##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549





FORM 20-F/A

(Amendment No.1)







| ̈ | 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, 2013

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: 175,890,554 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, 2013





TABLE OF CONTENTS



|                                      |  |                                                                              |     |  |     | 
|------------------------------------- |  | ---------------------------------------------------------------------------- | --- |  | --- | 
|Explanatory Note                      |  |                                                                              | ii  | 
|                                      | 
|Introduction and Use of Certain Terms |  |                                                                              | iii | 
|Forward-Looking Statements            |  |                                                                              | v   | 
|PART I                                |  |                                                                              |     |  | 1   | 
|Item 1.                               |  | Identity of Directors, Senior Management and Advisers                        |     |  | 1   | 
|Item 2.                               |  | Offer Statistics and Expected Timetable                                      |     |  | 1   | 
|Item 3.                               |  | Key Information                                                              |     |  | 1   | 
|Item 4.                               |  | Information on the Company                                                   |     |  | 24  | 
|Item 4A.                              |  | Unresolved Staff Comments                                                    |     |  | 34  | 
|Item 5.                               |  | Operating and Financial Review and Prospects                                 |     |  | 35  | 
|Item 6.                               |  | Directors, Senior Management and Employees                                   |     |  | 86  | 
|Item 7.                               |  | Major Shareholders and Related Party Transactions                            |     |  | 101 | 
|Item 8.                               |  | Financial Information                                                        |     |  | 103 | 
|Item 9.                               |  | The Offer and Listing                                                        |     |  | 105 | 
|Item 10.                              |  | Additional Information                                                       |     |  | 107 | 
|Item 11.                              |  | Quantitative and Qualitative Disclosures About Market Risk                   |     |  | 121 | 
|Item 12.                              |  | Description of Securities Other Than Equity Securities                       |     |  | 124 | 
|PART II                               |  |                                                                              |     |  | 125 | 
|Item 13.                              |  | Defaults, Dividend Arrearages and Delinquencies                              |     |  | 125 | 
|Item 14.                              |  | Material Modifications to the Rights of Security Holders and Use of Proceeds |     |  | 125 | 
|Item 15.                              |  | Controls and Procedures                                                      |     |  | 125 | 
|Item 16.                              |  | [Reserved]                                                                   |     |  | 126 | 
|Item 16A.                             |  | Audit Committee Financial Expert                                             |     |  | 126 | 
|Item 16B.                             |  | Code of Ethics                                                               |     |  | 126 | 
|Item 16C.                             |  | Principal Accountant Fees and Services                                       |     |  | 127 | 
|Item 16D.                             |  | Exemptions From the Listing Standards for Audit Committees                   |     |  | 127 | 
|Item 16E.                             |  | Purchases of Equity Securities by the Issuer and Affiliated Purchasers       |     |  | 127 | 
|Item 16F.                             |  | Change In Registrants Certifying Accountant                                 |     |  | 127 | 
|Item 16G.                             |  | Corporate Governance                                                         |     |  | 127 | 
|Item 16H.                             |  | Mine Safety Disclosure                                                       |     |  | 128 | 
|PART III                              |  |                                                                              |     |  | 128 | 
|Item 17.                              |  | Financial Statements                                                         |     |  | 128 | 
|Item 18.                              |  | Financial Statements                                                         |     |  | 128 | 
|Item 19.                              |  | Exhibits                                                                     |     |  | 130 | 
|Signatures                            |  |                                                                              |     |  | 132 | 



i



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##### Table of Contents

EXPLANATORY NOTE

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.

This Form 20-F/A is being filed to amend our Annual Report on Form 20-F for the year ended December 31, 2013, as filed with the U.S.
Securities and Exchange Commission (the SEC) on April 16, 2014. This amendment includes the restatement of our audited consolidated financial statements as of December 31, 2013 and as of December 31, 2012 and for the years
then ended to retrospectively reflect the amendment in the estimated revenues and costs of completion of the construction projects of our fully-consolidated subsidiary, U. Dori Construction Ltd. (Dori Construction) and related disclosure
in Item 3. Key Information, Item 5. Operating and Financial Review and Prospects, and Item 11. Quantitative and Qualitative Disclosures About Market Risk. Please note that the corrections to the audited
consolidated financial statements as of December 31, 2012 and for the year then ended were not material. For further information, please see Note 2ee and Note 41 to our audited consolidated financial statements included elsewhere in this Annual
Report. As a result of the 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. For
further information, see Item 15. Controls and Procedures.

In addition, this amendment reflects a retrospective adjustment to
our audited consolidated financial statements and related disclosure in Item 3. Key Information and Item 5. Operating and Financial Review and Prospects due to the adoption of a clarification to IAS 12, Income taxes
that was published in July 2014, with regard to the accounting treatment of taxes on income in situations where an entity is holding single asset entities and where the manner in which the entity expects to realize the investment is by selling the
shares of the single asset entity, rather than by disposing of the asset itself (the Clarification to IAS 12). For further information, please see Note 2a and Note 41 to our audited consolidated financial statements included elsewhere in
this Annual Report.

In addition, this amendment reflects a reclassification adjustment to our audited consolidated financial statements
and related disclosure in Item 3. Key Information and Item 5. Operating and Financial Review and Prospects due to the adoption of a Clarification to IAS 17, Leases (the Clarification to IAS 17), that was
published in March 2014, pursuant to which internal fixed costs are not to be considered as incremental costs for the purposes of IAS 17. As a result, we classified internal costs that were incurred in the leasing of properties (primarily salary
expenses) as part of the General and administrative expenses, instead of capitalizing them to Investment property and including them as part of Fair value gain from investment property line item. We have
reclassified the comparative amounts in these restated financial statements to reflect the adoption of the Clarification to IAS 17. For further information, please refer to Note 2a to our audited consolidated financial statements included elsewhere
in this Annual Report.

Lastly, this amendment reflects additional disclosure that was added to Item 4. Information on the
Company and Item 5. Operating and Financial Review and Prospects in light of comments received from the staff of the SEC in letters dated May 30, 2014, July 17, 2014, and July 29, 2014, respectively, and agreed
upon by us in our response letters dated June 23, 2014 and July 23, 2014, respectively.

This amendment continues to speak as of
the date of the original filing and other than information relating to matters mentioned in the above paragraphs, no amendment was made in this Form 20-F/A to update or revise the disclosure originally published in the Annual Report on Form 20-F
filed on April 16, 2014. Except as stated herein, this Form 20-F/A does not reflect events or developments occurring after the filing of our Annual Report on Form 20-F on April 16, 2014. As a result, this Form 20-F/A should be read in
conjunction with the documents we furnished to the SEC subsequent to the filing of the Annual Report, including, but not limited to, the Companys Second Quarter 2014 Financial Report, furnished to the SEC as Exhibit 99.1 to the Current Report
on Form 6-K on September 3, 2014, the Companys Restated 2013 Annual Report, furnished to the SEC as Exhibit 99.1 to the Current Report on Form 6-K on September 15, 2014, and the Companys Restated First Quarter 2014 Financial
Report, furnished to the SEC as Exhibit 99.2 to the Current Report on Form 6-K on September 15, 2014.



ii



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##### Table of Contents

INTRODUCTION AND USE OF CERTAIN TERMS

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



| |  |  | adjusted EPRA FFO means EPRA FFO (as defined below) 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 the engagement of 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); and extraordinary legal proceedings not related
to the reporting periods.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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 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.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  |  | Group  the Company, its subsidiaries and its 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, 2013.
| | - |  | -----------------------------------------------------------------



| |  |  | 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. a wholly-owned subsidiary through which Gazit Development currently holds 73.9% 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, (VSE/EURONEXT:ATRS) which owns and operates shopping centers in Central and Eastern Europe.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  |  | Dori Group means U. Dori Group Ltd. (TASE: DORI) and its subsidiaries, which as of December 31, 2013, held 59.7% of U. Dori Construction Ltd. which is also traded on the Tel Aviv Stock Exchange, and U.
Dori Construction Ltd.s wholly-owned subsidiaries and related companies.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



iii



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##### Table of Contents

| |  |  | 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, 2013, held indirectly 12.1% 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 holds 73.9% of Dori Group through Acad.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  |  | Norstar means Norstar Holdings Inc. (TASE: NSTR), a Panamanian company (formerly known as Gazit Inc.) which had voting power of 50.6% of our issued ordinary shares as of April 10, 2014.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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, 2013, 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 3.471 = 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, 2013. 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.



iv



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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.



v



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##### Table of Contents

PART I



|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 2009, 2010, 2011, 2012, and 2013 and the
selected consolidated balance sheet data set forth below as of December 31, 2009, 2010, 2011, 2012 and 2013 have been derived from our consolidated financial statements which have been prepared in accordance with IFRS.

As aforementioned, the data set below with respect to each of the years ended on December 31, 2013 and 2012 was restated to reflect the correction of an
error in the estimated revenues and costs of completion of the construction projects of our subsidiary Dori Construction. For additional information please see Note 2ee and Note 41 to our audited consolidated financial statements included elsewhere
in this Annual Report; the data for each of years ended on December 31, 2013, December 31, 2012 and December 31, 2011 was retrospectively adjusted due to the adoption of a clarification to IAS 12, Income taxes; and the
data for each of years ended on December 31, 2013, December 31, 2012 and December 31, 2011 was reclassified due to the adoption of a clarification to IAS 17, Leases.

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, 2011, 2012 and 2013 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, 2013. These translations are solely for the convenience of the reader and were calculated at the rate of NIS 3.471 = 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, 2013. 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, |       
|                                                                                                  |  | 2009                    |        |   | 2010  |  |        | 2011 |  |  | 2012   |   |  | 2013 |        |   | 2013 | 
|(In millions except for per share data)(1) (2) (3)
(4)                                            |  | NIS                     |        |   | U.S.$ | 
|Statement of Income Data:                                                                         |  |                         |        |   |       |  |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |       |  
|Rental income                                                                                     |  |                         | 4,084  |   |       |  | 4,147  |      |  |  | 4,718  |   |  |      | 5,249  |   |      |  | 5,146  |   |  |  | 1,483 |  
|Property operating expenses                                                                       |  |                         | 1,369  |   |       |  | 1,341  |      |  |  | 1,522  |   |  |      | 1,705  |   |      |  | 1,689  |   |  |  | 487   |  
|                                                                                                  |  |                         |        |   |       |  |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |       |  
|Net operating rental income                                                                       |  |                         | 2,715  |   |       |  | 2,806  |      |  |  | 3,196  |   |  |      | 3,544  |   |      |  | 3,457  |   |  |  | 996   |  
|Revenues from sale of buildings, land and construction work performed(5)                          |  |                         | 596    |   |       |  |       |      |  |  | 1,001  |   |  |      | 1,760  |   |      |  | 1,672  |   |  |  | 481   |  
|Cost of buildings sold, land and construction work performed(5)                                   |  |                         | 554    |   |       |  |       |      |  |  | 967    |   |  |      | 1,720  |   |      |  | 1,688  |   |  |  | 486   |  
|                                                                                                  |  |                         |        |   |       |  |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |       |  
|Gross profit (loss) from sale of buildings, land and construction work performed                  |  |                         | 42     |   |       |  |       |      |  |  | 34     |   |  |      | 40     |   |      |  | (16    | ) |  |  | (5    | )
|                                                                                                  |  |                         |        |   |       |  |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |       |  
|Total gross profit                                                                                |  |                         | 2,757  |   |       |  | 2,806  |      |  |  | 3,230  |   |  |      | 3,584  |   |      |  | 3,441  |   |  |  | 991   |  
|                                                                                                  |  |                         |        |   |       |  |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |       |  
|Fair value gain (loss) from investment property and investment property under development, net(6) |  |                         | (1,922 | ) |       |  | 935    |      |  |  | 1,692  |   |  |      | 1,938  |   |      |  | 962    |   |  |  | 277   |  
|General and administrative expenses                                                               |  |                         | (584   | ) |       |  | (569   | )    |  |  | (755   | ) |  |      | (673   | ) |      |  | (610   | ) |  |  | (176  | )
|Other income                                                                                      |  |                         | 777    |   |       |  | 21     |      |  |  | 115    |   |  |      | 164    |   |      |  | 218    |   |  |  | 63    |  
|Other expenses                                                                                    |  |                         | (41    | ) |       |  | (46    | )    |  |  | (110   | ) |  |      | (47    | ) |      |  | (74    | ) |  |  | (21   | )
|Companys share in earnings (losses) of equity-accounted investees, net                           |  |                         | (268   | ) |       |  | 171    |      |  |  | 334    |   |  |      | 299    |   |      |  | 149    |   |  |  | 43    |  
|                                                                                                  |  |                         |        |   |       |  |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |       |  
|Operating income                                                                                  |  |                         | 719    |   |       |  | 3,318  |      |  |  | 4,506  |   |  |      | 5,265  |   |      |  | 4,086  |   |  |  | 1,177 |  
|Finance expenses                                                                                  |  |                         | (1,793 | ) |       |  | (1,764 | )    |  |  | (2,197 | ) |  |      | (2,214 | ) |      |  | (2,185 | ) |  |  | (629  | )
|Finance income                                                                                    |  |                         | 1,551  |   |       |  | 525    |      |  |  | 72     |   |  |      | 120    |   |      |  | 549    |   |  |  | 158   |  
|Increase in value of financial investments                                                        |  |                         | 81     |   |       |  |       |      |  |  |       |   |  |      |       |   |      |  |       |   |  |  |      |  
|                                                                                                  |  |                         |        |   |       |  |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |       |  
|Income before taxes on income                                                                     |  |                         | 558    |   |       |  | 2,079  |      |  |  | 2,381  |   |  |      | 3,171  |   |      |  | 2,450  |   |  |  | 706   |  
|Taxes on income (tax benefit)                                                                     |  |                         | (142   | ) |       |  | 390    |      |  |  | 352    |   |  |      | 758    |   |      |  | 265    |   |  |  | 76    |  
|                                                                                                  |  |                         |        |   |       |  |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |       |  
|Net income                                                                                        |  |                         | 700    |   |       |  | 1,689  |      |  |  | 2,029  |   |  |      | 2,413  |   |      |  | 2,185  |   |  |  | 630   |  
|                                                                                                  |  |                         |        |   |       |  |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |       |  



