 2017 | 
|2012              |  | I |  |                     | 4.75 |  |                       |    | 6.19 |                          |             |  | 26.75-27.75                |  |  |                      | 52.50 |  |  |  | 2019 | 
|2013              |  | J |  |                     | 4.45 |  |                       |    | 5.34 |                          |             |  | 26.75-27.75                |  |  |                      | 57.10 |  |  |  | 2020 | 
|                  |  |   |  |                     |      |  |                       |    |      |                          |             |  |                            |  |  |                      |       |  |  |  |      | 
|                  |  |   |  |                     |      |  |                       |    |      |                          |             |  |                            |  |  |                      | 388.2 |  |  |  |      | 
|                  |  |   |  |                     |      |  |                       |    |      |                          |             |  |                            |  |  |                      |       |  |  |  |      | 

According to the terms of the convertible debentures, FCR is entitled to repay the debentures principal and
interest in shares at its sole discretion, at 97% of a weighted average trading price of FCRs Ordinary shares during the 20 trade days before repayments. In addition, FCR is entitled to repay the debentures prior to the maturity date under
certain circumstances, either in cash or in Ordinary shares.

According to FCRs policy as of the reporting date, repayment of
principal and interest of all outstanding convertible debentures is in FCR shares.

During 2014, FCR paid all of its convertible debentures
interest payments through issuance of 1.1 million shares of FCR (In 2013, FCR issued 1.1 million shares as an interest payment), according to its aforementioned policy.



F-62



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 22:- INTEREST-BEARING LOANS FROM FINANCIAL INSTITUTIONS AND OTHERS



| | a. | Composition
| | -- | -----------



|                             |  |                    |     |  |                 |  |     |       |  |  |        |  |  |      |       |  |              |  |       |       |  |  |       |  |  |  |    |  |  |  |        | 
|---------------------------- |  | ------------------ | --- |  | --------------- |  | --- | ----- |  |  | ------ |  |  | ---- | ----- |  | ------------ |  | ----- | ----- |  |  | ----- |  |  |  | -- |  |  |  | ------ | 
|                             |  | In NISlinkedto CPI |     |  | In NISnonlinked |  |     | In C$ |  |  | In US$ |  |  | In  |       |  | SwedishKrona |  |       | Other |  |  | Total | 
|                             |  | NIS in millions    |    
|December 31, 2014            |  |                    |     |  |                 |  |     |       |  |  |        |  |  |      |       |  |              |  |       |       |  |  |       |  |  |  |    |  |  |  |        | 
|Banks                        |  |                    | 364 |  |                 |  | 61  |       |  |  | 4,269  |  |  |      | 2,970 |  |              |  | 594   |       |  |  | 539   |  |  |  |   |  |  |  | 8,797  | 
|Other financial institutions |  |                    |    |  |                 |  | 175 |       |  |  |       |  |  |      | 686   |  |              |  |      |       |  |  |      |  |  |  |   |  |  |  | 861    | 
|                             |  |                    |     |  |                 |  |     |       |  |  |        |  |  |      |       |  |              |  |       |       |  |  |       |  |  |  |    |  |  |  |        | 
|                             |  |                    | 364 |  |                 |  | 236 |       |  |  | 4,269  |  |  |      | 3,656 |  |              |  | 594   |       |  |  | 539   |  |  |  |   |  |  |  | 9,658  | 
|Net of current maturities    |  |                    | 8   |  |                 |  | 61  |       |  |  | 853    |  |  |      | 107   |  |              |  | 31    |       |  |  | 46    |  |  |  |   |  |  |  | 1,106  | 
|                             |  |                    |     |  |                 |  |     |       |  |  |        |  |  |      |       |  |              |  |       |       |  |  |       |  |  |  |    |  |  |  |        | 
|                             |  |                    | 356 |  |                 |  | 175 |       |  |  | 3,416  |  |  |      | 3,549 |  |              |  | 563   |       |  |  | 493   |  |  |  |   |  |  |  | 8,552  | 
|                             |  |                    |     |  |                 |  |     |       |  |  |        |  |  |      |       |  |              |  |       |       |  |  |       |  |  |  |    |  |  |  |        | 
|December 31, 2013            |  |                    |     |  |                 |  |     |       |  |  |        |  |  |      |       |  |              |  |       |       |  |  |       |  |  |  |    |  |  |  |        | 
|Total                        |  |                    | 328 |  |                 |  | 48  |       |  |  | 4,547  |  |  |      | 4,577 |  |              |  | 3,838 |       |  |  | 1,387 |  |  |  | 42 |  |  |  | 14,767 | 
|                             |  |                    |     |  |                 |  |     |       |  |  |        |  |  |      |       |  |              |  |       |       |  |  |       |  |  |  |    |  |  |  |        | 
|Net of current maturities    |  |                    | 310 |  |                 |  | 44  |       |  |  | 3,717  |  |  |      | 4,150 |  |              |  | 3,093 |       |  |  | 1,337 |  |  |  | 41 |  |  |  | 12,692 | 
|                             |  |                    |     |  |                 |  |     |       |  |  |        |  |  |      |       |  |              |  |       |       |  |  |       |  |  |  |    |  |  |  |        | 

The composition of classification of loans by fixed or variable interest rate:



|                                             |  |                    |     |  |                 |  |     |       |  |  |        |  |  |      |       |  |              |  |     |       |  |  |       |  |  |  |   |  |  |  |       | 
|-------------------------------------------- |  | ------------------ | --- |  | --------------- |  | --- | ----- |  |  | ------ |  |  | ---- | ----- |  | ------------ |  | --- | ----- |  |  | ----- |  |  |  | - |  |  |  | ----- | 
|                                             |  | In NISlinkedto CPI |     |  | In NISnonlinked |  |     | In C$ |  |  | In US$ |  |  | In  |       |  | SwedishKrona |  |     | Other |  |  | Total | 
|                                             |  | NIS in millions    |    
|December 31, 2014                            |  |                    |     |  |                 |  |     |       |  |  |        |  |  |      |       |  |              |  |     |       |  |  |       |  |  |  |   |  |  |  |       | 
|Fixed interest rate                          |  |                    | 364 |  |                 |  | 175 |       |  |  | 3,915  |  |  |      | 2,148 |  |              |  |    |       |  |  | 48    |  |  |  |  |  |  |  | 6,650 | 
|                                             |  |                    |     |  |                 |  |     |       |  |  |        |  |  |      |       |  |              |  |     |       |  |  |       |  |  |  |   |  |  |  |       | 
|Weighted average effective interest rate (%) |  |                    | 2.2 |  |                 |  | 3.2 |       |  |  | 4.7    |  |  |      | 6.1   |  |              |  |    |       |  |  | 4.3   |  |  |  |  |  |  |  |       | 
|                                             |  |                    |     |  |                 |  |     |       |  |  |        |  |  |      |       |  |              |  |     |       |  |  |       |  |  |  |   |  |  |  |       | 
|Variable interest rate                       |  |                    |    |  |                 |  | 61  |       |  |  | 354    |  |  |      | 1,508 |  |              |  | 594 |       |  |  | 491   |  |  |  |  |  |  |  | 3,008 | 
|                                             |  |                    |     |  |                 |  |     |       |  |  |        |  |  |      |       |  |              |  |     |       |  |  |       |  |  |  |   |  |  |  |       | 
|Weighted average effective interest rate (%) |  |                    |    |  |                 |  | 4.3 |       |  |  | 3.1    |  |  |      | 2.5   |  |              |  | 2.4 |       |  |  | 1.1   |  |  |  |  |  |  |  |       | 
|                                             |  |                    |     |  |                 |  |     |       |  |  |        |  |  |      |       |  |              |  |     |       |  |  |       |  |  |  |   |  |  |  |       | 



| | b. | Maturity dates
| | -- | --------------



|                            |  |                    |     |  |                 |  |     |       |  |  |        |  |  |      |       |  |              |  |     |       |  |  |       |  |  |  |   |  |  |  |       | 
|--------------------------- |  | ------------------ | --- |  | --------------- |  | --- | ----- |  |  | ------ |  |  | ---- | ----- |  | ------------ |  | --- | ----- |  |  | ----- |  |  |  | - |  |  |  | ----- | 
|                            |  | In NISlinkedto CPI |     |  | In NISnonlinked |  |     | In C$ |  |  | In US$ |  |  | In  |       |  | SwedishKrona |  |     | Other |  |  | Total | 
|                            |  | NIS in millions    |    
|December 31, 2014           |  |                    |     |  |                 |  |     |       |  |  |        |  |  |      |       |  |              |  |     |       |  |  |       |  |  |  |   |  |  |  |       | 
|Year 1 - current maturities |  |                    | 8   |  |                 |  | 61  |       |  |  | 853    |  |  |      | 107   |  |              |  | 31  |       |  |  | 46    |  |  |  |  |  |  |  | 1,106 | 
|                            |  |                    |     |  |                 |  |     |       |  |  |        |  |  |      |       |  |              |  |     |       |  |  |       |  |  |  |   |  |  |  |       | 
|Year 2                      |  |                    | 7   |  |                 |  | 6   |       |  |  | 841    |  |  |      | 694   |  |              |  | 29  |       |  |  | 2     |  |  |  |  |  |  |  | 1,579 | 
|Year 3                      |  |                    | 7   |  |                 |  | 6   |       |  |  | 354    |  |  |      | 298   |  |              |  | 23  |       |  |  |      |  |  |  |  |  |  |  | 688   | 
|Year 4                      |  |                    | 7   |  |                 |  | 9   |       |  |  | 572    |  |  |      | 486   |  |              |  | 12  |       |  |  |      |  |  |  |  |  |  |  | 1,086 | 
|Year 5                      |  |                    | 335 |  |                 |  | 8   |       |  |  | 411    |  |  |      | 1,097 |  |              |  | 473 |       |  |  | 491   |  |  |  |  |  |  |  | 2,815 | 
|Year 6 and thereafter       |  |                    |    |  |                 |  | 146 |       |  |  | 1,238  |  |  |      | 974   |  |              |  | 26  |       |  |  |      |  |  |  |  |  |  |  | 2,384 | 
|                            |  |                    |     |  |                 |  |     |       |  |  |        |  |  |      |       |  |              |  |     |       |  |  |       |  |  |  |   |  |  |  |       | 
|                            |  |                    | 356 |  |                 |  | 175 |       |  |  | 3,416  |  |  |      | 3,549 |  |              |  | 563 |       |  |  | 493   |  |  |  |  |  |  |  | 8,552 | 
|                            |  |                    |     |  |                 |  |     |       |  |  |        |  |  |      |       |  |              |  |     |       |  |  |       |  |  |  |   |  |  |  |       | 
|                            |  |                    | 364 |  |                 |  | 236 |       |  |  | 4,269  |  |  |      | 3,656 |  |              |  | 594 |       |  |  | 539   |  |  |  |  |  |  |  | 9,658 | 
|                            |  |                    |     |  |                 |  |     |       |  |  |        |  |  |      |       |  |              |  |     |       |  |  |       |  |  |  |   |  |  |  |       | 



| | c. | As for charges, refer to Note 29.
| | -- | ---------------------------------



| | d. | Contractual restrictions and financial covenants
| | -- | ------------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 22: | - INTEREST-BEARING LOANS FROM FINANCIAL INSTITUTIONS AND OTHERS (Cont.)
|-------- | -----------------------------------------------------------------------



Certain loans and credit facilities which the Company and its subsidiaries obtained in the
ordinary course of business, include customary financial and other covenants that a breach in the covenant will cause immediate redemption, among which are the following:



| | 1. | The Company
| | -- | -----------



| | a) | Ratio of actual drawn credit to market value of securities (marketable securities of public subsidiaries of the Company) in the maximum range of 47.5% to 91% as was determined in the credit agreements.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) | Minimum shareholders equity (excluding non-controlling interests) of NIS 3.75 billion for the Company.
| | -- | -------------------------------------------------------------------------------------------------------



| | c) | Ratio of net interest bearing liabilities to value of total assets, based on consolidated financial statements, shall not exceed 75%.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------



| | d) | Ratio of net interest bearing liabilities to value of total assets, based on expanded solo financial statements (the Company and other owned private entities) of the Company, shall not exceed 77.5%, based on the equity
method accounting.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | e) | Equity attributable to equity holders of ATR shall not be less than  1.5 billion.
| | -- | ----------------------------------------------------------------------------------



| | f) | Liabilities bearing net interest of ATR to total consolidated balance sheet of ATR shall not be higher than 45%.
| | -- | ----------------------------------------------------------------------------------------------------------------



| | g) | Ratio of actual debt to value of securities (pledged CTY shares which fair value is the average of its market value and net asset value) shall not exceed 70%.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| | h) | The Companys average quarterly EPRA Earnings, calculated according to the European Public Real Estate Association, over any two consecutive quarters, shall not be less than NIS 60 million.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | i) | The ratio of total equity (including equity loans, but excluding minority interests, derivatives at fair value and the tax effect with respect thereto) to the total assets of CTY shall not be less than 30%.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | j) | The number of shares pledged to the bank shall not be less than 20% of the issued and paid up share capital of CTY and also that, in the event of a financial institution (which is not a financial manager of others or
for others) holding CTY shares for itself at a rate in excess of 15%, the Company shall pledge additional CTY shares to the bank so that the pledged shares as a percentage of the total issued and paid up capital of CTY shall be at least 5% higher
than the percentage held by the aforementioned financial institution in the issued and paid up capital of CTY, but not more than 30.1% of the issued and paid up capital of CTY.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | k) | The number of CTY shares held directly and indirectly by the Company shall not be less than 30% of the share capital of CTY.
| | -- | ----------------------------------------------------------------------------------------------------------------------------



| | l) | Ratio of CTYs EBITDA (with certain adjustments) to CTYs net financial expenses shall not be less than 1.6.
| | -- | ------------------------------------------------------------------------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 22: | - INTEREST-BEARING LOANS FROM FINANCIAL INSTITUTIONS AND OTHERS (Cont.)
|-------- | -----------------------------------------------------------------------



| | m) | The percentage of FCRs shares pledged due to relevant credit terms will be no less than 26% of FCRs share capital (20% on diluted basis) and, if there is another holder of FCRs shares who owns over
19.9% of the shares, the Company will pledge to the bank shares such that their proportion will exceed the interests of the other holder by 10%, moreover, the Companys interests in FCR will be no less than 34% of FCRs share capital.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n) | Ratio of FCRs net financial debt according to the portion of FCR shares pledged to the bank, with the addition of the leverage that is reflected by the amount of utilized bank credit out of the total credit
facility, to FCRs EBITDA shall not exceed 14.2 and shall not exceed 13.5 over any three consecutive quarters.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | o) | Ratio of annual dividend from FCR shares held to secure a credit facility, to the interest payments on the credit facility over any three consecutive quarters shall not be less than 1.5 (or 1.75, if shareholders equity
lower than NIS 5.5 billion or the ratio of the consolidated net financial debt exceeds 62.5%).
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | p) | Ratio of FCRs EBITDA to FCRs finance expenses shall not be less than 1.55 or 1.75 over three consecutive quarters.
| | -- | --------------------------------------------------------------------------------------------------------------------



| | q) | Ratio of FCRs net financial debt, with the addition of the utilized credit out of the total credit facility, to the proportion of FCRs real estate value (by the ratio of FCRs shares that are pledged)
shall not exceed 82% and shall not exceed 80% over any three consecutive quarters.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | r) | The ratio of EQY shares pledged or not pledged to any party shall not be less than 28% of EQYs share capital on a fully diluted basis, and ratio of EQY shares used as collateral to bank shall not be less than 20%
from EQYs fully diluted share capital.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | s) | Ratio of dividend from EQY shares which are held as collateral, to interest expense on actual drawn credit, shall not be less than 1.25 over any three consecutive quarters.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | t) | Ratio of EQYs interest bearing debt, with the addition of the utilized credit out of the total credit facility, to the proportion EQYs real estate value (by the ratio of EQYs shares that are pledged)
shall not exceed 82.5%.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | u) | In accumulation: (i) Ratio of EQYs net interest bearing debt, with the addition of utilized credit out of the total credit facilities, to EQYs EBITDA shall not exceed 14; and (ii) Ratio of
EQYs net interest bearing debt, with the addition of utilized credit out of the total credit facilities, to EQYs NOI shall not exceed 13.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | v) | Ratio of EQYs EBITDA to EQYs finance expenses shall not be less than 1.65.
| | -- | ----------------------------------------------------------------------------



| | w) | Ratio of actual drawn credit to value of securities (EQYs shares by average of market value and net asset value) shall not exceed 70%.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 22: | - INTEREST-BEARING LOANS FROM FINANCIAL INSTITUTIONS AND OTHERS (Cont.)
|-------- | -----------------------------------------------------------------------



| | 2. | EQY
| | -- | ---



| | a) | Ratio of total debt to value of total assets shall not exceed 60%.
| | -- | ------------------------------------------------------------------



| | b) | Ratio of secured debt to total assets value shall not exceed 40%.
| | -- | -----------------------------------------------------------------



| | c) | Ratio of unsecured debt to unsecured assets shall not exceed 60%.
| | -- | -----------------------------------------------------------------



| | d) | Ratio of mortgage receivables and mezzanine debt investments to total assets value shall not exceed 10%.
| | -- | --------------------------------------------------------------------------------------------------------



| | e) | Ratio of EBITDA to debt service (principal and interest payments) shall not be less than 1.5.
| | -- | ---------------------------------------------------------------------------------------------



| | f) | Ratio of NOI from unpledged assets to interest on unsecured debt shall not be less than 1.75.
| | -- | ---------------------------------------------------------------------------------------------



| | g) | Ratio of total non-income producing properties (relating to investment in vacant lands, properties under development, unconsolidated affiliates, equity securities of other entities and in mortgages) to total assets
value shall not exceed 35%.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | h) | Total development budgeted costs shall be less than 20% of the total assets.
| | -- | ----------------------------------------------------------------------------



| | 3. | FCR
| | -- | ---



| | a) | Ratio of total debt to total assets shall not exceed 65%.
| | -- | ---------------------------------------------------------



| | b) | Ratio of EBITDA to interest expense shall not be less than 1.65.
| | -- | ----------------------------------------------------------------



| | c) | Ratio of debt service (EBITDA to principal and interest payments) shall not be less than 1.5.
| | -- | ---------------------------------------------------------------------------------------------



| | d) | Average equity in last four quarters shall not be less than approximately C$ 1.4 billion.
| | -- | -----------------------------------------------------------------------------------------



| | e) | Ratio of unpledged assets (excluding properties under development) to unsecured debts shall not be less than 1.3.
| | -- | -----------------------------------------------------------------------------------------------------------------



| | f) | Ratio of secured debt to total assets shall not exceed 40%.
| | -- | -----------------------------------------------------------



| | 4. | CTY
| | -- | ---



| | a) | Ratio of shareholders equity (plus debt components with equity characteristics) to total assets shall not be less than 32.5%.
| | -- | ------------------------------------------------------------------------------------------------------------------------------



| | b) | Minimum debt coverage ratio (EBITDA to net interest expense) of 1.8.
| | -- | --------------------------------------------------------------------



| | c) | Ratio of secured debt to total debt will be less than 7.5%.
| | -- | -----------------------------------------------------------



| | 5. | Gazit Development
| | -- | -----------------

Shareholders equity shall not be less than NIS 500
million and the shareholders equity including owners loans shall not be less than 25% of total assets; debt coverage ratios and debt to value of collateral; negative pledge on some properties.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 22: | - INTEREST-BEARING LOANS FROM FINANCIAL INSTITUTIONS AND OTHERS (Cont.)
|-------- | -----------------------------------------------------------------------



| | 6. | Dori Group and Dori Construction
| | -- | --------------------------------

With respect to their financial debt, Dori Group and
its investees have undertaken to comply with the following principal financial covenants: a ratio of consolidated equity to total assets at Dori Group of no less than 15%, on the basis of consolidated financial statements (in August 2014 it was
agreed that the definition of consolidated equity included in this covenant will be amended such that consolidated equity shall include shareholders loans granted or to be granted to Dori Group or its subsidiaries, for which
subordination arrangements would be placed towards the relevant bank); ratios of equity to total assets in Dori Construction and its subsidiary of no less than 13%-20%, on the basis of consolidated financial statements; the equity of Dori
Construction Ltd. (excluding non-controlling interests) is to be no less than NIS 100 million; liquidity (cash and unutilized credit facilities) at the Dori Group and Dori Construction is to be no less than NIS 40 million and in its
subsidiary no less than NIS 30 million; a ratio of financial debt to Dori Constructions capital of no more than 70%; a ratio of financial debt plus guarantees of no more than three times Dori Constructions tangible capital; a ratio
of debt to total assets at Dori Construction and in its subsidiary of no more than 30%; The financing banks share will not exceed 30% of the financial debt (including guarantees) of Dori Construction; Maintaining the extent of Dori
Constructions financial debt to banks no more than 30%; an undertaking not to create a charge on the assets of Dori Construction and of its subsidiary and/or to transfer them to any third party; an undertaking of Dori Construction not to draw
on shareholders loans granted to a subsidiary and/or dividends, if Dori Construction is not in compliance with its undertakings to the bank; no change in the control of a subsidiary of Dori Construction; a subsidiary of Dori Construction is to
present positive EBITDA in every year of operation.

In relation to the commitments of Dori Group to various financial institutions to
comply with financial covenants, at the request of Dori Group all the aforesaid financial institutions have confirmed that the commitments to meet the aforementioned financial ratios will apply only with effect from the financial statements to
December 31, 2014 and thereafter (and, in relation to one financial institution, said commitment will apply only with effect from the financial statements for the first quarter of 2015). The aforesaid will also apply in relation to the
financial statements of Dori Group for prior periods that are to be restated, should this occur. In March 2015, all of the aforesaid financial institutions approved to extend their agreement that the said commitment will apply only with effect from
the financial statement as of June 30, 2015 and thereafter.

In relation to the commitments of Dori Construction to various financial
institutions to meet various financial ratios, in August 2014, at the request of Dori Construction, all the financial institutions that had extended credit facilities to Dori Construction confirmed that the commitments of Dori Construction to them
to comply with certain financial covenants, will apply only with effect from the financial statements of Dori Construction for December 31, 2014 and thereafter, and in relation to one financial institution, said commitment will apply only with
effect from the financial statements for the first quarter of 2015. The aforesaid will also apply in relation to the financial statements of Dori Construction for prior periods that are to be restated, should this occur. until March 2015, all of the
aforesaid financial institutions approved to extend their agreement that the said commitment will apply only with effect from the financial statement as of June 30, 2015 and thereafter.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 22: | - INTEREST-BEARING LOANS FROM FINANCIAL INSTITUTIONS AND OTHERS (Cont.)
|-------- | -----------------------------------------------------------------------



| | 7. | The Companys investees have other customary financial covenants, such as debt coverage ratios for principal and/or interest, leverage ratios and ratio of NOI to debt among others.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Furthermore, in certain loan documents of the Company and its investees, there are customary provisions for immediate loan repayment,
including: change of control in a company or in companies whose securities are pledged to secure credit, restructuring, certain material legal proceedings (including dissolution and liquidation of assets, as well as court judgments), discontinued
operations, suspension of trading of securities pledged to secure credit or of securities of the Company cross default under certain conditions, holding minimum interest in investees by the Company, service of certain officers etc.

As of December 31, 2014, other than non-compliance with financial covenants by Dori Group and Dori Construction, for which waivers were
received as noted above, the Company and its subsidiaries were in compliance with all the aforementioned covenants.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 23:- OTHER FINANCIAL LIABILITIES



| | a. | Composition
| | -- | -----------



|                                                          |  |                 |     |  |      |  |     | 
|--------------------------------------------------------- |  | --------------- | --- |  | ---- |  | --- | 
|                                                          |  | December 31     |    
|                                                          |  | 2014            |     |  | 2013 | 
|                                                          |  | NIS in millions |    
|Tenants security deposits (1)                            |  |                 | 40  |  |      |  | 41  | 
|Leasing liabilities for investment properties             |  |                 | 99  |  |      |  | 91  | 
|Put option to acquire additional rights in joint ventures |  |                 |    |  |      |  | 3   | 
|Deferred purchase price of investment property            |  |                 | 6   |  |      |  |    | 
|Employee benefit liabilities, net (Note 24)               |  |                 | 8   |  |      |  | 7   | 
|Other liabilities                                         |  |                 | 37  |  |      |  | 56  | 
|                                                          |  |                 |     |  |      |  |     | 
|                                                          |  |                 | 190 |  |      |  | 198 | 
|                                                          |  |                 |     |  |      |  |     | 



|(1) | Tenants security deposits are received to secure the fulfillment of the terms of the lease agreements. Deposits are refunded to the tenants at the end of the rental period, primarily linked to the US dollar.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | As for the linkage basis of other financial liabilities, refer to Note 37.
| | -- | --------------------------------------------------------------------------

NOTE 24:- EMPLOYEE BENEFIT
LIABILITIES AND ASSETS

The Group provides post-employment benefit plans. The plans are generally financed by contributions to
insurance companies and are classified both as defined contribution plans and as defined benefit plans, as follows:



| | a. | Under labor laws and severance pay laws in Israel, Germany and Brazil, the Group is required to pay compensation to employees upon dismissal or retirement in certain circumstances. The calculation of the Companys
employee benefit liability is made based on valid employment contracts and based on the employees salary which establishes the entitlement to receive the compensation.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Section 14 of the Severance Pay Law in Israel (1963) applies to part of the compensation payments, pursuant to which current
contributions paid by the Group in pension funds and/or in form of insurance policies release the Group from any additional liability to employees for whom such contributions were made (defined contribution plan).

The Group accounts for that part of the postemployment benefit payments that are not covered by contributions, as described above, as a defined
benefit plan for which an employee benefit liability is recognized using actuarial assumptions.



| | b. | The liabilities of subsidiaries in the U.S, Canada, Finland and Sweden, under the law prevailing in those countries, are normally financed by contributions to pension funds, social security, medical insurance,
unemployment insurance and by payments which the employee bears (such as: insurance fees for disability insurance). Additional payments for sick leave, severance pay, vacation and others are at each subsidiarys discretion, unless otherwise
provided for in a specific employment contract.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. | The amounts accrued in officers insurance policies, in other insurance policies and in provident funds on behalf of the employees and the related liabilities are not reflected in the statement of financial
position as the funds are not controlled and managed by the Company or its subsidiaries.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

All of the Groups
post-employment benefit plans do not have a material effect on the Groups financial statements



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 25:- TAXES ON INCOME



| | a. | Tax laws applicable to the Group in Israel
| | -- | ------------------------------------------



| | 1. | Capital gains/losses
| | -- | --------------------

The capital gain tax rate applicable to Israeli resident
companies is the corporate tax rate, see section 4 below.



| | 2. | Taxation of dividend income
| | -- | ---------------------------

Pursuant to paragraph 126(b) to the Income Tax Ordinance
(the Ordinance), income from distribution of profits or from dividends originating from income accrued or derived in Israel which was received, directly or indirectly, from another entity subject to the corporate tax in Israel is not
included in the computation of the Companys taxable income.

Dividends that the Company receives from a foreign entity are taxed in
Israel at the rate of 25% and credit is given for the tax withheld on the dividends overseas (direct credit). Excess direct credit may be carried forward to future years over a period of not more than five years.