1



---

##### Table of Contents

|                                                                      |  |                         |       |   |       |  |       |      |  |  |       |  |  |      |       |  |      |  |       |  |  |  |      | 
|--------------------------------------------------------------------- |  | ----------------------- | ----- | - | ----- |  | ----- | ---- |  |  | ----- |  |  | ---- | ----- |  | ---- |  | ----- |  |  |  | ---- | 
|                                                                      |  | Year Ended December 31, |      
|                                                                      |  | 2009                    |       |   | 2010  |  |       | 2011 |  |  | 2012  |  |  | 2013 |       |  | 2013 | 
|(In millions except for per share data)(1) (2) (3)
(4)                |  | NIS                     |       |   | U.S.$ | 
|Net income (loss) attributable to:                                    |  |                         |       |  
|Equity holders of the Company                                         |  |                         | 1,101 |   |       |  | 831   |      |  |  | 708   |  |  |      | 901   |  |      |  | 927   |  |  |  | 267  | 
|Non-controlling interests                                             |  |                         | (401  | ) |       |  | 858   |      |  |  | 1,321 |  |  |      | 1,512 |  |      |  | 1,258 |  |  |  | 363  | 
|                                                                      |  |                         |       |   |       |  |       |      |  |  |       |  |  |      |       |  |      |  |       |  |  |  |      | 
|                                                                      |  |                         | 700   |   |       |  | 1,689 |      |  |  | 2,029 |  |  |      | 2,413 |  |      |  | 2,185 |  |  |  | 630  | 
|                                                                      |  |                         |       |   |       |  |       |      |  |  |       |  |  |      |       |  |      |  |       |  |  |  |      | 
|Net earnings per share attributable to equity holders of the Company: |  |                         |       |  
|Basic net earnings per share                                          |  |                         | 8.49  |   |       |  | 5.89  |      |  |  | 4.57  |  |  |      | 5.46  |  |      |  | 5.41  |  |  |  | 1.56 | 
|Diluted net earnings per share                                        |  |                         | 8.47  |   |       |  | 5.87  |      |  |  | 4.23  |  |  |      | 5.25  |  |      |  | 5.35  |  |  |  | 1.54 | 



|                                                     |  |                         |         |  |      |  |         |      |  |  |         |  |  |      |         |  |  |  |         | 
|---------------------------------------------------- |  | ----------------------- | ------- |  | ---- |  | ------- | ---- |  |  | ------- |  |  | ---- | ------- |  |  |  | ------- | 
|                                                     |  | Year Ended December 31, |        
|(In thousands)                                       |  | 2009                    |         |  | 2010 |  |         | 2011 |  |  | 2012    |  |  | 2013 |        
|Weighted average number of shares used to calculate: |  |                         |         |  |      |  |         |      |  |  |         |  |  |      |         |  |  |  |         | 
|Basic earnings per share                             |  |                         | 129,677 |  |      |  | 141,150 |      |  |  | 154,456 |  |  |      | 164,912 |  |  |  | 171,103 | 
|Diluted earnings per share                           |  |                         | 129,706 |  |      |  | 141,387 |      |  |  | 154,783 |  |  |      | 165,016 |  |  |  | 171,413 | 



|(1) | We have early adopted IFRS 10, Consolidated Financial Statements, IFRS 11, Joint Arrangements, IFRS 12, Disclosure of Interests in Other Entities, IAS 28R, Investments in Associates and Joint
Ventures, and IAS 27R  Separate Financial Statements (collectively: the New Standards) starting from the consolidated financial statements of the second quarter of 2012. Additionally, we implemented the amendment to IAS
12 in the first quarter of 2012 as prescribed by IFRS (the New Standards and the amendment to IAS 12, collectively, the New IFRSs) with the effective adoption date being January 1, 2010 in accordance with the New IFRSs
transition provisions. Accordingly, the data shown above for the year ended December 31, 2009 is as originally presented without any effect of the New IFRSs. Had the New IFRSs been applied to the aforementioned years, both revenue from sale of
buildings and cost of buildings sold would have been reduced substantially but we estimate that the impact on net income (loss) would have been immaterial.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | As stated above, the data for each of the years ended December 31, 2013 and December 31, 2012 was restated to reflect the correction of an error. For further information, refer to Notes 2ee and 41 to our
audited consolidated financial statements included elsewhere in this Annual Report.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | As stated above, in July 2014, the International Financial Reporting Interpretations Committee (the IFRIC) published a Clarification to IAS 12, Income taxes. We have adopted the Clarification to IAS
12 in this restated annual report. As a result of the adoption of the Clarification to IAS 12, we have retrospectively adjusted our financial statements for each of the years ended December 31, 2013, December 31, 2012 and
December 31, 2011 with the effective adoption date being January 1, 2011. Accordingly, the data shown above for the years ended December 31, 2010 and December 31, 2009 is as originally presented without any effect of the
Clarification to IAS 12. Had the Clarification to IAS 12 been applied to the aforementioned years, taxes on income would have been amended but we estimate that the impact on net income (loss) would have not been material. For further information
please refer to Notes 2a and 41 to our audited consolidated financial statements included elsewhere in this Annual Report.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | As stated above, in March 2014, the IFRIC published a Clarification to IAS 17, Leases, pursuant to which internal fixed costs are not to be considered as incremental costs for the purposes of IAS 17. As a result,
we have reclassified the comparative amounts in these restated financial statements to reflect the Clarification to IAS 17 for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, with the effective
adoption date being January 1, 2011. Accordingly, the data shown above for the years ended December 31, 2010 and December 31, 2009 is as originally presented without any effect of the Clarification to IAS 17. Had the Clarification to
IAS 17 been applied to the aforementioned years, the reclassification impact would have been not material and there would have been no impact on the net income. For further information please refer to Note 2a to our audited consolidated financial
statements included elsewhere in this Annual Report.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | 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. See also footnote (1) above.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | 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.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



2



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##### Table of Contents

|                                                                                |  |                    |        |  |       |  |        |      |  |  |        |  |  |      |        |  |      |  |        |  |  |  |        | 
|------------------------------------------------------------------------------- |  | ------------------ | ------ |  | ----- |  | ------ | ---- |  |  | ------ |  |  | ---- | ------ |  | ---- |  | ------ |  |  |  | ------ | 
|                                                                                |  | As of December 31, |       
|                                                                                |  | 2009               |        |  | 2010  |  |        | 2011 |  |  | 2012   |  |  | 2013 |        |  | 2013 | 
|(In millions)(1) (2) (3)                                                        |  | NIS                |        |  | U.S.$ | 
|Selected Balance Sheet Data:                                                    |  |                    |        |  |       |  |        |      |  |  |        |  |  |      |        |  |      |  |        |  |  |  |        | 
|Equity-accounted investees                                                      |  |                    | 45     |  |       |  | 3,694  |      |  |  | 4,390  |  |  |      | 4,713  |  |      |  | 5,907  |  |  |  | 1,702  | 
|Investment property                                                             |  |                    | 42,174 |  |       |  | 41,242 |      |  |  | 51,014 |  |  |      | 55,465 |  |      |  | 53,309 |  |  |  | 15,358 | 
|Investment property under development                                           |  |                    | 2,994  |  |       |  | 2,266  |      |  |  | 2,198  |  |  |      | 2,806  |  |      |  | 2,479  |  |  |  | 714    | 
|Total assets                                                                    |  |                    | 51,504 |  |       |  | 50,408 |      |  |  | 64,599 |  |  |      | 71,034 |  |      |  | 67,927 |  |  |  | 19,570 | 
|Long term interest-bearing liabilities from financial institutions
andothers(4) |  |                    | 17,162 |  |       |  | 14,644 |      |  |  | 18,973 |  |  |      | 19,433 |  |      |  | 12,692 |  |  |  | 3,656  | 
|Long term debentures(5)                                                         |  |                    | 13,862 |  |       |  | 13,768 |      |  |  | 15,379 |  |  |      | 18,500 |  |      |  | 22,231 |  |  |  | 6,405  | 
|Total liabilities                                                               |  |                    | 38,238 |  |       |  | 35,217 |      |  |  | 45,203 |  |  |      | 48,737 |  |      |  | 45,574 |  |  |  | 13,130 | 
|Equity attributable to equity holders of the Company                            |  |                    | 5,189  |  |       |  | 5,986  |      |  |  | 7,199  |  |  |      | 7,681  |  |      |  | 7,802  |  |  |  | 2,248  | 
|Non-controlling interests                                                       |  |                    | 8,077  |  |       |  | 9,205  |      |  |  | 12,197 |  |  |      | 14,616 |  |      |  | 14,551 |  |  |  | 4,192  | 
|Total equity                                                                    |  |                    | 13,266 |  |       |  | 15,191 |      |  |  | 19,396 |  |  |      | 22,297 |  |      |  | 22,353 |  |  |  | 6,440  | 



|(1) | As stated above, we have adopted and implemented the New IFRSs during 2012 with the effective adoption date being January 1, 2010. Accordingly, the numbers shown above as of December 31, 2009 are as originally
presented without any effect of the New IFRSs. Had the New IFRSs been applied to the aforementioned date the most significant impact would have been to include Atrium as equity-accounted investee as of December 31, 2009 instead of its
proportionate consolidation as presented above. However, we estimate that the impact on shareholders equity and on total equity would have been immaterial.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | As stated above, the data as of December 31, 2013 and December 31, 2012 was restated to reflect the correction of an error. For further information, refer to Notes 2ee and 41 to our audited consolidated
financial statements included elsewhere in this Annual Report.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | As stated above, in July 2014, the IFRIC published the Clarification to IAS 12, Income taxes. We have adopted the Clarification to IAS 12 in this restated annual report. As a result of the adoption, we have
retrospectively adjusted our financial statements as of December 31, 2013, December 31, 2012 and December 31, 2011, in order to reflect the Clarification to IAS 12, with the effective adoption date being January 1, 2011.
Accordingly, the data shown above as of December 31, 2010 and December 31, 2009 is as originally presented without any effect of the Clarification to IAS 12. Had the Clarification to IAS 12 been applied to the aforementioned dates,
deferred tax liability would have been increased and total equity and shareholders equity would have been decreased. However, we estimate that the impact would have not been material. For further information please refer to Notes 2a and 41 to
our audited consolidated financial statements included elsewhere in this Annual Report.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | As of December 31, 2013, NIS 5.3 billion (U.S.$ 1.5 billion) of our interest-bearing liabilities from financial institutions (including current maturities) were unsecured and the remainder were secured.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | As of December 31, 2013, NIS 861 million (U.S.$ 248 million) aggregate principal amount of our debentures was secured and the remainder was unsecured.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------



|                                          |  |                    |        |  |      |  |        |      |  |  |        |  |  |      |        |  |  |  |        | 
|----------------------------------------- |  | ------------------ | ------ |  | ---- |  | ------ | ---- |  |  | ------ |  |  | ---- | ------ |  |  |  | ------ | 
|                                          |  | As of December 31, |       
|                                          |  | 2009               |        |  | 2010 |  |        | 2011 |  |  | 2012   |  |  | 2013 |       
|Other Operating Data(1):                  |  |                    |        |  |      |  |        |      |  |  |        |  |  |      |        |  |  |  |        | 
|Number of Group operating properties      |  |                    | 629    |  |      |  | 646    |      |  |  | 642    |  |  |      | 622    |  |  |  | 577    | 
|Total Group GLA (in thousands of sq. ft.) |  |                    | 67,559 |  |      |  | 70,006 |      |  |  | 72,903 |  |  |      | 73,292 |  |  |  | 71,431 | 
|Group occupancy (%)                       |  |                    | 93.6   |  |      |  | 93.9   |      |  |  | 94.3   |  |  |      | 95.0   |  |  |  | 95.0   | 



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



|                                                        |  |                         |       |  |       |  |       |      |  |  |       |  |  |      |       |  |      |  |       |  |  |  |      | 
|------------------------------------------------------- |  | ----------------------- | ----- |  | ----- |  | ----- | ---- |  |  | ----- |  |  | ---- | ----- |  | ---- |  | ----- |  |  |  | ---- | 
|                                                        |  | Year Ended December 31, |      
|                                                        |  | 2009                    |       |  | 2010  |  |       | 2011 |  |  | 2012  |  |  | 2013 |       |  | 2013 | 
|(In millions except for per share data) (1) (2) (3)
(4) |  | NIS                     |       |  | U.S.$ | 
|Other Financial Data:                                   |  |                         |       |  |       |  |       |      |  |  |       |  |  |      |       |  |      |  |       |  |  |  |      | 
|NOI(5)                                                  |  |                         | 2,729 |  |       |  | 2,806 |      |  |  | 3,196 |  |  |      | 3,544 |  |      |  | 3,457 |  |  |  | 996  | 
|Adjusted EBITDA(5)                                      |  |                         | 2,254 |  |       |  | 2,548 |      |  |  | 2,864 |  |  |      | 3,257 |  |      |  | 3,192 |  |  |  | 920  | 
|Dividends                                               |  |                         | 186   |  |       |  | 211   |      |  |  | 241   |  |  |      | 264   |  |      |  | 298   |  |  |  | 87   | 
|Dividends per share                                     |  |                         | 1.42  |  |       |  | 1.48  |      |  |  | 1.56  |  |  |      | 1.60  |  |      |  | 1.72  |  |  |  | 0.50 | 
|EPRA FFO(5)(6)                                          |  |                         | 223   |  |       |  | 141   |      |  |  | 80    |  |  |      | 327   |  |      |  | 269   |  |  |  | 77   | 
|Adjusted EPRA FFO(5)(6)                                 |  |                         | 420   |  |       |  | 359   |      |  |  | 405   |  |  |      | 533   |  |      |  | 585   |  |  |  | 169  | 



3



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##### Table of Contents

|                                  |  |                         |       |   |       |  |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |      |  
|--------------------------------- |  | ----------------------- | ----- | - | ----- |  | ------ | ---- |  |  | ------ | - |  | ---- | ------ | - | ---- |  | ------ | - |  |  | ---- | -
|                                  |  | Year Ended December 31, |      
|                                  |  | 2009                    |       |   | 2010  |  |        | 2011 |  |  | 2012   |   |  | 2013 |        |   | 2013 | 
|(In millions)(1) (4)              |  | NIS                     |       |   | U.S.$ | 
|Cash flows provided by (used in): |  |                         |       |   |       |  |        |      |  |  |        |   |  |      |        |   |      |  |        |  
|Operating activities              |  |                         | 926   |   |       |  | 659    |      |  |  | 1,104  |   |  |      | 1,368  |   |      |  | 1,189  |   |  |  | 342  |  
|Investing activities              |  |                         | (677  | ) |       |  | (2,548 | )    |  |  | (4,195 | ) |  |      | (4,621 | ) |      |  | (2,208 | ) |  |  | (636 | )
|Financing activities              |  |                         | 1,225 |   |       |  | 1,589  |      |  |  | 4,017  |   |  |      | 3,490  |   |      |  | 428    |   |  |  | 123  |  



|                     |  |                    |       |  |       |  |       |      |  |  |       |  |  |      |        |  |      |  |        |  |  |  |       | 
|-------------------- |  | ------------------ | ----- |  | ----- |  | ----- | ---- |  |  | ----- |  |  | ---- | ------ |  | ---- |  | ------ |  |  |  | ----- | 
|                     |  | As of December 31, |      
|                     |  | 2009               |       |  | 2010  |  |       | 2011 |  |  | 2012  |  |  | 2013 |        |  | 2013 | 
|(In millions)(1) (3) |  | NIS                |       |  | U.S.$ | 
|EPRA NAV(5)(6)(7)    |  |                    | 6,108 |  |       |  | 6,709 |      |  |  | 8,762 |  |  |      | 10,037 |  |      |  | 10,200 |  |  |  | 2,939 | 
|EPRA NNNAV(5)(6)     |  |                    | 5,472 |  |       |  | 5,195 |      |  |  | 6,781 |  |  |      | 7,157  |  |      |  | 7,361  |  |  |  | 2,120 | 



|(1) | As stated above, we have early adopted and implemented the New IFRSs during 2012 with the effective adoption date being January 1, 2010. Accordingly, the data shown above as of December 31, 2009 and for the
year then ended is as originally presented without any effect of the New IFRSs. Had the New IFRSs been applied to the aforementioned year, we estimate that the impact on the above figures would have been immaterial.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | As stated above, the data for each of the years ended December 31, 2013 and December 31, 2012 was restated to reflect the correction of an error. For further information, refer to Notes 2ee and 41 to our
audited consolidated financial statements included elsewhere in this Annual Report.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | As stated above, we have adopted the Clarification to IAS 12 in these restated financial statements, with effective adoption date being January 1, 2011. Accordingly, the data shown above as of December 31,
2010, December 31, 2009 is as originally presented without any effect of the Clarification to IAS 12. Had the Clarification to IAS 12 been applied to the aforementioned years, taxes on income and shareholders equity would have been
amended but we estimate that there would have been no impact on Adjusted EBITDA, Adjusted EPRA FFO and EPRA NAV and that the adverse impact on EPRA NNNAV would have been not material.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | As stated above, we have adopted the Clarification to IAS 17, in these restated financial statements, with effective adoption date being January 1, 2011. Accordingly, the data shown above for each of the years
ended December 31, 2010 and December 31, 2009 is as originally presented without any effect of the Clarification to IAS 17. Had the Clarification to IAS 17 been applied to the aforementioned years, the reclassification impact would have
been not material and there would have been no impact on the net income. For the impact on the cash flow statements, refer to Note 2a to our audited consolidated financial statements included elsewhere in this Annual Report.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | 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.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | 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.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | EPRA NAV was retrospectively adjusted to reflect an update in EPRA Best Practice Recommendations published in January 2014. See Item 5Operating and Financial Review and ProspectsNon-IFRS Financial
Measures for further details.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 on the last day of each month 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, |     
|             |  | 2009                    |      |  | 2010 |  |      | 2011 |  |  | 2012 |  |  | 2013 |     
|High         |  |                         | 4.25 |  |      |  | 3.89 |      |  |  | 3.82 |  |  |      | 4.08 |  |  |  | 3.79 | 
|Low          |  |                         | 3.69 |  |      |  | 3.54 |      |  |  | 3.36 |  |  |      | 3.70 |  |  |  | 3.47 | 
|Period end   |  |                         | 3.77 |  |      |  | 3.54 |      |  |  | 3.82 |  |  |      | 3.73 |  |  |  | 3.47 | 
|Average Rate |  |                         | 3.92 |  |      |  | 3.73 |      |  |  | 3.58 |  |  |      | 3.86 |  |  |  | 3.61 | 



4



---

##### Table of Contents

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:



|              |  |           |      |  |          |  |      | 
|------------- |  | --------- | ---- |  | -------- |  | ---- | 
|Month         |  | High(NIS) |      |  | Low(NIS) | 
|October 2013  |  |           | 3.57 |  |          |  | 3.52 | 
|November 2013 |  |           | 3.57 |  |          |  | 3.52 | 
|December 2013 |  |           | 3.53 |  |          |  | 3.47 | 
|January 2014  |  |           | 3.51 |  |          |  | 3.48 | 
|February 2014 |  |           | 3.55 |  |          |  | 3.50 | 
|March 2014    |  |           | 3.50 |  |          |  | 3.46 | 

On April 10, 2014 the daily representative rate of exchange between the NIS and U.S. dollar as published
by the Bank of Israel was NIS 3.47 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 2013, our rental income (assuming full
consolidation of jointly-controlled entities) was derived 33.1% from Canada, 20.9% from the United States, 22.2% from Northern and Western Europe, 20.2% from Central and Eastern Europe, 3.1% from Israel, and 0.5% from Brazil. During the recent
economic downturn, 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 92.4%
as of December 31, 2013. 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 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, 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.