Nonetheless, at the Companys request and subject to certain conditions, the Company may elect to implement an alternative under which
the corporate tax rate will be imposed (26.5% in 2014) on the gross income from which the dividend was distributed (the dividend distributed plus the tax withheld and the corporate tax paid on the income in the foreign countries) and a credit will
be given for the foreign tax paid on the income from which the dividend was distributed in the foreign company (indirect credit) and the tax withheld in the foreign country. It should be noted that indirect credit is eligible down to two tiers only
and is subject to certain conditions. Excess indirect credit cannot be carried forward to future years.



| | 3. | Capital gain/loss from sale of shares in subsidiaries
| | -- | -----------------------------------------------------

A real capital gain by the
Company on the sale of its direct holdings in one or more of the Groups foreign companies is taxed in Israel and credit is given for the foreign tax paid overseas on the capital gain from that sale, subject to the provisions of the relevant
treaty for avoidance of double taxation.



| | 4. | Tax rates applicable to the Group companies in Israel
| | -- | -----------------------------------------------------

The Israeli corporate tax rate
was 25% for 2012 and 2013 and 26.5% for 2014. On July 30, 2013, the Knesset (Israeli Parliament) approved the economic plan for 2013-2014 (the Budget Law), in order to primarily enhance the collection of taxes in those years among other fiscal
changes.

These changes include, among others, taxation of revaluation gains which is subject to future regulation. As of the reporting
date the above mentioned regulation had not been instated.

An entity is liable to tax on a real capital gain at the corporate tax rate
applicable in the year of the sale.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 25:- | TAXES ON INCOME (Cont.)
|--------- | -----------------------



| | b. | Taxation in the U.S.
| | -- | --------------------

Since January 1, 1995, due to the change in EQYs tax
status in the U.S. to that of a REIT, EQY has not recorded tax expenses on income in its financial statements effective from that date, other than tax expenses recorded with respect to subsidiaries of EQY that do not have REIT status for tax
purposes. The implication of this status is that income distributed to shareholders is exempted from tax. In order to maintain its status as a REIT, EQY is obligated, inter alia, to distribute at least 90% of its taxable income and apply the tax on
the recipients.

To the best of the Companys managements knowledge, EQY operates as a REIT as of the date of these financial
statements. As stated above, since EQY is required, among other things, to distribute its income to its shareholders in order to maintain its status as a REIT, the Company records a deferred tax liability in respect of the temporary differences
attributable to the investment in EQY based on the Groups percentage interest in EQY (as of the reporting date - 43.3%). If EQY is not considered a REIT, it will be subject to corporate tax at the normal rates in the U.S. and similarly, in
this case, it may be that the recipient will be subject to additional tax in the U.S. upon the distribution of dividends (inter alia, by way of withholding tax) at the rate that is conditional on the place of residence for tax purposes,
classification of the taxpayer as an individual or a company, and the taxpayers percentage shareholding in EQY.

The remaining U.S.
resident Group companies are subject to corporate tax at the normal rates in the U.S. (Federal tax at a rate of up to 35% and State and City taxes). Upon distribution of dividends from the U.S. to the company, 12.5% reduced withholding tax rate
applies in accordance with the tax treaty between Israel and the U.S., provided that the company holds at least 10% of the distributing company.



| | c. | Taxation in Canada
| | -- | ------------------

The taxable income of the Group companies is subject to the
effective corporate tax (Federal and Provincial) which ranges between 25% and 31%. A Canadian resident company that realizes a capital gain is taxed in Canada only on half of the capital gain. Subject to certain conditions, a Canadian resident
company that receives dividends may not be taxable in Canada or the dividends may have no effect on the taxable income of a Canadian resident company that receives the dividend. According to FAPI (Foreign Accrual Property Income) rules, a Canadian
resident company may be liable to tax in Canada on undistributed passive income of a foreign company and receive a relief for foreign tax imposed on this income. Generally, distribution of dividends from a Canadian resident company to a foreign
resident is subject to withholding tax of 25%. Reduced tax rates may be valid based on the relevant tax treaty (if applicable). According to the tax treaty between Israel and Canada, payments of dividends and interest are subject to a reduced
withholding tax rate of 15%.



| | d. | Taxation in Finland
| | -- | -------------------

The corporate tax rate in Finland in 2014 is 20%. The dividend
withholding tax rate upon distribution from Finland to Israel is 5% pursuant to the tax treaty between Israel and Finland (only if the share of holding is higher than 10%, otherwise the withholding tax rate is 15%). Due to the change of legislation
in Finland, starting from January 1, 2014 the withholding tax will apply also on dividends classified as a return of capital.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 25:- | TAXES ON INCOME (Cont.)
|--------- | -----------------------



| | e. | Taxation in Germany
| | -- | -------------------

Generally, the corporate tax rate (including the solidarity tax) in
Germany is 15.825% (assuming that the company is not subject to trade tax). Distribution of profits from a German resident partnership to the Dutch resident company partners is not liable to tax in Germany according to domestic law. Payment of
interest to a foreign resident from Germany is exempt from withholding tax in Germany according to the domestic law. Capital gains on disposition of holdings in Germany may be liable to tax in Germany, however, 95% of the gain may be tax exempt in
Germany if the conditions of the German participation exemption apply.



| | f. | Taxation in Netherlands
| | -- | -----------------------

A Dutch company is subject to a 25% corporate tax in the
Netherlands. Under certain conditions, income of the Dutch company from its holdings in Germany would be tax exempt in the Netherlands. According to the tax treaty between Israel and Netherlands, distribution of dividends to an Israeli resident
company by a Dutch resident company will be subject to withholding tax of 5% in the Netherlands (only if the share of holding is higher than 25%, otherwise the withholding tax rate is 15%).



| | g. | Taxation in Sweden
| | -- | ------------------

The operations in Sweden are carried out by Swedish resident
companies that are held by CTY. Generally, the corporate tax rate in Sweden is 22%. Tax rate for dividends distribution by a Swedish resident company under the domestic law is 30%. Reduced tax rate may be possible under various tax treaties.



| | h. | Taxation in Brazil
| | -- | ------------------

The tax rate on companies in Brazil is 34%. The tax rate upon
dividend distribution from a Brazilian resident company under domestic law is 0%.



| | i. | Finalized tax assessments
| | -- | -------------------------

The Company has finalized its tax assessments through 2011
and its wholly owned subsidiaries in Israel have finalized their tax assessments through 2010.



| | j. | Subsidiaries disputed tax assessments
| | -- | -------------------------------------

In June 2012, two indirectly-owned subsidiaries
were issued with tax orders according section 152 (b) to the Israeli Income tax ordinance in relation to the tax years 2007-2010 and 2008-2010, respectively, since their claim to be House Property Companies as defined in Section 64 of the
Ordinance was not accepted. Accordingly, the tax orders did not allow the gain that arose from the sale of a real estate asset by one of the companies in question to be offset against accumulated losses in the subsidiary. Should the position of the
ITA prevail in full, a nominal tax liability will be created in the indirectly-owned subsidiaries for the subsidiary of approximately NIS 49.1 million.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 25:- | TAXES ON INCOME (Cont.)
|--------- | -----------------------



The indirect subsidiaries have lodged appeals against these assessments with the District
Court. In the opinion of the subsidiaries and its professional advisors, the position of the ITA, as reflected in the aforesaid demands, should not be accepted. On June 26, 2014, the aforementioned subsidiaries were issued with assessments
under Section 145(A)(2)(b) of the Ordinance in relation to the 2011 and 2012 tax years regarding the same argument. The nominal tax according to the assessments amounts to a total of NIS 4.9 million. Those subsidiaries have filed an objection
to these assessments.

On February 21, 2013, an in direct subsidiary of the Company signed an assessments agreement for the 2006-2010
tax years. The assessments agreement does not cover the dispute with respect to the indirectly-held subsidiaries, as described above. It should also be noted that the subsidiary is involved in an assessment process with the real estate taxes office
in relation to the betterment amount included as part of its chargeable income for 2009. Accordingly, the assessments for 2009 and thereafter will be revised in accordance with the betterment amount that is to be determined either by an agreement or
through a court proceeding.

In the opinion of the subsidiaries, the provision in the financial statements covers the exposure pertaining
to the disputed tax assessments.



| | k. | Disputed VAT assessments
| | -- | ------------------------

In March 2008, the Company received VAT assessments for 2006,
2007 and part of 2005, and in April 2010, the Company received VAT assessments for the period starting January 2008 through October 2009 (inclusive), in which the VAT Authorities limited input VAT deductions for these periods by a total of
NIS 6 million and NIS 5.3 million, respectively. The Company appealed these VAT assessments and the appeal filed by the Company was rejected. On November 11, 2013 the Company appealed these rejections to the District Court.

The Company estimates that the provision recognized in the financial statements covers its exposure with respect to the disputed VAT
assessment.



| | l. | Carry-forward losses for tax purposes as of December 31, 2014
| | -- | -------------------------------------------------------------

The Company and its
wholly-owned Israeli resident subsidiaries have carry-forward losses for tax purposes. With respect to the tax benefit associated with such losses, the Group has recognized deferred tax assets amounting to NIS 19 million as of the reporting
date (2013 - NIS 45 million), which have been offset against the deferred tax liability of the Company.

Partly-owned Israeli resident
subsidiaries have carry-forward losses for tax purposes amounting to NIS 983 million. With respect to the tax benefit associated with these losses, deferred tax assets were recognized, amounting to NIS 107 million (2014 - NIS 102
million) which have been partly offset against the deferred tax liability.

The Companys Canadian resident subsidiaries have
carry-forward losses for tax purposes amounting to NIS 344 million, of which a recognized deferred tax asset represents approximately NIS 76 million (2013 - NIS 69 million) primarily offsetting the deferred tax liability. The
carry-forward losses may be utilized over a 20-year period, which expires between 2015-2034.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 25:- TAXES ON INCOME (Cont.)



The Companys wholly-owned U.S. resident subsidiary has carry-forward nondeductible
interest amounting to NIS 310 million that can be offset under certain restrictions against future tax gains, of which deferred tax assets were recognized in the amount of NIS 116 million (2013 - NIS 104 million), offsetting the
deferred tax liability. The non-deductible interest may be utilized with no time limit.

The Companys Finnish resident subsidiary and
its subsidiaries have carry-forward losses for tax purposes amounting to NIS 71 million (2013 - NIS 124 million), for which deferred tax assets have been recognized at an amount of NIS 22 million.



| | m. | Deferred taxes, net:
| | -- | --------------------

The composition and movement in deferred taxes are as follows:



|                                                        |  |                                                |        |   |                     |  |      |        |  |  |       |   |  |  |        |  
|------------------------------------------------------- |  | ---------------------------------------------- | ------ | - | ------------------- |  | ---- | ------ |  |  | ----- | - |  |  | ------ | -
|                                                        |  | Investmentpropertiesanddepreciablefixed assets |        |   | Carry-forwardlosses |  |      | Others |  |  | Total |  
|                                                        |  | NIS in millions                                |       
|Balance as of January 1, 2012                           |  |                                                | (2,812 | ) |                     |  | 392  |        |  |  | (53   | ) |  |  | (2,473 | )
|Amounts carried to foreign currency translation reserve |  |                                                | 6      |   |                     |  | (3   | )      |  |  |      |   |  |  | 3      |  
|Amounts carried to other comprehensive income           |  |                                                |       |   |                     |  |     |        |  |  | 33    |   |  |  | 33     |  
|Amounts carried to other capital reserves               |  |                                                | (23    | ) |                     |  | 16   |        |  |  |      |   |  |  | (7     | )
|Amounts carried to income statement                     |  |                                                | (579   | ) |                     |  | (175 | )      |  |  | 16    |   |  |  | (738   | )
|                                                        |  |                                                |        |   |                     |  |      |        |  |  |       |   |  |  |        |  
|Balance as of December 31, 2012                         |  |                                                | (3,408 | ) |                     |  | 230  |        |  |  | (4    | ) |  |  | (3,182 | )
|Carried to foreign currency translation reserve         |  |                                                | 294    |   |                     |  | (6   | )      |  |  | (3    | ) |  |  | 285    |  
|Amounts carried to other comprehensive loss             |  |                                                |       |   |                     |  |     |        |  |  | (74   | ) |  |  | (74    | )
|Amounts carried to other capital reserves               |  |                                                | 2      |   |                     |  | 2    |        |  |  |      |   |  |  | 4      |  
|Amounts carried to income statement                     |  |                                                | (302   | ) |                     |  | (11  | )      |  |  | 110   |   |  |  | (203   | )
|                                                        |  |                                                |        |   |                     |  |      |        |  |  |       |   |  |  |        |  
|Balance as of December 31, 2013                         |  |                                                | (3,414 | ) |                     |  | 215  |        |  |  | 29    |   |  |  | (3,170 | )
|Amounts carried to foreign currency translation reserve |  |                                                | (166   | ) |                     |  | 14   |        |  |  |      |   |  |  | (152   | )
|Amounts carried to other comprehensive income           |  |                                                |       |   |                     |  |     |        |  |  | (31   | ) |  |  | (31    | )
|Amounts carried to other capital reserves               |  |                                                | 39     |   |                     |  | 3    |        |  |  |      |   |  |  | 42     |  
|Amounts carried to income statement                     |  |                                                | (299   | ) |                     |  | 54   |        |  |  | 16    |   |  |  | (229   | )
|                                                        |  |                                                |        |   |                     |  |      |        |  |  |       |   |  |  |        |  
|Balance as of December 31, 2014                         |  |                                                | (3,840 | ) |                     |  | 286  |        |  |  | 14    |   |  |  | (3,540 | )
|                                                        |  |                                                |        |   |                     |  |      |        |  |  |       |   |  |  |        |  

The deferred taxes are calculated at tax rates ranging between 13.1% and 44.4% (the tax rates applicable
include federal and state tax).

The utilization of deferred tax assets is dependent on the existence of sufficient taxable income at the
losses amount in the following years.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 25:- TAXES ON INCOME (Cont.)



Deferred taxes are presented as follows



|                               |  |                 |        |   |      |  |        |  
|------------------------------ |  | --------------- | ------ | - | ---- |  | ------ | -
|                               |  | December 31     |       
|                               |  | 2014            |        |   | 2013 | 
|                               |  | NIS in millions |       
|Within non-current assets      |  |                 | 78     |   |      |  | 106    |  
|Within non-current liabilities |  |                 | (3,618 | ) |      |  | (3,276 | )
|                               |  |                 |        |   |      |  |        |  
|                               |  |                 | (3,540 | ) |      |  | (3,170 | )
|                               |  |                 |        |   |      |  |        |  



| | n. | Taxes on income included in the income statements
| | -- | -------------------------------------------------



|                                |  |                        |     |  |      |  |     |      |  |  |     | 
|------------------------------- |  | ---------------------- | --- |  | ---- |  | --- | ---- |  |  | --- | 
|                                |  | Year ended December 31 |    
|                                |  | 2014                   |     |  | 2013 |  |     | 2012 | 
|                                |  | NIS in millions        |    
|Current taxes *)                |  |                        | 167 |  |      |  | 53  |      |  |  | 19  | 
|Taxes in respect of prior years |  |                        | 9   |  |      |  | 9   |      |  |  | 1   | 
|Deferred taxes                  |  |                        | 229 |  |      |  | 203 |      |  |  | 738 | 
|                                |  |                        |     |  |      |  |     |      |  |  |     | 
|                                |  |                        | 405 |  |      |  | 265 |      |  |  | 758 | 
|                                |  |                        |     |  |      |  |     |      |  |  |     | 



|*) | Current income taxes include capital gain tax, withholding tax from interest paid by foreign subsidiaries to the Company, as well as current tax expenses of foreign subsidiaries.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | o. | Taxes on income relates to other comprehensive income and to other equity items
| | -- | -------------------------------------------------------------------------------

With
respect to income tax relates to other comprehensive income and other equity line items, see Notes 25m and 27f.



| | p. | Below is the reconciliation between the statutory tax rate and the effective tax rate:
| | -- | --------------------------------------------------------------------------------------



|                                                                                                                   |  |                        |       |   |      |  |       |      |  |  |       |  
|------------------------------------------------------------------------------------------------------------------ |  | ---------------------- | ----- | - | ---- |  | ----- | ---- |  |  | ----- | -
|                                                                                                                   |  | Year ended December 31 |      
|                                                                                                                   |  | 2014                   |       |   | 2013 |  |       | 2012 | 
|                                                                                                                   |  | NIS in millions        |      
|Income before taxes on income                                                                                      |  |                        | 1,488 |   |      |  | 2,450 |      |  |  | 3,171 |  
|                                                                                                                   |  |                        |       |   |      |  |       |      |  |  |       |  
|Statutory tax rate                                                                                                 |  |                        | 26.5  | % |      |  | 25.0  | %    |  |  | 25.0  | %
|                                                                                                                   |  |                        |       |   |      |  |       |      |  |  |       |  
|Tax calculated using statutory tax rate                                                                            |  |                        | 394   |   |      |  | 613   |      |  |  | 793   |  
|Increase (decrease) in taxes resulting from permanent differences - the tax effect:                                |  |                        |       |   |      |  |       |      |  |  |       |  
|Tax exempt income, income subject to special tax rates and nondeductible expenses *)                               |  |                        | (36   | ) |      |  | (110  | )    |  |  | (101  | )
|Increase in taxes resulting from change in carry-forward tax losses for which no deferred taxes were provided, net |  |                        | 245   |   |      |  | 84    |      |  |  | 78    |  
|Taxes on non-controlling interest in a subsidiary qualifies as a REIT                                              |  |                        | (166  | ) |      |  | (218  | )    |  |  | (13   | )
|Taxes with respect to prior years                                                                                  |  |                        | 9     |   |      |  | 9     |      |  |  | 1     |  
|Deferred taxes due to changes in tax rates                                                                         |  |                        |      |   |      |  | (49   | )    |  |  | 33    |  
|Taxes with respect to Groups share of earnings of associates, net                                                 |  |                        | (3    | ) |      |  | (37   | )    |  |  | (75   | )
|Difference in tax rate applicable to income of foreign companies and other differences                             |  |                        | (38   | ) |      |  | (27   | )    |  |  | 42    |  
|                                                                                                                   |  |                        |       |   |      |  |       |      |  |  |       |  
|Taxes on income                                                                                                    |  |                        | 405   |   |      |  | 265   |      |  |  | 758   |  
|                                                                                                                   |  |                        |       |   |      |  |       |      |  |  |       |  
|Effective tax rate                                                                                                 |  |                        | 27.2  | % |      |  | 10.8  | %    |  |  | 23.9  | %
|                                                                                                                   |  |                        |       |   |      |  |       |      |  |  |       |  



|*) | Primarily with respect to income which is not taxable income, and for tax rates of 0%-13.1% expected to apply upon disposal of some of the Groups properties, primarily in Canada.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 26:- CONTINGENT LIABILITIES AND COMMITMENTS



| | a. | Engagements
| | -- | -----------



| | 1. | Shareholders agreement in connection with FCR
| | -- | ----------------------------------------------

In January 2011, the Company and
Alony-Hetz entered into a shareholders agreement that replaced the shareholders agreement from October 2000. The agreement includes provisions, among others, as to mutual support of appointment of directors on FCRs Board (up to two
directors by Alony-Hetz and all other directors by the Company), the grant of tag-along rights to Alony-Hetz upon the sale of FCR shares by the Company, the Companys drag-along right to compel Alony-Hetz to participate in the sale of its
shares in FCR, a right of either party to participate in acquiring additional securities of FCR, the Companys right of first offer in the event of a sale of FCR shares by Alony-Hetz under certain conditions, and Alony-Hetzs undertaking
to refrain from interfering in FCRs management or attempting to acquire control of FCR, subject to certain conditions. It was also agreed that FCRs Board of Directors shall not include more than 15 members.

The shareholders agreement is in effect until the earlier of the following: 10 years; once Alony-Hetzs holdings in FCR shares
decreases below 3% of the issued share capital of FCR; or the date on which the Companys holdings in FCR decreases below 20%.



| | 2. | Shareholders agreement in connection with ATR
| | -- | ----------------------------------------------

The Company and CPI (collectively:
the Investors) have entered into a series of agreements that regulate their relations with respect to their interests in ATR, including rules for joint voting at a shareholders meeting of ATR and rules for the transfer of shares.
Additionally, the Investors have entered into a series of agreements with ATR that govern their rights in ATR and which include, inter alia, the right to appoint four members of ATRs Board of Directors on behalf of the Investors, the right to
determine the identity of the Chairman of ATRs Board of Directors, the right to appoint the majority of the members of the Nominations Committee of ATRs Board of Directors, and rights of consent in connection with the taking of very
material decisions at ATR, including the appointment of ATRs President.

The aforesaid series of agreements, together with their
aggregate interests in ATR (55% as of the reporting date) conferred the Investors with joint control over ATR. Upon the Companys acquisition of all of CPIs shares subsequent to the reporting date (see Notes 9c and 40a), the
shareholders agreement between the Company and CPI was canceled and the agreement with ATR was amended, such that the aforementioned rights of the Investors are left exclusively in the hands of the Company.



| | 3. | Shareholders agreement in connection with CTY
| | -- | ----------------------------------------------

Simultaneously with CTYs
private offering in 2014 (refer to Note 9f5), the Company has entered into an agreement with CPPIBEH, accordingly the Company undertook to support the appointment of up to two directors for the board of directors of CTY that will be recommended by
CPPIBEH and CPPIBEH undertook to support the appointment of up to three directors for the board of directors of CTY that will be recommended by the Company. In addition, the Company shall grant CPPIBEH a tag-along right for a sale of CTY shares to
the extent higher than 5% of CTYs shares during 12 months period under certain conditions. The agreement will terminate at the sooner of: (1) 10 years from the signature date, (2) if CPPIBEH will hold less than 10% of CTYs
shares, or (3) the Company will hold less than 20% of CTYs shares.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 26:- CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)



| | 4. | The Group has a lease agreement for an aircraft for business use by the Groups executives. The lease is classified as an operating lease according to IAS 17. The annual lease payment is approximately U.S.
$ 2.5 million. The lease agreement ends in May 2017. In addition, the Group entered into an agreement with a third party which will provide operating services and maintenance for the aircraft in consideration for fixed annual service fees of
approximately one million U.S. dollar plus variable expenses based on the extent of use of the aircraft.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. | The Groups companies have entered into operating lease agreements with tenants occupying their properties. The following details the minimum lease fee receivable in respect to the lease agreements:
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                      |  |                 |        | 
|--------------------- |  | --------------- | ------ | 
|                      |  | December 31     |       
|                      |  | 2014            |       
|                      |  | NIS in millions |       
|Year 1                |  |                 | 2,855  | 
|Year 2 to 5           |  |                 | 7,847  | 
|Year 6 and thereafter |  |                 | 6,151  | 
|                      |  |                 |        | 
|Total                 |  |                 | 16,853 | 
|                      |  |                 |        | 



| | 6. | As for engagements with related parties, refer to Note 38.
| | -- | ----------------------------------------------------------



| | b. | Guarantees
| | -- | ----------



| | 1. | As of December 31, 2014, the Companys subsidiaries excluding Dori Group are guarantors for loans from various entities in respect of investment properties under development, which they own together with
partners and for bank guarantees, which were provided in the ordinary course of business, in the aggregate amount of approximately NIS 758 million (December 31, 2013 - approximately NIS 784 million).
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | As of December 31, 2014 Dori Group and its subsidiaries provided guarantees as follows:
| | -- | ---------------------------------------------------------------------------------------



|                                                                              |  |                |     | 
|----------------------------------------------------------------------------- |  | -------------- | --- | 
|                                                                              |  | NIS inmillions |    
|Bank guarantees under the Apartments Sales Law in Israel                      |  |                | 422 | 
|Bank guarantees to secure performance and quality of other construction works |  |                | 416 | 
|Others                                                                        |  |                | 159 | 
|                                                                              |  |                |     | 
|                                                                              |  |                | 997 | 
|                                                                              |  |                |     | 



| | 3. | The Company guarantees an unlimited amount to banks to secure credit received by wholly-owned subsidiaries of the Company. Total guarantees (including for debentures) as of December 31, 2014 and 2013 amounted to
NIS 1,335 million and NIS 1,305 million, respectively. Total utilized guarantees (including debentures) as of December 31, 2014 and 2013 amounted to NIS 463 million and NIS 373 million, respectively. Wholly-owned
subsidiaries of the Company guarantee loans and credit facilities obtained by the Company from banks, in an unlimited amount. In addition the company had pledged subsidiarys shares to secure credit of subsidiary.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | As for collaterals granted to secure guarantees, refer to Note 29.
| | -- | ------------------------------------------------------------------



| | c. | Contingent liabilities for the completion of the construction and redevelopment of properties and others
| | -- | --------------------------------------------------------------------------------------------------------



| | 1. | The Companys subsidiaries have off-balance sheet commitments for the completion of the construction and redevelopment of investment properties which, as of December 31, 2014, totaled approximately
NIS 2,096 million (December 31, 2013 - NIS 1,444 million).
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | As of the reporting date, CTY has a contingent liability to refund input VAT received of approximately NIS 448 million (December 31, 2013 - NIS 383 million), should the property, subject to the input VAT,
be sold to a VAT-exempt entity within 10 years, or within five years for properties acquired in Finland prior to 2008.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 26:- CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)



| | d. | Legal claims
| | -- | ------------



| | 1. | Several legal proceedings are pending against the Companys subsidiaries in the ordinary course of their business including in respect of personal injury and property damage that occurred in their shopping centers
and in other properties, as well as construction defects and claims of suppliers and sub constructors related to Dori Group. The Company estimates that the claimed amounts are immaterial (on a stand-alone basis or on a cumulative basis) to the
Companys results.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | As ATR noted in its financial reports as of December 31, 2014, there are currently criminal proceedings pending against Mr. Julius Meinl and others before the criminal court in Vienna relating to events that
occurred in 2007 and earlier. In connection with this, a law firm representing various investors in ATR, who had invested at the time of these events, has alleged that ATR is liable for various instances of fraud, breach of trust and infringements
of the Austrian Stock Corporation Act and Austrian Capital Market Act arising from the same events. The public prosecutor has directed ATR to reply to the allegations and has started criminal investigation proceedings against Atrium based on the
Austrian Corporate Criminal Liability Act. This legislation, which came into force on ATR in 2006, is of uncertain application. ATRs management believes a finding of liability on its part would be inappropriate. Accordingly, ATR intends to
actively defend these proceedings.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, ATR is involved in certain civil claims and regulatory investigations in
Austria, in connection with securities transaction and related matters during 2006 and 2007, in a scope which is not material for the Company. It should be noted, that the Jersey Financial Service Commission found that there was no breach of Jersey
Laws due to the aforementioned events.



| | 3. | In July and August 2014, a number of lawsuits were filed with the Economic Affairs Division of the Tel Aviv District Court to certify lawsuits as class actions, against Dori Construction, Dori Group, their directors and
officers and their auditors, as well as against Gazit Development and the Company. The motions deal with damage allegedly caused to the public that have invested in Dori Construction and/or Dori Group, as the case may be, as a result of the
publication of allegedly erroneous information in the reporting of Dori Construction, including in its financial statements, and as a result of failing to report, at the appointed time, material adverse information concerning the financial results
and the financial position of Dori Construction, and consequently, concerning the financial results of Dori Group. The grounds for the claims in the aforementioned motions include grounds under the Securities Law, 1968, among which are the inclusion
of erroneous details in the financial statements and deficient and erroneous reporting, a tort of negligence under the Torts Laws, breach of statutory duty (in relation to the Securities Law and the Regulations promulgated thereunder, as well as the
Companies Law), all being with regard to the reporting of Dori Construction. The amounts of the aforesaid claims range from NIS 13 million to NIS 75 million (subject to quantifying the exact damage in the course of the hearings on the
lawsuits), which are not material for the Company (including cumulatively).
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Moreover, two derivative actions were filed
against Dori Construction and Dori Group and their directors and officers in connection with a dividend distribution made by Dori Construction to its shareholders.