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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. 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
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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.
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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 16.1% of Citycons rental income in 2013, Publix accounted for 3.8% of Equity
Ones total annual minimum rent as of December 31, 2013 and Sobeys accounted for 7.1% of First Capitals total annual minimum rent as of December 31, 2013. In addition, supermarkets and other grocery stores, many of which
are anchor tenants, accounted for approximately 18% of our total rental income in 2013, 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 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.



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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, 2013, we and our private subsidiaries had outstanding interest-bearing debt in the aggregate amount of NIS 14,590 million (U.S.$ 4,204 million) and other liabilities
outstanding in the aggregate amount of NIS 736 million (U.S.$ 212 million), of which approximately 8% matures during 2014. On a consolidated basis, we had debt and other liabilities outstanding as of December 31, 2013 in the aggregate
amount of NIS 45,269 million (U.S.$ 13,042 million), of which 12.7% matures during 2014. 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.



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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 private subsidiaries. As of December 31, 2013, the principal amount of such indebtedness was NIS
1,664 million (U.S.$ 479 million), which constituted 3.7% 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 8,749 million (U.S.$ 2,521 million) as of December 31, 2013, which
constituted 19.3% 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 of 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 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, 2013, 33.1% of our rental income (assuming full consolidation of jointly-controlled entities) was earned in Canadian dollars, 30.0% in Euros, 21.7% in U.S. dollars, 7.7% in Swedish Krona, and 3.1%
in NIS. Our income from development and construction of residential projects activity is primarily generated in NIS (NIS 16 million of gross loss during 2013). 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 the
U.S. dollar and the Canadian dollar weakened 6.4% and 9.1%, respectively, for 2013 compared to 2012, which resulted in our net operating income decreasing by a total amount of NIS 194 million, or 5.6%. 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 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.



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

As of December 31, 2013, approximately 11.5%, 9.6%, 6.8% 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, 2013 comprised 19.0% and 0.5% 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, 2013) 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 assets even though no actual disposition
of assets took place. For example, in 2013 and 2012, we increased the fair value of our properties on a consolidated basis by NIS 962 million and NIS 1,938 million, respectively.

The valuation of property is inherently subjective due to the individual nature of each property. 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 60% of such investment properties during the year ended December 31, 2013 (48% of which were
performed at December 31, 2013). 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 real estate assets could impact us
disproportionately compared to these other companies.



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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.

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, president and chief executive officer 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 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.



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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.

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 2.3% and 4.6% of the value of our properties (including of our equity-accounted joint ventures) as of December 31, 2013, 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 3.4% 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 15.5% 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.



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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, 2013, 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.

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 3.6% of our total GLA as of
December 31, 2013. 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. In addition, further to a criminal investigation in Austria against Julius Meinl, the controlling shareholder of Meinl Bank AG, stemming from events that occurred in or before 2007, various investors in
Atrium have alleged that Atrium is liable for related wrongdoing including fraud, breach of trust, and other infringements of Austrian laws. The public prosecutor has directed Atrium 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 in 2006, is of uncertain application. Atriums management believes a finding of liability on its part would be
inappropriate. Accordingly, Atrium intends to actively defend the proceedings. Any adverse resolution of the various aforementioned claims, if they were to materialize, could have a material adverse effect on our business, financial condition,
results of operations, or cash flows. Please see also Item 8Financial InformationLegal Proceedings.

We have
restated our historical financial statements and identified a material weakness in our internal control over financial reporting. Restatements of our historical financial statements may have a material adverse effect on our business, financial
condition or operations.

As discussed in Note 2ee and Note 41 to our audited consolidated financial statements included
elsewhere in this Annual Report, we have restated our audited consolidated financial statements as of December 31, 2013 and as of December 31, 2012 and for the years then ended to retrospectively reflect the amendment in the estimated
revenues and costs of completion of the construction projects of our fully-consolidated subsidiary, U. Dori Construction Ltd.

While we
have taken measures to prevent future restatements we cannot be certain that the measures we have taken since we completed the restatement process will ensure that restatements will not occur in the future. The restatement may affect investor
confidence in the accuracy of our financial disclosures and may raise reputational issues for our business.



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Although we have now completed the restatement, we cannot guarantee that we will not receive
inquiries from the SEC regarding our restated financial statements or matters relating thereto. Any future inquiries from the SEC 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.

As a result of the restatement of our historical financial statements, 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. For further information, see Item 15. Controls and Procedures. 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.

Failure to remediate our material weaknesses could adversely affect our ability to
report our results of operations and financial condition accurately and in a timely manner. 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 the 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. We can give no assurance that the measures we have taken and plan to take in the future will remediate the material weaknesses identified or that any additional material weaknesses or
restatements of financial results will not 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 innaccuracies.

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 believe that we have been, and
will continue to be, provided with all material information from our subsidiaries that we require to manage our business and comply with our reporting obligations as a public company, we do not have formal arrangements to receive information with
all of our public subsidiaries. In addition, directors in 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. As such, 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 consolidated
financial statements for December 31, 2013 and for the year then ended (which also included corrections to the consolidated financial statements for December 31, 2012 and for the year then ended which were not material) 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 estimated revenues and costs of completion for its construction projects. Our
ability to supervise the preparation of the financial statements of our public subsidiaries and investees is inherently limited. 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 2013, we received dividend payments of NIS 690 million from 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, and Dori Group, and have
joint control over Atrium which is an equity-accounted investee, 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, 2013, 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 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 been minimal; 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 primarily our investment in Atrium with Apollo Global Real Estate Management LP (Apollo) (the current owner of CPI CEE Management LLC
(CPI), the original partner to the investment), 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, and Citycons recent joint investment with the Canada Pension Plan Investment Board (CPPIB) in the Kista Galleria Shopping Center located in Stockholm, Sweden. 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.



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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.

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 may restrict the ability of financial institutions or their controlling shareholders to invest in the Company, or, in
turn, may restrict 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.



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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 share holdings 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 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 28.0% of Norstars, our controlling shareholder, outstanding shares as of April 10, 2014. In addition, Dor J. Segal, our executive vice-chairman,
holds 9.4% of the outstanding shares of Norstar and Erica Ottosson (Mr. Segals spouse) holds 6.2% of the outstanding shares of Norstar. Norstar owned 50.6% of our outstanding ordinary shares as of April 10, 2014. First U.S. Financial,
LLC, or FUF, holds 18.8% 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, 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Related Party Transactions.

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.



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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.

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 will continue to incur significant additional increased costs as a result of the registration of our ordinary
shares under the Securities Exchange Act of 1934 and the recent 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. We expect these rules and regulations to 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 is likely to introduce other costs, and has and will continue to take a significant amount of managements time. The implementation and testing
of such processes and systems has required us to hire outside consultants and incur other significant costs. 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.



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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.

Most 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 50.6% of our outstanding shares as of April 10, 2014. Norstar is a public
company listed on the TASE. Most 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, 2013 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 has been an increase in unrest and terrorist activity, which began in September 2000 and
has continued with varying levels of severity through 2011 and into 2013. In mid-2006, Israel was engaged in an armed conflict with Hezbollah in Lebanon, resulting in thousands of rockets being fired from Lebanon and disrupting most day-to-day
civilian activity in northern Israel. In December 2008 and again during November 2012, Israel engaged in an armed conflict with Hamas in the Gaza Strip, which involved missile strikes against civilian targets in various parts of Israel and
negatively affected business conditions in Israel. Recent popular uprisings in various countries in the Middle East and North Africa are affecting the political stability of those countries Such instability may lead to a deterioration in the
political and trade relationships that exist between the State of Israel and these countries. In addition, the recent increase in tension regarding the Iranian nuclear program is another source of potential instability in the region. Iran is also
believed to have a strong influence among extremist groups in the region, such as Hamas and Hezbollah. The tension between Israel and Iran and/or these groups may escalate in the future and turn violent, which could affect the Israeli economy
generally and us in particular. 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.



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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 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 577 properties have a gross leasable area, or GLA, of approximately 71 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.

On January 17, 2013, Citycon and the Canada Pension Plan Investment Board jointly acquired the Kista Galleria Shopping Center located in
Stockholm, Sweden, for EUR 530 million (approximately U.S.$ 730 million). Kista Galleria has approximately 1.0 million square feet of GLA, most of which is retail space with the remaining square footage comprising a hotel, student housing,
healthcare premises and municipal services. Following the transaction, both Citycon and the Canada Pension Plan Investment Board each hold a 50% interest in the property.



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After disposing of the vast majority of the assets owned by Royal Senior Care during 2012, for a
total consideration of approximately U.S.$ 230 million before transaction costs (of which the Companys share was U.S.$ 138 million), on April 19, 2013, we sold our 50% interest in one remaining property and a 60% interest in land for
approximately U.S.$ 15 million.

On August 13, 2013, Gazit-Globe exercised outstanding options issued to it by Gazit Development for
NIS 214 million thereby increasing our holdings in the latter from 75% to 82.5% of its issued and outstanding share capital. The aforementioned consideration was used by Gazit Development to partially prepay an existing loan from
Gazit-Globe to Gazit Development. For further information, please see Note 9i to our audited consolidated financial statements included elsewhere in this Annual Report.

On August 27, 2013, Gazit-Globe entered into an agreement to purchase 20,416,463 additional Atrium ordinary shares from an entity
forming part of the consortium managed by CPI CEE Management LLC (CPI), at a price of 4.3 Euros per share for a total consideration of approximately EUR 87.8 million in an off-market transaction. Following the completion of the
aforementioned acquisition as of December 31, 2013, we held 39.8% of the issued and outstanding shares and voting rights of Atrium (39.6% of the issued and outstanding shares and voting rights on a fully diluted basis). For further information,
please see Note 9c to our audited consolidated financial statements included elsewhere in this Annual Report.

On October 16, 2013,
we completed the listing of our ordinary shares for trading on the Toronto Stock Exchange under the symbol GZT.

Our capital
expenditures consist of the acquisition, construction and development of investment property including land for future development and amounted to NIS 3,237 million (U.S.$ 933 million) during 2013. 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 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.$ 22.1 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.$ 5.8 billion of which is not recorded in our financial statements) as of December 31, 2013. 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, 2013, 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, we own and operate medical office building in North America through public and private subsidiaries, and we own and operate our
shopping centers in Brazil, Germany and Israel through private subsidiaries. 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 71 million square feet as of December 31, 2013.



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##### Table of Contents

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, 3.6% from 2009 to 2010, 4.0% from 2010 to 2011, and 3.9% from 2011 to 2012. In the year ended
December 31, 2013, average same property NOI increased by 3.4% from the year ended December 31, 2012. 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.

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,
Israel and Germany. As of December 31, 2013, our asset base included 577 properties totaling approximately 71 million square feet of GLA. Approximately 99% of our net operating income, or NOI, on a proportionate consolidation basis, for
the year ended December 31, 2013 was derived from properties in countries with investment grade credit ratings as assigned either by Moodys or Standard & Poors, and 75% of our NOI on a proportionate consolidation basis for
the year ended December 31, 2013, 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 purchase our 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, 2013, Equity One owned 143 properties (including a property under development) with a GLA of 18.4 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 164 properties (including properties under
development) in Canada with a GLA of 23.8 million square feet as of December 31, 2013. 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.



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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 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 $ 31.3 million. In November 2010, we completed our first development project in Brazil. In 2013, we acquired our fifth property in Brazil. 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 in the medical
office building sector through ProMed in the United States, which since 2006 has grown to a total of 16 medical office building properties with a total GLA of approximately 1.5 million square feet as of December 31, 2013. For the year
ending December 31, 2013, we did not invest in the acquisition of medical office buildings in the United States due to high valuations in the regions in which we typically acquire properties (in comparison to investments of U.S.$
22 million in 2012 and U.S.$ 143 million in 2011).

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, 2011 to
December 31, 2013, we invested approximately NIS 5.5 billion (U.S.$ 1.6 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.$ 0.9 billion) in development and redevelopment projects (excluding attributed lease expenditures) representing an average investment of approximately U.S.$ 154 per
square foot.



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##### Table of Contents

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, our subsidiary Royal Senior Care sold the majority of 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. 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.

Properties under Development

We had 37 properties under development or redevelopment as of December 31, 2013. The following table summarizes our properties under
development, redevelopment and expansion as of December 31, 2013:



|                                    |  |                        |    |  |                                         |  |       |                                                             |  |  |                                     |  |  |  |         | 
|----------------------------------- |  | ---------------------- | -- |  | --------------------------------------- |  | ----- | ----------------------------------------------------------- |  |  | ----------------------------------- |  |  |  | ------- | 
|Region                              |  | Number ofProperties(1) |    |  | EstimateTotal GLA (sq.ft. in thousands) |  |       | Total investmentsas of December 31,2013 (U.S.$ inthousands) |  |  | Cost to Complete(U.S.$ inthousands) | 
|Development                         |  |                        |    |  |                                         |  |       |                                                             |  |  |                                     |  |  |  |         | 
|United states                       |  |                        | 1  |  |                                         |  | 151   |                                                             |  |  | 27,946                              |  |  |  | 38,606  | 
|Canada                              |  |                        | 4  |  |                                         |  | 959   |                                                             |  |  | 252,377                             |  |  |  | 12,676  | 
|Northern Europe                     |  |                        | 1  |  |                                         |  | 366   |                                                             |  |  | 22,184                              |  |  |  | 52,434  | 
|Central and Eastern Europe(2)       |  |                        | 1  |  |                                         |  | 592   |                                                             |  |  | 124,460                             |  |  |  | 32,844  | 
|Israel                              |  |                        | 2  |  |                                         |  | 129   |                                                             |  |  | 23,048                              |  |  |  | 31,403  | 
|Brazil(3)                           |  |                        | 1  |  |                                         |  |      |                                                             |  |  | 35,436                              |  |  |  |        | 
|                                    |  |                        |    |  |                                         |  |       |                                                             |  |  |                                     |  |  |  |         | 
|Total Development                   |  |                        | 10 |  |                                         |  | 2,197 |                                                             |  |  | 485,451                             |  |  |  | 167,963 | 
|Redevelopment(4)                    |  |                        |    |  |                                         |  |       |                                                             |  |  |                                     |  |  |  |         | 
|United states                       |  |                        | 7  |  |                                         |  | 345   |                                                             |  |  | 34,284                              |  |  |  | 38,029  | 
|Canada                              |  |                        | 16 |  |                                         |  | 2,983 |                                                             |  |  | 887,640                             |  |  |  | 44,944  | 
|Northern Europe                     |  |                        | 3  |  |                                         |  | 345   |                                                             |  |  | 25,065                              |  |  |  | 127,917 | 
|Central and Eastern Europe          |  |                        | 1  |  |                                         |  | 183   |                                                             |  |  | 25,929                              |  |  |  | 34,284  | 
|                                    |  |                        |    |  |                                         |  |       |                                                             |  |  |                                     |  |  |  |         | 
|Total Redevelopment                 |  |                        | 27 |  |                                         |  | 3,856 |                                                             |  |  | 972,918                             |  |  |  | 245,174 | 
|                                    |  |                        |    |  |                                         |  |       |                                                             |  |  |                                     |  |  |  |         | 
|Total Development and Redevelopment |  |                        | 37 |  |                                         |  | 6,053 |                                                             |  |  | 1,458,369                           |  |  |  | 413,137 | 
|                                    |  |                        |    |  |                                         |  |       |                                                             |  |  |                                     |  |  |  |         | 