On November 9, 2014, the court ordered the plaintiffs in the class actions to file a single unified motion on their joint behalf, apart
from the action on behalf of the Movement for Quality Government, and apart from the two last actions that have been dismissed. With regard to the two motions to certify derivative actions, the court has decided that a ruling with regard to the
procedural rules in these motions will be granted by it at a later date, following the filing of the unified motion to certify the lawsuit as a class action. On December 28, 2014, the amended unified motion was filed to certify a lawsuit as a
class action, and on March 3, 2015, a statement of claim was filed that should have been attached to the aforesaid motion, but was



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 26:- CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)



omitted therefrom. Currently, the due date for the Company to file its response to the amended unified certification motion is May 7, 2015. The Company cannot estimate the chance of the
lawsuits success at this preliminary stage of the procedure.

NOTE 27:- Equity



| | a. | Composition
| | -- | -----------



|                                        |  |                   |                |  |                       |  |             |                 |  |  |                       |  |  |            |             |  |                       |  |                |  |  |  |             | 
|--------------------------------------- |  | ----------------- | -------------- |  | --------------------- |  | ----------- | --------------- |  |  | --------------------- |  |  | ---------- | ----------- |  | --------------------- |  | -------------- |  |  |  | ----------- | 
|                                        |  | December 31, 2014 |                |  | December 31, 2013     |  |             | January 1, 2013 | 
|                                        |  | Authorized        |                |  | Issued andoutstanding |  |             | Authorized      |  |  | Issued andoutstanding |  |  | Authorized |             |  | Issued andoutstanding | 
|                                        |  | Number of shares  |               
|Ordinary shares of NIS 1 par value each |  |                   | 500,000,000 *) |  |                       |  | 179,444,463 |                 |  |  | 500,000,000 *)        |  |  |            | 176,837,508 |  |                       |  | 500,000,000 *) |  |  |  | 166,294,246 | 
|                                        |  |                   |                |  |                       |  |             |                 |  |  |                       |  |  |            |             |  |                       |  |                |  |  |  |             | 



| | b. | Movement in issued and outstanding share capital
| | -- | ------------------------------------------------



|                                                   |  |                  |             |  |      |  |             |      |  |  |             | 
|-------------------------------------------------- |  | ---------------- | ----------- |  | ---- |  | ----------- | ---- |  |  | ----------- | 
|                                                   |  | 2014             |             |  | 2013 |  |             | 2012 | 
|                                                   |  | Number of Shares |            
|Balance as of January 1 *)                         |  |                  | 176,837,508 |  |      |  | 166,294,246 |      |  |  | 165,868,103 | 
|Exercise of share options (employees and officers) |  |                  | 147,670     |  |      |  | 104,242     |      |  |  | 426,143     | 
|Vesting of RSUs (employees and officers)           |  |                  | 59,285      |  |      |  |            |      |  |  |            | 
|Issue of shares                                    |  |                  | 2,400,000   |  |      |  | 10,439,020  |      |  |  |            | 
|                                                   |  |                  |             |  |      |  |             |      |  |  |             | 
|Balance as of December 31 *)                       |  |                  | 179,444,463 |  |      |  | 176,837,508 |      |  |  | 166,294,246 | 
|                                                   |  |                  |             |  |      |  |             |      |  |  |             | 



|*) | of which NIS 1,046,993 par value shares are held in treasury by the Company.
|-- | ----------------------------------------------------------------------------



| | c. | In October 2014, the Company completed a private placement and issued to a private qualified investor 1.7 million of Companys shares and 3.4 million of untraded warrants and to a wholly owned subsidiary
of the parent company 0.7 million of Companys shares and 1.4 million of untraded warrants for immediate total consideration of NIS 118 million at U.S.$ 13.25 per share. The untraded warrants were issued for no additional
consideration and expired on December 29, 2014.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | d. | On June 13, 2013, the Company issued to the public through a shelf prospectus, approximately 10.4 million ordinary shares, at a price of NIS 47.9 per share, for a total gross consideration of NIS
500 million (approximately NIS 489 million, net of issuance expenses).
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | e. | Composition of other capital reserves:
| | -- | --------------------------------------



|                                            |  |                        |     |   |      |  |     |      |  |  |      |  
|------------------------------------------- |  | ---------------------- | --- | - | ---- |  | --- | ---- |  |  | ---- | -
|                                            |  | Year ended December 31 |    
|                                            |  | 2014                   |     |   | 2013 |  |     | 2012 | 
|                                            |  | NIS in millions        |    
|Available-for-sale financial assets         |  |                        | 51  |   |      |  | 15  |      |  |  | 19   |  
|Transactions with controlling shareholder   |  |                        | 147 |   |      |  | 147 |      |  |  | 147  |  
|Transactions with non-controlling interests |  |                        | (43 | ) |      |  | 44  |      |  |  | 77   |  
|Share-based payment                         |  |                        | 15  |   |      |  | 16  |      |  |  | 11   |  
|Revaluation reserve of cash flow hedges     |  |                        | (43 | ) |      |  | (76 | )    |  |  | (199 | )
|Revaluation reserve of fixed assets         |  |                        |    |   |      |  |    |      |  |  | 5    |  
|                                            |  |                        |     |   |      |  |     |      |  |  |      |  
|                                            |  |                        | 127 |   |      |  | 146 |      |  |  | 60   |  
|                                            |  |                        |     |   |      |  |     |      |  |  |      |  



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 27:- Equity (Cont.)



| | f. | Supplementary information with regard to other comprehensive income (loss)
| | -- | --------------------------------------------------------------------------



|                                                                                 |  |                        |       |   |      |  |        |      |  |  |      |  
|-------------------------------------------------------------------------------- |  | ---------------------- | ----- | - | ---- |  | ------ | ---- |  |  | ---- | -
|                                                                                 |  | Year ended December 31 |      
|                                                                                 |  | 2014                   |       |   | 2013 |  |        | 2012 | 
|                                                                                 |  | NIS in millions        |      
|Exchange differences on translation of foreign operations                        |  |                        | 1,215 |   |      |  | (2,414 | )    |  |  | (425 | )
|Transfer to income statement with respect to disposal of foreign operations      |  |                        |      |   |      |  |       |      |  |  | 3    |  
|Tax effect                                                                       |  |                        | (45   | ) |      |  |       |      |  |  |     |  
|Groups share in equity-accounted investees                                      |  |                        | (22   | ) |      |  | (29    | )    |  |  | 9    |  
|                                                                                 |  |                        |       |   |      |  |        |      |  |  |      |  
|                                                                                 |  |                        | 1,148 |   |      |  | (2,443 | )    |  |  | (413 | )
|                                                                                 |  |                        |       |   |      |  |        |      |  |  |      |  
|Gain (loss) with respect to cash flow hedges                                     |  |                        | (6    | ) |      |  | 172    |      |  |  | (128 | )
|Transfer to income statement with respect to cash flow hedges                    |  |                        | 74    |   |      |  | 130    |      |  |  | 8    |  
|Tax effect                                                                       |  |                        | (10   | ) |      |  | (73    | )    |  |  | 32   |  
|Groups share in equity-accounted investees                                      |  |                        | (12   | ) |      |  | 10     |      |  |  | (12  | )
|                                                                                 |  |                        |       |   |      |  |        |      |  |  |      |  
|                                                                                 |  |                        | 46    |   |      |  | 239    |      |  |  | (100 | )
|                                                                                 |  |                        |       |   |      |  |        |      |  |  |      |  
|Income (loss) with respect to available-for-sale financial assets                |  |                        | 87    |   |      |  | (7     | )    |  |  | 39   |  
|Transfer to income statement with respect to available-for-sale financial assets |  |                        | (34   | ) |      |  | 4      |      |  |  | (3   | )
|Tax effect                                                                       |  |                        | (17   | ) |      |  | (1     | )    |  |  | 1    |  
|                                                                                 |  |                        |       |   |      |  |        |      |  |  |      |  
|                                                                                 |  |                        | 36    |   |      |  | (4     | )    |  |  | 37   |  
|                                                                                 |  |                        |       |   |      |  |        |      |  |  |      |  
|Revaluation gain on fixed assets in jointly controlled entity                    |  |                        |      |   |      |  | (6     | )    |  |  | 10   |  
|                                                                                 |  |                        |       |   |      |  |        |      |  |  |      |  
|Total other comprehensive income (loss)                                          |  |                        | 1,230 |   |      |  | (2,214 | )    |  |  | (466 | )
|                                                                                 |  |                        |       |   |      |  |        |      |  |  |      |  



| | g. | Composition of non-controlling interests
| | -- | ----------------------------------------



|                                                                                     |  |                        |        |  |      |  |        |      |  |  |        | 
|------------------------------------------------------------------------------------ |  | ---------------------- | ------ |  | ---- |  | ------ | ---- |  |  | ------ | 
|                                                                                     |  | Year ended December 31 |       
|                                                                                     |  | 2014                   |        |  | 2013 |  |        | 2012 | 
|                                                                                     |  | NIS in millions        |       
|Share in equity of subsidiaries *)                                                   |  |                        | 17,713 |  |      |  | 14,381 |      |  |  | 14,406 | 
|Share options, warrants and capital reserve from share-based payment in subsidiaries |  |                        | 107    |  |      |  | 144    |      |  |  | 154    | 
|Conversion option proceeds in subsidiaries                                           |  |                        | 27     |  |      |  | 26     |      |  |  | 56     | 
|                                                                                     |  |                        |        |  |      |  |        |      |  |  |        | 
|                                                                                     |  |                        | 17,847 |  |      |  | 14,551 |      |  |  | 14,616 | 
|                                                                                     |  |                        |        |  |      |  |        |      |  |  |        | 



|*) | Including capital reserves and acquisition-date fair value adjustments.
|-- | -----------------------------------------------------------------------



| | h. | Dividends
| | -- | ---------



| | 1. | Pursuant to the Companys policy, the Company announces at the end of each year the anticipated dividend for the following year. In November 2014, the Company announced that the dividend to be declared in 2015
would not be less than NIS 0.46 per share per quarter (NIS 1.84 per share on an annualized basis), in place of the dividend policy announced in November 2013, pursuant to which the Company distributed NIS 0.45 per share per quarter
(NIS 1.80 per share on an annualized basis).
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The above is subject to the existence of sufficient distributable income
at the relevant dates and is subject to the provisions of any law relating to dividend distributions and to decisions that the Company is permitted to take. This includes the appropriation of its income for other purposes and the revision of this
policy.



| | 2. | During 2014, the Company declared and paid dividends in the total amount of approximately NIS 318 million (NIS 1.80 per share) (2013 - NIS 298 million (NIS 1.72 per share), 2012 - NIS
264 million (NIS 1.60 per share)).
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 27: | - Equity (Cont.)
|-------- | ----------------



| | 3. | On March 23, 2015, the Company declared a dividend in the amount of NIS 0.46 per share (a total of approximately NIS 82.1 million), payable on April 14, 2015 to the shareholders of the Company on
April 7, 2015.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | i. | Capital management of the Company
| | -- | ---------------------------------

The Company evaluates and analyzes its capital in
terms of economic capital, that is, the excess of fair value of its assets over its liabilities. The Company manages its capital in the currencies of the different markets in which it operates and at similar levels to the ratio of assets in a
particular currency to total assets according to proportionate consolidation.

The Company manages its capital in order to ensure broad
economic flexibility for investing in its areas of operations as well as in synergistic areas, while maintaining strong credit rating, high level of liquidity and seeking to maintain most of its assets as unencumbered.

The Companys Board of directors determined the optimal capital ratios that will provide adequate return for the shareholders at a risk
which it defines as low. From time to time the Companys Board authorized a deviation from the capital ratio that the Board deems appropriate when the Companys management makes significant investments, while simultaneously setting targets
for the restoration of appropriate ratios within a reasonable time.

Over the years, the Company and its subsidiaries have raised equity
capital on a regular basis in the markets in which they operate. In 2014, the Group raised a total of approximately NIS 2,483 million, in 2013 - NIS 1,025 million and in
2012 - NIS 1,832 million.

The Company evaluates its capital ratios on a
consolidated basis (including non-controlling interests), on the basis of extended stand alone basis with reference to the capital of its listed subsidiaries presented at equity method, and also based on cash flow ratios.

NOTE 28:- SHARE-BASED COMPENSATION



| | a. | In December 2011 the Companys Board of Directors approved a new Share Incentive Plan (the Plan). Pursuant to the Plan, the Company may grant directors, employees, officers and services providers,
options, ordinary shares, restricted shares and other share based awards as set out in the Plan, convertible into up to 4.5 million of the Companys shares, subject to various tax consequences and regimes.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | In 2013, the Company granted, as part of the plan in section a above share options, Restricted Share Units (RSUs) and Performance Share Units (PSUs) to Companys officers and employees.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 28: | - SHARE-BASED COMPENSATION (Cont.)
|-------- | ----------------------------------



| | c. | The following table presents the change in number of the Companys share options and their original weighted average exercise price:
| | -- | ------------------------------------------------------------------------------------------------------------------------------------



|                                         |  |                  |           |   |                              |  |       |                  |  |  |                              |   |  |  |       | 
|---------------------------------------- |  | ---------------- | --------- | - | ---------------------------- |  | ----- | ---------------- |  |  | ---------------------------- | - |  |  | ----- | 
|                                         |  | 2014             |           |   | 2013                         | 
|                                         |  | Number ofoptions |           |   | Weightedaverageexerciseprice |  |       | Number ofoptions |  |  | Weightedaverageexerciseprice |  
|                                         |  |                  |           |   | NIS                          |  |       |                  |  |  | NIS                          |  
|Share options at beginning of year       |  |                  | 1,500,716 |   |                              |  | 44.00 |                  |  |  | 818,900                      |   |  |  | 36.12 | 
|Share options granted                    |  |                  |          |   |                              |  |      |                  |  |  | 1,048,287                    |   |  |  | 47.85 | 
|Share options forfeited                  |  |                  | (28,485   | ) |                              |  | 48.65 |                  |  |  | (12,871                      | ) |  |  | 46.59 | 
|Share options exercised                  |  |                  | (475,295  | ) |                              |  | 35.73 |                  |  |  | (353,600                     | ) |  |  | 37.04 | 
|Share options expired                    |  |                  | (97,082   | ) |                              |  | 48.65 |                  |  |  |                             |   |  |  |      | 
|                                         |  |                  |           |   |                              |  |       |                  |  |  |                              |   |  |  |       | 
|Share options at end of year             |  |                  | 899,854   |   |                              |  | 47.72 |                  |  |  | 1,500,716                    |   |  |  | 44.00 | 
|                                         |  |                  |           |   |                              |  |       |                  |  |  |                              |   |  |  |       | 
|Share options exercisable at end of year |  |                  | 299,951   |   |                              |  | 47.72 |                  |  |  | 311,425                      |   |  |  | 33.61 | 
|                                         |  |                  |           |   |                              |  |       |                  |  |  |                              |   |  |  |       | 

Each abovementioned share option is exercisable into one ordinary share of NIS 1 par value of the Company at
an exercise price that is linked to the Israeli CPI and subject to adjustments for share distributions, rights issues and dividend distributions. The grantees are also provided the choice of a cashless exercise. The options vest over three years in
three equal instalments, starting one year from the grant date of the options, and the options expire four years after the grant date.



| | d. | The following table presents the movement in units of the Company RSUs and PSUs and the information that was used to calculate the fair value at the grant date:
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



|                               |  |      |         |   |      |  |         |      |  |  |         |   |  |  |         | 
|------------------------------ |  | ---- | ------- | - | ---- |  | ------- | ---- |  |  | ------- | - |  |  | ------- | 
|                               |  | 2014 |         |   | 2013 | 
|                               |  | RSUs |         |   | PSUs |  |         | RSUs |  |  | PSUs    |  
|Units at beginning of the year |  |      | 151,091 |   |      |  | 244,760 |      |  |  |        |   |  |  |        | 
|Units granted                  |  |      |        |   |      |  |        |      |  |  | 153,920 |   |  |  | 244,761 | 
|Units forfeited                |  |      | (4,408  | ) |      |  | (41,258 | )    |  |  | (2,829  | ) |  |  |        | 
|Units Vested                   |  |      | (59,285 | ) |      |  |        |      |  |  |        |   |  |  |        | 
|                               |  |      |         |   |      |  |         |      |  |  |         |   |  |  |         | 
|Units at end of year           |  |      | 87,398  |   |      |  | 203,502 |      |  |  | 151,091 |   |  |  | 244,761 | 
|                               |  |      |         |   |      |  |         |      |  |  |         |   |  |  |         | 

Each RSU and PSU is exercisable into one ordinary share of the Company. The RSUs vest over three years in
three equal instalments, starting one year from the grant date of the RSU.

The PSUs (which were granted to officers only) vest over three
years in one instalment from the grant date and are subject to a general yield (including dividend distributions) of the Company share price during the vesting period of at least 20% with respect to the Company share price at the grant date. In the
event of a dividend distribution, the grantees shall be entitled to remuneration that reflects the benefit relating to the dividend in respect of the RSUs and PSUs that had not vested on the dividend distribution date.



| | e. | The expenses recognized in the income statement for share options, RSUs and PSUs in 2014, 2013 and 2012 amounted to NIS 9.1 million, NIS 9.7 million and NIS 3.9 million, respectively.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 28: | - SHARE-BASED COMPENSATION (Cont.)
|-------- | ----------------------------------



| | f. | Cash-settled transactions
| | -- | -------------------------

Several employees and officers of a wholly-owned subsidiary
of the Company are entitled to cash compensation, based on the price of the Companys shares (units). The vesting period of the units is three years as of the reporting date, there are 185 thousand units outstanding (As of
December 31, 2013 274 thousand units outstanding).

In addition, as of the reporting date there are 25 thousand RSU units
that are vesting over three years period and are settled in cash (as of December 31, 2013 43 thousand RSU units).

The carrying
amount of the liability relating to the aforementioned cash settled compensation plans as of December 31, 2014 is NIS 1 million (2013 - NIS 1 million).

NOTE 29:- CHARGES (ASSETS PLEDGED)



| | a. | As collateral for part of the Groups liabilities, including guarantees provided by banks in favor of other parties, the Groups rights to various real estate properties which it owns have been mortgaged and
other assets, including the right to receive payments from tenants and from apartment buyers under sale agreements, rights under contracts with customers, funds and securities in certain bank accounts, have been pledged. In addition, charges have
been placed on part of the shares of investees and of other companies which are held by the companies in the Group.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The
balances of the secured liabilities are as follows:



|                                                       |  |                 |       |  |      |  |        | 
|------------------------------------------------------ |  | --------------- | ----- |  | ---- |  | ------ | 
|                                                       |  | December 31     |      
|                                                       |  | 2014            |       |  | 2013 | 
|                                                       |  | NIS in millions |      
|Short-term loans and credit                            |  |                 | 117   |  |      |  | 175    | 
|Non-current liabilities (including current maturities) |  |                 | 7,360 |  |      |  | 9,555  | 
|Debentures (including current maturities)              |  |                 | 847   |  |      |  | 861    | 
|                                                       |  |                 |       |  |      |  |        | 
|                                                       |  |                 | 8,324 |  |      |  | 10,591 | 
|                                                       |  |                 |       |  |      |  |        | 



| | b. | To secure the debentures (series J), issued by the Company in February 2009, a fixed pledge has been placed on five real estate properties which are owned by Gazit Development and whose total value as of the reporting
date is approximately NIS 1,167 million.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 30:- RENTAL INCOME

During the years 2012-2014, the Group had no single tenant which contributed more than 10% to total rental income. As for information about
rental income by operating segments and geographical regions, see Note 39.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 31:- PROPERTY OPERATING EXPENSES



|                              |  |                        |       |  |      |  |       |      |  |  |       | 
|----------------------------- |  | ---------------------- | ----- |  | ---- |  | ----- | ---- |  |  | ----- | 
|                              |  | Year ended December 31 |      
|                              |  | 2014                   |       |  | 2013 |  |       | 2012 | 
|                              |  | NIS in millions        |      
|Salaries and related expenses |  |                        | 97    |  |      |  | 103   |      |  |  | 96    | 
|Property tax and other fees   |  |                        | 624   |  |      |  | 650   |      |  |  | 672   | 
|Maintenance and repairs       |  |                        | 389   |  |      |  | 413   |      |  |  | 421   | 
|Utilities                     |  |                        | 243   |  |      |  | 258   |      |  |  | 259   | 
|Insurance and security        |  |                        | 120   |  |      |  | 124   |      |  |  | 127   | 
|Others                        |  |                        | 111   |  |      |  | 141   |      |  |  | 130   | 
|                              |  |                        |       |  |      |  |       |      |  |  |       | 
|                              |  |                        | 1,584 |  |      |  | 1,689 |      |  |  | 1,705 | 
|                              |  |                        |       |  |      |  |       |      |  |  |       | 

NOTE 32:- REVENUES AND COSTS FROM SALE OF BUILDINGS, LAND AND CONSTRUCTION WORKS
                    PERFORMED



|                                                    |  |                        |       |  |      |  |       |      |  |  |       | 
|--------------------------------------------------- |  | ---------------------- | ----- |  | ---- |  | ----- | ---- |  |  | ----- | 
|                                                    |  | Year ended December 31 |      
|                                                    |  | 2014                   |       |  | 2013 |  |       | 2012 | 
|                                                    |  | NIS in millions        |      
|a.      Revenues                                    |  |                        |       |  |      |  |       |      |  |  |       | 
|                                                    |  |                        |      
|Revenues from sale of buildings and land            |  |                        | 230   |  |      |  | 328   |      |  |  | 200   | 
|Revenues from construction contracts                |  |                        | 1,127 |  |      |  | 1,344 |      |  |  | 1,560 | 
|                                                    |  |                        |       |  |      |  |       |      |  |  |       | 
|                                                    |  |                        | 1,357 |  |      |  | 1,672 |      |  |  | 1,760 | 
|                                                    |  |                        |       |  |      |  |       |      |  |  |       | 
|b.      Cost of revenues by revenue sources         |  |                        |       |  |      |  |       |      |  |  |       | 
|                                                    |  |                        |      
|Cost of sale of buildings and land                  |  |                        | 252   |  |      |  | 279   |      |  |  | 181   | 
|Cost of revenues from construction contracts        |  |                        | 1,408 |  |      |  | 1,409 |      |  |  | 1,539 | 
|                                                    |  |                        |       |  |      |  |       |      |  |  |       | 
|                                                    |  |                        | 1,660 |  |      |  | 1,688 |      |  |  | 1,720 | 
|                                                    |  |                        |       |  |      |  |       |      |  |  |       | 
|c.      Cost of revenues by expense components      |  |                        |       |  |      |  |       |      |  |  |       | 
|                                                    |  |                        |      
|Land                                                |  |                        | 98    |  |      |  | 73    |      |  |  | 46    | 
|Materials                                           |  |                        | 311   |  |      |  | 427   |      |  |  | 464   | 
|Subcontractors                                      |  |                        | 1,011 |  |      |  | 959   |      |  |  | 953   | 
|Salaries and related expenses                       |  |                        | 120   |  |      |  | 116   |      |  |  | 119   | 
|Depreciation                                        |  |                        | 7     |  |      |  | 5     |      |  |  | 5     | 
|Fair value upon acquisition amortization and others |  |                        | 113   |  |      |  | 108   |      |  |  | 133   | 
|                                                    |  |                        |       |  |      |  |       |      |  |  |       | 
|                                                    |  |                        | 1,660 |  |      |  | 1,688 |      |  |  | 1,720 | 
|                                                    |  |                        |       |  |      |  |       |      |  |  |       | 



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 33:- GENERAL AND ADMINISTRATIVE EXPENSES



|                                         |  |                        |     |  |      |  |     |      |  |  |     | 
|---------------------------------------- |  | ---------------------- | --- |  | ---- |  | --- | ---- |  |  | --- | 
|                                         |  | Year ended December 31 |    
|                                         |  | 2014                   |     |  | 2013 |  |     | 2012 | 
|                                         |  | NIS in millions        |    
|Salaries and management fees (1)         |  |                        | 346 |  |      |  | 350 |      |  |  | 397 | 
|Professional fees                        |  |                        | 84  |  |      |  | 77  |      |  |  | 86  | 
|Depreciation                             |  |                        | 25  |  |      |  | 29  |      |  |  | 29  | 
|Sales and marketing                      |  |                        | 40  |  |      |  | 38  |      |  |  | 32  | 
|Other (including office maintenance) (2) |  |                        | 124 |  |      |  | 116 |      |  |  | 129 | 
|                                         |  |                        |     |  |      |  |     |      |  |  |     | 
|                                         |  |                        | 619 |  |      |  | 610 |      |  |  | 673 | 
|                                         |  |                        |     |  |      |  |     |      |  |  |     | 



|(1) | As for salaries and management fees to related parties, refer to Note 38b.
|--- | --------------------------------------------------------------------------

|(2) | Net of income management fees from related party, refer to Note 38a.
|--- | --------------------------------------------------------------------

NOTE 34:- OTHER INCOME AND EXPENSES



| | a. | Other income
| | -- | ------------



|                                   |  |                        |    |  |      |  |     |      |  |  |     | 
|---------------------------------- |  | ---------------------- | -- |  | ---- |  | --- | ---- |  |  | --- | 
|                                   |  | Year ended December 31 |   
|                                   |  | 2014                   |    |  | 2013 |  |     | 2012 | 
|                                   |  | NIS in millions        |   
|Gain from realization of associate |  |                        |   |  |      |  |    |      |  |  | 4   | 
|Capital gain on assets disposal    |  |                        |   |  |      |  | 5   |      |  |  | 21  | 
|Gain from bargain purchase*)       |  |                        | 47 |  |      |  | 198 |      |  |  | 134 | 
|Others                             |  |                        | 8  |  |      |  | 15  |      |  |  | 5   | 
|                                   |  |                        |    |  |      |  |     |      |  |  |     | 
|                                   |  |                        | 55 |  |      |  | 218 |      |  |  | 164 | 
|                                   |  |                        |    |  |      |  |     |      |  |  |     | 



|*) | In 2014 includes amount of NIS 47 million due to purchase of additional ATR shares (refer to Note 9c).
|-- | ------------------------------------------------------------------------------------------------------



| | b. | Other expenses
| | -- | --------------



|                                                                 |  |                        |    |  |      |  |    |      |  |  |    | 
|---------------------------------------------------------------- |  | ---------------------- | -- |  | ---- |  | -- | ---- |  |  | -- | 
|                                                                 |  | Year ended December 31 |   
|                                                                 |  | 2014                   |    |  | 2013 |  |    | 2012 | 
|                                                                 |  | NIS in millions        |   
|Loss from decrease in holding interest, net                      |  |                        | 1  |  |      |  | 11 |      |  |  | 4  | 
|Capital loss on assets disposal (including transaction expenses) |  |                        | 65 |  |      |  | 58 |      |  |  | 26 | 
|Impairment of other assets                                       |  |                        | 14 |  |      |  | 2  |      |  |  | 7  | 
|Other                                                            |  |                        | 1  |  |      |  | 3  |      |  |  | 10 | 
|                                                                 |  |                        |    |  |      |  |    |      |  |  |    | 
|                                                                 |  |                        | 81 |  |      |  | 74 |      |  |  | 47 | 
|                                                                 |  |                        |    |  |      |  |    |      |  |  |    | 