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

|(2) | Unconsolidated equity-accounted investee.
|--- | -----------------------------------------

|(3) | The project is in the advanced planning stage that has not yet been completed.
|--- | ------------------------------------------------------------------------------

|(4) | Including properties under expansion.
|--- | -------------------------------------



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##### Table of Contents

The following table summarizes the rental income and NOI of our shopping center and healthcare
properties for the years ended December 31, 2011, December 31, 2012, and December 31, 2013. 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, |       
|                                                     |  |                               |       | 2011                    |        |   | 2012                  |  |        | 2013 |       |  | 2011   |   |       | 2012 |       |   | 2013  | 
|                                                     |  |                               |       | Rental Income           |        |   | NOI                   | 
|Property type                                        |  | Region                        |       | (NIS in thousands)(6)   |        |   | (NIS in thousands)(6) | 
|Shopping Centers                                     |  |                               |       |                         |        |   |                       |  |        |      |       |  |        |   |       |      |       |   |       |  |       |   |       |  |        |  
|                                                     |  | United States                 |       |                         | 1,236  |   |                       |  | 1,261  |      |       |  | 1,210  |   |       |      | 883   |   |       |  | 918   |   |       |  | 874    |  
|                                                     |  | Canada                        |       |                         | 1,893  |   |                       |  | 2,237  |      |       |  | 2,216  |   |       |      | 1,223 |   |       |  | 1,426 |   |       |  | 1,396  |  
|                                                     |  | Northern Europe(1)            |       |                         | 1,081  |   |                       |  | 1,185  |      |       |  | 1,406  |   |       |      | 720   |   |       |  | 803   |   |       |  | 964    |  
|                                                     |  | Central and Eastern Europe(2) |       |                         | 1,198  |   |                       |  | 1,324  |      |       |  | 1,345  |   |       |      | 771   |   |       |  | 898   |   |       |  | 915    |  
|                                                     |  | Germany                       |       |                         | 80     |   |                       |  | 83     |      |       |  | 81     |   |       |      | 59    |   |       |  | 56    |   |       |  | 53     |  
|                                                     |  | Israel(3)                     |       |                         | 193    |   |                       |  | 202    |      |       |  | 211    |   |       |      | 149   |   |       |  | 151   |   |       |  | 159    |  
|                                                     |  | Brazil                        |       |                         | 34     |   |                       |  | 31     |      |       |  | 34     |   |       |      | 29    |   |       |  | 16    |   |       |  | 18     |  
|Healthcare                                           |  |                               |       |                         |        |   |                       |  |        |      |       |  |        |   |       |      |       |   |       |  |       |   |       |  |        |  
|                                                     |  | Senior housing facilities(4)  |       |                         | 183    |   |                       |  |       |      |       |  |       |   |       |      | 73    |   |       |  |      |   |       |  |       |  
|                                                     |  | Medical office buildings(5)   |       |                         | 200    |   |                       |  | 248    |      |       |  | 200    |   |       |      | 133   |   |       |  | 173   |   |       |  | 147    |  
|Other Properties                                     |  |                               |       |                         |        |   |                       |  |        |      |       |  |        |   |       |      |       |   |       |  |       |   |       |  |        |  
|                                                     |  | Other properties(7)           |       |                         | 1      |   |                       |  | 131    |      |       |  | 6      |   |       |      |      |   |       |  | 60    |   |       |  | 1      |  
|                                                     |  |                               |       |                         |        |   |                       |  |        |      |       |  |        |   |       |      |       |   |       |  |       |   |       |  |        |  
|Total                                                |  |                               |       |                         | 6,099  |   |                       |  | 6,702  |      |       |  | 6,709  |   |       |      | 4,040 |   |       |  | 4,501 |   |       |  | 4,527  |  
|Adjustment to Exclude Non-Consolidated Properties(8) |  |                               |       |                         | (1,381 | ) |                       |  | (1,453 | )    |       |  | (1,563 | ) |       |      | (844  | ) |       |  | (957  | ) |       |  | (1,070 | )
|                                                     |  |                               |       |                         |        |   |                       |  |        |      |       |  |        |   |       |      |       |   |       |  |       |   |       |  |        |  
|Total Consolidated Properties                        |  |                               | 4,718 |                         |        |   | 5,249                 |  |        |      | 5,146 |  |        |   | 3,196 |      |       |   | 3,544 |  |       |   | 3,457 | 
|                                                     |  |                               |       |                         |        |   |                       |  |        |      |       |  |        |   |       |      |       |   |       |  |       |   |       |  |        |  



|(1) | For 2013, includes rental income and NOI of Kista Galleria which was purchased with a 50% partner and accounted for with 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.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|(4) | Our senior housing facilities were located exclusively in the United States and were presented in the financial statements according to the equity method.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Our medical office buildings are located in the United States through ProMed and in Canada through Gazit America through August 2012.
|--- | -------------------------------------------------------------------------------------------------------------------------------------

|(6) | Convenience translation of December 31, 2013 figures into U.S. dollars is provided in chart under Properties, Plants, and EquipmentOur Properties below.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | NOI for 2011 represents an amount of less than NIS 1 million. In 2012, Rental income and NOI represent mainly the senior housing facilities activity that was sold during 2012.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | Primarily with respect to properties in Central and Eastern Europe and through 2011 also senior housing facilities, which are held through equity-accounted investees and presented above at 100% under the assumption of
full consolidation. For 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, 2013, our top three tenants (by base rent) represented 9.4% of our consolidated rental income. Our properties are
subject to over 14,000 leases.



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##### Table of Contents

The following table sets forth as of December 31, 2013 the anticipated expirations of
tenant leases for our properties for each year from 2014 through 2023 and thereafter(1):



|                    |  |                         |        |  |                                             |  |        |                      |  |  |                     |   |  |                                           |      |   |                               |  |           |  |  |  |      |  
|------------------- |  | ----------------------- | ------ |  | ------------------------------------------- |  | ------ | -------------------- |  |  | ------------------- | - |  | ----------------------------------------- | ---- | - | ----------------------------- |  | --------- |  |  |  | ---- | -
|                    |  | Number ofExpiringLeases |        |  | GLA of ExpiringLeases (thousandsof sq. ft.) |  |        | Percent ofLeased GLA |  |  | Percent ofTotal GLA |   |  | Expiring RentalIncome (U.S.$ inthousands) |      |   | Percent of TotalRental Income | 
|Month-to-Month      |  |                         | 536    |  |                                             |  | 762    |                      |  |  | 1.1                 | % |  |                                           | 1.1  | % |                               |  | 19,845    |  |  |  | 1.1  | %
|2014                |  |                         | 3,750  |  |                                             |  | 8,373  |                      |  |  | 12.5                | % |  |                                           | 11.9 | % |                               |  | 232,313   |  |  |  | 13.2 | %
|2015                |  |                         | 2,312  |  |                                             |  | 7,585  |                      |  |  | 11.3                | % |  |                                           | 10.8 | % |                               |  | 218,934   |  |  |  | 12.5 | %
|2016                |  |                         | 1,956  |  |                                             |  | 7,026  |                      |  |  | 10.5                | % |  |                                           | 10.0 | % |                               |  | 204,486   |  |  |  | 11.7 | %
|2017                |  |                         | 1,717  |  |                                             |  | 8,112  |                      |  |  | 12.1                | % |  |                                           | 11.5 | % |                               |  | 218,037   |  |  |  | 12.4 | %
|2018                |  |                         | 1,459  |  |                                             |  | 6,641  |                      |  |  | 9.9                 | % |  |                                           | 9.4  | % |                               |  | 183,654   |  |  |  | 10.5 | %
|2019                |  |                         | 522    |  |                                             |  | 4,071  |                      |  |  | 6.1                 | % |  |                                           | 5.8  | % |                               |  | 108,559   |  |  |  | 6.2  | %
|2020                |  |                         | 378    |  |                                             |  | 2,880  |                      |  |  | 4.3                 | % |  |                                           | 4.1  | % |                               |  | 77,026    |  |  |  | 4.4  | %
|2021                |  |                         | 380    |  |                                             |  | 3,175  |                      |  |  | 4.7                 | % |  |                                           | 4.5  | % |                               |  | 91,994    |  |  |  | 5.2  | %
|2022                |  |                         | 409    |  |                                             |  | 3,483  |                      |  |  | 5.2                 | % |  |                                           | 4.9  | % |                               |  | 107,167   |  |  |  | 6.1  | %
|2023 and thereafter |  |                         | 975    |  |                                             |  | 15,004 |                      |  |  | 22.3                | % |  |                                           | 21.4 | % |                               |  | 294,072   |  |  |  | 16.8 | %
|Vacant              |  |                         | N/A    |  |                                             |  | 3,305  |                      |  |  | N/A                 |   |  |                                           | 4.6  | % |                               |  | N/A       |  |  |  | N/A  |  
|                    |  |                         |        |  |                                             |  |        |                      |  |  |                     |   |  |                                           |      |   |                               |  |           |  |  |  |      |  
|Total               |  |                         | 14,394 |  |                                             |  | 70,417 |                      |  |  | 100                 | % |  |                                           | 100  | % |                               |  | 1,756,087 |  |  |  | 100  | %
|                    |  |                         |        |  |                                             |  |        |                      |  |  |                     |   |  |                                           |      |   |                               |  |           |  |  |  |      |  



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

We have 8.3 million, 7.6 million and 7.0 million square feet of GLA in our consolidated portfolio with leases expiring in
2014, 2015 and 2016, respectively. We expect to achieve moderate increases in average rent spreads as we renew or re-lease these spaces across most of our markets. 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 indication of the market rents across our markets. For
further information regarding our expectations regarding future market rents across our markets, refer to Item 5Operating and Financial Review and ProspectsOperating ResultsShopping Centers below.

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 Virginia                                                                                 |  | Bed Bath & Beyond, CVS Pharmacy, TheGap Inc., Greater Atlantic & Pacific TeaCo., LA Fitness, Office Depot, Publix,Sports Authority, Supervalu, and The TJXCompanies
|              |  |                                                                                                                                                                                                                                     
|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, Loblaws,Metro, RBC Royal Bank, Shoppers DrugMart, Sobeys, TD Canada Trust andWalmart                                              
|              |  |                                                                                                                                                                                                                                     
|Citycon       |  | Northern Europe                                                                                                                                                                                                                      |  |                                                                                                                                                                    
|              |  | Finland, Sweden, Denmark, Estonia and Lithuania                                                                                                                                                                                      |  | ICA, Kesko Corp., S-Group, Stockman andTokmanni                                                                                                                    
|              |  |                                                                                                                                                                                                                                     
|Atrium        |  | Central and Eastern Europe                                                                                                                                                                                                           |  |                                                                                                                                                                    
|              |  | Poland, the Czech Republic, Hungary, Russia, Slovakia, Romania and Latvia                                                                                                                                                            |  | Ahold, Auchan, LPP, Metro Group and Spar                                                                                                                           
|              |  |                                                                                                                                                                                                                                     
|Gazit Germany |  | Germany                                                                                                                                                                                                                              |  | Aldi, Edeka, HIT, Kaisers and Rewe                                                                                                                                



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|                  |  |                                 |  |                                                                                                               
|----------------- |  | ------------------------------- |  | --------------------------------------------------------------------------------------------------------------
|Subsidiary        |  | Geographical Region             |  | Anchor/Major Tenants                                                                                          
|                  |  |                                
|Gazit Development |  | Israel                          |  | Cinema City, Homecenter, Eden Teva Market, 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, McDonalds and Renner

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

Through our wholly-owned subsidiary, ProMed, we own and operate medical office buildings in the United States. Among our properties
are medical and research office buildings, located mostly in or in proximity to hospitals and university campuses, including Hackensack University Medical Center, University of Pennsylvania/Childrens Hospital of Philadelphia, the Tufts Medical
Center Campus in Boston, and MedStar Healths Union Memorial Hospital near the Johns Hopkins Campus in Baltimore.

As of
December 31, 2013, ProMed had 16 income-producing properties, with a GLA of approximately 1.5 million square feet, which were recorded on our balance sheet at the total value of U.S.$ 557 million. For the year ended December 31, 2013
and the year ended December 31, 2012, these properties generated revenue in the amount of U.S.$ 55 million and U.S.$ 50 million, respectively. As of December 31, 2013, the occupancy rate of ProMeds properties was 96.0%.

In most of the medical office buildings owned by ProMed, it rents out areas to anchor tenants that are usually hospitals, medical
schools, or other medical providers, doctors and/or practice groups. The anchor tenants constitute a focal point that attracts customers to the whole center. In most cases, the leases of anchor tenants are for longer periods than those of other
tenants, and the anchor tenants are generally economically sound hospitals or large medical practices.

In addition, in August of 2012,
First Capital has acquired and integrated the medical office buildings in Canada that we previously owned through ProMed Canada.

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, 2013, 73.9% 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, 2013) 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 is working towards the construction and operation of a private power station, which will be fueled by natural gas in Ashkelon, located in the southern coastal region of Israel.

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, 2013 we invested U.S.$ 95.2 million. As of December 31,
2013, Hiref had entered into investment agreements for thirteen projects with a total investment commitment of U.S.$ 527 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.



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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, 2013:





LOGO



|(1) | A company jointly controlled together with CPI, which holds, to the best of the Companys knowledge, approximately 13.9% of the share capital of Atrium as of December 31, 2013.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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For the country of incorporation of each subsidiary, see Appendix A to Consolidated
Financial StatementsList of Major Group Investees as of December 31, 2013.

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 of our affiliate
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.