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 35:- FINANCE EXPENSES AND INCOME



| | a. | Finance expenses
| | -- | ----------------



|                                                                 |  |                        |       |   |      |  |       |      |  |  |       |  
|---------------------------------------------------------------- |  | ---------------------- | ----- | - | ---- |  | ----- | ---- |  |  | ----- | -
|                                                                 |  | Year ended December 31 |      
|                                                                 |  | 2014                   |       |   | 2013 |  |       | 2012 | 
|                                                                 |  | NIS in millions        |      
|Finance expenses on debentures                                   |  |                        | 1,166 |   |      |  | 1,190 |      |  |  | 1,050 |  
|Finance expenses on convertible debentures                       |  |                        | 77    |   |      |  | 89    |      |  |  | 99    |  
|Finance expenses on loans from financial institutions and others |  |                        | 611   |   |      |  | 831   |      |  |  | 1,013 |  
|Revaluation of derivatives*)                                     |  |                        | 190   |   |      |  | 2     |      |  |  |      |  
|Loss from early redemption of debentures **)                     |  |                        | 154   |   |      |  | 142   |      |  |  | 147   |  
|Exchange rate differences and other                              |  |                        | 45    |   |      |  | 44    |      |  |  | 37    |  
|Finance expenses capitalized to real estate under development    |  |                        | (128  | ) |      |  | (113  | )    |  |  | (132  | )
|                                                                 |  |                        |       |   |      |  |       |      |  |  |       |  
|                                                                 |  |                        | 2,115 |   |      |  | 2,185 |      |  |  | 2,214 |  
|                                                                 |  |                        |       |   |      |  |       |      |  |  |       |  



|*) | Mainly from swap hedging transactions.
|-- | --------------------------------------

|**) | In 2014 and 2013 includes NIS 62 million and NIS 118 million, respectively due to unwinding hedging transactions in a subsidiary, that were reclassified from other comprehensive income, also refer to note 20d.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | Finance income:
| | -- | ---------------



|                                            |  |                        |     |  |      |  |     |      |  |  |     | 
|------------------------------------------- |  | ---------------------- | --- |  | ---- |  | --- | ---- |  |  | --- | 
|                                            |  | Year ended December 31 |    
|                                            |  | 2014                   |     |  | 2013 |  |     | 2012 | 
|                                            |  | NIS in millions        |    
|Gain from investments in securities, net    |  |                        | 35  |  |      |  | 7   |      |  |  | 28  | 
|Dividend income                             |  |                        | 24  |  |      |  | 4   |      |  |  | 6   | 
|Interest income from investees              |  |                        | 44  |  |      |  | 34  |      |  |  | 5   | 
|Interest income                             |  |                        | 47  |  |      |  | 73  |      |  |  | 63  | 
|Revaluation of derivatives, fees and others |  |                        | 3   |  |      |  | 431 |      |  |  | 13  | 
|Exchange rate differences                   |  |                        | 4   |  |      |  |    |      |  |  | 5   | 
|                                            |  |                        |     |  |      |  |     |      |  |  |     | 
|                                            |  |                        | 157 |  |      |  | 549 |      |  |  | 120 | 
|                                            |  |                        |     |  |      |  |     |      |  |  |     | 

NOTE 36:- NET EARNINGS PER SHARE

Details about the number of shares and net income used in calculation of net earnings per share:



|                                                      |  |                         |         |  |                                                     |  |    |                         |  |  |                                                     |  |  |                         |     |   |                                                     |  |         |  |  |  |     |  
|----------------------------------------------------- |  | ----------------------- | ------- |  | --------------------------------------------------- |  | -- | ----------------------- |  |  | --------------------------------------------------- |  |  | ----------------------- | --- | - | --------------------------------------------------- |  | ------- |  |  |  | --- | -
|                                                      |  | Year ended December 31, |        
|                                                      |  | 2014                    |         |  | 2013                                                |  |    | 2012                    | 
|                                                      |  | Weightednumberof shares |         |  | Net incomeattributableto equityholders oftheCompany |  |    | Weightednumber ofshares |  |  | Net incomeattributableto equityholders oftheCompany |  |  | Weightednumber ofshares |     |   | Net incomeattributableto equityholders oftheCompany | 
|                                                      |  | Inthousands             |         |  | NIS inmillions                                      |  |    | Inthousands             |  |  | NIS inmillions                                      |  |  | Inthousands             |     |   | NIS inmillions                                      | 
|For the calculation of basic net earnings per share   |  |                         | 176,459 |  |                                                     |  | 73 |                         |  |  | 171,103                                             |  |  |                         | 926 |   |                                                     |  | 164,912 |  |  |  | 901 |  
|                                                      |  |                         |         |  |                                                     |  |    |                         |  |  |                                                     |  |  |                         |     |   |                                                     |  |         |  |  |  |     |  
|Effect of dilutive potential ordinary shares          |  |                         | 87      |  |                                                     |  | (4 | )                       |  |  | 310                                                 |  |  |                         | (10 | ) |                                                     |  | 104     |  |  |  | (34 | )
|                                                      |  |                         |         |  |                                                     |  |    |                         |  |  |                                                     |  |  |                         |     |   |                                                     |  |         |  |  |  |     |  
|For the calculation of diluted net earnings per share |  |                         | 176,546 |  |                                                     |  | 69 |                         |  |  | 171,413                                             |  |  |                         | 916 |   |                                                     |  | 165,016 |  |  |  | 867 |  
|                                                      |  |                         |         |  |                                                     |  |    |                         |  |  |                                                     |  |  |                         |     |   |                                                     |  |         |  |  |  |     |  

For details in respect of the outstanding warrants and stock options of the Companys investees, refer to
Note 9c(4), 9d(3), 9e(3) and 9f(3) and for convertible debentures issued by subsidiary, refer to Note 21.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 37:- FINANCIAL INSTRUMENTS



| | a. | Financial risk factors
| | -- | ----------------------

Groups global operations expose it to various financial
risk factors such as market risk (including foreign exchange risk, CPI risk, interest risk and price risk), credit risk and liquidity risk. The Groups comprehensive risk management strategy focuses on activities that reduce to a minimum any
possible adverse effects on the Groups financial performance.

The following is additional information about market risks and their
management:



| | 1. | Foreign currency risk
| | -- | ---------------------

The Group operates in a large number of countries, therefore it
is exposed to currency risks resulting from the exposure to the fluctuations of exchange rates in different currencies, mainly to the U.S. dollar, the Canadian dollar and the Euro. Some of the Group companies transactions are performed in
currency other than their functional currency. The Groups policy is to maintain a high correlation between the currency in which its assets are purchased and its activity is executed and the currency in which the liabilities relating to the
purchase of these assets are assumed in order to minimize currency risk. As part of this policy, the Group enters into cross-currency swap transactions with respect to the liabilities, for details refer to d. below.



| | 2. | CPI risk
| | -- | --------

The Group has loans from banks and issued debentures linked to changes in the
Consumer Price Index (CPI) in Israel. For the sum of financial instruments linked to the CPI and for cross currency swap transactions, with respect to which the Group is exposed to changes in the CPI, refer to sections d and f below.



| | 3. | Interest rate risk
| | -- | ------------------

Liabilities that bear floating interest rate expose the Group to
cash flow risk and liabilities that bear fix interest rate expose the Group to interest rate risk in respect of fair value. As part of the risk management strategy, the Group maintains certain composition of exposure to fix interest to exposure to
floating interest. From time to time and according to market conditions, the Group enters into interest rate swaps in which they exchange variable interest with fixed interest and, vice-versa, to hedge their liabilities against changes in market
interest rate (refer to section d below). As of the reporting date, 91.4% of the Groups liabilities (88.6% excluding interest rate swaps) bear fixed interest (as of December 31, 2013 - 90%, 80% excluding interest rate swaps). For
additional details regarding interest rates and the maturity dates, refer also to Notes 20 to 22.



| | 4. | Price risk
| | -- | ----------

The Group has investments in marketable financial instruments traded on
stock exchanges, including shares, participation certificates in mutual funds and debentures, which are classified either as available-for-sale financial assets or financial assets measured at fair value through profit or loss, with respect to which
the Group is exposed to risk resulting from fluctuations in security prices which are determined by market prices on stock exchanges. The carrying amount of such investments as of December 31, 2014 is NIS 299 million (December 31, 2013 -
NIS 220 million). This exposure is not hedged.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 37: | - FINANCIAL INSTRUMENTS (Cont.)
|-------- | -------------------------------



| | 5. | Credit risk
| | -- | -----------

The financial strength of the Groups customers has an effect on its
results. The Group is not exposed to significant concentration of credit risks. The Group regularly evaluates the quality of the customers and the scope of credit extended to its customers. Accordingly, the Group provides for an allowance of
doubtful debts based on the credit risk in respect of certain customers.

Cash and deposits are deposited with major financial
institutions. Company management estimates that the risk that such parties will fail to meet their obligations is remote as they are financially sound.



| | 6. | Liquidity risk
| | -- | --------------

The Groups policy is to maintain a certain balance between
long-term financing, among others mortgages, bank loans and debentures to more flexible financing through the use of revolving lines of credit for periods up to 5 years, in which the Group can utilize credit for different periods.

As of December 31, 2014, the Group has a working capital deficiency of NIS 2.1 billion. The Group has unused approved credit facilities
in the amount of NIS 10.2 billion that can be used over the coming year. The Companys management believes that these sources, as well as the positive cash flow generated from operating activities, will allow each of the Groups
companies to repay their current liabilities when due.

For additional details regarding the maturity dates of the Groups financial
liabilities, see e. below.



| | b. | Fair value
| | -- | ----------

The following table presents the carrying amount and fair value of groups
of financial instruments that are measured in the financial statements not at fair value:



|                                                              |  |      |    |  |                   |  |          |                   |  |  |                |   |  |           |          |   |  |  |         |  
|------------------------------------------------------------- |  | ---- | -- |  | ----------------- |  | -------- | ----------------- |  |  | -------------- | - |  | --------- | -------- | - |  |  | ------- | -
|                                                              |  |      |    |  | December 31, 2014 |  |          | December 31, 2013 | 
|                                                              |  | note |    |  | Carryingamount    |  |          | Fairvalue         |  |  | Carryingamount |   |  | Fairvalue |         
|                                                              |  |      |    |  | NIS in millions   | 
|Financial assets                                              |  |      |    |  |                   |  |          |                   |  |  |                |   |  |           |          |   |  |  |         |  
|Non-current deposits and loans                                |  |      | 10 |  |                   |  | 564      |                   |  |  | 562            |   |  |           | 659      |   |  |  | 657     |  
|                                                              |  |      |    |  |                   |  |          |                   |  |  |                |   |  |           |          |   |  |  |         |  
|Financial liabilities                                         |  |      |    |  |                   |  |          |                   |  |  |                |   |  |           |          |   |  |  |         |  
|Debentures                                                    |  |      | 20 |  |                   |  | 26,038   |                   |  |  | 28,081         |   |  |           | 23,070   |   |  |  | 24,598  |  
|Convertible debentures                                        |  |      | 21 |  |                   |  | *) 1,254 |                   |  |  | 1,317          |   |  |           | *) 1,221 |   |  |  | 1,273   |  
|Interest-bearing loans from financial institutions and others |  |      | 22 |  |                   |  | 9,768    |                   |  |  | 10,187         |   |  |           | 14,767   |   |  |  | 15,090  |  
|                                                              |  |      |    |  |                   |  |          |                   |  |  |                |   |  |           |          |   |  |  |         |  
|                                                              |  |      |    |  |                   |  | 37,060   |                   |  |  | 39,585         |   |  |           | 39,058   |   |  |  | 40,961  |  
|                                                              |  |      |    |  |                   |  |          |                   |  |  |                |   |  |           |          |   |  |  |         |  
|Total financial liabilities, net                              |  |      |    |  |                   |  | (36,496  | )                 |  |  | (39,023        | ) |  |           | (38,399  | ) |  |  | (40,304 | )
|                                                              |  |      |    |  |                   |  |          |                   |  |  |                |   |  |           |          |   |  |  |         |  



|*) | Excluding the conversion component which is presented in non-controlling interests, for a total of NIS 27 million (2013 - NIS 26 million).
|-- | ------------------------------------------------------------------------------------------------------------------------------------------



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 37: | - FINANCIAL INSTRUMENTS (Cont.)
|-------- | -------------------------------



Fair value determination of financial instruments:

The carrying amount of the financial instruments that are classified as current assets and current liabilities approximate their fair value.

The fair value of financial instruments that are quoted in an active market (such as marketable securities, debentures) were calculated
based on quoted market closing prices on the reporting date.

The fair value of loans bearing variable interest approximates their nominal
value.

The fair value of debt instruments that are not quoted in an active market or that are traded in an illiquid market is determined
using standard pricing valuation models such as DCF which considers the present value of future cash flows discounted at the interest rate, which according to Companys management and external valuators estimates reflects market conditions
including the parties credit risk on the reporting date.

As of December 31, 2014 the interest rate range for unquoted debt
instruments (mortgages receivable) that were classified at level 3 in the fair value hierarchy is 4%-11%.

The fair value of forward
contracts with respect to foreign currency is calculated taking into account the future rates quoted for contracts having the same settlement dates and in addition the amounts are discounted with relevant interest and the value is adjusted to the
credit risk of the counter party.

The fair value of interest rate swap contracts and cross-currency swap contracts that include a
principle and interest are determined by discounting the anticipated cash flows from the transaction by the applicable yield curve, with adjustments for inter-currency liquidity gaps (CBS), inflation expectations and the credit risk of the parties.



| | c. | Classification of financial instruments by fair value hierarchy
| | -- | ---------------------------------------------------------------

Following is the
classification of financial instruments that are not measured at fair value in the financial statements, according to fair value hierarchy as defined in IFRS 13 (refer to Note 2n):



|                                                              |  |      |    |  |                   |  |        |         |  |  |         |  |  |  |     | 
|------------------------------------------------------------- |  | ---- | -- |  | ----------------- |  | ------ | ------- |  |  | ------- |  |  |  | --- | 
|                                                              |  |      |    |  | December 31, 2014 | 
|                                                              |  |      |    |  | Level 1           |  |        | Level 2 |  |  | Level 3 | 
|                                                              |  | Note |    |  | NIS in millions   | 
|Financial assets                                              |  |      |    |  |                   |  |        |         |  |  |         |  |  |  |     | 
|Non current investments and loans                             |  |      | 10 |  |                   |  |       |         |  |  |        |  |  |  | 564 | 
|                                                              |  |      |    |  |                   |  |        |         |  |  |         |  |  |  |     | 
|Financial liabilities                                         |  |      |    |  |                   |  |        |         |  |  |         |  |  |  |     | 
|Debentures                                                    |  |      | 20 |  |                   |  | 11,353 |         |  |  | 14,685  |  |  |  |    | 
|Convertible debentures                                        |  |      | 21 |  |                   |  | 1,254  |         |  |  |        |  |  |  |    | 
|Interest bearing loans from financial institutions and others |  |      | 22 |  |                   |  |       |         |  |  | 9,768   |  |  |  |    | 
|                                                              |  |      |    |  |                   |  |        |         |  |  |         |  |  |  |     | 
|Total financial liabilities                                   |  |      |    |  |                   |  | 12,607 |         |  |  | 24,453  |  |  |  |    | 
|                                                              |  |      |    |  |                   |  |        |         |  |  |         |  |  |  |     | 



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 37: | - FINANCIAL INSTRUMENTS (Cont.)
|-------- | -------------------------------



|                                                              |  |      |    |  |                   |  |        |         |  |  |         |  |  |  |     | 
|------------------------------------------------------------- |  | ---- | -- |  | ----------------- |  | ------ | ------- |  |  | ------- |  |  |  | --- | 
|                                                              |  |      |    |  | December 31, 2013 | 
|                                                              |  |      |    |  | Level 1           |  |        | Level 2 |  |  | Level 3 | 
|                                                              |  | Note |    |  | NIS in millions   | 
|Financial assets                                              |  |      |    |  |                   |  |        |         |  |  |         |  |  |  |     | 
|Non current investments and loans                             |  |      | 10 |  |                   |  |       |         |  |  | 211     |  |  |  | 448 | 
|                                                              |  |      |    |  |                   |  |        |         |  |  |         |  |  |  |     | 
|Financial liabilities                                         |  |      |    |  |                   |  |        |         |  |  |         |  |  |  |     | 
|Debentures                                                    |  |      | 20 |  |                   |  | 11,294 |         |  |  | 11,778  |  |  |  |    | 
|Convertible debentures                                        |  |      | 21 |  |                   |  | 1,221  |         |  |  |        |  |  |  |    | 
|Interest bearing loans from financial institutions and others |  |      | 22 |  |                   |  |       |         |  |  | 14,840  |  |  |  |    | 
|                                                              |  |      |    |  |                   |  |        |         |  |  |         |  |  |  |     | 
|Total financial liabilities                                   |  |      |    |  |                   |  | 12,515 |         |  |  | 26,618  |  |  |  |    | 
|                                                              |  |      |    |  |                   |  |        |         |  |  |         |  |  |  |     | 

Following is the classification of financial instruments that are measured at fair value presented in the
financial statements, according to the fair value hierarchy as defined in IFRS 13 (refer to Note 2m):

Financial assets measured at
fair value



|                                                       |  |      |  |                 |     |  |         |  |     |         |  |  |     | 
|------------------------------------------------------ |  | ---- |  | --------------- | --- |  | ------- |  | --- | ------- |  |  | --- | 
|                                                       |  |      |  | Level 1         |     |  | Level 2 |  |     | Level 3 | 
|                                                       |  | Note |  | NIS in millions |    
|December 31, 2014                                      |  |      |  |                 |     |  |         |  |     |         |  |  |     | 
|Financial assets at fair value through profit or loss: |  |      |  |                 |     |  |         |  |     |         |  |  |     | 
|Shares                                                 |  | 4b   |  |                 | 103 |  |         |  |    |         |  |  |    | 
|Debentures                                             |  | 4b   |  |                 | 9   |  |         |  |    |         |  |  |    | 
|Hedging financial derivatives                          |  | 37d  |  |                 |    |  |         |  | 378 |         |  |  |    | 
|Available-for-sale financial assets:                   |  |      |  |                 |     |  |         |  |     |         |  |  |     | 
|Shares                                                 |  | 11   |  |                 | 187 |  |         |  |    |         |  |  |    | 
|Participation certificates in equity funds *)          |  | 11   |  |                 |    |  |         |  |    |         |  |  | 383 | 
|                                                       |  |      |  |                 |     |  |         |  |     |         |  |  |     | 
|                                                       |  |      |  |                 | 299 |  |         |  | 378 |         |  |  | 383 | 
|                                                       |  |      |  |                 |     |  |         |  |     |         |  |  |     | 
|December 31, 2013                                      |  |      |  |                 |     |  |         |  |     |         |  |  |     | 
|Financial assets at fair value through profit or loss: |  |      |  |                 |     |  |         |  |     |         |  |  |     | 
|Shares                                                 |  | 4b   |  |                 | 69  |  |         |  |    |         |  |  |    | 
|Debentures                                             |  | 4b   |  |                 | 22  |  |         |  |    |         |  |  |    | 
|Hedging financial derivatives                          |  | 37d  |  |                 |    |  |         |  | 808 |         |  |  |    | 
|Available-for-sale financial assets:                   |  |      |  |                 |     |  |         |  |     |         |  |  |     | 
|Shares                                                 |  | 11   |  |                 | 116 |  |         |  |    |         |  |  |    | 
|Participation certificates in equity funds *)          |  | 11   |  |                 |    |  |         |  |    |         |  |  | 328 | 
|                                                       |  |      |  |                 |     |  |         |  |     |         |  |  |     | 
|                                                       |  |      |  |                 | 207 |  |         |  | 808 |         |  |  | 328 | 
|                                                       |  |      |  |                 |     |  |         |  |     |         |  |  |     | 



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 37: | - FINANCIAL INSTRUMENTS (Cont.)
|-------- | -------------------------------



|*) | Below is a roll forward of the financial assets measured at fair value which are classifies as Level 3:
|-- | -------------------------------------------------------------------------------------------------------



|                                                |  |                  |     |   |                  |  |     |  
|----------------------------------------------- |  | ---------------- | --- | - | ---------------- |  | --- | -
|                                                |  | December 31,2014 |     |   | December 31,2013 | 
|                                                |  | NIS in millions  |    
|Balance at beginning of the year                |  |                  | 328 |   |                  |  | 343 |  
|Additions                                       |  |                  | 2   |   |                  |  | 14  |  
|Capital return                                  |  |                  | (10 | ) |                  |  | (8  | )
|Impairment through profit or loss               |  |                  | (3  | ) |                  |  |    |  
|Revaluation through capital reserve             |  |                  | 27  |   |                  |  | 4   |  
|Translation adjustments from foreign operations |  |                  | 39  |   |                  |  | (25 | )
|                                                |  |                  |     |   |                  |  |     |  
|Balance at end of the year                      |  |                  | 383 |   |                  |  | 328 |  
|                                                |  |                  |     |   |                  |  |     |  

Balance represents units in private equity funds, see Note 11 for additional information.

During 2014, there were no transfers with respect to fair value measurement of any financial instrument between Level 1 and Level 2, and there
were no transfers to or from Level 3 with respect to fair value measurement of any financial instrument.

Financial liabilities
measured at fair value



|                                                            |  |      |  |                 |    |  |         |  |     |         |  |  |   | 
|----------------------------------------------------------- |  | ---- |  | --------------- | -- |  | ------- |  | --- | ------- |  |  | - | 
|                                                            |  |      |  | Level 1         |    |  | Level 2 |  |     | Level 3 | 
|                                                            |  | Note |  | NIS in millions |   
|December 31, 2014                                           |  |      |  |                 |    |  |         |  |     |         |  |  |   | 
|Financial liabilities at fair value through profit or loss: |  |      |  |                 |    |  |         |  |     |         |  |  |   | 
|Hedging financial derivatives                               |  | 37d  |  |                 |   |  |         |  | 153 |         |  |  |  | 
|Non-hedging financial derivatives                           |  | 19   |  |                 | 42 |  |         |  |    |         |  |  |  | 
|Other liabilities                                           |  |      |  |                 |   |  |         |  |    |         |  |  |  | 
|                                                            |  |      |  |                 |    |  |         |  |     |         |  |  |   | 
|                                                            |  |      |  |                 | 42 |  |         |  | 153 |         |  |  |  | 
|                                                            |  |      |  |                 |    |  |         |  |     |         |  |  |   | 
|December 31, 2013                                           |  |      |  |                 |    |  |         |  |     |         |  |  |   | 
|Financial liabilities at fair value through profit or loss: |  |      |  |                 |    |  |         |  |     |         |  |  |   | 
|Hedging financial derivatives                               |  | 37d  |  |                 |   |  |         |  | 201 |         |  |  |  | 
|Non-hedging financial derivatives                           |  | 19   |  |                 | 26 |  |         |  |    |         |  |  |  | 
|Other liabilities                                           |  |      |  |                 |   |  |         |  |    |         |  |  | 4 | 
|                                                            |  |      |  |                 |    |  |         |  |     |         |  |  |   | 
|                                                            |  |      |  |                 | 26 |  |         |  | 201 |         |  |  | 4 | 
|                                                            |  |      |  |                 |    |  |         |  |     |         |  |  |   | 



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 37: | - FINANCIAL INSTRUMENTS (Cont.)
|-------- | -------------------------------



| | d. | Financial derivatives
| | -- | ---------------------

The following table present information about cross-currency
swaps, interest rate swaps, forward contracts and purchase options:



|                                   |  |                          |  |                                          |       |  |                                  |  |                               |  |                                   |                          |  |                               |  |  |            |  |  |          |     |   |  |  |      |  
|---------------------------------- |  | ------------------------ |  | ---------------------------------------- | ----- |  | -------------------------------- |  | ----------------------------- |  | --------------------------------- | ------------------------ |  | ----------------------------- |  |  | ---------- |  |  | -------- | --- | - |  |  | ---- | -
|Transaction type                   |  | Denomination             |  | Outstanding notionalamountNIS in million |       |  | Linkage basis/Interestreceivable |  | Linkage basis/Interestpayable |  | Remainingaverageeffectiveduration |                          |  | Fair value - NIS in millions  | 
|                                   |  |                          |  | 31.12.14                                 |       |  | 31.12.13                         |  |                               |  |                                   |                          |  |                               |  |  | 31.12.14   |  |  | 31.12.13 |    
|Cross currency swaps               |  |                          |  |                                          |       |  |                                  |  |                               |  |                                   |                          |  |                               |  |  |            |  |  |          |     |   |  |  |      |  
|                                   |  | Euro-NIS                 |  |                                          | 2,307 |  |                                  |  | 2,172                         |  |                                   | CPI linked, 1.10%-5.10%  |  | Fixed, 2.15%-6.36%            |  |  | 7.1        |  |  |          | 16  |   |  |  | 145  |  
|                                   |  |                          |  |                                          | 60    |  |                                  |  | 70                            |  |                                   | CPI linked, 4.95%        |  | Variable L+1.35%              |  |  | 2.5        |  |  |          | 29  |   |  |  | 35   |  
|                                   |  |                          |  |                                          | 306   |  |                                  |  | 220                           |  |                                   | nominal, 1.30%-6.83%     |  | Fixed, 0.71%-5.06%            |  |  | 2.6        |  |  |          | 40  |   |  |  | 40   |  
|                                   |  |                          |  |                                          | 531   |  |                                  |  | 151                           |  |                                   | nominal, 2.63%-2.64%     |  | Variable L                    |  |  | 5.4        |  |  |          | 46  |   |  |  | (2   | )
|                                   |  | U.S.$-NIS                |  |                                          | 255   |  |                                  |  | 272                           |  |                                   | CPI linked, 3.56%- 4.57% |  | Fixed 5.38%- 5.97%            |  |  | 7.3        |  |  |          | (5  | ) |  |  | 33   |  
|                                   |  |                          |  |                                          | 160   |  |                                  |  | 160                           |  |                                   | nominal, 6%-7.7%         |  | Fixed, 4.59%-6.33%            |  |  | 1.5        |  |  |          | 9   |   |  |  | 26   |  
|                                   |  |                          |  |                                          | 150   |  |                                  |  | 150                           |  |                                   | Telbor + 0.7%            |  | Fixed 3.53%                   |  |  | 2.8        |  |  |          | 7   |   |  |  | 20   |  
|                                   |  |                          |  |                                          | 243   |  |                                  |  | 243                           |  |                                   | nominal, 2.67%           |  | Variable L                    |  |  | 5.4        |  |  |          | (6  | ) |  |  | 1    |  
|                                   |  | C$-NIS                   |  |                                          | 408   |  |                                  |  | 773                           |  |                                   | CPI linked, 3.45%-4.95%  |  | Fixed, 5.43%-6.07%            |  |  | 7.0        |  |  |          | 35  |   |  |  | 115  |  
|                                   |  |                          |  |                                          |      |  |                                  |  | 305                           |  |                                   |                         |  |                              |  |  |           |  |  |          |    |   |  |  | 180  |  
|                                   |  |                          |  |                                          | 80    |  |                                  |  | 80                            |  |                                   | nominal, 6.4%            |  | Variable, L + 1.08%           |  |  | 1.5        |  |  |          | 12  |   |  |  | 16   |  
|                                   |  |                          |  |                                          | 326   |  |                                  |  | 76                            |  |                                   | nominal, 1.80%-6.00%     |  | Fixed, 2.85%-3.15%            |  |  | 6.3        |  |  |          | 1   |   |  |  | 19   |  
|                                   |  |                          |  |                                          | 100   |  |                                  |  | 100                           |  |                                   | Telbor + 0.7%            |  | Fixed 3.37%                   |  |  | 2.8        |  |  |          | 14  |   |  |  | 16   |  
|                                   |  |                          |  |                                          |      |  |                                  |  | 250                           |  |                                   |                         |  |                              |  |  |           |  |  |          |    |   |  |  | 46   |  
|                                   |  | BRL-NIS                  |  |                                          | 273   |  |                                  |  | 273                           |  |                                   | CPI Linked 2.60%         |  | Brazil CPI linked 3.45%-3.79% |  |  | 3.0        |  |  |          | 54  |   |  |  | 80   |  
|                                   |  | Swedish Krona-Euro       |  |                                          | 709   |  |                                  |  |                              |  |                                   | Fixed, 3.75%             |  | Fixed, 4.45%-4.48%            |  |  | 5.5        |  |  |          | 3   |   |  |  |     |  
|Interest rate swaps fixed/variable |  |                          |  |                                          |       |  |                                  |  |                               |  |                                   |                          |  |                               |  |  |            |  |  |          |     |   |  |  |      |  
|                                   |  | U.S.$                    |  |                                          | 972   |  |                                  |  | 868                           |  |                                   | Variable                 |  | Fixed                         |  |  | 4.1        |  |  |          | (1  | ) |  |  | 10   |  
|                                   |  | C$                       |  |                                          | 250   |  |                                  |  | 273                           |  |                                   | Variable                 |  | Fixed                         |  |  | 0.0        |  |  |          | 1   |   |  |  | 6    |  
|                                   |  |                         |  |                                          |      |  |                                  |  | 2,138                         |  |                                   | Variable                 |  | Fixed                         |  |  |           |  |  |          |    |   |  |  | (147 | )
|                                   |  | Swedish Krona            |  |                                          | 275   |  |                                  |  | 1,125                         |  |                                   | Variable                 |  | Fixed                         |  |  | 2.9        |  |  |          | (25 | ) |  |  | (34  | )
|Forward contracts                  |  |                          |  |                                          |       |  |                                  |  |                               |  |                                   |                          |  |                               |  |  |            |  |  |          |     |   |  |  |      |  
|                                   |  | Different currencies     |  |                                          | 4,586 |  |                                  |  | 3,946                         |  |                                   |                          |  |                               |  |  | short term |  |  |          | 3   |   |  |  | 1    |  
|Call options                       |  |                          |  |                                          |       |  |                                  |  |                               |  |                                   |                          |  |                               |  |  |            |  |  |          |     |   |  |  |      |  
|                                   |  | Canadiangovernment bonds |  |                                          | 470   |  |                                  |  | 294                           |  |                                   |                          |  |                               |  |  | 8.5        |  |  |          | (8  | ) |  |  | 1    |  
|                                   |  |                          |  |                                          |       |  |                                  |  |                               |  |                                   |                          |  |                               |  |  |            |  |  |          |     |   |  |  |      |  
|                                   |  |                          |  |                                          |       |  |                                  |  |                               |  |                                   |                          |  |                               |  |  |            |  |  |          | 225 |   |  |  | 607  |  
|                                   |  |                          |  |                                          |       |  |                                  |  |                               |  |                                   |                          |  |                               |  |  |            |  |  |          |     |   |  |  |      |  



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 37: | - FINANCIAL INSTRUMENTS (Cont.)
|-------- | -------------------------------



Fair value of financial derivatives is presented in the statement of financial position
within the following categories:



|                        |  |                 |     |   |      |  |      |  
|----------------------- |  | --------------- | --- | - | ---- |  | ---- | -
|                        |  | December 31     |    
|                        |  | 2014            |     |   | 2013 | 
|                        |  | NIS in millions |    
|Current assets *)       |  |                 | 90  |   |      |  | 39   |  
|Non-current assets *)   |  |                 | 288 |   |      |  | 769  |  
|Current liabilities     |  |                 | (59 | ) |      |  | (32  | )
|Non-current liabilities |  |                 | (94 | ) |      |  | (169 | )
|                        |  |                 |     |   |      |  |      |  
|                        |  |                 | 225 |   |      |  | 607  |  
|                        |  |                 |     |   |      |  |      |  



|*) | In 2014, the Company unwound cash flow hedging interest-rate swap transactions (principal and interest swap) totaling notional amount of NIS 1.1 billion in consideration for approximately NIS 334 million (the
amount includes NIS 91 million in respect of interest). Following the unwinding, the Company entered into a new cash flow hedging transactions, according to Companys risk hedging policy.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Below is the fair value of derivatives designated for hedge accounting included in the above table:



|            |  |                 |     |   |      |  |      |  
|----------- |  | --------------- | --- | - | ---- |  | ---- | -
|            |  | December 31     |    
|            |  | 2014            |     |   | 2013 | 
|            |  | NIS in millions |    
|Assets      |  |                 | 16  |   |      |  | 38   |  
|Liabilities |  |                 | (36 | ) |      |  | (138 | )
|            |  |                 |     |   |      |  |      |  
|            |  |                 | (20 | ) |      |  | (100 | )
|            |  |                 |     |   |      |  |      |  



| | e. | Liquidity risk
| | -- | --------------

The table below presents the maturity schedule of the Groups
financial liabilities based on contractual undiscounted payments (including interest payments):

December 31, 2014



|                                                              |  |                   |       |   |             |  |        |             |  |  |             |   |  |       |        |  |  |  |        |  
|------------------------------------------------------------- |  | ----------------- | ----- | - | ----------- |  | ------ | ----------- |  |  | ----------- | - |  | ----- | ------ |  |  |  | ------ | -
|                                                              |  | Less thanone year |       |   | 2 to 3years |  |        | 4 to 5years |  |  | Over 5years |   |  | Total |       
|                                                              |  | NIS in millions   |      
|Credit from banks and others (excluding current maturities)   |  |                   | 553   |   |             |  |       |             |  |  |            |   |  |       |       |  |  |  | 553    |  
|Trade payables                                                |  |                   | 900   |   |             |  |       |             |  |  |            |   |  |       |       |  |  |  | 900    |  
|Other accounts payable                                        |  |                   | 1,080 |   |             |  |       |             |  |  |            |   |  |       |       |  |  |  | 1,080  |  
|Debentures                                                    |  |                   | 2,715 |   |             |  | 6,721  |             |  |  | 5,438       |   |  |       | 17,696 |  |  |  | 32,570 |  
|Convertible debentures                                        |  |                   | 66    |   |             |  | 507    |             |  |  | 778         |   |  |       | 193    |  |  |  | 1,544  |  
|Interest-bearing loans from financial institutions and others |  |                   | 1,946 |   |             |  | 2,873  |             |  |  | 4,335       |   |  |       | 2,807  |  |  |  | 11,961 |  
|Hedging financial derivatives, net                            |  |                   | (6    | ) |             |  | (47    | )           |  |  | (13         | ) |  |       | 43     |  |  |  | (23    | )
|Other financial liabilities                                   |  |                   | 342   |   |             |  | 58     |             |  |  | 33          |   |  |       | 217    |  |  |  | 650    |  
|                                                              |  |                   |       |   |             |  |        |             |  |  |             |   |  |       |        |  |  |  |        |  
|                                                              |  |                   | 7,596 |   |             |  | 10,112 |             |  |  | 10,571      |   |  |       | 20,956 |  |  |  | 49,235 |  
|                                                              |  |                   |       |   |             |  |        |             |  |  |             |   |  |       |        |  |  |  |        |  



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 37: | - FINANCIAL INSTRUMENTS (Cont.)
|-------- | -------------------------------



December 31, 2013



|                                                              |  |                   |       |  |             |  |        |             |  |  |             |   |  |       |        |   |  |  |        |  
|------------------------------------------------------------- |  | ----------------- | ----- |  | ----------- |  | ------ | ----------- |  |  | ----------- | - |  | ----- | ------ | - |  |  | ------ | -
|                                                              |  | Less thanone year |       |  | 2 to 3years |  |        | 4 to 5years |  |  | Over 5years |   |  | Total |       
|                                                              |  | NIS in millions   |      
|Credit from banks and others (excluding current maturities)   |  |                   | 257   |  |             |  |       |             |  |  |            |   |  |       |       |   |  |  | 257    |  
|Trade payables                                                |  |                   | 940   |  |             |  |       |             |  |  |            |   |  |       |       |   |  |  | 940    |  
|Other accounts payable                                        |  |                   | 1,116 |  |             |  |       |             |  |  |            |   |  |       |       |   |  |  | 1,116  |  
|Debentures                                                    |  |                   | 1,952 |  |             |  | 5,302  |             |  |  | 6,595       |   |  |       | 15,711 |   |  |  | 29,560 |  
|Convertible debentures                                        |  |                   | 65    |  |             |  | 130    |             |  |  | 646         |   |  |       | 760    |   |  |  | 1,601  |  
|Interest-bearing loans from financial institutions and others |  |                   | 2,859 |  |             |  | 5,954  |             |  |  | 4,501       |   |  |       | 4,006  |   |  |  | 17,320 |  
|Hedging financial derivatives, net                            |  |                   | 80    |  |             |  | (18    | )           |  |  | (180        | ) |  |       | (174   | ) |  |  | (292   | )
|Other financial liabilities                                   |  |                   | 184   |  |             |  | 82     |             |  |  | 61          |   |  |       | 347    |   |  |  | 674    |  
|                                                              |  |                   |       |  |             |  |        |             |  |  |             |   |  |       |        |   |  |  |        |  
|                                                              |  |                   | 7,453 |  |             |  | 11,450 |             |  |  | 11,623      |   |  |       | 20,650 |   |  |  | 51,176 |  
|                                                              |  |                   |       |  |             |  |        |             |  |  |             |   |  |       |        |   |  |  |        |  



| | f. | Linkage terms of monetary balances
| | -- | ----------------------------------



|                                                              |  |                             |        |   |                     |  |        |                  |  |  |                    |  |  |                   |        |  |       |  |       |          |  |  |       |  |  |  |        |   |  |  |        | 
|------------------------------------------------------------- |  | --------------------------- | ------ | - | ------------------- |  | ------ | ---------------- |  |  | ------------------ |  |  | ----------------- | ------ |  | ----- |  | ----- | -------- |  |  | ----- |  |  |  | ------ | - |  |  | ------ | 
|                                                              |  | December 31, 2014           |       
|                                                              |  | NIS -Linkedto theIsraeliCPI |        |   | In orlinkedto U.S.$ |  |        | In orlinkedto C$ |  |  | In orlinkedto Euro |  |  | InNIS -non-linked |        |  | Other |  |       | Unlinked |  |  | Total | 
|                                                              |  | NIS in millions             |       
|Assets                                                        |  |                             |        |   |                     |  |        |                  |  |  |                    |  |  |                   |        |  |       |  |       |          |  |  |       |  |  |  |        |   |  |  |        | 
|Cash and cash equivalents                                     |  |                             |       |   |                     |  | 196    |                  |  |  | 68                 |  |  |                   | 158    |  |       |  | 140   |          |  |  | 88    |  |  |  |       |   |  |  | 650    | 
|Short-term investments and loans                              |  |                             | 102    |   |                     |  | 44     |                  |  |  | 220                |  |  |                   | 2      |  |       |  |      |          |  |  |      |  |  |  |       |   |  |  | 368    | 
|Trade and other accounts receivable                           |  |                             | 361    |   |                     |  | 207    |                  |  |  | 51                 |  |  |                   | 56     |  |       |  | 25    |          |  |  | 65    |  |  |  | 88     |   |  |  | 853    | 
|Long-term investments and loans                               |  |                             | 169    |   |                     |  | 150    |                  |  |  | 337                |  |  |                   | 183    |  |       |  | 33    |          |  |  | 499   |  |  |  | 71     |   |  |  | 1,442  | 
|                                                              |  |                             |        |   |                     |  |        |                  |  |  |                    |  |  |                   |        |  |       |  |       |          |  |  |       |  |  |  |        |   |  |  |        | 
|Total monetary assets                                         |  |                             | 632    |   |                     |  | 597    |                  |  |  | 676                |  |  |                   | 399    |  |       |  | 198   |          |  |  | 652   |  |  |  | 159    |   |  |  | 3,313  | 
|Other financial assets (1)                                    |  |                             |       |   |                     |  |       |                  |  |  |                   |  |  |                   |       |  |       |  |      |          |  |  |      |  |  |  | 1,060  |   |  |  | 1,060  | 
|Other assets (2)                                              |  |                             |       |   |                     |  | 16,978 |                  |  |  | 25,735             |  |  |                   | 12,952 |  |       |  | 3,507 |          |  |  | 6,255 |  |  |  | 184    |   |  |  | 65,611 | 
|                                                              |  |                             |        |   |                     |  |        |                  |  |  |                    |  |  |                   |        |  |       |  |       |          |  |  |       |  |  |  |        |   |  |  |        | 
|Total assets                                                  |  |                             | 632    |   |                     |  | 17,575 |                  |  |  | 26,411             |  |  |                   | 13,351 |  |       |  | 3,705 |          |  |  | 6,907 |  |  |  | 1,403  |   |  |  | 69,984 | 
|                                                              |  |                             |        |   |                     |  |        |                  |  |  |                    |  |  |                   |        |  |       |  |       |          |  |  |       |  |  |  |        |   |  |  |        | 
|Liabilities:                                                  |  |                             |        |   |                     |  |        |                  |  |  |                    |  |  |                   |        |  |       |  |       |          |  |  |       |  |  |  |        |   |  |  |        | 
|Short-term credit from banks and others                       |  |                             | 3      |   |                     |  |       |                  |  |  | 12                 |  |  |                   | 323    |  |       |  | 215   |          |  |  |      |  |  |  |       |   |  |  | 553    | 
|Trade payables and other accounts payable                     |  |                             | 292    |   |                     |  | 222    |                  |  |  | 680                |  |  |                   | 240    |  |       |  | 534   |          |  |  | 50    |  |  |  | 218    |   |  |  | 2,236  | 
|Liabilities attributable to assets held for sale              |  |                             |       |   |                     |  |       |                  |  |  |                   |  |  |                   |       |  |       |  | 110   |          |  |  |      |  |  |  |       |   |  |  | 110    | 
|Debentures (3)                                                |  |                             | 9,959  |   |                     |  | 2,963  |                  |  |  | 7,218              |  |  |                   | 4,717  |  |       |  | 1,181 |          |  |  |      |  |  |  |       |   |  |  | 26,038 | 
|Convertible debentures                                        |  |                             |       |   |                     |  |       |                  |  |  | 1,254              |  |  |                   |       |  |       |  |      |          |  |  |      |  |  |  |       |   |  |  | 1,254  | 
|Interest-bearing loans from financial institutions and others |  |                             | 359    |   |                     |  | 3,656  |                  |  |  | 4,269              |  |  |                   | 593    |  |       |  | 242   |          |  |  | 539   |  |  |  |       |   |  |  | 9,658  | 
|Other financial liabilities                                   |  |                             | 2      |   |                     |  | 82     |                  |  |  | 68                 |  |  |                   | 25     |  |       |  | 6     |          |  |  |      |  |  |  | 7      |   |  |  | 190    | 
|                                                              |  |                             |        |   |                     |  |        |                  |  |  |                    |  |  |                   |        |  |       |  |       |          |  |  |       |  |  |  |        |   |  |  |        | 
|Total financial liabilities                                   |  |                             | 10,615 |   |                     |  | 6,923  |                  |  |  | 13,501             |  |  |                   | 5,898  |  |       |  | 2,288 |          |  |  | 589   |  |  |  | 225    |   |  |  | 40,039 | 
|Other liabilities (4)                                         |  |                             |       |   |                     |  |       |                  |  |  |                   |  |  |                   |       |  |       |  |      |          |  |  |      |  |  |  | 4,075  |   |  |  | 4,075  | 
|                                                              |  |                             |        |   |                     |  |        |                  |  |  |                    |  |  |                   |        |  |       |  |       |          |  |  |       |  |  |  |        |   |  |  |        | 
|Total liabilities                                             |  |                             | 10,615 |   |                     |  | 6,923  |                  |  |  | 13,501             |  |  |                   | 5,898  |  |       |  | 2,288 |          |  |  | 589   |  |  |  | 4,300  |   |  |  | 44,114 | 
|                                                              |  |                             |        |   |                     |  |        |                  |  |  |                    |  |  |                   |        |  |       |  |       |          |  |  |       |  |  |  |        |   |  |  |        | 
|Assets, net of liabilities                                    |  |                             | (9,983 | ) |                     |  | 10,652 |                  |  |  | 12,910             |  |  |                   | 7,453  |  |       |  | 1,417 |          |  |  | 6,318 |  |  |  | (2,897 | ) |  |  | 25,870 | 
|                                                              |  |                             |        |   |                     |  |        |                  |  |  |                    |  |  |                   |        |  |       |  |       |          |  |  |       |  |  |  |        |   |  |  |        | 



|(1) | Mainly financial instruments at fair value.
|--- | -------------------------------------------

|(2) | Mainly investment property, investment property under development, fixed assets and deferred taxes.
|--- | ---------------------------------------------------------------------------------------------------

|(3) | As for cross currency swap transactions for the exchange of the linkage basis on part of the debentures, see d. above. As of the reporting date, the Company has NIS 3,396 million of cross-currency swaps from NIS
linked to Israeli CPI to foreign currency and NIS 1,896 million from non-linked NIS to foreign currency.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Mainly deferred faxes, derivatives and advances from customers.
|--- | ---------------------------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 37: | - FINANCIAL INSTRUMENTS (Cont.)
|-------- | -------------------------------



|                                                              |  |                             |         |   |                     |  |        |                  |  |  |                    |  |  |                   |        |  |       |  |       |          |  |  |       |  |  |  |        |   |  |  |        | 
|------------------------------------------------------------- |  | --------------------------- | ------- | - | ------------------- |  | ------ | ---------------- |  |  | ------------------ |  |  | ----------------- | ------ |  | ----- |  | ----- | -------- |  |  | ----- |  |  |  | ------ | - |  |  | ------ | 
|                                                              |  | December 31, 2013           |        
|                                                              |  | NIS -Linkedto theIsraeliCPI |         |   | In orlinkedto U.S.$ |  |        | In orlinkedto C$ |  |  | In orlinkedto Euro |  |  | InNIS -non-linked |        |  | Other |  |       | Unlinked |  |  | Total | 
|                                                              |  | NIS in millions             |        
|Assets                                                        |  |                             |         |   |                     |  |        |                  |  |  |                    |  |  |                   |        |  |       |  |       |          |  |  |       |  |  |  |        |   |  |  |        | 
|Cash and cash equivalents                                     |  |                             |        |   |                     |  | 168    |                  |  |  | 25                 |  |  |                   | 168    |  |       |  | 585   |          |  |  | 72    |  |  |  |       |   |  |  | 1,018  | 
|Short-term investments and loans                              |  |                             | 117     |   |                     |  | 78     |                  |  |  | 297                |  |  |                   | 2      |  |       |  | 10    |          |  |  |      |  |  |  |       |   |  |  | 504    | 
|Trade and other accounts receivable                           |  |                             | 8       |   |                     |  | 158    |                  |  |  | 87                 |  |  |                   | 86     |  |       |  | 86    |          |  |  | 491   |  |  |  | 94     |   |  |  | 1,010  | 
|Long-term investments and loans                               |  |                             | 131     |   |                     |  | 421    |                  |  |  | 222                |  |  |                   | 80     |  |       |  | 38    |          |  |  | 506   |  |  |  | 4      |   |  |  | 1,402  | 
|                                                              |  |                             |         |   |                     |  |        |                  |  |  |                    |  |  |                   |        |  |       |  |       |          |  |  |       |  |  |  |        |   |  |  |        | 
|Total monetary assets                                         |  |                             | 256     |   |                     |  | 825    |                  |  |  | 631                |  |  |                   | 336    |  |       |  | 719   |          |  |  | 1,069 |  |  |  | 98     |   |  |  | 3,934  | 
|Other financial assets (1)                                    |  |                             |        |   |                     |  |       |                  |  |  |                   |  |  |                   |       |  |       |  |      |          |  |  |      |  |  |  | 1,343  |   |  |  | 1,343  | 
|Other assets (2)                                              |  |                             |        |   |                     |  | 15,633 |                  |  |  | 24,024             |  |  |                   | 13,428 |  |       |  | 3,417 |          |  |  | 5,938 |  |  |  | 210    |   |  |  | 62,650 | 
|                                                              |  |                             |         |   |                     |  |        |                  |  |  |                    |  |  |                   |        |  |       |  |       |          |  |  |       |  |  |  |        |   |  |  |        | 
|Total assets                                                  |  |                             | 256     |   |                     |  | 16,458 |                  |  |  | 24,655             |  |  |                   | 13,764 |  |       |  | 4,136 |          |  |  | 7,007 |  |  |  | 1,651  |   |  |  | 67,927 | 
|                                                              |  |                             |         |   |                     |  |        |                  |  |  |                    |  |  |                   |        |  |       |  |       |          |  |  |       |  |  |  |        |   |  |  |        | 
|Liabilities:                                                  |  |                             |         |   |                     |  |        |                  |  |  |                    |  |  |                   |        |  |       |  |       |          |  |  |       |  |  |  |        |   |  |  |        | 
|Short-term credit from banks and others                       |  |                             | 86      |   |                     |  | 3      |                  |  |  | 86                 |  |  |                   | 4      |  |       |  | 78    |          |  |  |      |  |  |  |       |   |  |  | 257    | 
|Trade payables and other accounts payable                     |  |                             | 271     |   |                     |  | 173    |                  |  |  | 604                |  |  |                   | 192    |  |       |  | 690   |          |  |  | 171   |  |  |  | 143    |   |  |  | 2,244  | 
|Liabilities attributable to assets held for sale              |  |                             |        |   |                     |  |       |                  |  |  | 73                 |  |  |                   |       |  |       |  |      |          |  |  |      |  |  |  |       |   |  |  | 73     | 
|Debentures (3)                                                |  |                             | 9,814   |   |                     |  | 2,680  |                  |  |  | 6,078              |  |  |                   | 3,288  |  |       |  | 1,210 |          |  |  |      |  |  |  |       |   |  |  | 23,070 | 
|Convertible debentures                                        |  |                             |        |   |                     |  |       |                  |  |  | 1,221              |  |  |                   |       |  |       |  |      |          |  |  |      |  |  |  |       |   |  |  | 1,221  | 
|Interest-bearing loans from financial institutions and others |  |                             | 336     |   |                     |  | 4,577  |                  |  |  | 4,547              |  |  |                   | 3,838  |  |       |  | 40    |          |  |  | 1,429 |  |  |  |       |   |  |  | 14,767 | 
|Other liabilities                                             |  |                             | 2       |   |                     |  | 72     |                  |  |  | 70                 |  |  |                   | 25     |  |       |  | 14    |          |  |  | 5     |  |  |  | 10     |   |  |  | 198    | 
|                                                              |  |                             |         |   |                     |  |        |                  |  |  |                    |  |  |                   |        |  |       |  |       |          |  |  |       |  |  |  |        |   |  |  |        | 
|Total financial liabilities                                   |  |                             | 10,509  |   |                     |  | 7,505  |                  |  |  | 12,679             |  |  |                   | 7,347  |  |       |  | 2,032 |          |  |  | 1,605 |  |  |  | 153    |   |  |  | 41,830 | 
|Other liabilities (4)                                         |  |                             |        |   |                     |  |       |                  |  |  |                   |  |  |                   |       |  |       |  |      |          |  |  |      |  |  |  | 3,744  |   |  |  | 3,744  | 
|                                                              |  |                             |         |   |                     |  |        |                  |  |  |                    |  |  |                   |        |  |       |  |       |          |  |  |       |  |  |  |        |   |  |  |        | 
|Total liabilities                                             |  |                             | 10,509  |   |                     |  | 7,505  |                  |  |  | 12,679             |  |  |                   | 7,347  |  |       |  | 2,032 |          |  |  | 1,605 |  |  |  | 3,897  |   |  |  | 45,574 | 
|                                                              |  |                             |         |   |                     |  |        |                  |  |  |                    |  |  |                   |        |  |       |  |       |          |  |  |       |  |  |  |        |   |  |  |        | 
|Assets, net of liabilities                                    |  |                             | (10,253 | ) |                     |  | 8,953  |                  |  |  | 11,976             |  |  |                   | 6,417  |  |       |  | 2,104 |          |  |  | 5,402 |  |  |  | (2,246 | ) |  |  | 22,353 | 
|                                                              |  |                             |         |   |                     |  |        |                  |  |  |                    |  |  |                   |        |  |       |  |       |          |  |  |       |  |  |  |        |   |  |  |        | 



|(1) | Mainly financial instruments at fair value.
|--- | -------------------------------------------

|(2) | Mainly investment property, investment property under development, fixed assets and deferred taxes.
|--- | ---------------------------------------------------------------------------------------------------

|(3) | As for cross currency swap transactions for the exchange of the linkage basis on part of the debentures, see d. above. As of December 31, 2013, the Company has NIS 4,067 million of cross- currency swaps from
NIS linked to Israeli CPI to foreign currency and has NIS 1,430 million from non-linked NIS to foreign currency.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Mainly deferred taxes, derivatives and advances from customers.
|--- | ---------------------------------------------------------------



F-95



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 37: | - FINANCIAL INSTRUMENTS (Cont.)
|-------- | -------------------------------



| | g. | Sensitivity analysis of market risks
| | -- | ------------------------------------



|                                                                                |                 |                                                                                       |      |   |            |  |      |           |  |  |             |   |  |  |     |  
|------------------------------------------------------------------------------- | --------------- | ------------------------------------------------------------------------------------- | ---- | - | ---------- |  | ---- | --------- |  |  | ----------- | - |  |  | --- | -
|                                                                                |                 | Sensitivity analysis of financial balances toabsolute changes in interest rates       |     
|Impact on pre-tax income (loss) for the year of a 1% increase in interest rates |                 | U.S.$interest                                                                         |      |   | C$interest |  |      | interest |  |  | NISinterest |  
|                                                                                | NIS in millions |                                                                                      
|31.12.2014                                                                      |                 |                                                                                       | (48  | ) |            |  | (10  | )         |  |  | (18         | ) |  |  | (3  | )
|31.12.2013                                                                      |                 |                                                                                       | (22  | ) |            |  | (7   | )         |  |  | (23         | ) |  |  | (3  | )
|                                                                                |                 | Sensitivity analysis of financial balances ofabsolute changes in Consumer Price Index |     
|                                                                                |                 | +2%                                                                                   |      |   | +1%        |  |      | -1%       |  |  | -2%         |  
|Effect on pre-tax equity                                                        |                 | NIS in millions                                                                       |     
|31.12.2014                                                                      |                 |                                                                                       | (200 | ) |            |  | (100 | )         |  |  | 100         |   |  |  | 200 |  
|31.12.2013                                                                      |                 |                                                                                       | (205 | ) |            |  | (103 | )         |  |  | 103         |   |  |  | 205 |  
|                                                                                |                 | Sensitivity analysis for financial derivativeabsolute changes in Consumer Price Index |     
|                                                                                |                 | +2%                                                                                   |      |   | +1%        |  |      | -1%       |  |  | -2%         |  
|Effect on pre-tax income (loss)                                                 |                 | NIS in millions                                                                       |     
|31.12.2014                                                                      |                 |                                                                                       | 81   |   |            |  | 40   |           |  |  | (41         | ) |  |  | (83 | )
|31.12.2013                                                                      |                 |                                                                                       | 94   |   |            |  | 47   |           |  |  | (47         | ) |  |  | (95 | )
|                                                                                |                 | Sensitivity analysis for financial derivatives-relative changes in exchange rates     |     
|Effect on pre-tax income (loss)                                                 |                 | +10%                                                                                  |      |   | +5%        |  |      | -5%       |  |  | -10%        |  
|                                                                                |                 | NIS in millions                                                                       |     
|31.12.2014                                                                      |                 |                                                                                       |      |   |            |  |      |           |  |  |             |   |  |  |     |  
|Change in exchange rate of                                                     |                 |                                                                                       | (377 | ) |            |  | (187 | )         |  |  | 185         |   |  |  | 367 |  
|Change in exchange rate of U.S.$                                                |                 |                                                                                       | (91  | ) |            |  | (45  | )         |  |  | 45          |   |  |  | 90  |  
|Change in exchange rate of C$                                                   |                 |                                                                                       | (96  | ) |            |  | (48  | )         |  |  | 48          |   |  |  | 95  |  
|Change in exchange rate of Brazilian Real                                       |                 |                                                                                       | (24  | ) |            |  | (12  | )         |  |  | 12          |   |  |  | 24  |  
|31.12.2013                                                                      |                 |                                                                                       |      |   |            |  |      |           |  |  |             |   |  |  |     |  
|Change in exchange rate of                                                     |                 |                                                                                       | (294 | ) |            |  | (146 | )         |  |  | 145         |   |  |  | 289 |  
|Change in exchange rate of U.S.$                                                |                 |                                                                                       | (80  | ) |            |  | (40  | )         |  |  | 40          |   |  |  | 79  |  
|Change in exchange rate of C$                                                   |                 |                                                                                       | (149 | ) |            |  | (74  | )         |  |  | 74          |   |  |  | 149 |  
|Change in exchange rate of Brazilian Real                                       |                 |                                                                                       | (22  | ) |            |  | (11  | )         |  |  | 11          |   |  |  | 22  |  