D. Property, Plants and Equipment

Our Properties

We own interests in 577
properties in over 20 countries. The following tables summarize our properties as of December 31, 2013:



|                                 |  |                           |     |  |                                |  |       |                       |  |  |                     |  |  |                 |      |   |                        |  |           |                       |  |  |                          |   |  |                 |           |      |  |  |      |    |  |  |            |     
|-------------------------------- |  | ------------------------- | --- |  | ------------------------------ |  | ----- | --------------------- |  |  | ------------------- |  |  | --------------- | ---- | - | ---------------------- |  | --------- | --------------------- |  |  | ------------------------ | - |  | --------------- | --------- | ---- |  |  | ---- | -- |  |  | ---------- | ----
|                                 |  | As of December 31, 2013   |     |  | Year Ended December 31, 2013   |  |       | As ofDecember 31,2013 | 
|Region                           |  | Total No. ofProperties(1) |     |  | Gazit-GlobesOwnershipInterest |  |       | GLA(1)                |  |  | Occupancy           |  |  | RentalIncome(2) |      |   | Percentof RentalIncome |  |           | NetOperatingIncome(2) |  |  | SamePropertyNOIGrowth(3) |   |  | FairValue(4)(5) |          
|                                 |  |                           |     |  |                                |  |       | (thousandsof sq. ft.) |  |  | (U.S.$ inthousands) |  |  |                 |      |   | (U.S.$ inthousands)    |  |           |                       |  |  | (U.S.$ inthousands)      |   |  |                 |          
|Shopping Center                  |  |                           |     |  |                                |  |       |                       |  |  |                     |  |  |                 |      |   |                        |  |           |                       |  |  |                          |   |  |                 |           |      |  |  |      |    |  |  |            |     
|United States(6)(7)              |  |                           | 142 |  |                                |  | 45.2  | %                     |  |  | 18,356              |  |  |                 | 92.4 | % |                        |  | 348,678   |                       |  |  | 18                       | % |  |                 | 251,857   |      |  |  | 3.1  | %  |  |  | 3,790,318  |     
|Canada                           |  |                           | 160 |  |                                |  | 45.2  | %                     |  |  | 23,788              |  |  |                 | 95.5 | % |                        |  | 638,313   |                       |  |  | 33                       | % |  |                 | 402,096   |      |  |  | 2.7  | %  |  |  | 6,400,395  |     
|Northern Europe(1)               |  |                           | 71  |  |                                |  | 49.3  | %                     |  |  | 11,373              |  |  |                 | 95.7 | % |                        |  | 405,060   |                       |  |  | 21                       | % |  |                 | 277,503   |      |  |  | 4.6  | %  |  |  | 4,477,643  |     
|Central and Eastern Europe(1)    |  |                           | 153 |  |                                |  | 39.8  | %                     |  |  | 13,578              |  |  |                 | 97.6 | % |                        |  | 387,616   |                       |  |  | 20                       | % |  |                 | 263,683   |      |  |  | 3.7  | %  |  |  | 3,246,022  |     
|Germany                          |  |                           | 7   |  |                                |  | 100.0 | %                     |  |  | 1,085               |  |  |                 | 88.0 | % |                        |  | 23,423    |                       |  |  | 1                        | % |  |                 | 15,390    |      |  |  | (0.5 | %) |  |  | 249,316    |     
|Israel(8)                        |  |                           | 11  |  |                                |  | 82.5  | %                     |  |  | 1,433               |  |  |                 | 97.1 | % |                        |  | 60,776    |                       |  |  | 3                        | % |  |                 | 45,747    |      |  |  | 3.6  | %  |  |  | 687,441    |     
|Brazil                           |  |                           | 4   |  |                                |  | 100.0 | %                     |  |  | 349                 |  |  |                 | 92.4 | % |                        |  | 9,879     |                       |  |  | 1                        | % |  |                 | 5,178     |      |  |  |     |    |  |  | 96,170     |     
|                                 |  |                           |     |  |                                |  |       |                       |  |  |                     |  |  |                 |      |   |                        |  |           |                       |  |  |                          |   |  |                 |           |      |  |  |      |    |  |  |            |     
|Healthcare                       |  |                           |     |  |                                |  |       |                       |  |  |                     |  |  |                 |      |   |                        |  |           |                       |  |  |                          |   |  |                 |           |      |  |  |      |    |  |  |            |     
|Medical Office(9)                |  |                           | 16  |  |                                |  | 100.0 | %                     |  |  | 1,464               |  |  |                 | 96.0 | % |                        |  | 57,478    |                       |  |  | 3                        | % |  |                 | 42,384    |      |  |  | 3.2  | %  |  |  | 557,189    |     
|                                 |  |                           |     |  |                                |  |       |                       |  |  |                     |  |  |                 |      |   |                        |  |           |                       |  |  |                          |   |  |                 |           |      |  |  |      |    |  |  |            |     
|Other properties                 |  |                           |     |  |                                |  |       |                       |  |  |                     |  |  |                 |      |   |                        |  |           |                       |  |  |                          |   |  |                 |           |      |  |  |      |    |  |  |            |     
|land for future development      |  |                           |    |  |                                |  |      |                       |  |  |                    |  |  |                 |     |   |                        |  |          |                       |  |  |                         |   |  |                 |          |      |  |  |     |    |  |  | 949,681    |     
|Properties under development(10) |  |                           | 10  |  |                                |  |      |                       |  |  |                    |  |  |                 |     |   |                        |  |          |                       |  |  |                         |   |  |                 |          |      |  |  |     |    |  |  | 586,634    |     
|Other                            |  |                           | 3   |  |                                |  |      |                       |  |  | 5                   |  |  |                 |     |   |                        |  | 1,635     |                       |  |  |                         |   |  |                 | 405       |      |  |  |     |    |  |  | 69,874     |     
|                                 |  |                           |     |  |                                |  |       |                       |  |  |                     |  |  |                 |      |   |                        |  |           |                       |  |  |                          |   |  |                 |           |      |  |  |      |    |  |  |            |     
|Total                            |  |                           | 577 |  |                                |  |      |                       |  |  | 71,431              |  |  |                 | 95.0 | % |                        |  | 1,932,858 | (12)                  |  |  | 100                      | % |  |                 | 1,304,243 | (13) |  |  | 3.4  | %  |  |  | 21,110,683 | (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 as well as Kista Galleria which was purchased with a 50% partner and
accounted for with the equity method. Gazit-Globe jointly controls Atrium and Atrium is accounted for using the equity method in Gazit-Globes financial statements pursuant to IFRS 11.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Represents amounts translated into U.S.$ using the exchange rate in effect on December 31, 2013 (U.S.$ 1.00 = NIS 3.471).
|--- | -------------------------------------------------------------------------------------------------------------------------

|(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 57 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.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(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, 2013.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | As of December 31, 2013, includes seven office, industrial, residential and storage properties.
|--- | -----------------------------------------------------------------------------------------------

|(7) | Occupancy data excludes the occupancy of seven 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 92.5%.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

|(10) | As of December 31, 2013, total GLA under development was 2.2 million square feet.
|---- | ---------------------------------------------------------------------------------

|(11) | This amount would be approximately NIS 76.7 billion (U.S.$ 22.1 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.$ 5.8 billion of this amount is not recorded in our financial statements. The approximately U.S.$ 5.8 billion 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, 2013: NIS 53,309 million (U.S.$ 15,358 million) of investment property, NIS 2,479 million (U.S.$ 714
million) of investment property under development, NIS 611 million (U.S.$ 176 million) of assets classified as held for sale and NIS 160 million (U.S.$ 46 million) of fixed assets, net, but excludes furniture, fixtures and other equipment.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(12) | This amount includes our rental income from our joint ventures in the amount of U.S.$ 529 million.
|---- | --------------------------------------------------------------------------------------------------

|(13) | This amount includes our net operating income from our joint ventures in the amount of U.S.$ 364 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, 2013, 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.



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|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 577 properties have a GLA
of approximately 71 million square feet and are geographically diversified across over 20 countries. We operate properties with a total value of approximately U.S.$ 22.1 billion (including the full value of properties that are consolidated and
of equity-accounted jointly controlled entities, approximately U.S.$ 5.8 billion of which is not recorded in our financial statements) as of December 31, 2013. 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, 2013, 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 are Equity One in the United States, First Capital in Canada and Citycon in Northern Europe. We also jointly control Atrium in Central and Eastern Europe with another party. 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. 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, 2013, 2012 and
2011, rental income represented 75%, 75% and 82% of our total revenues, respectively (79%, 80%, 81%, respectively, assuming full consolidation of 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 recent economic downturn 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 somewhat since the downturn of 2008 and 2009, we are still facing macro-economic challenges in some of our
markets. In the United States we continue to see gradual improvement and in Eastern Europe we have experienced a degree of stability with a concurrent slow improvement in the markets. Canada continues to be stable while the Northern Europe markets
continue to gradually improve.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Scheduled lease expirations. As of December 31, 2013, leases representing 11.9% and 10.8% of the GLA of our properties will expire during 2014 and 2015, 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, 2013 were impacted by the acquisition of 12 properties and the disposition of
53 properties across our markets, including the remaining assets of Royal Senior Care. The acquisitions include the purchase of Kista Galleria that is located in Stockholm, Sweden, and comprises GLA of 1.0 million square feet, which we
purchased in January 2013 together with a partner in equal shares for total consideration of  530 million including a purchase of one property by Atrium. Similarly, our results of operations for the year ended December 31, 2012 were
impacted by the acquisition of 30 properties and the disposition of 34 properties across our markets, including 12 senior housing facilities by Royal Senior Care, decreasing our GLA in a net amount of 0.8 million square feet. Similarly, our
results of operations for the year ended December 31, 2011 were impacted by the net disposition of six shopping centers and medical office buildings across our markets which nevertheless resulted in a net increase in total GLA of approximately
3.1 million square feet, including the acquisition of C&C US No. 1 Inc. (CapCo) through a joint venture with a subsidiary of Intu Properties Plc (formerly: Capital Shopping Centers Group Plc (CSC)).
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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, 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. For the year
ended December 31, 2011, we completed the development and redevelopment of properties representing 0.6 million square feet of GLA.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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, 2011, valuation gains
from investment property and investment property under development were NIS 1.7 billion. 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 (U.S. $ 277 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. Our principal subsidiaries and affiliates 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 gain of NIS 1.1 billion for the year ended December 31, 2011, a loss of NIS 0.4 billion for the year ended December 31, 2012 and a loss of NIS 2.4 billion (U.S.$ 704 million) for the year ended
December 31, 2013. 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 in respect of liabilities. See also Item 11Quantitative and Qualitative Disclosures About Market Risk for a discussion of our hedging
activities.



36



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##### Table of Contents

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, |      
|                                                 |  | 2011               |       |      | 2012 |  |       | 2013 | 
|Our economic interest in Equity One              |  |                    | 43.4  | %(1) |      |  | 45.5  | %    |  |  | 45.2  | %
|Shopping centers(2)                              |  |                    | 157   |      |      |  | 160   |      |  |  | 135   |  
|Other properties(3)                              |  |                    | 7     |      |      |  | 7     |      |  |  | 7     |  
|Properties under development(2)                  |  |                    | 1     |      |      |  | 1     |      |  |  | 1     |  
|GLA (millions of square feet)(2)                 |  |                    | 19.5  |      |      |  | 20.5  |      |  |  | 18.4  |  
|Occupancy rate(4)                                |  |                    | 90.7  | %    |      |  | 92.1  | %    |  |  | 92.4  | %
|Average annualized base rent (U.S.$ per sq. ft.) |  |                    | 13.97 |      |      |  | 14.58 |      |  |  | 16.16 |  



|(1) | Reflected our 34.1% direct interest and our share of Gazit Americas 12.7% interest in Equity One.
|--- | --------------------------------------------------------------------------------------------------

|(2) | Includes properties of equity-accounted joint ventures.
|--- | -------------------------------------------------------

|(3) | Comprised of office, industrial, residential and storage properties.
|--- | --------------------------------------------------------------------

|(4) | Excludes seven 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 90.3% as of December 31, 2011, 91.7% as of December 31, 2012 and 92.5% as of December 31, 2013.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                                                                                                    |  |                                                  |       |   |                    |  |       |      |  |  |       |  |  |  |     | 
|--------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------ | ----- | - | ------------------ |  | ----- | ---- |  |  | ----- |  |  |  | --- | 
|                                                                                                                                                    |  | Year Ended December 31,                          |      
|                                                                                                                                                    |  | 2011                                             |       |   | 2012               |  |       | 2013 |  |  | 2013  | 
|                                                                                                                                                    |  | (NIS in millions except sameproperty NOI growth) |       |   | (U.S.$ inmillions) | 
|Rental income                                                                                                                                       |  |                                                  | 1,236 |   |                    |  | 1,261 |      |  |  | 1,210 |  |  |  | 349 | 
|Net operating income                                                                                                                                |  |                                                  | 883   |   |                    |  | 918   |      |  |  | 874   |  |  |  | 252 | 
|Increase (decrease) in value of investment property and investment property under development, net (as reclassified due to
clarification to IAS 17) |  |                                                  | (22   | ) |                    |  | 538   |      |  |  | 686   |  |  |  | 198 | 
|Same property NOI growth (%)                                                                                                                        |  |                                                  | 1.3   |   |                    |  | 3.3   |      |  |  | 3.1   |  |  |  | N/A | 

The decrease in Equity Ones rental income to NIS 1,210 million (U.S.$ 349 million) for the year
ended December 31, 2013 from NIS 1,261 million for the year ended December 31, 2012 was driven primarily by a lower average U.S.$/NIS exchange rate in the year 2013 compared to the year 2012, offset by property acquisitions, rent
commencement of development and redevelopment projects and an increase in expense recovery income. The increase in Equity Ones rental income to NIS 1,261 million for the year ended December 31, 2012 from NIS 1,236 million for
the year ended December 31, 2011 was driven primarily by a higher average U.S.$/NIS exchange rate in the year 2012 compared to the year 2011, offset by a decrease in revenue from the disposition of the DIM properties during 2011.



37



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##### Table of Contents

The following table summarizes Equity Ones leasing activities for the years ended
December 31, 2011, 2012, and 2013:



|                                                                    |  |                         |       |  |      |  |       |      |  |  |       | 
|------------------------------------------------------------------- |  | ----------------------- | ----- |  | ---- |  | ----- | ---- |  |  | ----- | 
|                                                                    |  | Year Ended December 31, |      
|                                                                    |  | 2011                    |       |  | 2012 |  |       | 2013 | 
|Renewals                                                            |  |                         |       |  |      |  |       |      |  |  |       | 
|Number of leases                                                    |  |                         | 431   |  |      |  | 274   |      |  |  | 256   | 
|GLA leased (square feet at end of period, in thousands)             |  |                         | 1,655 |  |      |  | 948   |      |  |  | 1,320 | 
|New contracted annualized rent per leased square foot (U.S.$)       |  |                         | 13.47 |  |      |  | 17.67 |      |  |  | 16.33 | 
|Prior contracted annualized rent per leased square foot (U.S.$)     |  |                         | 13.72 |  |      |  | 16.55 |      |  |  | 14.76 | 
|New Leases                                                          |  |                         |       |  |      |  |       |      |  |  |       | 
|Number of leases                                                    |  |                         | 228   |  |      |  | 207   |      |  |  | 158   | 
|GLA leased (square feet at end of period, in thousands)             |  |                         | 685   |  |      |  | 720   |      |  |  | 735   | 
|Contracted annualized rent per leased square foot (U.S.$)           |  |                         | 14.35 |  |      |  | 17.52 |      |  |  | 26.55 | 
|Total New Leases and Renewals                                       |  |                         |       |  |      |  |       |      |  |  |       | 
|Number of leases                                                    |  |                         | 659   |  |      |  | 481   |      |  |  | 414   | 
|GLA leased (square feet at end of period, in thousands)             |  |                         | 2,340 |  |      |  | 1,668 |      |  |  | 2,055 | 
|Contracted annualized rent per leased square foot (U.S.$)           |  |                         | 13.73 |  |      |  | 17.61 |      |  |  | 18.75 | 
|Expired Leases                                                      |  |                         |       |  |      |  |       |      |  |  |       | 
|Number of leases(1)                                                 |  |                         | 326   |  |      |  | 199   |      |  |  | 181   | 
|GLA of expiring leases (square feet at end of period, in thousands) |  |                         | 897   |  |      |  | 772   |      |  |  | 832   | 



|(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.

In
2013, while the economic situation in most of the markets in which Equity One operated continued to improve, the rate of economic recovery varied among its different operating regions. Most of Equity Ones shopping centers have anchor tenants
that sell consumer goods (such as supermarkets, pharmacies and discount chain stores), and that are therefore less sensitive to economic cycles.

While Equity Ones management expects to see continued gradual improvement in economic conditions in 2014, it also expects the rate of
economic recovery to vary across the regions in which it operates. Volatile consumer confidence, increasing competition from larger retailers, internet sales and limited access to capital have continued to pose challenges for small shop tenants,
particularly in the Southeast and North and Central Florida markets. In addition, certain retail categories such as electronic goods, office supply stores and book stores continue to face increased threats from internet retailers. Equity Ones
management believes that the continued growth and diversification of its portfolio into top urban markets combined with the lack of new supply which limits competition, should continue to help to mitigate the impact of these challenges on it
business, and it further anticipates that same-property portfolio occupancy in 2014 will increase approximately 1.0% over 2013 and its same-property net operating income for 2014 will reflect an increase over 2013 of 2.5% to 3.5%.

Equity One has 2.2 million square feet of GLA in its consolidated shopping center portfolio with leases expiring in 2014 and another
approximately 235,000 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-lease these spaces.