F-96



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 37: | - FINANCIAL INSTRUMENTS (Cont.)
|-------- | -------------------------------



|                                          |  |                                                                                   |      |   |     |  |      |     |  |  |      |   |  |  |      |  
|----------------------------------------- |  | --------------------------------------------------------------------------------- | ---- | - | --- |  | ---- | --- |  |  | ---- | - |  |  | ---- | -
|                                          |  | Sensitivity analysis for financial derivatives-absolute changes in interest rates |     
|Effect on pre-tax income (loss)           |  | +2%                                                                               |      |   | +1% |  |      | -1% |  |  | -2%  |  
|                                          |  | NIS in millions                                                                   |     
|2014                                      |  |                                                                                   |      |   |     |  |      |     |  |  |      |   |  |  |      |  
|Change in interest on                    |  |                                                                                   | 257  |   |     |  | 135  |     |  |  | (129 | ) |  |  | (129 | )
|Change in interest on U.S.$               |  |                                                                                   | 48   |   |     |  | 25   |     |  |  | (26  | ) |  |  | (49  | )
|Change in interest on C$                  |  |                                                                                   | 88   |   |     |  | 46   |     |  |  | (51  | ) |  |  | (101 | )
|Change in exchange rate of Brazilian Real |  |                                                                                   | 13   |   |     |  | 7    |     |  |  | (6   | ) |  |  | (12  | )
|Change in nominal interest on NIS         |  |                                                                                   | (138 | ) |     |  | (71  | )   |  |  | 68   |   |  |  | 109  |  
|Change in real interest on NIS            |  |                                                                                   | (459 | ) |     |  | (238 | )   |  |  | 252  |   |  |  | 527  |  
|2013                                      |  |                                                                                   |      |   |     |  |      |     |  |  |      |   |  |  |      |  
|Change in interest on                    |  |                                                                                   | 315  |   |     |  | 165  |     |  |  | (172 | ) |  |  | (303 | )
|Change in interest on U.S.$               |  |                                                                                   | 48   |   |     |  | 25   |     |  |  | (24  | ) |  |  | (43  | )
|Change in interest on C$                  |  |                                                                                   | 103  |   |     |  | 54   |     |  |  | (58  | ) |  |  | (118 | )
|Change in exchange rate of Brazilian Real |  |                                                                                   | 14   |   |     |  | 7    |     |  |  | (8   | ) |  |  | (16  | )
|Change in nominal interest on NIS         |  |                                                                                   | (74  | ) |     |  | (38  | )   |  |  | 40   |   |  |  | 68   |  
|Change in real interest on NIS            |  |                                                                                   | (537 | ) |     |  | (276 | )   |  |  | 297  |   |  |  | 622  |  



|                                            |  |                                                                                   |    |  |     |  |    |     |  |  |     |   |  |  |     |  
|------------------------------------------- |  | --------------------------------------------------------------------------------- | -- |  | --- |  | -- | --- |  |  | --- | - |  |  | --- | -
|                                            |  | Sensitivity analysis for financial derivatives-absolute changes in interest rates |   
|Effect on pre-tax equity (accounting hedge) |  | +2%                                                                               |    |  | +1% |  |    | -1% |  |  | -2% |  
|                                            |  | NIS in millions                                                                   |   
|31.12.2014                                  |  |                                                                                   |    |  |     |  |    |     |  |  |     |   |  |  |     |  
|Change in interest on U.S.$                 |  |                                                                                   | 66 |  |     |  | 34 |     |  |  | (37 | ) |  |  | (59 | )
|Change in interest on C$                    |  |                                                                                   | 60 |  |     |  | 32 |     |  |  | (34 | ) |  |  | (71 | )
|Change in Swedish Krona                     |  |                                                                                   | 15 |  |     |  | 8  |     |  |  | (3  | ) |  |  | (3  | )
|31.12.2013                                  |  |                                                                                   |    |  |     |  |    |     |  |  |     |   |  |  |     |  
|Change in interest on                      |  |                                                                                   | 91 |  |     |  | 47 |     |  |  | (32 | ) |  |  | (32 | )
|Change in interest on U.S.$                 |  |                                                                                   | 71 |  |     |  | 36 |     |  |  | (39 | ) |  |  | (67 | )
|Change in interest on C$                    |  |                                                                                   | 29 |  |     |  | 15 |     |  |  | (16 | ) |  |  | (34 | )
|Change in Swedish Krona                     |  |                                                                                   | 51 |  |     |  | 26 |     |  |  | (27 | ) |  |  | (45 | )

Sensitivity analysis and main assumptions

The Company has performed sensitivity tests of principal market risk factors that are liable to affect its reported operating results or
financial position. The sensitivity analysis presents the gain or loss or change in equity (before tax) in respect of each financial instrument for the relevant risk variable chosen for that instrument as of each reporting date. The examination of
risk factors and the financial assets and liabilities were determined based on the materiality of the exposure in relation to each risk assuming that all the other variables remain constant. The sensitivity analysis refers to a potential increase in
the relevant variables at rates that the Company deemed appropriate, as the case may be. The same is true for a decrease in same percentage which would impact profit or loss by the same amounts in the opposite direction, unless otherwise indicated.

In addition:



| | 1. | The sensitivity analysis for changes in interest rates of monetary balances was performed on long-term liabilities with variable interest as of the reporting date.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-97



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 37: | - FINANCIAL INSTRUMENTS (Cont.)
|-------- | -------------------------------



| | 2. | According to the Companys policy, as discussed in a. above, the Company generally hedges its main exposures to foreign currency, among others, through maintaining a high correlation between the currency in which
its assets are purchased and the currency in which the liabilities are assumed. Accordingly, economic exposure of assets net of financial balances to changes in foreign currency exchange rates is fairly limited in scope. Nonetheless, there is
accounting exposure to changes in foreign currency and interest rates with respect to cross currency swap transactions which were not designated for hedge accounting, as presented in the above table.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | The main accounting exposure in respect of derivative financial instruments is in respect of changes in fair value due to changes in interest, CPI and currency which may have an effect on the profit or loss or directly
on equity due to transactions that do not qualify for accounting hedge and transactions that do qualify for accounting hedge, respectively.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | Cash and cash equivalents, including financial assets that are deposited or maintained for less than one year, were not included in the analysis of exposure to changes in interest.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 38:- TRANSACTIONS AND BALANCES WITH RELATED PARTIES



| | a. | Income
| | -- | ------



|                                                    |  |                        |     |  |      |  |     |      |  |  |     | 
|--------------------------------------------------- |  | ---------------------- | --- |  | ---- |  | --- | ---- |  |  | --- | 
|                                                    |  | Year ended December 31 |    
|                                                    |  | 2014                   |     |  | 2013 |  |     | 2012 | 
|                                                    |  | NIS in millions        |    
|Management fees from the parent company (section d) |  |                        | 1.3 |  |      |  | 1.3 |      |  |  | 1.4 | 
|                                                    |  |                        |     |  |      |  |     |      |  |  |     | 
|Interest income from investees                      |  |                        | 44  |  |      |  | 34  |      |  |  | 5   | 
|                                                    |  |                        |     |  |      |  |     |      |  |  |     | 



| | b. | Other expenses and payments
| | -- | ---------------------------



|                                             |  |                        |   |  |                |  |         |                |  |  |                |  |  |                |         |  |                |  |   |  |  |  |      | 
|-------------------------------------------- |  | ---------------------- | - |  | -------------- |  | ------- | -------------- |  |  | -------------- |  |  | -------------- | ------- |  | -------------- |  | - |  |  |  | ---- | 
|                                             |  | Year ended December 31 |  
|                                             |  | 2014                   |   |  | 2013           |  |         | 2012           | 
|                                             |  | Numberofpeople         |   |  | NIS inmillions |  |         | Numberofpeople |  |  | NIS inmillions |  |  | Numberofpeople |         |  | NIS inmillions | 
|Directors fees                              |  |                        | 9 |  |                |  | 2.5     |                |  |  | 8              |  |  |                | 2.9     |  |                |  | 7 |  |  |  | 2.3  | 
|                                             |  |                        |   |  |                |  |         |                |  |  |                |  |  |                |         |  |                |  |   |  |  |  |      | 
|Salaries and related expenses, see (1) below |  |                        | 5 |  |                |  | *) 60.5 |                |  |  | 4              |  |  |                | *) 26.4 |  |                |  | 4 |  |  |  | 25.3 | 
|                                             |  |                        |   |  |                |  |         |                |  |  |                |  |  |                |         |  |                |  |   |  |  |  |      | 



|*) | Includes compensation of NIS 14.6 million and NIS 2.9 million for the years 2014 and 2013, respectively, from equity-accounted jointly controlled company.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------

|(1) | As for the employment terms (including share based compensation) of the Chairman of the Board, the Executive Vice Chairman of the Board, the Deputy Chairman of the Board and the Companys President, see details in
section c below.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 38:- | TRANSACTIONS AND BALANCES WITH RELATED PARTIES (Cont.)
|--------- | ------------------------------------------------------



| | c. | Employment agreements
| | -- | ---------------------



| | 1. | Chairman of the Board of Directors, Mr. Chaim Katzman
| | -- | -----------------------------------------------------



| | a) | Mr. Katzman serves as the chairman of the Board of Directors of the Company but his employment agreement with wholly owned subsidiary of the Company terminated in November 2011.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

It is hereby clarified that, despite the expiration of the agreement, Mr. Katzman is continuing to fulfill his duties as Chairman of the
Companys Board of Directors without compensation from the Company, although in the course of fulfilling his duties Mr. Katzman is entitled to continue using the Companys resources in order to fulfill his duties.



| | b) | In June 2014, EQY and Mr. Katzman entered into an agreement for the period commencing on January 1, 2015 and ending on December 31, 2017, according to which Mr. Katzman will continue serving as
EQYs Chairman of the Board of Directors. Pursuant to the provisions in the agreement, at the end of the period, the agreement will be automatically renewed on a yearly basis, unless one party objects. According to the agreement,
Mr. Katzman is entitled to an annual grant which is determined at the discretion of EQYs compensation committee as well as to a reimbursement of expenses with respect to his position. The agreement also sets forth provisions relating to
its termination by either EQY or Mr. Katzman and the compensation to which Mr. Katzman will be entitled to upon termination. In additional, in January 2015 255,000 restricted shares were granted to Mr. Katzman, which will vest every
month over 36 months commencing January 2015 and ending on December 31, 2017.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c) | According to the agreement between Mr. Katzman and FCR from 2011, pursuant to which, as long as Mr. Katzman serves as the chairman of FCRs Board, he is entitled to an annual remuneration at an amount of
C$ 500 thousand plus annual issuances of restricted units that are convertible to FCRs shares in value of C$ 500 thousand. The agreement with FCR also provides for Mr. Katzmans entitlement of compensation in the case of
termination of his contract due to change of control in FCR. According to the agreement in March 2014, Mr. Katzman was granted 19,718 deferred restricted share units for no consideration that are convertible into 19,718 FCR shares, based on the
price of C$ 17.75 per share at the grant date.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In January 2015, FCR and Mr. Katzman entered into an agreement
replacing the aforementioned agreement in light of the appointment of Mr. Katzman as Non-Executive Chair of the Board. In accordance with the amended agreement, with effect from January 1, 2015, Mr. Katzman is entitled to annual
compensation in the amount of C$ 150 thousand, as well as to an annual grant of deferred restricted share units convertible into FCR shares with a value of C$ 150 thousand. It was also provided that the agreement would be for a period of
two years. In accordance with the terms of the new employment agreement, in January 2015, Mr. Katzman was granted 1,995 deferred restricted share units for no consideration, that are convertible into 1,995 FCR shares based on a price of C$
18.85 per unit at the grant date, that will vest at the end of Mr. Katzman service as a director in FCR.



| | d) | According to the advisory agreement since 2008 with ATR, Mr. Katzman, ATRs Chairman of the Board is entitled to a yearly remuneration of  550 thousand due to advisory services and recovery of
expenses from ATR.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, in August 2012 Mr. Katzman was granted 127 thousands share options for ATR shares with
an exercise price of  3.63 over a vesting period of 3 years commencing the grant date. In addition, in November 2013 Mr. Katzman was granted additional 200 thousands share option for ATR shares, for an exercise price of 
4.38 per share in total value of  150 thousands. These share options were not exercised as of the reporting date.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 38:- | TRANSACTIONS AND BALANCES WITH RELATED PARTIES (Cont.)
|--------- | ------------------------------------------------------



| | e) | For 2014, Mr. Katzman is entitled for directors remuneration in the amount of  165 thousand for his services as CTYs chairman of the Board.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | Active Vice Chairman of the Companys Board of Directors, Mr. Dori Segal
| | -- | ------------------------------------------------------------------------



| | a) | Mr. Segal serves as the Active vice Chairman of the Companys Board of Directors, but his employment agreement with a wholly owned subsidiary of the Company terminated in November 2011.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

It is hereby clarified that despite the expiration of the agreement, Mr. Segal continues to fulfill his duties as Executive Vice-Chairman
of the Companys Board of Directors without compensation from the Company, although in the course of fulfilling his duties Mr. Segal is entitled to continue using the Companys resources in order to fulfill his duties.



| | b) | Mr. Segal, who also served as FCRs President and CEO until the first quarter of 2015, entered into an employment agreement with FCR, effective October 2001 (which was amended from time to time and recently in
July 2010), pursuant to which, he is entitled to an annual compensation of C$ 720 thousand as well as to reimbursement of expenses with respect to his position. In respect of 2014, Mr. Segals total salary cost was C$ 778
thousand. The employment agreement mentioned above is for an unlimited period. According to the agreement, Mr. Segal is also entitled to annual bonuses and to participate in FCRs compensation plans, including share compensation. For 2014,
Mr. Segal was not entitled to an annual bonus. Likewise, the agreement also contains provisions relating to its termination by either of the parties and the amounts to which Mr. Segal will be entitled upon its termination. In December
2014, FCR and Mr. Segal entered into an agreement for the termination of Mr. Segals employment as President and CEO of FCR. Within the framework of the agreements, it was provided that Mr. Segal is entitled to a one-time payment
in the amount of C$ 4.6 million in connection with the termination of his service. It was also provided that, for his service as Executive Vice Chairman of the board of directors, Mr. Segal would be entitled to annual compensation in the
amount of C$ 700 thousand and to an annual grant of restricted stock units with a value of C$ 300 thousand. It was provided that the agreement would be for a period of two years.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

According to his agreement, Mr. Segal was granted compensation of equity instruments by FCR. Approximately 25 thousand restricted
units convertible into 25 thousand FCR shares were issued to Mr. Segal for no consideration in March 2014, based on the price of C$ 17.75 per share at the grant date.

On March 2014, Mr. Segal was granted 65 thousand share options convertible into 65 thousand FCR shares that will vest over
period of 5 years at an exercise price of C$ 17.77 per share, which are exercisable through March 2024. The fair value of each share option on the grant date, based on the binomial model, is C$ 8.43.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 38:- | TRANSACTIONS AND BALANCES WITH RELATED PARTIES (Cont.)
|--------- | ------------------------------------------------------



| | c) | Mr. Segal receives for his services on EQYs Board restricted shares each year. In 2014 Mr. Segal was granted 3,500 restricted shares at the average price per share of U.S.$ 22.53. In January 2015
Mr. Segal was granted 3,500 restricted shares at the average price per share of U.S$ 25.62. with respect to 2014. Mr. Segal also received directors compensation of U.S.$ 74.5 thousand with respect to 2014.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | Deputy Chairman of the Board, Mr. Arie Mientkavich
| | -- | --------------------------------------------------

In accordance with his
employment agreement from June 2005, as recently extended in September 2013, Mr. Mientkavich is employed as Active Deputy Chairman of the Companys Board of Directors for a three-year period which ends in September 2016, in a 50% capacity,
at a gross monthly salary of NIS 80 thousand linked to the CPI, plus associated benefits. Mr. Mientkavich is also entitled to an annual cash bonus that will not exceed NIS 500 thousand, which will be calculated in accordance with the
attainment of measurable goals set for the Company and at the discretion of the Compensation Committee and the Board of Directors of the Company, in a ratio of up to 20% of the annual bonus.

The provision of the employment agreement also provides that, in the event of the agreement being terminated by either party to the agreement
at the end of the agreements term or during the course thereof, other than for dismissal with cause, Mr. Mientkavich will be entitled to 60 days advance notice during the course of which he will be entitled to receive
the full terms provided under the employment agreement as well as an adaptation grant in an amount equivalent to six months salary.

As part of the renewal of his employment agreement, Mr. Mientkavich was granted in 2013 144 thousand share options, 16 thousand
RSUs and 36 thousand PSUs, refer to Note 28 for details.



| | 4. | Companys President, Mr. Aharon Soffer
| | -- | --------------------------------------

As part of his employment agreement,
as renewed in September 2013 for a period of three years from November 2013, entitle Mr. Soffer to a gross monthly salary of NIS 160 thousands, linked to the CPI, plus associated customary benefits and an annual bonus at an amount of up to
100% of his yearly salary in accordance with the attainment of measurable goals set for the Company pursuant to the Companys Compensation Policy and at the discretion of the Compensation Committee and the Board of Directors of the Company, in
a ratio of 20% of the annual bonus. Mr. Soffers annual salary for 2014 (excluding bonus) totaled to NIS 2,763 thousand.

The
employment agreement may be canceled by either of the parties upon providing 180 days advance notice. In addition, the terms of the employment agreement provide that in the event of termination of the employment on the initiative of the
Company, other than for dismissal with cause and also in the event of resignation in circumstances where the resignation is viewed under the law as a dismissal or in the event of death or loss of working ability, Mr. Soffer will be
entitled to 180 days advance notice during the course of which he will be entitled to receive the full terms provided under the employment agreement, an additional six months salary including social benefits, plus the lower of his basic
salary for an additional 12 months or for the period remaining until the end of the agreement, and the acceleration of the vesting period of the equity compensation instruments granted to Mr. Soffer. If Mr. Soffers employment is
terminated during the 12-month period following a change in the Companys control, Mr. Soffer will be entitled to acceleration of the vesting period of all the equity compensation instruments granted to him (instead of the aforementioned
terms), as well as a bonus equivalent to 200% of his basic annual salary.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 38:- | TRANSACTIONS AND BALANCES WITH RELATED PARTIES (Cont.)
|--------- | ------------------------------------------------------



As part of the renewal of his employment agreement, Mr. Soffer was granted in 2013 382
thousands share options, 43 thousands RSUs and 97 thousands PSUs, refer to Note 28 for details.

In March 2015, the Companys
Compensation Committee and Board of Directors approved Mr. Soffer annual bonus for 2014 in the amount of NIS 480 thousand.

For his
services as a director in ATR, Mr. Soffer is entitled to director fees in the amount of  25 thousand for 2014. Such fees are fully transferred to the Company.



| | d. | Entering into an agreement with Norstar
| | -- | ---------------------------------------

On January 26 2012, the Companys
shareholders meeting approved entering into an agreement with Norstar (the Gazit-Norstar Agreement) with respect to the following matters:



| | 1. | Amending the management agreement with Norstar, which expired on November 15, 2011, pursuant to which Norstar will pay the Company monthly payment of NIS 105 thousands linked to the Israeli CPI including VAT for
various management services. The Agreement is for a three-year period and renews automatically for further periods, each for three years, with each party being entitled to give notice of non-renewal subject to the applications of the Companies Law.
Management services will include secretarial services, book keeping services, treasury services, computer services, communications, legal services, and dealing with bank financing, the capital markets and investments.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | Amending the existing non-competition provisions between the Company and Norstar Group in the following manner: Norstar has undertaken that, so long as Norstar Group continues to be the Companys controlling
shareholder and so long as the Company is engaged, as its principal business, in the field of shopping centers and medical office buildings, Norstar Group will not engage in such fields and will not own shares in companies that are engaged in such
fields as its principal activity and proposals it receives to engage in and/or to hold the aforementioned will be passed on by it to the Company, except for holding up to 5% of the share capital of such companies listed on a stock exchange in Israel
or abroad. With regard to business in the real estate field other than shopping centers and medical office buildings, Norstar has undertaken to grant the Company the right of first offer.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | In light of the Companys shares offering on the NYSE, registration rights have been granted to Norstar in connection with the securities of the Company that are held by Norstar Group, subject to the terms set
forth in the Gazit-Norstar Agreement.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In September 2014, the relevant organs of the Company and of Norstar approved the
renewal of the aforesaid agreement, without any change apart from updating the monthly management fees to an amount of NIS 122 thousand.



| | e. | Balances with related parties
| | -- | -----------------------------



|                                                                                |  |                 |     |  |      |  |     | 
|------------------------------------------------------------------------------- |  | --------------- | --- |  | ---- |  | --- | 
|                                                                                |  | December 31     |    
|                                                                                |  | 2014            |     |  | 2013 | 
|                                                                                |  | NIS in millions |    
|Interest receivable from joint ventures and equity-accounted investees (Note 6) |  |                 | 30  |  |      |  | 30  | 
|                                                                                |  |                 |     |  |      |  |     | 
|Loans to equity-accounted investees (Note 9a)                                   |  |                 | 878 |  |      |  | 743 | 
|                                                                                |  |                 |     |  |      |  |     | 



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 39:- SEGMENT INFORMATION



| | a. | General
| | -- | -------

According to the management approach, as defined in IFRS 8, the
Group operates in several operating segments, five of which meet the definition of reportable segment (as presented in the table below). The segments are identified both on the basis of geographical location of the income producing
properties and on the basis of the nature of the business activity, as appropriate. Companys management evaluates the segment results separately in order to allocate the resources and asses the segment performance which, in certain cases,
differ from the measurements used in the consolidated financial statements, as described below. Financial expenses, financial income and taxes on income are managed on a group basis and, therefore, were not allocated to the different segment
activities.

Other segments include, among others, activities that meet the qualitative criteria of an operating segment in
accordance with IFRS 8 as they constitute the entitys business component from which it generates revenues and incurs expenses and for which financial information is available and separately reviewed by the Companys management. Such
segments however, do not meet the quantitative threshold that requires their presentation as a reportable segment and comprise mainly the following activities: medical office buildings sector in United States (ProMed), shopping centers and lands in
Israel, Germany, Brazil and Bulgaria.



| | b. | Financial information by operating segments
| | -- | -------------------------------------------

As of and for the year ended
December 31, 2014



|                                        |  |                           |        |  |                          |  |        |                               |  |  |                                             |  |  |                                                 |        |  |               |  |       |                                   |  |  |              |   |  |  |        |   |  |  |        | 
|--------------------------------------- |  | ------------------------- | ------ |  | ------------------------ |  | ------ | ----------------------------- |  |  | ------------------------------------------- |  |  | ----------------------------------------------- | ------ |  | ------------- |  | ----- | --------------------------------- |  |  | ------------ | - |  |  | ------ | - |  |  | ------ | 
|                                        |  | Shoppingcenters inU.S.(1) |        |  | Shoppingcenters inCanada |  |        | Shoppingcentersin NorthEurope |  |  | Shoppingcenters inCentral-EasternEurope (2) |  |  | Initiationandperformanceofconstructionworks (2) |        |  | Othersegments |  |       | Adjustmentsforconsolidated(3)-(8) |  |  | Consolidated |  
|                                        |  | NIS in millions           |       
|Segment revenues                        |  |                           |        |  |                          |  |        |                               |  |  |                                             |  |  |                                                 |        |  |               |  |       |                                   |  |  |              |   |  |  |        |   |  |  |        | 
|External revenues (3)                   |  |                           | 1,263  |  |                          |  | 2,100  |                               |  |  | 1,366                                       |  |  |                                                 | 1,372  |  |               |  | 1,355 |                                   |  |  | 459          |   |  |  | (1,645 | ) |  |  | 6,270  | 
|                                        |  |                           |        |  |                          |  |        |                               |  |  |                                             |  |  |                                                 |        |  |               |  |       |                                   |  |  |              |   |  |  |        |   |  |  |        | 
|Segment results:                        |  |                           |        |  |                          |  |        |                               |  |  |                                             |  |  |                                                 |        |  |               |  |       |                                   |  |  |              |   |  |  |        |   |  |  |        | 
|Gross profit (loss) (4)                 |  |                           | 943    |  |                          |  | 1,318  |                               |  |  | 948                                         |  |  |                                                 | 969    |  |               |  | (302  | )                                 |  |  | 332          |   |  |  | (1,182 | ) |  |  | 3,026  | 
|Depreciation and amortization (4)       |  |                           | 361    |  |                          |  | 9      |                               |  |  | 4                                           |  |  |                                                 | 13     |  |               |  | 9     |                                   |  |  | 3            |   |  |  | (367   | ) |  |  | 32     | 
|Share in earnings (losses) of investees |  |                           | 39     |  |                          |  | 30     |                               |  |  |                                            |  |  |                                                 |       |  |               |  | (9    | )                                 |  |  | (2           | ) |  |  | (46    | ) |  |  | 12     | 
|Operating income (loss) (5)             |  |                           | 473    |  |                          |  | 1,193  |                               |  |  | 853                                         |  |  |                                                 | 756    |  |               |  | (393  | )                                 |  |  | 260          |   |  |  | 304    |   |  |  | 3,446  | 
|Segment assets:                         |  |                           |        |  |                          |  |        |                               |  |  |                                             |  |  |                                                 |        |  |               |  |       |                                   |  |  |              |   |  |  |        |   |  |  |        | 
|Operating assets (6)                    |  |                           | 11,356 |  |                          |  | 25,817 |                               |  |  | 15,945                                      |  |  |                                                 | 14,217 |  |               |  | 1,122 |                                   |  |  | 5,145        |   |  |  | (9,831 | ) |  |  | 63,771 | 
|Investments in investees                |  |                           | 343    |  |                          |  | 465    |                               |  |  | 171                                         |  |  |                                                 |       |  |               |  | 416   |                                   |  |  | 53           |   |  |  | 4,765  |   |  |  | 6,213  | 
|                                        |  |                           |        |  |                          |  |        |                               |  |  |                                             |  |  |                                                 |        |  |               |  |       |                                   |  |  |              |   |  |  |        |   |  |  |        | 
|Total assets                            |  |                           | 11,699 |  |                          |  | 26,282 |                               |  |  | 16,116                                      |  |  |                                                 | 14,217 |  |               |  | 1,538 |                                   |  |  | 5,198        |   |  |  | (5,066 | ) |  |  | 69,984 | 
|                                        |  |                           |        |  |                          |  |        |                               |  |  |                                             |  |  |                                                 |        |  |               |  |       |                                   |  |  |              |   |  |  |        |   |  |  |        | 
|Investments in non-current assets (7)   |  |                           | 799    |  |                          |  | 1,552  |                               |  |  | 457                                         |  |  |                                                 | 1,255  |  |               |  | 3     |                                   |  |  | 536          |   |  |  | (1,253 | ) |  |  | 3,349  | 
|                                        |  |                           |        |  |                          |  |        |                               |  |  |                                             |  |  |                                                 |        |  |               |  |       |                                   |  |  |              |   |  |  |        |   |  |  |        | 
|Segment liabilities (8)                 |  |                           | 288    |  |                          |  | 458    |                               |  |  | 332                                         |  |  |                                                 | 579    |  |               |  | 523   |                                   |  |  | 87           |   |  |  | 41,847 |   |  |  | 44,114 | 
|                                        |  |                           |        |  |                          |  |        |                               |  |  |                                             |  |  |                                                 |        |  |               |  |       |                                   |  |  |              |   |  |  |        |   |  |  |        | 