38



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##### Table of Contents

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.



|                                              |  |                         |       |   |      |  |       |      |  |  |       |  
|--------------------------------------------- |  | ----------------------- | ----- | - | ---- |  | ----- | ---- |  |  | ----- | -
|                                              |  | Year Ended December 31, |      
|                                              |  | 2011                    |       |   | 2012 |  |       | 2013 | 
|Our economic interest in First Capital        |  |                         | 50.5  | % |      |  | 45.6  | %    |  |  | 45.2  | %
|Income-Producing Properties                   |  |                         | 162   |   |      |  | 169   |      |  |  | 160   |  
|Properties under development                  |  |                         | 7     |   |      |  | 6     |      |  |  | 4     |  
|GLA (millions of square feet)                 |  |                         | 23.0  |   |      |  | 24.1  |      |  |  | 23.8  |  
|Occupancy rate                                |  |                         | 96.2  | % |      |  | 95.6  | %    |  |  | 95.5  | %
|Average annualized base rent (C$ per sq. ft.) |  |                         | 16.81 |   |      |  | 17.51 |      |  |  | 17.96 |  





|                                                                                                                                         |  |                                                  |       |  |                    |  |       |      |  |  |       |  |  |  |     | 
|---------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------ | ----- |  | ------------------ |  | ----- | ---- |  |  | ----- |  |  |  | --- | 
|                                                                                                                                         |  | Year Ended December 31,                          |      
|                                                                                                                                         |  | 2011                                             |       |  | 2012               |  |       | 2013 |  |  | 2013  | 
|                                                                                                                                         |  | (NIS in millions except sameproperty NOI growth) |       |  | (U.S.$ inmillions) | 
|Rental income                                                                                                                            |  |                                                  | 1,893 |  |                    |  | 2,237 |      |  |  | 2,216 |  |  |  | 638 | 
|Net operating income                                                                                                                     |  |                                                  | 1,223 |  |                    |  | 1,426 |      |  |  | 1,396 |  |  |  | 402 | 
|Increase in value of investment property and investment property under development, net (as reclassified due to clarification to IAS
17) |  |                                                  | 1,699 |  |                    |  | 1,121 |      |  |  | 217   |  |  |  | 63  | 
|Same property NOI growth (%)(1)(2)(3)                                                                                                    |  |                                                  | 2.0   |  |                    |  | 1.4   |      |  |  | 2.7   |  |  |  | N/A | 



|(1) | In 2011 including expansion and development, same property NOI growth was 2.5%.
|--- | -------------------------------------------------------------------------------

|(2) | In 2012 including expansion and development, same property NOI growth was 2.3%.
|--- | -------------------------------------------------------------------------------

|(3) | In 2013 including expansion and development, same property NOI growth was 3.7%.
|--- | -------------------------------------------------------------------------------

The decrease
in First Capitals rental income to NIS 2,216 million (U.S.$ 638 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 increase in First Capitals rental income to NIS 2,237 million for the year ended December 31, 2012 from NIS 1,893 million for the year ended December 31, 2011 was driven primarily by an
increase in base rent and recoveries from tenants as a result of net acquisitions and developments coming on line, as well as increases in rental rates due to step-ups and lease renewals.

The following table summarizes First Capitals leasing activities for the years ended December 31, 2011, 2012, and 2013:



|                                                                    |  |                         |       |  |      |  |       |      |  |  |       | 
|------------------------------------------------------------------- |  | ----------------------- | ----- |  | ---- |  | ----- | ---- |  |  | ----- | 
|                                                                    |  | Year Ended December 31, |      
|                                                                    |  | 2011                    |       |  | 2012 |  |       | 2013 | 
|Renewals                                                            |  |                         |       |  |      |  |       |      |  |  |       | 
|Number of leases                                                    |  |                         | 325   |  |      |  | 393   |      |  |  | 478   | 
|GLA leased (square feet at end of period, in thousands)             |  |                         | 1,402 |  |      |  | 1,301 |      |  |  | 1,419 | 
|New contracted annualized rent per leased square foot (C$)          |  |                         | 15.73 |  |      |  | 18.65 |      |  |  | 20.13 | 
|Prior contracted annualized rent per leased square foot (C$)        |  |                         | 14.31 |  |      |  | 16.95 |      |  |  | 18.30 | 
|New Leases                                                          |  |                         |       |  |      |  |       |      |  |  |       | 
|Number of leases                                                    |  |                         | 369   |  |      |  | 425   |      |  |  | 339   | 
|GLA leased (square feet at end of period, in thousands)             |  |                         | 1,120 |  |      |  | 1,407 |      |  |  | 1,007 | 
|Contracted annualized rent per leased square foot (C$)              |  |                         | 21.78 |  |      |  | 21.47 |      |  |  | 21.23 | 
|Total New Leases and Renewals                                       |  |                         |       |  |      |  |       |      |  |  |       | 
|Number of leases                                                    |  |                         | 694   |  |      |  | 818   |      |  |  | 817   | 
|GLA leased (square feet at end of period, in thousands)             |  |                         | 2,522 |  |      |  | 2,708 |      |  |  | 2,426 | 
|Contracted annualized rent per leased square foot (C$)              |  |                         | 18.42 |  |      |  | 20.11 |      |  |  | 20.59 | 
|Expired Leases                                                      |  |                         |       |  |      |  |       |      |  |  |       | 
|Number of leases                                                    |  |                         | 300   |  |      |  | 290   |      |  |  | 352   | 
|GLA of expiring leases (square feet at end of period, in thousands) |  |                         | 1,022 |  |      |  | 947   |      |  |  | 687   | 



39



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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,
comprising in the first stage 246 residential units, of which 240 units have been sold as of December 31, 2013. The second stage is expected to include an additional 500 residential units and retail areas.

As of December 31, 2013, Canadas economy was growing at a relatively modest pace and uncertainty remains in spite of signs of
positive growth in the United States. There remains a lot of uncertainty in the global economic environment. The announcements by the United States Federal Reserve Bank related to moderating purchases of its bonds has recently impacted the long term
cost of debt. However, both the equity and long-term debt markets are accessible, but from a price perspective the costs have increased.

For the year ended December 31, 2013, First Capitals gross new leasing including development and redevelopment space totaled
1,007 thousand square feet. Renewal leasing totaled 1,419 thousand square feet with a 10.0% increase over expiring lease rates. The weighted average rate per occupied square foot increased to C$ 17.74 at December 31, 2013 before
acquisitions and dispositions from C$ 17.51 at December 31, 2012 as a result of leasing and development activity. During 2013, First Capital acquired properties with gross leasable area totaling 286 thousand square feet with an average
lease rate of C$ 27.82, bringing the total portfolio average in place rent to C$ 17.96 per square foot at year end. Compared to the year ending December 31, 2012, average lease rate per occupied square foot increased by 2.6%.

During 2013, new term leases on existing space averaged C$ 19.77 per square foot, and renewals averaged C$ 20.13 per square foot.
Newly developed space was leased at an average rate of C$ 23.61 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$ 23.00 to C$ 25.00 per square foot range.

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

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, as well as in Sweden, Denmark, Estonia and Lithuania. The following data is presented on a fully consolidated basis without reflecting non-controlling
interests.



|                                                |  |                    |       |   |      |  |       |      |  |  |       |  
|----------------------------------------------- |  | ------------------ | ----- | - | ---- |  | ----- | ---- |  |  | ----- | -
|                                                |  | As of December 31, |      
|                                                |  | 2011               |       |   | 2012 |  |       | 2013 | 
|Our economic interest in Citycon                |  |                    | 48.0  | % |      |  | 48.8  | %    |  |  | 49.3  | %
|Shopping centers(1)                             |  |                    | 78    |   |      |  | 78    |      |  |  | 71    |  
|Properties under development                    |  |                    | 2     |   |      |  |      |      |  |  | 1     |  
|GLA (millions of square feet)(1)                |  |                    | 10.7  |   |      |  | 10.8  |      |  |  | 11.4  |  
|Occupancy rate                                  |  |                    | 95.5  | % |      |  | 95.7  | %    |  |  | 95.7  | %
|Average annualized base rent (Euro per sq. ft.) |  |                    | 21.95 |   |      |  | 23.06 |      |  |  | 23.95 |  



|                                                                                                   |  |                                                  |       |   |                    |  |       |      |  |  |       |  |  |  |     | 
|-------------------------------------------------------------------------------------------------- |  | ------------------------------------------------ | ----- | - | ------------------ |  | ----- | ---- |  |  | ----- |  |  |  | --- | 
|                                                                                                   |  | Year Ended December 31,                          |      
|                                                                                                   |  | 2011                                             |       |   | 2012               |  |       | 2013 |  |  | 2013  | 
|                                                                                                   |  | (NIS in millions except sameproperty NOI growth) |       |   | (U.S.$ inmillions) | 
|Rental income(1)                                                                                   |  |                                                  | 1,081 |   |                    |  | 1,185 |      |  |  | 1,406 |  |  |  | 405 | 
|Net operating income(1)                                                                            |  |                                                  | 720   |   |                    |  | 803   |      |  |  | 964   |  |  |  | 278 | 
|Increase (decrease) in value of investment property and investment property under development, net |  |                                                  | (177  | ) |                    |  | 117   |      |  |  | 126   |  |  |  | 36  | 
|Same property NOI growth (%)                                                                       |  |                                                  | 3.8   |   |                    |  | 4.9   |      |  |  | 4.6   |  |  |  | N/A | 



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



40



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##### Table of Contents

Citycons rental income for the year ended December 31, 2013 compared to the year
ended December 31, 2012 increased by 18.6% due mainly to 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 increase in Citycons rental income by 9.6% for the year ended December 31, 2012 compared to the year ended December 31,
2011 was a result of the active redevelopment of retail properties and acquisitions of additional properties.

The following table
summarizes Citycons leasing activities for the years ended December 31, 2011, 2012, and 2013:



|                                                                    |  |                         |       |  |      |  |       |      |  |  |       | 
|------------------------------------------------------------------- |  | ----------------------- | ----- |  | ---- |  | ----- | ---- |  |  | ----- | 
|                                                                    |  | Year Ended December 31, |      
|                                                                    |  | 2011                    |       |  | 2012 |  |       | 2013 | 
|Renewals                                                            |  |                         |       |  |      |  |       |      |  |  |       | 
|Number of leases                                                    |  |                         | 213   |  |      |  | 137   |      |  |  | 107   | 
|GLA leased (square feet at end of period, in thousands)             |  |                         | 888   |  |      |  | 442   |      |  |  | 455   | 
|New contracted annualized rent per leased square foot (EUR)         |  |                         | 24.9  |  |      |  | 27.0  |      |  |  | 25.1  | 
|Prior contracted annualized rent per leased square foot (EUR)       |  |                         | 28.2  |  |      |  | 27.1  |      |  |  | 25.0  | 
|New Leases                                                          |  |                         |       |  |      |  |       |      |  |  |       | 
|Number of leases                                                    |  |                         | 569   |  |      |  | 655   |      |  |  | 504   | 
|GLA leased (square feet at end of period, in thousands)             |  |                         | 1,018 |  |      |  | 1,078 |      |  |  | 1,161 | 
|Contracted annualized rent per leased square foot (EUR)             |  |                         | 19.4  |  |      |  | 21.1  |      |  |  | 19.4  | 
|Total New Leases and Renewals                                       |  |                         |       |  |      |  |       |      |  |  |       | 
|Number of leases                                                    |  |                         | 782   |  |      |  | 792   |      |  |  | 611   | 
|GLA leased (square feet at end of period, in thousands)             |  |                         | 1,906 |  |      |  | 1,520 |      |  |  | 1,616 | 
|Contracted annualized rent per leased square foot (EUR)             |  |                         | 22.0  |  |      |  | 22.8  |      |  |  | 20.9  | 
|Expired Leases                                                      |  |                         |       |  |      |  |       |      |  |  |       | 
|Number of leases                                                    |  |                         | 877   |  |      |  | 1,064 |      |  |  | 1,117 | 
|GLA of expiring leases (square feet at end of period, in thousands) |  |                         | 2,005 |  |      |  | 1,615 |      |  |  | 2,009 | 

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, 2013 was characterized by continuing challenges in the countries in which Citycon operates, although
there are signs that the Swedish economy is gradually strengthening. Consumer confidence improved in all countries in which Citycon operates and remained above the Eurozone average, although it remained negative in Estonia and Lithuania. The year
saw strong growth in retail sales in Estonia and Lithuania, positive growth in Finland and Sweden, and negative growth in Denmark. In addition, inflation increased in Finland, Estonia, and Denmark but remained stable in Sweden and Lithuania. In all
of Citycons operating countries, except Lithuania, seasonally adjusted unemployment rates were lower than the Eurozone average. Finally, the availability of credit from financial institutions in the countries in which Citycon operates remained
low and credit spreads remained high, although there was an improvement from the previous year.

During the year ended December 31,
2013, Citycons occupancy rate, calculated by the economic method on a rental income basis, remained stable at 95.7%. The market rents for retail premises remained stable in Finland. The average rent level of new lease agreements made during
the year decreased compared to the previous year.

The average rent of the leases that began in 2013 was EUR 20.9/sq. ft. and the average
annualized rent of the leases that ended in 2013 was EUR 20.7/sq. ft. More specifically, in Finland, the average annualized rent rose during 2013 from EUR 23.8/sq. ft. to EUR 25.0/sq. ft., and the occupancy rate decreased to 95.1% from 95.3% mainly
due to a finalized redevelopment project with temporary vacancy; in Sweden, during 2013, the average annualized rent rose from EUR 21.5/sq. ft. to EUR 23.2/sq. ft., while the occupancy rate rose to 95.1% from 94.7%, mainly due to divestment of
properties.

Citycons management believes that, as a whole, its existing rental rates correspond well to the current rental market,
especially in both Finland and Sweden. Finally, in the Baltic countries, several lease agreements still have rental discounts but since retail sales have improved, their proportion has decreased. Citycons management, however, still believes
that there is a risk that some leases may be renewed at rental rates that correspond with the current, discounted rates.



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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, |      
|                                                |  | 2011               |       |   | 2012 |  |       | 2013 | 
|Our economic interest in Atrium                 |  |                    | 31.6  | % |      |  | 34.5  | %    |  |  | 39.8  | %
|Shopping centers                                |  |                    | 155   |   |      |  | 156   |      |  |  | 153   |  
|Properties under development                    |  |                    | 3     |   |      |  | 1     |      |  |  | 1     |  
|GLA (millions of square feet)                   |  |                    | 13.0  |   |      |  | 13.4  |      |  |  | 13.6  |  
|Occupancy rate                                  |  |                    | 97.3  | % |      |  | 97.4  | %    |  |  | 97.6  | %
|Average annualized base rent (Euro per sq. ft.) |  |                    | 12.80 |   |      |  | 13.09 |      |  |  | 13.43 |  



|                                                                                                   |  |                                                  |       |  |                    |  |       |      |  |  |       |   |  |  |     |  
|-------------------------------------------------------------------------------------------------- |  | ------------------------------------------------ | ----- |  | ------------------ |  | ----- | ---- |  |  | ----- | - |  |  | --- | -
|                                                                                                   |  | Year Ended December 31,                          |      
|                                                                                                   |  | 2011                                             |       |  | 2012               |  |       | 2013 |  |  | 2013  |  
|                                                                                                   |  | (NIS in millions except sameproperty NOI growth) |       |  | (U.S.$ inmillions) | 
|Rental income                                                                                      |  |                                                  | 1,198 |  |                    |  | 1,324 |      |  |  | 1,345 |   |  |  | 388 |  
|Net operating income                                                                               |  |                                                  | 771   |  |                    |  | 898   |      |  |  | 915   |   |  |  | 264 |  
|Increase (decrease) in value of investment property and investment property under development, net |  |                                                  | 385   |  |                    |  | (25   | )    |  |  | (101  | ) |  |  | (29 | )
|Same property NOI growth (%)                                                                       |  |                                                  | 8.6   |  |                    |  | 7.3   |      |  |  | 3.7   |   |  |  | N/A |  

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 acquisition in Poland and rental indexation which was offset by a lower average EUR/NIS exchange rate in 2013 compared to the year 2012.

The increase in Atriums rental income by 10.5% for the year ended December 31, 2012 compared to the year ended December 31,
2011 was a result of properties acquisitions, mainly in Poland and in Czech Republic, rental indexation and reduction in the level of temporary discounts previously granted to tenants.