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 39: | - SEGMENT INFORMATION (Cont.)
|-------- | -----------------------------



| | b. | Financial information by operating segments
| | -- | -------------------------------------------

As of and for the Year ended
December 31, 2013



|                                        |  |                           |        |  |                          |  |        |                               |  |  |                                             |  |  |                                                 |        |  |               |  |       |                                   |  |  |              |   |  |  |         |   |  |  |        | 
|--------------------------------------- |  | ------------------------- | ------ |  | ------------------------ |  | ------ | ----------------------------- |  |  | ------------------------------------------- |  |  | ----------------------------------------------- | ------ |  | ------------- |  | ----- | --------------------------------- |  |  | ------------ | - |  |  | ------- | - |  |  | ------ | 
|                                        |  | Shoppingcenters inU.S.(1) |        |  | Shoppingcenters inCanada |  |        | Shoppingcenters inNorthEurope |  |  | Shoppingcenters inCentral-EasternEurope (2) |  |  | Initiationandperformanceofconstructionworks (2) |        |  | Othersegments |  |       | Adjustmentsforconsolidated(3)-(8) |  |  | Consolidated |  
|                                        |  | NIS in millions           |       
|Segment revenues                        |  |                           |        |  |                          |  |        |                               |  |  |                                             |  |  |                                                 |        |  |               |  |       |                                   |  |  |              |   |  |  |         |   |  |  |        | 
|External revenues (3)                   |  |                           | 1,201  |  |                          |  | 2,216  |                               |  |  | 1,406                                       |  |  |                                                 | 1,345  |  |               |  | 1,569 |                                   |  |  | 526          |   |  |  | (1,445  | ) |  |  | 6,818  | 
|                                        |  |                           |        |  |                          |  |        |                               |  |  |                                             |  |  |                                                 |        |  |               |  |       |                                   |  |  |              |   |  |  |         |   |  |  |        | 
|Segment results:                        |  |                           |        |  |                          |  |        |                               |  |  |                                             |  |  |                                                 |        |  |               |  |       |                                   |  |  |              |   |  |  |         |   |  |  |        | 
|Gross profit (loss) (4)                 |  |                           | 870    |  |                          |  | 1,396  |                               |  |  | 963                                         |  |  |                                                 | 915    |  |               |  | (27   | )                                 |  |  | 377          |   |  |  | (1,053  | ) |  |  | 3,441  | 
|Depreciation and amortization (4)       |  |                           | 315    |  |                          |  | 11     |                               |  |  | 4                                           |  |  |                                                 | 10     |  |               |  | 7     |                                   |  |  | 3            |   |  |  | (316    | ) |  |  | 34     | 
|Share in earnings (losses) of investees |  |                           | 10     |  |                          |  | 8      |                               |  |  |                                            |  |  |                                                 |       |  |               |  | (11   | )                                 |  |  | (4           | ) |  |  | 146     |   |  |  | 149    | 
|Operating income (loss) (5)             |  |                           | 420    |  |                          |  | 1,275  |                               |  |  | 884                                         |  |  |                                                 | 743    |  |               |  | (79   | )                                 |  |  | 326          |   |  |  | 517     |   |  |  | 4,086  | 
|Segment assets:                         |  |                           |        |  |                          |  |        |                               |  |  |                                             |  |  |                                                 |        |  |               |  |       |                                   |  |  |              |   |  |  |         |   |  |  |        | 
|Operating assets (6)                    |  |                           | 10,380 |  |                          |  | 24,313 |                               |  |  | 15,799                                      |  |  |                                                 | 14,339 |  |               |  | 1,356 |                                   |  |  | 6,233        |   |  |  | (10,400 | ) |  |  | 62,020 | 
|Investments in investees                |  |                           | 322    |  |                          |  | 125    |                               |  |  | 66                                          |  |  |                                                 |       |  |               |  | 401   |                                   |  |  | 56           |   |  |  | 4,937   |   |  |  | 5,907  | 
|                                        |  |                           |        |  |                          |  |        |                               |  |  |                                             |  |  |                                                 |        |  |               |  |       |                                   |  |  |              |   |  |  |         |   |  |  |        | 
|Total assets                            |  |                           | 10,702 |  |                          |  | 24,438 |                               |  |  | 15,865                                      |  |  |                                                 | 14,339 |  |               |  | 1,757 |                                   |  |  | 6,289        |   |  |  | (5,463  | ) |  |  | 67,927 | 
|                                        |  |                           |        |  |                          |  |        |                               |  |  |                                             |  |  |                                                 |        |  |               |  |       |                                   |  |  |              |   |  |  |         |   |  |  |        | 
|Investments in non-current assets (7)   |  |                           | 845    |  |                          |  | 1,774  |                               |  |  | 377                                         |  |  |                                                 | 1,276  |  |               |  | 6     |                                   |  |  | 218          |   |  |  | (1,259  | ) |  |  | 3,237  | 
|                                        |  |                           |        |  |                          |  |        |                               |  |  |                                             |  |  |                                                 |        |  |               |  |       |                                   |  |  |              |   |  |  |         |   |  |  |        | 
|Segment liabilities (8)                 |  |                           | 235    |  |                          |  | 383    |                               |  |  | 391                                         |  |  |                                                 | 656    |  |               |  | 709   |                                   |  |  | 106          |   |  |  | 43,094  |   |  |  | 45,574 | 
|                                        |  |                           |        |  |                          |  |        |                               |  |  |                                             |  |  |                                                 |        |  |               |  |       |                                   |  |  |              |   |  |  |         |   |  |  |        | 

As of and for the Year ended December 31, 2012



|                                  |  |                           |       |  |                          |  |       |                               |  |  |                                             |  |  |                                                 |       |  |               |  |       |                                   |  |  |              |  |  |  |        |   |  |  |       | 
|--------------------------------- |  | ------------------------- | ----- |  | ------------------------ |  | ----- | ----------------------------- |  |  | ------------------------------------------- |  |  | ----------------------------------------------- | ----- |  | ------------- |  | ----- | --------------------------------- |  |  | ------------ |  |  |  | ------ | - |  |  | ----- | 
|                                  |  | Shoppingcenters inU.S.(1) |       |  | Shoppingcenters inCanada |  |       | Shoppingcenters inNorthEurope |  |  | Shoppingcenters inCentral-EasternEurope (2) |  |  | Initiationandperformanceofconstructionworks (2) |       |  | Othersegments |  |       | Adjustmentsforconsolidated(3)-(8) |  |  | Consolidated | 
|                                  |  | NIS in millions           |      
|Segment revenues                  |  |                           |       |  |                          |  |       |                               |  |  |                                             |  |  |                                                 |       |  |               |  |       |                                   |  |  |              |  |  |  |        |   |  |  |       | 
|External revenues (3)             |  |                           | 1,256 |  |                          |  | 2,237 |                               |  |  | 1,185                                       |  |  |                                                 | 1,324 |  |               |  | 1,760 |                                   |  |  | 565          |  |  |  | (1,318 | ) |  |  | 7,009 | 
|                                  |  |                           |       |  |                          |  |       |                               |  |  |                                             |  |  |                                                 |       |  |               |  |       |                                   |  |  |              |  |  |  |        |   |  |  |       | 
|Segment results:                  |  |                           |       |  |                          |  |       |                               |  |  |                                             |  |  |                                                 |       |  |               |  |       |                                   |  |  |              |  |  |  |        |   |  |  |       | 
|Gross profit (4)                  |  |                           | 587   |  |                          |  | 1,426 |                               |  |  | 803                                         |  |  |                                                 | 898   |  |               |  | 40    |                                   |  |  | 396          |  |  |  | (566   | ) |  |  | 3,584 | 
|Depreciation and amortization (4) |  |                           | 333   |  |                          |  | 11    |                               |  |  | 6                                           |  |  |                                                 | 6     |  |               |  | 6     |                                   |  |  | 4            |  |  |  | (332   | ) |  |  | 34    | 
|Share in earnings of investees    |  |                           | 3     |  |                          |  | 28    |                               |  |  | 1                                           |  |  |                                                 |      |  |               |  | 8     |                                   |  |  | 60           |  |  |  | 199    |   |  |  | 299   | 
|Operating income (loss) (5)       |  |                           | 332   |  |                          |  | 1,301 |                               |  |  | 694                                         |  |  |                                                 | 718   |  |               |  | (17   | )                                 |  |  | 351          |  |  |  | 1,886  |   |  |  | 5,265 | 



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 39: | - SEGMENT INFORMATION (Cont.)
|-------- | -----------------------------



| | c. | Geographical information
| | -- | ------------------------

External revenues



|                            |  |                        |        |   |      |  |        |      |  |  |        |  
|--------------------------- |  | ---------------------- | ------ | - | ---- |  | ------ | ---- |  |  | ------ | -
|                            |  | Year ended December 31 |       
|                            |  | 2014                   |        |   | 2013 |  |        | 2012 | 
|                            |  | NIS in millions        |       
|U.S.                        |  |                        | 1,391  |   |      |  | 1,401  |      |  |  | 1,448  |  
|Canada                      |  |                        | 2,100  |   |      |  | 2,216  |      |  |  | 2,292  |  
|Northern and Western Europe |  |                        | 1,441  |   |      |  | 1,487  |      |  |  | 1,268  |  
|Central-Eastern Europe      |  |                        | 1,374  |   |      |  | 1,348  |      |  |  | 1,327  |  
|Israel                      |  |                        | 1,568  |   |      |  | 1,778  |      |  |  | 1,960  |  
|Other                       |  |                        | 40     |   |      |  | 34     |      |  |  | 31     |  
|Reconciliations (1) (3)     |  |                        | (1,644 | ) |      |  | (1,446 | )    |  |  | (1,317 | )
|                            |  |                        |        |   |      |  |        |      |  |  |        |  
|Total                       |  |                        | 6,270  |   |      |  | 6,818  |      |  |  | 7,009  |  
|                            |  |                        |        |   |      |  |        |      |  |  |        |  

Location of non-current operating assets (7)



|                            |  |                 |        |   |      |  |        |  
|--------------------------- |  | --------------- | ------ | - | ---- |  | ------ | -
|                            |  | December 31     |       
|                            |  | 2014            |        |   | 2013 | 
|                            |  | NIS in millions |       
|U.S.                        |  |                 | 11,892 |   |      |  | 12,223 |  
|Canada                      |  |                 | 24,875 |   |      |  | 23,544 |  
|Northern and Western Europe |  |                 | 16,251 |   |      |  | 16,543 |  
|Central-Eastern Europe      |  |                 | 13,991 |   |      |  | 14,433 |  
|Israel                      |  |                 | 2,693  |   |      |  | 2,748  |  
|Other                       |  |                 | 904    |   |      |  | 487    |  
|Reconciliations (1) (6)     |  |                 | (4,516 | ) |      |  | (6,025 | )
|                            |  |                 |        |   |      |  |        |  
|Total non- current assets   |  |                 | 66,090 |   |      |  | 63,953 |  
|                            |  |                 |        |   |      |  |        |  



| | d. | Notes to segment information
| | -- | ----------------------------



| | 1. | The relevant data for the analysis and allocation of resources to the shopping centers in the U.S. is based on financial statements which have been prepared in accordance with accounting principles in the U.S. (U.S.
GAAP) (EQY accounts).
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | Jointly controlled entities are accounted for according to the equity method. Therefore, the information of the segment shopping centers in central-eastern Europe that represent reportable segment is
included in segments information at its full value and offset against the consolidation adjustments column.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Similarly, the
information of the segment shopping centers in North Europe reflects the full value of the joint venture Kista Galleria, that was purchased in 2013 and is offset against the consolidation adjustments column.



| | 3. | The Group has no material intersegment revenues. Adjustments with respect to segment revenues primarily include revenues presented in EQY accounts as revenues from discontinued operations, proportionate consolidation of
EQY in joint ventures other adjustments between U.S.GAAP to IFRS, elimination of ATRs and Kita Galleria results and other adjustments.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | The reconciliations to the consolidated information in the gross profit item include the effect of the reconciliations to revenues, as mentioned above, and cancellation of depreciation and amortization expenses which
were recognized in EQY accounts.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 39: | - SEGMENT INFORMATION (Cont.)
|-------- | -----------------------------



| | 5. | Adjustments for consolidation under Operating Income include, in addition to section 4 above, goodwill impairment, adjustment due to ATR results as mentioned above, gain from revaluation of investment property not
included in segment reporting, amounting to NIS 1,053 million, NIS 962 million and NIS 1,938 for 2014, 2013 and 2012, respectively. Likewise, these reconciliations include unallocated general and administrative expenses of
approximately NIS 115 million, NIS 159 million and NIS 175 million and unallocated net other income (expense) of approximately NIS 24 million, NIS 162 million and NIS 132 million, for 2014, 2013
and 2012, respectively.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 6. | Includes current operating assets, investment property, property under development fixed assets and non-current inventory. The reconciliations for consolidation include mainly available-for-sale securities, deferred
taxes, derivatives, goodwill and fair value adjustments of investment property mainly in EQY and cancellation of ATRs and Kista Galleria assets as mentioned above.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 7. | Non-current assets include mainly fixed assets, investment property, investment property under development and non-current inventory.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------



| | 8. | Segment liabilities include operating liabilities such as trade payables, land lease liabilities, other payables and tenants security deposits. The reconciliations for consolidation include mainly deferred taxes,
financial derivatives and interest-bearing liabilities.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 40:- EVENTS AFTER THE REPORTING DATE



| | a. | On January 21, 2015 the Company acquired approximately 52 million shares of ATR representing approximately 13.87% of ATRs issued share capital and voting rights. The shares were acquired from CPI at a
price of EUR 4.40 per share, for a total consideration of approximately EUR 229 million (NIS 1.06 billion) in an off-market transaction (the acquisition). As a result at the acquisition the Companys interest in ATR
increased to 55% and the Company became the sole controlling entity in ATR, and commencing with its financial statement for the first quarter of 2015, the Company will consolidate ATRs financial statement. The Company expects to recognize a
net loss from gaining control of approximately NIS 23 million. In addition, the Company will reclassify capital reserves (mainly translation reserve) accumulated from the investment in ATR and were recognized in the past as other comprehensive loss
at an amount of NIS 466 million to profit or loss, against recognition of income to capital reserves. The net non cash impact on profit or loss is expected to be a loss of NIS 489 million. Total decrease in equity attributed to Companys
shareholders is NIS 23 million. The aforesaid information is estimation as of December 31, 2014, and may change subject to changes in ATRs equity and to the completion of purchase price allocation work.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | In January 2015, The Company issued to the public NIS 752 million par value unsecured debentures (series L), by way of an expansion of a listed series, for net consideration of NIS 789 million, that bears an
effective annual interest rate of 3.51%.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. | In January 2015, FCR issued to the public in Canada C$ 90 million par value (NIS 302 million) unsecured debentures (series S), by way of an expansion of a listed series. The debentures bear a fixed annual interest
rate of 4.32% and are payable in one installment on July 31, 2025.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 40: | - EVENTS AFTER THE REPORTING DATE (Cont.)
|-------- | -----------------------------------------



| | d. | In February 2015 FCR completed a public offering in Canada of approximately 3.8 million shares, for C$ 19.8 per share, for a total consideration of C$ 75 million (NIS 253 million). The Company didnt
purchase any shares at this issuance. In addition, FCR has granted to the offerings underwriters an option to acquire from it at the offering price, an additional 570 thousand shares. This option was fully exercised for consideration of
C$ 11.3 million (NIS 38 million). As a result of the offering, the Companys interest in FCR decreased to 43.1%, and the Company recognized an equity increase in an amount of NIS 24 million, which was recognized in other reserves.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | e. | In March 2015, EQY announced a public offering in United States of approximately 3.9 million shares, for U.S.$ 27.05 per share, for a total consideration of U.S.$ 105.5 million (NIS 410 million). EQY has
granted to the offerings underwriters an option, to acquire from it at the offering price, up to an additional 585 thousand shares. This option is valid for a period of 30 days from the date of closing the offering and was not exercised
yet.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, EQY issued in a private placement to a wholly owned subsidiary of the Company 675 thousands shares in
consideration for U.S.$ 16.2 million (NIS 63 million). As a result of the offering, the Companys interest in EQY decreased from 43.3% to 42.3%, and the Company expects to recognize an equity increase in an amount of NIS 77 million,
which was recognized in other reserves.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 41:- CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY

Condensed statements of financial position



|                                                                           |  |                 |        |  |      |  |        | 
|-------------------------------------------------------------------------- |  | --------------- | ------ |  | ---- |  | ------ | 
|                                                                           |  | December 31,    |       
|                                                                           |  | 2014            |        |  | 2013 | 
|                                                                           |  | NIS in millions |       
|ASSETS                                                                     |  |                 |        |  |      |  |        | 
|CURRENT ASSETS                                                             |  |                 |        |  |     
|Cash and cash equivalents                                                  |  |                 | 45     |  |      |  | 474    | 
|Short-term loans and current maturities of long-term loans to subsidiaries |  |                 | 395    |  |      |  | 363    | 
|Available for sale marketable securities                                   |  |                 | 180    |  |      |  |       | 
|Financial derivatives                                                      |  |                 | 88     |  |      |  | 17     | 
|Other accounts receivable                                                  |  |                 | 3      |  |      |  | 4      | 
|                                                                           |  |                 |        |  |      |  |        | 
|Total current assets                                                       |  |                 | 711    |  |      |  | 858    | 
|                                                                           |  |                 |        |  |      |  |        | 
|NON-CURRENT ASSETS                                                         |  |                 |        |  |      |  |        | 
|Long-term loans *)                                                         |  |                 |       |  |      |  |       | 
|Available for sale marketable securities                                   |  |                 |       |  |      |  | 108    | 
|Financial derivatives                                                      |  |                 | 278    |  |      |  | 743    | 
|Loans to subsidiaries                                                      |  |                 | 5,926  |  |      |  | 6,267  | 
|Investments in subsidiaries                                                |  |                 | 6,991  |  |      |  | 6,145  | 
|Fixed assets, net                                                          |  |                 | 5      |  |      |  | 6      | 
|                                                                           |  |                 |        |  |      |  |        | 
|Total non-current assets                                                   |  |                 | 13,200 |  |      |  | 13,269 | 
|                                                                           |  |                 |        |  |      |  |        | 
|Total assets                                                               |  |                 | 13,911 |  |      |  | 14,127 | 
|                                                                           |  |                 |        |  |      |  |        | 



|                                                     |  |                 |        |   |      |  |        |  
|---------------------------------------------------- |  | --------------- | ------ | - | ---- |  | ------ | -
|                                                     |  | December 31,    |       
|                                                     |  | 2014            |        |   | 2013 | 
|                                                     |  | NIS in millions |       
|LIABILITIES AND EQUITY                               |  |                 |        |   |      |  |        |  
|CURRENT LIABILITIES                                  |  |                 |        |   |     
|Current maturities of debentures                     |  |                 | 976    |   |      |  | 256    |  
|Financial derivatives                                |  |                 | 40     |   |      |  |       |  
|Trade payables                                       |  |                 | 3      |   |      |  | 4      |  
|Other accounts payable                               |  |                 | 192    |   |      |  | 181    |  
|Current tax payable                                  |  |                 | 9      |   |      |  | 8      |  
|                                                     |  |                 |        |   |      |  |        |  
|Total current liabilities                            |  |                 | 1,220  |   |      |  | 449    |  
|                                                     |  |                 |        |   |      |  |        |  
|NON-CURRENT LIABILITIES                              |  |                 |        |   |      |  |        |  
|Loans from banks and others                          |  |                 | 1,001  |   |      |  | 1,154  |  
|Debentures                                           |  |                 | 9,900  |   |      |  | 10,464 |  
|Financial derivatives                                |  |                 | 62     |   |      |  |       |  
|Deferred taxes                                       |  |                 |       |   |      |  | 26     |  
|                                                     |  |                 |        |   |      |  |        |  
|Total non-current liabilities                        |  |                 | 10,963 |   |      |  | 11,644 |  
|                                                     |  |                 |        |   |      |  |        |  
|EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY |  |                 |        |   |      |  |        |  
|Share capital                                        |  |                 | 232    |   |      |  | 229    |  
|Share premium                                        |  |                 | 4,411  |   |      |  | 4,288  |  
|Accumulated losses                                   |  |                 | (2,918 | ) |      |  | (2,480 | )
|Reserves                                             |  |                 | 3      |   |      |  | (3     | )
|                                                     |  |                 |        |   |      |  |        |  
|Total equity                                         |  |                 | 1,728  |   |      |  | 2,034  |  
|                                                     |  |                 |        |   |      |  |        |  
|Total liabilities and equity                         |  |                 | 13,911 |   |      |  | 14,127 |  
|                                                     |  |                 |        |   |      |  |        |  



|*) | Represents an amount lower than NIS 1 million.
|-- | ----------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|NOTE 41: | - CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (Cont.)
|-------- | ---------------------------------------------------------------



Condensed statements of income



|                                            |  |                         |      |   |      |  |     |      |  |  |      |  
|------------------------------------------- |  | ----------------------- | ---- | - | ---- |  | --- | ---- |  |  | ---- | -
|                                            |  | Year ended December 31, |     
|                                            |  | 2014                    |      |   | 2013 |  |     | 2012 | 
|                                            |  | NIS in millions         |     
|Dividend income                             |  |                         | 184  |   |      |  | 113 |      |  |  | 99   |  
|Management fees from investees              |  |                         | 2    |   |      |  | 2   |      |  |  | 3    |  
|Finance income from subsidiaries            |  |                         | 456  |   |      |  | 340 |      |  |  | 413  |  
|Other finance income                        |  |                         | 127  |   |      |  | 540 |      |  |  | 25   |  
|                                            |  |                         |      |   |      |  |     |      |  |  |      |  
|Total income                                |  |                         | 769  |   |      |  | 995 |      |  |  | 540  |  
|                                            |  |                         |      |   |      |  |     |      |  |  |      |  
|General and administrative expenses         |  |                         | 64   |   |      |  | 79  |      |  |  | 68   |  
|Finance expenses                            |  |                         | 817  |   |      |  | 611 |      |  |  | 602  |  
|Exchange differences on loans to investees  |  |                         |     |   |      |  | 256 |      |  |  | 98   |  
|Other expenses *)                           |  |                         |     |   |      |  |    |      |  |  |     |  
|                                            |  |                         |      |   |      |  |     |      |  |  |      |  
|Total expenses                              |  |                         | 881  |   |      |  | 946 |      |  |  | 768  |  
|                                            |  |                         |      |   |      |  |     |      |  |  |      |  
|Income (loss) before taxes on income        |  |                         | (112 | ) |      |  | 49  |      |  |  | (228 | )
|Taxes on income (tax benefit)               |  |                         | 7    |   |      |  | (54 | )    |  |  | (12  | )
|                                            |  |                         |      |   |      |  |     |      |  |  |      |  
|Net income (loss) attributed to the Company |  |                         | (119 | ) |      |  | 103 |      |  |  | (216 | )
|                                            |  |                         |      |   |      |  |     |      |  |  |      |  



|*) | Represents an amount lower than NIS 1 million.
|-- | ----------------------------------------------



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 41:- CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (Cont.)



Condensed statements of cash flows



|                                                                                                    |  |                        |      |   |      |  |      |      |  |  |      |  
|--------------------------------------------------------------------------------------------------- |  | ---------------------- | ---- | - | ---- |  | ---- | ---- |  |  | ---- | -
|                                                                                                    |  | Year endedDecember 31, |     
|                                                                                                    |  | 2014                   |      |   | 2013 |  |      | 2012 | 
|                                                                                                    |  | NIS in millions        |     
|Cash flows from operating activities of the Company:                                                |  |                        |      |   |      |  |      |      |  |  |      |  
|                                                                                                    |  |                        |     
|Net income (loss) attributed to the Company                                                         |  |                        | (119 | ) |      |  | 103  |      |  |  | (216 | )
|                                                                                                    |  |                        |     
|Adjustments required to present net cash provided by (used in) operating activities of the Company: |  |                        |      |   |      |  |      |      |  |  |      |  
|Adjustments to profit and loss items of the Company:                                                |  |                        |      |   |      |  |      |      |  |  |      |  
|Depreciation                                                                                        |  |                        | 2    |   |      |  | 2    |      |  |  | 1    |  
|Dividend income                                                                                     |  |                        | (184 | ) |      |  | (113 | )    |  |  | (99  | )
|Finance expenses (income), net                                                                      |  |                        | 234  |   |      |  | (13  | )    |  |  | 262  |  
|Cost of share-based payment                                                                         |  |                        | 9    |   |      |  | 10   |      |  |  | 4    |  
|Taxes on income (tax benefit)                                                                       |  |                        | 7    |   |      |  | (54  | )    |  |  | (12  | )
|                                                                                                    |  |                        |      |   |      |  |      |      |  |  |      |  
|                                                                                                    |  |                        | 68   |   |      |  | (168 | )    |  |  | 156  |  
|                                                                                                    |  |                        |      |   |      |  |      |      |  |  |      |  
|Changes in assets and liabilities of the Company:                                                   |  |                        |      |   |      |  |      |      |  |  |      |  
|Increase in other accounts receivable                                                               |  |                        | (3   | ) |      |  | (4   | )    |  |  | (11  | )
|Increase (decrease) in trade payables and other accounts payable                                    |  |                        | (1   | ) |      |  |     |      |  |  | 6    |  
|                                                                                                    |  |                        |      |   |      |  |      |      |  |  |      |  
|                                                                                                    |  |                        | (4   | ) |      |  | (4   | )    |  |  | (5   | )
|                                                                                                    |  |                        |      |   |      |  |      |      |  |  |      |  
|Cash paid and received during the year by the Company for:                                          |  |                        |      |   |      |  |      |      |  |  |      |  
|Interest paid                                                                                       |  |                        | (599 | ) |      |  | (491 | )    |  |  | (661 | )
|Interest received (Note 37.d)                                                                       |  |                        | 90   |   |      |  | 191  |      |  |  | 1    |  
|Interest received from subsidiaries                                                                 |  |                        | 237  |   |      |  | 233  |      |  |  | 303  |  
|Taxes paid                                                                                          |  |                        | (39  | ) |      |  | (33  | )    |  |  | (2   | )
|Dividends received                                                                                  |  |                        | 14   |   |      |  |     |      |  |  |     |  
|Dividends received from subsidiaries                                                                |  |                        | 170  |   |      |  | 113  |      |  |  | 99   |  
|                                                                                                    |  |                        |      |   |      |  |      |      |  |  |      |  
|                                                                                                    |  |                        | (127 | ) |      |  | 13   |      |  |  | (260 | )
|                                                                                                    |  |                        |      |   |      |  |      |      |  |  |      |  
|Net cash used in operating activities of the Company                                                |  |                        | (182 | ) |      |  | (56  | )    |  |  | (325 | )
|                                                                                                    |  |                        |      |   |      |  |      |      |  |  |      |  



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 41:- CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (Cont.)