We made our initial investment in Atrium on August 1, 2008 through the acquisition of convertible debentures and warrants as part of a
joint investment with CPI. As of December 31, 2008, we and CPI jointly held 27.2% of the voting rights in Atrium and our economic interest was 8.2%. In January and September 2009, we and CPI made a further investment in Atrium through the
acquisition of Atrium shares, partly in exchange for cancellation of our convertible debentures and warrants, bringing our economic interest in Atrium to 30.1%, achieving initial joint control over Atrium with CPI. As of December 31, 2011 our
economic interest in Atrium had increased to 31.6% and together with CPI we jointly controlled 51.0% of the voting rights in Atrium while as of December 31, 2012, our economic interest in Atrium had further risen to 34.5% and together with CPI
we jointly controlled 53.9% of the voting rights in Atrium. By December 31, 2013, our economic interest had reached 39.8% and together with CPI we jointly controlled 53.7% of the voting rights in Atrium. For the years ended December 31,
2009 through 2013, we accounted for our interest in Atrium using the equity method. At the end of 2009, Atrium was initially proportionally consolidated due to our initial joint control over Atrium. It, however, ceased to be proportionally
consolidated on January 1, 2010 due to our adoption of IFRS 11 as stated above. For further information on our acquisition Atrium share during 2013, please see Note 9c to our audited consolidated financial statements included elsewhere in this
Annual Report.



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##### Table of Contents

The following table summarizes Atriums leasing activities for the years ended
December 31, 2011, 2012 and 2013:



|                                                                    |  |                         |       |  |      |  |       |      |  |  |       | 
|------------------------------------------------------------------- |  | ----------------------- | ----- |  | ---- |  | ----- | ---- |  |  | ----- | 
|                                                                    |  | Year Ended December 31, |      
|                                                                    |  | 2011                    |       |  | 2012 |  |       | 2013 | 
|Renewals                                                            |  |                         |       |  |      |  |       |      |  |  |       | 
|Number of leases                                                    |  |                         | 401   |  |      |  | 394   |      |  |  | 739   | 
|GLA leased (square feet at end of period, in thousands)             |  |                         | 666   |  |      |  | 1,720 |      |  |  | 1,194 | 
|New contracted annualized rent per leased square foot (EUR)         |  |                         | 17.38 |  |      |  | 13.20 |      |  |  | 18.05 | 
|Prior contracted annualized rent per leased square foot (EUR)       |  |                         | 17.48 |  |      |  | 13.90 |      |  |  | 18.49 | 
|New Leases                                                          |  |                         |       |  |      |  |       |      |  |  |       | 
|Number of leases                                                    |  |                         | 506   |  |      |  | 565   |      |  |  | 285   | 
|GLA leased (square feet at end of period, in thousands)             |  |                         | 1,338 |  |      |  | 1,084 |      |  |  | 675   | 
|Contracted annualized rent per leased square foot (EUR)             |  |                         | 11.10 |  |      |  | 17.37 |      |  |  | 15.6  | 
|Total New Leases and Renewals                                       |  |                         |       |  |      |  |       |      |  |  |       | 
|Number of leases                                                    |  |                         | 907   |  |      |  | 959   |      |  |  | 1,024 | 
|GLA leased (square feet at end of period, in thousands)             |  |                         | 2,004 |  |      |  | 2,804 |      |  |  | 1,869 | 
|Contracted annualized rent per leased square foot (EUR)             |  |                         | 13.18 |  |      |  | 14.82 |      |  |  | 17.16 | 
|Expired Leases                                                      |  |                         |       |  |      |  |       |      |  |  |       | 
|Number of leases                                                    |  |                         | 611   |  |      |  | 613   |      |  |  | 647   | 
|GLA of expiring leases (square feet at end of period, in thousands) |  |                         | 863   |  |      |  | 929   |      |  |  | 1,019 | 

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.

The year ending December 31, 2013 saw positive momentum re-emerge across Europe, including Central and Eastern Europe, with better
growth, an improved outlook and renewed confidence. In the regions in which Atrium operates, several factors supported this trend, including the gradual pick-up in Eurozone demand, especially in Germany, and the easing of fiscal austerity within
most Central and Eastern European countries. Accordingly, indications are that domestic demand is benefitting from a steady rebound. Looking ahead, it is anticipated that the economic upturn is likely to progress at a steady pace throughout 2014 and
2015. Furthermore, Atriums core markets  namely Poland, the Czech Republic and Slovakia which account for approximately three quarters of Atriums total portfolio value and all of which hold an A credit ratingare
forecast to lead the regions growth over the next few years with the IMF forecasting 2014 GDP growth of 2.4%, 1.5% and 2.3% for Poland, the Czech Republic and Slovakia respectively.

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 5.3% from EUR 181.3 million for the year ended December 31, 2012 to EUR 190.8 million for the year ended December, 31 2013. Occupancy rates increased from 97.4% at the end of 2012 to 97.6% at
the end of 2013, and same property NOI grew by 3.7% to EUR 185.3 million for the year ended December 31, 2013 compared to EUR 178.7 million for the year ended December 31, 2012.

Atriums management believes that the majority of its current rental rates are in line with market rates, with potential for increases
through indexation.



43



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##### Table of Contents

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, |      
|                                                |  | 2011               |       |   | 2012 |  |       | 2013 | 
|Shopping centers                                |  |                    | 6     |   |      |  | 6     |      |  |  | 6     |  
|Other properties                                |  |                    | 1     |   |      |  | 1     |      |  |  | 1     |  
|GLA (millions of square feet)                   |  |                    | 1.1   |   |      |  | 1.1   |      |  |  | 1.1   |  
|Occupancy rate                                  |  |                    | 93.0  | % |      |  | 92.5  | %    |  |  | 88    | %
|Average annualized base rent (Euro per sq. ft.) |  |                    | 13.04 |   |      |  | 13.60 |      |  |  | 13.93 |  



|                                                                                        |  |                                                  |     |   |                    |  |      |      |  |  |      |   |  |  |     |  
|--------------------------------------------------------------------------------------- |  | ------------------------------------------------ | --- | - | ------------------ |  | ---- | ---- |  |  | ---- | - |  |  | --- | -
|                                                                                        |  | Year Ended December 31,                          |    
|                                                                                        |  | 2011                                             |     |   | 2012               |  |      | 2013 |  |  | 2013 |  
|                                                                                        |  | (NIS in millions except sameproperty NOI growth) |     |   | (U.S.$ inmillions) | 
|Rental income                                                                           |  |                                                  | 80  |   |                    |  | 83   |      |  |  | 81   |   |  |  | 23  |  
|Net operating income                                                                    |  |                                                  | 59  |   |                    |  | 56   |      |  |  | 53   |   |  |  | 15  |  
|Decrease in value of investment property and investment property under development, net |  |                                                  | (13 | ) |                    |  | (38  | )    |  |  | (45  | ) |  |  | (13 | )
|Same property NOI growth (decrease) (%)                                                 |  |                                                  | 3.5 |   |                    |  | (5.0 | )    |  |  | (0.5 | ) |  |  | 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, |       
|                                               |  | 2011               |        |   | 2012 |  |        | 2013 | 
|Our economic interest in Gazit Development     |  |                    | 75     | % |      |  | 75     | %    |  |  | 82.5   | %
|Shopping centers                               |  |                    | 11     |   |      |  | 11     |      |  |  | 11     |  
|Properties under development                   |  |                    | 1      |   |      |  | 1      |      |  |  | 2      |  
|GLA (millions of square feet)                  |  |                    | 1.4    |   |      |  | 1.4    |      |  |  | 1.4    |  
|Occupancy rate                                 |  |                    | 99.0   | % |      |  | 98.6   | %    |  |  | 97.1   | %
|Average annualized base rent (NIS per sq. ft.) |  |                    | 105.26 |   |      |  | 108.14 |      |  |  | 113.09 |  



|                                                                                        |  |                                                  |     |  |                    |  |     |      |  |  |      |  |  |  |     | 
|--------------------------------------------------------------------------------------- |  | ------------------------------------------------ | --- |  | ------------------ |  | --- | ---- |  |  | ---- |  |  |  | --- | 
|                                                                                        |  | Year Ended December 31,                          |    
|                                                                                        |  | 2011                                             |     |  | 2012               |  |     | 2013 |  |  | 2013 | 
|                                                                                        |  | (NIS in millions except sameproperty NOI growth) |     |  | (U.S.$ inmillions) | 
|Rental income                                                                           |  |                                                  | 193 |  |                    |  | 202 |      |  |  | 211  |  |  |  | 61  | 
|Net operating income                                                                    |  |                                                  | 149 |  |                    |  | 151 |      |  |  | 159  |  |  |  | 46  | 
|Increase in value of investment property and investment property under development, net |  |                                                  | 224 |  |                    |  | 35  |      |  |  | 28   |  |  |  | 8   | 
|Same property NOI growth (%)                                                            |  |                                                  | 7.2 |  |                    |  | 3.5 |      |  |  | 3.6  |  |  |  | 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, |     
|                                               |  | 2011               |      |   | 2012 |  |      | 2013 | 
|Shopping centers                               |  |                    | 4    |   |      |  | 3    |      |  |  | 4    |  
|Properties under development(1)                |  |                    |     |   |      |  | 1    |      |  |  | 1    |  
|GLA (millions of square feet)                  |  |                    | 0.43 |   |      |  | 0.25 |      |  |  | 0.35 |  
|Occupancy rate                                 |  |                    | 92.9 | % |      |  | 90.1 | %    |  |  | 92.4 | %
|Average annualized base rent (BRL per sq. ft.) |  |                    | 43.4 |   |      |  | 52.4 |      |  |  | 45.3 |  



|(1) | The project is in an advanced planning stage that has not yet been completed.
|--- | -----------------------------------------------------------------------------



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|                                                                                                   |  |                         |     |   |                    |  |    |      |  |  |      |   |  |  |     |  
|-------------------------------------------------------------------------------------------------- |  | ----------------------- | --- | - | ------------------ |  | -- | ---- |  |  | ---- | - |  |  | --- | -
|                                                                                                   |  | Year Ended December 31, |    
|                                                                                                   |  | 2011                    |     |   | 2012               |  |    | 2013 |  |  | 2013 |  
|                                                                                                   |  | (NIS in millions)       |     |   | (U.S.$ inmillions) | 
|Rental income                                                                                      |  |                         | 34  |   |                    |  | 31 |      |  |  | 34   |   |  |  | 10  |  
|Net operating income                                                                               |  |                         | 29  |   |                    |  | 16 |      |  |  | 18   |   |  |  | 5   |  
|Increase (decrease) in value of investment property and investment property under development, net |  |                         | (18 | ) |                    |  | 58 |      |  |  | (42  | ) |  |  | (12 | )

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, |      
|                                                 |  | 2011               |       |   | 2012 |  |       | 2013 | 
|Medical office buildings                         |  |                    | 15    |   |      |  | 16    |      |  |  | 16    |  
|GLA (millions of square feet)                    |  |                    | 1.4   |   |      |  | 1.5   |      |  |  | 1.5   |  
|Occupancy rate                                   |  |                    | 95.9  | % |      |  | 96.3  | %    |  |  | 96.0  | %
|Average annualized base rent (U.S.$ per sq. ft.) |  |                    | 29.97 |   |      |  | 30.31 |      |  |  | 30.45 |  



|                                                                                                   |  |                         |     |   |                    |  |     |      |  |  |      |   |  |  |    |  
|-------------------------------------------------------------------------------------------------- |  | ----------------------- | --- | - | ------------------ |  | --- | ---- |  |  | ---- | - |  |  | -- | -
|                                                                                                   |  | Year Ended December 31, |    
|                                                                                                   |  | 2011                    |     |   | 2012               |  |     | 2013 |  |  | 2013 |  
|                                                                                                   |  | (NIS in millions)       |     |   | (U.S.$ inmillions) | 
|Rental income                                                                                      |  |                         | 145 |   |                    |  | 193 |      |  |  | 200  |   |  |  | 57 |  
|Net operating income                                                                               |  |                         | 103 |   |                    |  | 142 |      |  |  | 147  |   |  |  | 42 |  
|Increase (decrease) in value of investment property and investment property under development, net |  |                         | (3  | ) |                    |  | 83  |      |  |  | (6   | ) |  |  | (2 | )

Other Businesses

Dori Group. Gazit Development holds, through Acad, 73.9% 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 October 2011, Dori Group announced that it had been informed by Gazit Development that Gazit
Development was making initial inquiries with the goal, among other things, of considering ways to make the business of Dori Group and Gazit Development more efficient, including restructuring, combining operations or bringing in new partners. The
aforementioned matters are still under consideration and neither company has made any definitive determination regarding how to proceed. Dori Group is primarily engaged in the development and construction of primarily residential projects in Israel
and Eastern Europe. Gazit-Globe jointly controlled Dori Group during the year ended December 31, 2010 and the period ended April 17, 2011 and accounted for its results for these periods using the equity method. The following data for the
period ended on April 17, 2011 is presented using the equity method. Since April 17, 2011, Dori Group has been fully consolidated due to our acquisition of an additional 50% interest in Acad. Set forth is Dori Groups revenues and
gross profit:



|                                                                         |  |                         |       |  |                    |  |       |         |  |  |         |   |  |  |     |  
|------------------------------------------------------------------------ |  | ----------------------- | ----- |  | ------------------ |  | ----- | ------- |  |  | ------- | - |  |  | --- | -
|                                                                         |  | Year Ended December 31, |      
|                                                                         |  | 2011                    |       |  | 2012(2)            |  |       | 2013(2) |  |  | 2013(2) |  
|                                                                         |  | (NIS in millions)       |       |  | (U.S.$ inmillions) | 
|Revenues from sale of buildings, land and construction work performed(1) |  |                         | 1,356 |  |                    |  | 1,760 |         |  |  | 1,569   |   |  |  | 452 |  
|Gross profit (loss)(1)                                                   |  |                         | 59    |  |                    |  | 40    |         |  |  | (26     | ) |  |  | (7  | )



|(1) | Revenues and gross profit on a 100% basis.
|--- | ------------------------------------------

|(2) | Restated, see Notes 2ee and 41 to our audited consolidated financial statement included elsewhere in this Annual Report.
|--- | ------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

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 abatement and the costs of certain renovations and other expenses, 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.

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.

Revenues from sale of buildings, land and construction work performed. Such revenues primarily consist of revenues from
construction work performed by Dori Group and revenues from the sale of residential apartments by Dori Group. Starting in 2013, it also includes 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 apartments sold by Dori Group and First Capital, including the cost of land, raw materials and subcontractors.

Increase (decrease) in value of 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 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
investees, which results from shares in these investees having been acquired at a price lower than the fair value of the investees identifiable net assets, capital gain and gain from dilution of interest in investees.

Other expenses. Other expenses primarily consist of impairment of goodwill and other assets, capital loss, and loss from
dilution of interest in investees.

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 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 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 derivative instruments, 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 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 and taxes with respect to previous years.