Condensed statements of cash flows (Cont.)



|                                                                   |  |                         |       |   |      |  |         |      |  |  |       |  
|------------------------------------------------------------------ |  | ----------------------- | ----- | - | ---- |  | ------- | ---- |  |  | ----- | -
|                                                                   |  | Year ended December 31, |      
|                                                                   |  | 2014                    |       |   | 2013 |  |         | 2012 | 
|                                                                   |  | NIS in millions         |      
|Cash flows from investing activities of the Company:               |  |                         |       |   |      |  |         |      |  |  |       |  
|                                                                   |  |                         |      
|Acquisition of fixed assets                                        |  |                         | (1    | ) |      |  | (2      | )    |  |  | (1    | )
|Proceeds from sale of fixed assets                                 |  |                         | *)   |   |      |  | *)     |      |  |  |      |  
|Investments in subsidiaries                                        |  |                         | (942) |   |      |  | (1,200) |      |  |  | (248) |  
|Redemption of preferred shares of subsidiary                       |  |                         | 168   |   |      |  | 231     |      |  |  |      |  
|Loans repaid by subsidiaries, net                                  |  |                         | 414   |   |      |  | 212     |      |  |  | 150   |  
|Proceeds from sale of convertible debenture of subsidiary          |  |                         |      |   |      |  |        |      |  |  | 208   |  
|Investment in available for sale marketable securities             |  |                         | (154) |   |      |  | (105)   |      |  |  |      |  
|Proceeds from sale of available for sale marketable securities     |  |                         | 141   |   |      |  |        |      |  |  |      |  
|                                                                   |  |                         |       |   |      |  |         |      |  |  |       |  
|Net cash provided by (used in) investing activities of the Company |  |                         | (374) |   |      |  | (864)   |      |  |  | 109   |  
|                                                                   |  |                         |       |   |      |  |         |      |  |  |       |  
|Cash flows from financing activities of the Company:               |  |                         |       |   |      |  |         |      |  |  |       |  
|Issue of shares (less issue expenses)                              |  |                         | 118   |   |      |  | 489     |      |  |  |      |  
|Exercise of stock options into shares                              |  |                         | *)   |   |      |  | *)     |      |  |  | 3     |  
|Repayment of loans for purchase of company shares                  |  |                         |      |   |      |  | *)     |      |  |  | *)   |  
|Dividends paid to equity holders of the Company                    |  |                         | (318) |   |      |  | (298)   |      |  |  | (264) |  
|Issue of debentures (less issue expenses)                          |  |                         | 445   |   |      |  | 1,670   |      |  |  | 1,676 |  
|Repayment and early redemption of debentures                       |  |                         | (255) |   |      |  | (885)   |      |  |  | (786) |  
|Repayment of long-term credit facilities from banks, net           |  |                         | (110) |   |      |  | (753)   |      |  |  | (314) |  
|Unwinding of hedging transactions (Note 37.d)                      |  |                         | 243   |   |      |  | 392     |      |  |  |      |  
|                                                                   |  |                         |       |   |      |  |         |      |  |  |       |  
|Net cash provided by financing activities of the Company           |  |                         | 123   |   |      |  | 615     |      |  |  | 315   |  
|                                                                   |  |                         |       |   |      |  |         |      |  |  |       |  
|Exchange differences on balance of cash and cash equivalents       |  |                         | 4     |   |      |  | (1      | )    |  |  | (11   | )
|                                                                   |  |                         |       |   |      |  |         |      |  |  |       |  
|Increase (decrease) in cash and cash equivalents                   |  |                         | (429  | ) |      |  | (306    | )    |  |  | 88    |  
|Cash and cash equivalents at the beginning of year                 |  |                         | 474   |   |      |  | 780     |      |  |  | 692   |  
|                                                                   |  |                         |       |   |      |  |         |      |  |  |       |  
|Cash and cash equivalents at the end of year                       |  |                         | 45    |   |      |  | 474     |      |  |  | 780   |  
|                                                                   |  |                         |       |   |      |  |         |      |  |  |       |  
|Significant non-cash activities of the Company:                    |  |                         |       |   |      |  |         |      |  |  |       |  
|Exchange of loan granted to subsidiaries for capital issuance      |  |                         | 72    |   |      |  | 214     |      |  |  | 373   |  
|                                                                   |  |                         |       |   |      |  |         |      |  |  |       |  
|Redemption of capital note of an subsidiary                        |  |                         |      |   |      |  |        |      |  |  | 180   |  
|                                                                   |  |                         |       |   |      |  |         |      |  |  |       |  



|*) | Represents an amount lower than NIS 1 million.
|-- | ----------------------------------------------



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 41:- CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (Cont.)



Note A  Basis of presentation -

The condensed financial information of the parent company (the Solo report) is prepared in accordance with International Financial
Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). In the Solo report the investment in subsidiaries is stated at its deemed cost according to IAS 27. Accordingly, the Company does
not record equity income from its subsidiaries in the Solo report. Dividends from subsidiaries are recorded as income in the condensed statements of income.

Note B  Non-current liabilities -

Non-current debt attributed to the Company

Composition



|                                    |  |                 |        |  |      |  |        | 
|----------------------------------- |  | --------------- | ------ |  | ---- |  | ------ | 
|                                    |  | December 31     |       
|                                    |  | 2014            |        |  | 2013 | 
|                                    |  | NIS in millions |       
|Loans from banks and others (1) (3) |  |                 | 1,001  |  |      |  | 1,154  | 
|Debentures (2) (3)                  |  |                 | 9,900  |  |      |  | 10,464 | 
|                                    |  |                 |        |  |      |  |        | 
|                                    |  |                 | 10,901 |  |      |  | 11,618 | 
|                                    |  |                 |        |  |      |  |        | 



| | (1) | Composition of banks credit
| | --- | ---------------------------



|                              |  |                   |      |   |                 |      |       |   |  |  |       |  
|----------------------------- |  | ----------------- | ---- | - | --------------- | ---- | ----- | - |  |  | ----- | -
|                              |  | Effectiveinterest |      |   | December 31     |     
|                              |  |                   | 2014 |   |                 | 2013 |      
|Denomination                  |  | %                 |      |   | NIS in millions |     
|In NIS - unlinked *)          |  |                   | 2.60 | % |                 |      | 25    |   |  |  |      |  
|In U.S.$ *)                   |  |                   | 2.40 | % |                 |      | 11    |   |  |  |      |  
|In U.S.$                      |  |                   | 5.52 | % |                 |      | 298   |   |  |  | 266   |  
|In C$ *)                      |  |                   | 3.35 | % |                 |      | 191   |   |  |  | 1     |  
|In  *)                       |  |                   | 2.65 | % |                 |      | 499   |   |  |  | 908   |  
|                              |  |                   |      |   |                 |      |       |   |  |  |       |  
|                              |  |                   |      |   |                 |      | 1,024 |   |  |  | 1,175 |  
|Less - deferred finance costs |  |                   |      |   |                 |      | (23   | ) |  |  | (21   | )
|                              |  |                   |      |   |                 |      |       |   |  |  |       |  
|                              |  |                   |      |   |                 |      | 1,001 |   |  |  | 1,154 |  
|                              |  |                   |      |   |                 |      |       |   |  |  |       |  



|*) | Variable interest
|-- | -----------------

To secure credit obtained from banks, the Company and its wholly-owned
subsidiaries have pledged shares of investees. Furthermore, the Companys wholly-owned subsidiaries guarantee the credit obtained by the Company from banks.

As for financial covenants, refer to Note 22d(1).



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 41:- CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (Cont.)



Note B - Non-current liabilities (Cont.) -



| | (2) | Composition of debentures
| | --- | -------------------------



|                                        |  |              |       |  |                       |  |             |            |  |      |                 |  |  |  |        |  |  |  |        | 
|--------------------------------------- |  | ------------ | ----- |  | --------------------- |  | ----------- | ---------- |  | ---- | --------------- |  |  |  | ------ |  |  |  | ------ | 
|                                        |  |              |       |  | Effectiveinterestrate |  |             | Couponrate |  |      | Carrying amount | 
|                                        |  |              |       |  |                       |  | December 31 |           
|                                        |  |              |       |  |                       |  | 2014        |            |  | 2013 |                
|                                        |  | Denomination |       |  | %                     |  |             | %          |  |      | NIS in millions | 
|Debentures (series A)                   |  |              | U.S.$ |  |                       |  | 6.18        |            |  |      | 6.50            |  |  |  | 132    |  |  |  | 158    | 
|Debentures (series B)**)                |  |              |      |  |                       |  | 2.27        |            |  |      | 2.17            |  |  |  | 98     |  |  |  | 149    | 
|Debentures (series C)                   |  |              | CPI   |  |                       |  | 4.88        |            |  |      | 4.95            |  |  |  | 962    |  |  |  | 1,125  | 
|Debentures (series D)                   |  |              | CPI   |  |                       |  | 5.02        |            |  |      | 5.10            |  |  |  | 2,463  |  |  |  | 2,466  | 
|Debentures (series E)**)                |  |              | NIS   |  |                       |  | 1.45        |            |  |      | 0.95            |  |  |  | 548    |  |  |  | 545    | 
|Debentures (series F)                   |  |              | NIS   |  |                       |  | 6.73        |            |  |      | 6.40            |  |  |  | 567    |  |  |  | 565    | 
|Debentures (series I)                   |  |              | CPI   |  |                       |  | 5.58        |            |  |      | 5.30            |  |  |  | 1,441  |  |  |  | 1,444  | 
|Debentures (series J) *)                |  |              | CPI   |  |                       |  | 5.76        |            |  |      | 6.50            |  |  |  | 847    |  |  |  | 861    | 
|Debentures (series K)                   |  |              | CPI   |  |                       |  | 4.35        |            |  |      | 5.35            |  |  |  | 2,937  |  |  |  | 2,961  | 
|Debentures (series L)                   |  |              | CPI   |  |                       |  | 3.82        |            |  |      | 4.00            |  |  |  | 881    |  |  |  | 446    | 
|                                        |  |              |       |  |                       |  |             |            |  |      |                 |  |  |  |        |  |  |  |        | 
|                                        |  |              |       |  |                       |  |             |            |  |      |                 |  |  |  | 10,876 |  |  |  | 10,720 | 
|Less - current maturities of debentures |  |              |       |  |                       |  |             |            |  |      |                 |  |  |  | 976    |  |  |  | 256    | 
|                                        |  |              |       |  |                       |  |             |            |  |      |                 |  |  |  |        |  |  |  |        | 
|                                        |  |              |       |  |                       |  |             |            |  |      |                 |  |  |  | 9,900  |  |  |  | 10,464 | 
|                                        |  |              |       |  |                       |  |             |            |  |      |                 |  |  |  |        |  |  |  |        | 



|*) | Debentures (Series J) are secured by a lien recorded on properties owned by a subsidiary of the Company, with aggregate fair value as of the reporting date amounted of NIS 1,167 million.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|**) | Floating interest rate.
|--- | -----------------------



|(3) | Maturities
|--- | ----------



|                            |  |                 |       |  |            |  |        | 
|--------------------------- |  | --------------- | ----- |  | ---------- |  | ------ | 
|                            |  | Loans frombanks |       |  | Debentures | 
|                            |  | NIS in millions |      
|Year 1 - current maturities |  |                 |      |  |            |  | 976    | 
|Year 2                      |  |                 | 106   |  |            |  | 978    | 
|Year 3                      |  |                 | 12    |  |            |  | 769    | 
|Year 4                      |  |                 | 146   |  |            |  | 1,386  | 
|Year 5                      |  |                 | 496   |  |            |  | 1,519  | 
|Year 6 and thereafter       |  |                 | 264   |  |            |  | 5,248  | 
|                            |  |                 |       |  |            |  |        | 
|                            |  |                 | 1,024 |  |            |  | 10,876 | 
|                            |  |                 |       |  |            |  |        | 

Note C - Contingent liabilities -

The Company provided unlimited guarantees to secure credit obtained by wholly-owned subsidiaries of the Company, whose total facility principal
(including non-listed debentures) as of the reporting date amounts to NIS 1,335 million.

As of the reporting date, total debt of the
wholly-owned subsidiaries which is guaranteed by the Company amounts to NIS 463 million.

As for legal claims, refer to Note 26.d
above. As for disputed VAT assessments, refer to Note 25.k above.



F-113



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 41:- CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (Cont.)



Note D - Dividends from subsidiaries -

Dividends declared and received from subsidiaries:



|            |  |                 |     |  |      |  |     |      |  |  |    | 
|----------- |  | --------------- | --- |  | ---- |  | --- | ---- |  |  | -- | 
|            |  | December 31     |    
|            |  | 2014            |     |  | 2013 |  |     | 2012 | 
|            |  | NIS in millions |    
|Citycon OYJ |  |                 | 157 |  |      |  | 113 |      |  |  | 99 | 
|Other       |  |                 | 13  |  |      |  |    |      |  |  |   | 
|            |  |                 |     |  |      |  |     |      |  |  |    | 
|            |  |                 | 170 |  |      |  | 113 |      |  |  | 99 | 
|            |  |                 |     |  |      |  |     |      |  |  |    | 



F-114



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##### Table of Contents

GAZIT-GLOBE LTD.

APPENDIX A TO CONSOLIDATED FINANCIAL STATEMENTS





LIST OF MAJOR GROUP INVESTEES AS OF DECEMBER 31, 2014 (1)



|                                          |  |                                    |       |     |      |  |                 |      |                              |     |  |                |  |   
|----------------------------------------- |  | ---------------------------------- | ----- | --- | ---- |  | --------------- | ---- | ---------------------------- | --- |  | -------------- |  | --
|                                          |  | Holding interest as ofDecember 31, |       |     |      |  | Incorporated in |      | Additionalinformationin Note
|                                          |  | 2014                               |       |     | 2013 |  |                 | Note |                              |    
|                                          |  | %                                  |       |     |      |  |                 |      |                             
|Equity One Inc.                           |  |                                    | *) 43 | .3  |      |  | *) 45           | .2   |                              | (3) |  | USA            |  | 9d
|First Capital Realty Inc.                 |  |                                    | 44    | .0  |      |  | 45              | .2   |                              | (3) |  | Canada         |  | 9e
|M.G.N USA Inc.                            |  |                                    | 100   |     |      |  | 100             |      |                              | (4) |  | USA            |  |   
|Gazit (1995) Inc.                         |  |                                    | 100   |     |      |  | 100             |      |                              | (3) |  | USA            |  |   
|Gazit Group USA Inc.                      |  |                                    | 100   |     |      |  | 100             |      |                              | (3) |  | USA            |  |   
|M.G.N America LLC.                        |  |                                    | 100   |     |      |  | 100             |      |                              | (3) |  | USA            |  |   
|M.G.N First Generation LLC.               |  |                                    | 100   |     |      |  | 100             |      |                              | (3) |  | USA            |  |   
|Gazit S.A. Inc.                           |  |                                    | 100   |     |      |  | 100             |      |                              | (3) |  | USA            |  |   
|ProMed Properties Inc.                    |  |                                    | 100   |     |      |  | 100             |      |                              | (3) |  | USA            |  | 9h
|Gazit 2003 Inc.                           |  |                                    | 100   |     |      |  | 100             |      |                              | (2) |  | Canada         |  |   
|Gazit Canada Inc.                         |  |                                    | 100   |     |      |  | 100             |      |                              | (4) |  | Canada         |  |   
|Gazit America Inc.                        |  |                                    | 100   |     |      |  | 100             |      |                              | (3) |  | Canada         |  |   
|Ficus Inc.                                |  |                                    | 100   |     |      |  | 100             |      |                              | (3) |  | USA            |  |   
|Silver Maple (2001) Inc.                  |  |                                    | 100   |     |      |  | 100             |      |                              | (3) |  | USA            |  |   
|Golden Oak Inc.                           |  |                                    | 100   |     |      |  | 100             |      |                              | (2) |  | Cayman Islands |  |   
|Hollywood Properties Ltd.                 |  |                                    | 100   |     |      |  | 100             |      |                              | (2) |  | Cayman Islands |  |   
|Citycon Oyj                               |  |                                    | 42    | .8  |      |  | 49              | .3   |                              | (2) |  | Finland        |  | 9f
|Gazit Europe (Netherlands) BV             |  |                                    | 100   |     |      |  | 100             |      |                              | (2) |  | Netherlands    |  |   
|Gazit Europe (Asia) BV                    |  |                                    | 100   |     |      |  | 100             |      |                              | (2) |  | Netherlands    |  |   
|Gazit Germany Beteilingungs GmbH & Co. KG |  |                                    | 100   |     |      |  | 100             |      |                              | (3) |  | Germany        |  | 9h
|Gazit Brazil Ltda.                        |  |                                    | 100   |     |      |  | 100             |      |                              | (3) |  | Brazil         |  | 9h
|Gazit Gaia Limited                        |  |                                    | 100   |     |      |  | 100             |      |                              | (2) |  | Jersey         |  |   
|Gazit Midas Limited                       |  |                                    | 100   |     |      |  | 100             |      |                              | (2) |  | Jersey         |  |   
|Atrium European Real Estate Limited       |  |                                    | 41    | .2  |      |  | 39              | .8   |                              | (3) |  | Jersey         |  | 9c
|Gazit Globe Israel (Development) Ltd.     |  |                                    | 84    | .65 |      |  | 82              | .5   |                              | (2) |  | Israel         |  | 9h
|Hashalom Boulevard House Ltd.             |  |                                    | 100   |     |      |  | 100             |      |                              | (3) |  | Israel         |  |   
|Gazit Globe Holdings (1992) Ltd.          |  |                                    | 100   |     |      |  | 100             |      |                              | (2) |  | Israel         |  |   
|G.G. Development Ltd.                     |  |                                    | 100   |     |      |  | 100             |      |                              | (2) |  | Israel         |  |   
|Acad Building and Investments Ltd.        |  |                                    | 100   |     |      |  | 100             |      |                              | (5) |  | Israel         |  |   
|U. Dori Group Ltd.                        |  |                                    | 84    | .9  |      |  | 73              | .9   |                              | (5) |  | Israel         |  | 9g



|(1) | The list does not include companies held by EQY, FCR, CTY, ATR, Gazit Development, Acad, Dori Group, Gazit Germany, Gazit Brazil and ProMed Properties Inc.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Held directly by the Company.
|--- | -----------------------------

|(3) | Held through subsidiaries.
|--- | --------------------------

|(4) | Held directly and through subsidiaries.
|--- | ---------------------------------------

|(5) | Held through Gazit Globe Israel (Development) Ltd.
|--- | --------------------------------------------------

|*) | The interest in voting rights as of December 31, 2014 and 2013 is 43.3% and 45.1%, respectively.
|-- | ------------------------------------------------------------------------------------------------



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##### Table of Contents

GAZIT-GLOBE LTD.

APPENDIX B TO CONSOLIDATED FINANCIAL STATEMENTS





SCHEDULE III

OF RULE 5-04 OF REGULATION S-X

AS OF DECEMBER 31, 2014

Investment
property



|                                           |  |                     |     |  |                            |  |        |                                               |  |  |                                        |  |  |                                       |      |  |  |  |      | 
|------------------------------------------ |  | ------------------- | --- |  | -------------------------- |  | ------ | --------------------------------------------- |  |  | -------------------------------------- |  |  | ------------------------------------- | ---- |  |  |  | ---- | 
|Company/Region of operation                |  | Number ofproperties |     |  | Fair value(NIS inmillions) |  |        | Encumbrances(e.g. Mortgages)- NIS in millions |  |  | WeightedAverage (1)year ofconstruction |  |  | WeightedAverage (2)year ofacquisition |     
|Equity One (3)                             |  |                     |     |  |                            |  |        |                                               |  |  |                                        |  |  |                                       |      |  |  |  |      | 
|South Florida                              |  |                     | 38  |  |                            |  | 4,148  |                                               |  |  | 374                                    |  |  |                                       | 1985 |  |  |  | 2002 | 
|North Florida                              |  |                     | 20  |  |                            |  | 1,489  |                                               |  |  | 60                                     |  |  |                                       | 1987 |  |  |  | 2001 | 
|South East U.S. (excluding S. Florida)     |  |                     | 19  |  |                            |  | 1,209  |                                               |  |  | 27                                     |  |  |                                       | 1987 |  |  |  | 2005 | 
|North East U.S.                            |  |                     | 27  |  |                            |  | 5,148  |                                               |  |  | 334                                    |  |  |                                       | 1985 |  |  |  | 2010 | 
|West Coast                                 |  |                     | 13  |  |                            |  | 3,853  |                                               |  |  | 407                                    |  |  |                                       | 1974 |  |  |  | 2011 | 
|                                           |  |                     |     |  |                            |  |        |                                               |  |  |                                        |  |  |                                       |      |  |  |  |      | 
|Subtotal Equity One                        |  |                     | 117 |  |                            |  | 15,847 |                                               |  |  | 1,202                                  |  |  |                                       |      |  |  |  |      | 
|                                           |  |                     |     |  |                           
|First Capital                              |  |                     |     |  |                            |  |        |                                               |  |  |                                        |  |  |                                       |      |  |  |  |      | 
|Central (Ontario)                          |  |                     | 57  |  |                            |  | 10,532 |                                               |  |  | 1,898                                  |  |  |                                       | 2008 |  |  |  | 2008 | 
|East (mainly Quebec)                       |  |                     | 51  |  |                            |  | 5,657  |                                               |  |  | 632                                    |  |  |                                       | 2008 |  |  |  | 2007 | 
|West (mainly British Columbia and Alberta) |  |                     | 46  |  |                            |  | 8,437  |                                               |  |  | 1,375                                  |  |  |                                       | 2004 |  |  |  | 2007 | 
|                                           |  |                     |     |  |                            |  |        |                                               |  |  |                                        |  |  |                                       |      |  |  |  |      | 
|Subtotal First Capital                     |  |                     | 154 |  |                            |  | 24,626 |                                               |  |  | 3,905                                  |  |  |                                       |      |  |  |  |      | 
|                                           |  |                     |     |  |                           
|Citycon (3)                                |  |                     |     |  |                            |  |        |                                               |  |  |                                        |  |  |                                       |      |  |  |  |      | 
|Finland                                    |  |                     | 43  |  |                            |  | 7,825  |                                               |  |  |                                       |  |  |                                       | 1988 |  |  |  | 2003 | 
|Sweden                                     |  |                     | 11  |  |                            |  | 3,379  |                                               |  |  |                                       |  |  |                                       | 1967 |  |  |  | 2006 | 
|Other (Baltic countries)                   |  |                     | 4   |  |                            |  | 1,651  |                                               |  |  |                                       |  |  |                                       | 1997 |  |  |  | 2008 | 
|                                           |  |                     |     |  |                            |  |        |                                               |  |  |                                        |  |  |                                       |      |  |  |  |      | 
|Subtotal Citycon                           |  |                     | 58  |  |                            |  | 12,855 |                                               |  |  |                                       |  |  |                                       |      |  |  |  |      | 
|                                           |  |                     |     |  |                           
|Promed Properties - U.S. (4)               |  |                     | 4   |  |                            |  | 688    |                                               |  |  | 260                                    |  |  |                                       | 1990 |  |  |  | 2008 | 
|Gazit Israel                               |  |                     | 11  |  |                            |  | 2,463  |                                               |  |  | 1,467                                  |  |  |                                       | 2004 |  |  |  | 2006 | 
|Gazit Germany                              |  |                     | 4   |  |                            |  | 447    |                                               |  |  |                                       |  |  |                                       | 1984 |  |  |  | 2007 | 
|Gazit Brazil                               |  |                     | 5   |  |                            |  | 661    |                                               |  |  |                                       |  |  |                                       | 1988 |  |  |  | 2011 | 
|Other                                      |  |                     | 1   |  |                            |  | 7      |                                               |  |  | 5                                      |  |  |                                       | 1998 |  |  |  | 1998 | 
|                                           |  |                     |     |  |                            |  |        |                                               |  |  |                                        |  |  |                                       |      |  |  |  |      | 
|Sub total - operating investment property  |  |                     | 354 |  |                            |  | 57,594 |                                               |  |  | 6,839                                  |  |  |                                       |      |  |  |  |      | 
|                                           |  |                     |     |  |                            |  |        |                                               |  |  |                                        |  |  |                                       |      |  |  |  |      | 
|Investment property under development      |  |                     | 8   |  |                            |  | 1,063  |                                               |  |  | 67                                     |  |  |                                       |      |  |  |  |      | 
|Land for future development (5)            |  |                     |    |  |                            |  | 677    |                                               |  |  | 37                                     |  |  |                                       |      |  |  |  |      | 
|                                           |  |                     |     |  |                            |  |        |                                               |  |  |                                        |  |  |                                       |      |  |  |  |      | 
|Grand total                                |  |                     | 362 |  |                            |  | 59,334 |                                               |  |  | 6,943                                  |  |  |                                       |      |  |  |  |      | 
|                                           |  |                     |     |  |                            |  |        |                                               |  |  |                                        |  |  |                                       |      |  |  |  |      | 



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##### Table of Contents

GAZIT-GLOBE LTD.

APPENDIX B TO CONSOLIDATED FINANCIAL STATEMENTS





Presentation in the consolidated financial statements:



|                                                                          |  |                 |        | 
|------------------------------------------------------------------------- |  | --------------- | ------ | 
|                                                                          |  | NIS in millions |       
|Properties classified as held for sale (including NIS 98 million of land) |  |                 | 1,046  | 
|Investment property                                                       |  |                 | 56,646 | 
|Development Property and Land                                             |  |                 | 1,642  | 
|                                                                          |  |                 |        | 
|                                                                          |  |                 | 59,334 | 
|                                                                          |  |                 |        | 



|(1) | The weighted average year of construction is calculated based on the average year of construction for the properties within the applicable region of operation, weighted to reflect each propertys relative portion
of the aggregate fair value of all properties in the region of operation.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The weighted average year of acquisition is calculated based on the average year of acquisition for the properties within the applicable region of operation, weighted to reflect each propertys relative portion of
the aggregate fair value of all properties in the region of operation.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Exclude Joint Venture properties.
|--- | ---------------------------------

|(4) | Medical offices buildings.
|--- | --------------------------

|(5) | Includes NIS 98 million of land presented under assets held for sale.
|--- | ---------------------------------------------------------------------



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##### Table of Contents

Independent Auditors Report

The Board of Directors and Stockholders

Atrium European Real
Estate Limited:

We have audited the accompanying consolidated statements of financial position of Atrium European Real Estate Limited and subsidiaries as
of December 31, 2014 and 2013, and the related consolidated income statements, statements of comprehensive income/(loss), cash flow statements, and statements of changes in equity for each of the years in the two-year period ended
December 31, 2014. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for
our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
Atrium European Real Estate Limited and subsidiaries as of December 31, 2014 and 2013, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2014, in conformity with
International Financial Reporting Standards as issued by the International Accounting Standards Board.

KPMG Channel Islands Limited

Jersey, Channel Islands

March 10, 2015



F-118



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##### Table of Contents

Independent Auditors Report

The Board of Directors and Stockholders

Atrium European Real
Estate Limited:

We have audited the accompanying consolidated statements of financial position of Atrium European Real Estate Limited and subsidiaries as
of December 31, 2013 and 2012, and the related consolidated income statements, consolidated statements of comprehensive income, consolidated cash flow statements, and consolidated statements of changes in equity for each of the years in the two
year period ended December 31, 2013. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for
our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
Atrium European Real Estate Limited and subsidiaries as of December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the years in the two year period ended December 31, 2013, in conformity with
International Financial Reporting Standards as issued by the International Accounting Standards Board.

KPMG Channel Islands Limited

Jersey, Channel Islands

March 11, 2014



F-119