46



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##### Table of Contents

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



|                                                                                        |                   |                         |        |   |                     |  |        |            |  |                  |                              |   |  |  |      |   |  |  |       |  
|--------------------------------------------------------------------------------------- | ----------------- | ----------------------- | ------ | - | ------------------- |  | ------ | ---------- |  | ---------------- | ---------------------------- | - |  |  | ---- | - |  |  | ----- | -
|                                                                                        |                   | Year Ended December 31, |        |   | Increase
(decrease) |  |        | Change (%) |  |                  | Year EndedDecember 31,2013 * |  
|                                                                                        |                   | 2012 *                  |        |   | 2013 *              |  |        |            | 
|                                                                                        |                   |                         |        |   |                     |  |        |            |  | U.S.$ inmillions |                             
|                                                                                        | (NIS in millions) |                         |        |  
|Rental income                                                                           |                   |                         | 5,249  |   |                     |  | 5,146  |            |  |                  | (103                         | ) |  |  | (2   | ) |  |  | 1,483 |  
|Property operating expenses                                                             |                   |                         | 1,705  |   |                     |  | 1,689  |            |  |                  | (16                          | ) |  |  | (1   | ) |  |  | 487   |  
|                                                                                        |                   |                         |        |   |                     |  |        |            |  |                  |                              |   |  |  |      |   |  |  |       |  
|Net operating rental income                                                             |                   |                         | 3,544  |   |                     |  | 3,457  |            |  |                  | (87                          | ) |  |  | (2   | ) |  |  | 996   |  
|                                                                                        |                   |                         |        |   |                     |  |        |            |  |                  |                              |   |  |  |      |   |  |  |       |  
|Revenues from sale of buildings, land and construction work performed                   |                   |                         | 1,760  |   |                     |  | 1,672  |            |  |                  | (88                          | ) |  |  | (5   | ) |  |  | 481   |  
|Cost of buildings sold, land and construction work performed                            |                   |                         | 1,720  |   |                     |  | 1,688  |            |  |                  | (32                          | ) |  |  | (2   | ) |  |  | 486   |  
|                                                                                        |                   |                         |        |   |                     |  |        |            |  |                  |                              |   |  |  |      |   |  |  |       |  
|Gross profit (loss) from sale of buildings, land and construction work performed        |                   |                         | 40     |   |                     |  | (16    | )          |  |                  | (56                          | ) |  |  | (140 | ) |  |  | (5    | )
|                                                                                        |                   |                         |        |   |                     |  |        |            |  |                  |                              |   |  |  |      |   |  |  |       |  
|Total gross profit                                                                      |                   |                         | 3,584  |   |                     |  | 3,441  |            |  |                  | (143                         | ) |  |  | (4   | ) |  |  | 991   |  
|Fair value gain from investment property and investment property under development, net |                   |                         | 1,938  |   |                     |  | 962    |            |  |                  | (976                         | ) |  |  | (50  | ) |  |  | 277   |  
|General and administrative expenses                                                     |                   |                         | (673   | ) |                     |  | (610   | )          |  |                  | 63                           |   |  |  | (9   | ) |  |  | (176  | )
|Other income                                                                            |                   |                         | 164    |   |                     |  | 218    |            |  |                  | 54                           |   |  |  | 33   |   |  |  | 63    |  
|Other expenses                                                                          |                   |                         | (47    | ) |                     |  | (74    | )          |  |                  | (27                          | ) |  |  | 57   |   |  |  | (21   | )
|Companys share in earnings of equity-accounted investees, net                          |                   |                         | 299    |   |                     |  | 149    |            |  |                  | (150                         | ) |  |  | (50  | ) |  |  | 43    |  
|                                                                                        |                   |                         |        |   |                     |  |        |            |  |                  |                              |   |  |  |      |   |  |  |       |  
|Operating income                                                                        |                   |                         | 5,265  |   |                     |  | 4,086  |            |  |                  | (1,179                       | ) |  |  | (22  | ) |  |  | 1,177 |  
|Finance expenses                                                                        |                   |                         | (2,214 | ) |                     |  | (2,185 | )          |  |                  | 29                           |   |  |  | (1   | ) |  |  | (629  | )
|Finance income                                                                          |                   |                         | 120    |   |                     |  | 549    |            |  |                  | 429                          |   |  |  | 358  |   |  |  | 158   |  
|                                                                                        |                   |                         |        |   |                     |  |        |            |  |                  |                              |   |  |  |      |   |  |  |       |  
|Income before taxes on income                                                           |                   |                         | 3,171  |   |                     |  | 2,450  |            |  |                  | (721                         | ) |  |  | (23  | ) |  |  | 706   |  
|Taxes on income                                                                         |                   |                         | 758    |   |                     |  | 265    |            |  |                  | (493                         | ) |  |  | (65  | ) |  |  | 76    |  
|                                                                                        |                   |                         |        |   |                     |  |        |            |  |                  |                              |   |  |  |      |   |  |  |       |  
|Net income                                                                              |                   |                         | 2,413  |   |                     |  | 2,185  |            |  |                  | (228                         | ) |  |  | (9   | ) |  |  | 630   |  
|                                                                                        |                   |                         |        |   |                     |  |        |            |  |                  |                              |   |  |  |      |   |  |  |       |  



|* | Restated and retrospectively adjusted, as referred to above, see also to Notes 2a, 2ee and 41 to our audited consolidated financial statements included elsewhere in this Annual Report.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Rental Income

The decrease of NIS
103 million (U.S.$ 30 million), or 2%, in rental income, or increase of NIS 216 million (U.S.$ 62 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.$ 5 million), or 1%, in property operating expenses, or increase of NIS 92 million (U.S.$ 27 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.



47



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##### Table of Contents

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.$ 25 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. Refer also to Note 2ee to our audited consolidated financial statements included elsewhere in this Annual Report.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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.$ 9 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 which was offset by an increase in the costs
estimates in projects under construction, refer also to Note 2ee to our audited consolidated financial statements included elsewhere in this Annual Report.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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.$ 277 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.$ 281 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 have 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 have 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 have 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. 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, 2013 and December 31, 2012 as well as sensitivity analysis, please refer to Notes 12 and 13 to our audited consolidated financial
statements included elsewhere in this Annual Report.



48



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##### Table of Contents

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.$ 18 million), or 9%, in general and administrative expenses, or NIS 94 million (U.S.$ 27 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.$ 16 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.$ 8 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.$ 43 million) or 43% 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.$ 8 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.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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.
| | - |  | -------------------------------------------------------------------------------------



49



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##### Table of Contents

Finance income

The increase of NIS 429 million (U.S.$ 124 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 39 million in interest income and an increase of NIS 418 million gain from the revaluation of financial derivatives, primarily with respect to currency hedging
transactions.

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.$ 76 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.



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##### Table of Contents

Year ended December 31, 2012 compared to year ended December 31, 2011



|                                                                                        |                   |                         |        |   |        |  |        |            |  |  |            |   |  |  |     |  
|--------------------------------------------------------------------------------------- | ----------------- | ----------------------- | ------ | - | ------ |  | ------ | ---------- |  |  | ---------- | - |  |  | --- | -
|                                                                                        |                   | Year Ended December 31, |        |   |        |  |        |            | 
|                                                                                        |                   | 2011 *                  |        |   | 2012 * |  |        | Increase   |  |  |            |  
|                                                                                        |                   |                         |        |   |        |  |        | (decrease) |  |  | Change (%) |  
|                                                                                        | (NIS in millions) |                         |       
|Rental income                                                                           |                   |                         | 4,718  |   |        |  | 5,249  |            |  |  | 531        |   |  |  | 11  |  
|Property operating expenses                                                             |                   |                         | 1,522  |   |        |  | 1,705  |            |  |  | 183        |   |  |  | 12  |  
|                                                                                        |                   |                         |        |   |        |  |        |            |  |  |            |   |  |  |     |  
|Net operating rental income                                                             |                   |                         | 3,196  |   |        |  | 3,544  |            |  |  | 348        |   |  |  | 11  |  
|                                                                                        |                   |                         |        |   |        |  |        |            |  |  |            |   |  |  |     |  
|Revenues from sale of buildings, land and construction work performed                   |                   |                         | 1,001  |   |        |  | 1,760  |            |  |  | 759        |   |  |  | 76  |  
|Cost of buildings sold, land and construction work performed                            |                   |                         | 967    |   |        |  | 1,720  |            |  |  | 753        |   |  |  | 78  |  
|                                                                                        |                   |                         |        |   |        |  |        |            |  |  |            |   |  |  |     |  
|Gross profit from sale of buildings, land and construction work performed               |                   |                         | 34     |   |        |  | 40     |            |  |  | 6          |   |  |  | 18  |  
|                                                                                        |                   |                         |        |   |        |  |        |            |  |  |            |   |  |  |     |  
|Total gross profit                                                                      |                   |                         | 3,230  |   |        |  | 3,584  |            |  |  | 354        |   |  |  | 11  |  
|Fair value gain from investment property and investment property under development, net |                   |                         | 1,692  |   |        |  | 1,938  |            |  |  | 246        |   |  |  | 15  |  
|General and administrative expenses                                                     |                   |                         | (755   | ) |        |  | (673   | )          |  |  | (82        | ) |  |  | (11 | )
|Other income                                                                            |                   |                         | 115    |   |        |  | 164    |            |  |  | 49         |   |  |  | 43  |  
|Other expenses                                                                          |                   |                         | (110   | ) |        |  | (47    | )          |  |  | (63        | ) |  |  | (57 | )
|Companys share in earnings of equity-accounted investees, net                          |                   |                         | 334    |   |        |  | 299    |            |  |  | (35        | ) |  |  | (10 | )
|                                                                                        |                   |                         |        |   |        |  |        |            |  |  |            |   |  |  |     |  
|Operating income                                                                        |                   |                         | 4,506  |   |        |  | 5,265  |            |  |  | 759        |   |  |  | 17  |  
|Finance expenses                                                                        |                   |                         | (2,197 | ) |        |  | (2,214 | )          |  |  | (17        | ) |  |  | 1   |  
|Finance income                                                                          |                   |                         | 72     |   |        |  | 120    |            |  |  | 48         |   |  |  | 67  |  
|                                                                                        |                   |                         |        |   |        |  |        |            |  |  |            |   |  |  |     |  
|Income before taxes on income                                                           |                   |                         | 2,381  |   |        |  | 3,171  |            |  |  | 790        |   |  |  | 33  |  
|Taxes on income                                                                         |                   |                         | 352    |   |        |  | 758    |            |  |  | 406        |   |  |  | 115 |  
|                                                                                        |                   |                         |        |   |        |  |        |            |  |  |            |   |  |  |     |  
|Net income                                                                              |                   |                         | 2,029  |   |        |  | 2,413  |            |  |  | 384        |   |  |  | 19  |  
|                                                                                        |                   |                         |        |   |        |  |        |            |  |  |            |   |  |  |     |  



|* | Restated and retrospectively adjusted, as referred to above, see also to Notes 2a, 2ee and 41 to our audited consolidated financial statements included elsewhere in this Annual Report.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Rental Income

The increase of NIS
531 million (U.S.$ 153 million), or 11%, in rental income, or NIS 310 million (U.S.$ 89 million), or 7%, excluding the impact of currency exchange rates, for the year ended December 31, 2012 compared to the year ended
December 31, 2011, was due primarily to:



| |  |  | an increase of NIS 204 million due to external and internal growth in First Capital; and
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | an increase of NIS 100 million in Citycon primarily from acquisitions and completion of development projects.
| | - |  | -------------------------------------------------------------------------------------------------------------

Property operating expenses

The
increase of NIS 183 million (U.S.$ 53 million), or 12%, in property operating expenses, or NIS 105 million (U.S.$ 30 million), or 6%, excluding the impact of currency exchange rates, for the year ended December 31, 2012 compared to
the year ended December 31, 2011, was due primarily to:



| |  |  | an increase of NIS 87 million due to the growth in GLA associated with properties acquired in 2011 and 2012.
| | - |  | ------------------------------------------------------------------------------------------------------------

Property operating expenses, as a percentage of rental income, was 32.5% for the year ended December 31, 2012 compared to 32.3% for the
year ended December 31, 2011.



51



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##### Table of Contents

Revenues from sale of buildings, land and construction work performed

The increase of NIS 759 million (U.S.$ 219 million), or 76%, in revenues from sale of buildings, land and construction work performed,
for the year ended December 31, 2012 compared to the year ended December 31, 2011, was due to:



| |  |  | an increase of NIS 321 million due to the initial consolidation of Dori Group since April 17, 2011;
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | an increase of NIS 252 million in revenues from construction work resulting mainly from an increase in the number of construction projects in which Dori Group was engaged compared to the year ended
December 31, 2011. Refer also to Note 2ee to our audited consolidated financial statements included elsewhere in this Annual Report; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of NIS 186 million due to higher revenues from the sale of apartments compared to the year ended December 31, 2011.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------

Cost of buildings sold, land and construction work performed

The increase of NIS 753 million (U.S.$ 217 million), or 78%, in cost of buildings sold, land and construction work performed, for the
year ended December 31, 2012 compared to the year ended December 31, 2011, was due primarily to:



| |  |  | an increase of NIS 300 million due to the initial consolidation of Dori Group since April 17, 2011;
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | an increase of NIS 290 million due to costs arising from an increase in the number of construction projects in which Dori Group was engaged in compared to the year ended December 31, 2011 and due to an
increase in the costs estimates in projects under construction, refer also to Note 2ee to our audited consolidated financial statements included elsewhere in this Annual Report; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of NIS 163 million due to the increase in the sale of apartments compared to the year ended December 31, 2011.
| | - |  | --------------------------------------------------------------------------------------------------------------------------

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, 2012, the fair value of our properties
increased by NIS 1,938 million (U.S.$ 558 million), due mainly to the net increase in the fair value of First Capitals and Equity Ones properties. This compares to a fair value gain during the year ended December 31, 2011 of
NIS 1,692 million, due mainly to the net increase in the fair value of First Capitals properties.

General and administrative expenses

The decrease of NIS 82 million (U.S.$ 24 million), or 11%, in general and administrative expenses, or NIS 58 million (U.S.
$ 17 million), or 8%, excluding the impact of currency exchange rates, for the year ended December 31, 2012 compared to the year ended December 31, 2011, was due primarily to:



| |  |  | a decrease of NIS 103 million due to compensation that the chairman of the board of directors was entitled to with respect to the expiration of his employment agreement in the amount of approximately NIS
60 million and the provision with respect to the 2011 bonus, in the amount of approximately NIS 43 million, which compensation was fully and irrevocably waived but recorded as an expense and a corresponding increase in capital reserve in
the year ended December 31, 2011 (in the year ended December 31, 2012, zero); and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

offset by:



| |  |  | an increase of NIS 24 million primarily due to the initial consolidation of Dori Group since April 17, 2011.
| | - |  | ------------------------------------------------------------------------------------------------------------

Other income

The increase of NIS
49 million (U.S.$ 14 million), or 43%, in other income, for the year ended December 31, 2012 compared to the year ended December 31, 2011, was due primarily to increase of NIS 32 million resulting from gain from bargain purchase
generated by the purchase of Atriums shares in an amount of NIS 134 million in 2012 compared to NIS 76 million gain generated by the purchase of Atrium shares and an NIS 26 million gain from the initial consolidation of Dori
Group in 2011, and an NIS 21 million gain resulting from the sale of properties.



52



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##### Table of Contents

Other expenses

The decrease of NIS 63 million (U.S.$ 18 million) or 57% in other expenses for the year ended December 31, 2012 compared to the year
ended December 31, 2011 was due primarily to a decrease of NIS 38 million in loss of sale of properties and to an impairment of goodwill of NIS 38 million with respect to Citycon recorded in 2011.

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

The decrease of NIS 35 million (U.S.$ 10 million) or 10% in Companys share in earnings of equity-accounted investees, net, for the
year ended December 31, 2012 compared to the year ended December 31, 2011 is comprised mainly of:



| |  |  | the Companys share of Atriums earnings in 2012, in an amount of NIS 159 million, compared to NIS 214 million in 2011. The decrease in Atriums earnings was due mainly to a devaluation in the
fair value on its investment properties (primarily with respect to lands), compared to a revaluation in 2011;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Companys share of Royal Senior Cares earnings in the reporting period, in an amount of NIS 63 million (primarily with respect to a capital gain from the sale of 12 senior housing facilities)
compared to NIS 15 million in 2011;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Equity Ones share in the earnings of its joint ventures in an amount of NIS 53 million, compared to NIS 16 million in 2011; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | 2011 included the Companys share of Dori Groups earnings (through March 31, 2011) in an amount of NIS 30 million.
| | - |  | -------------------------------------------------------------------------------------------------------------------

Finance expenses

The increase of NIS
17 million (U.S.$ 5 million), or 1%, in finance expenses, for the year ended December 31, 2012 compared to the year ended December 31, 2011, was due primarily to:



| |  |  | an increase of NIS 73 million resulting from the increase in the balance of our loans and debentures from an average balance of NIS 34.6 billion in the year ended December 31, 2011 to an average balance of NIS
39.7 billion in the year ended December 31, 2012; offset by a decrease in interest on liabilities with variable interest rates and in the effective interest rate of liabilities that are linked to the Israeli consumer price index in the year
ended December 31, 2012 compared to the year ended December 31, 2011;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of NIS 133 million due to the loss on early redemption of debentures (primarily in Equity One); and
| | - |  | ---------------------------------------------------------------------------------------------------------------

partially offset by:



| |  |  | a decrease of NIS 190 million due to the devaluation of derivatives in the year ended December 31, 2011, primarily with respect to economic currency hedging transactions (in the year ended December 31,
2012, a revaluation was recorded as finance income).
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Finance income

The increase of NIS 48 million (U.S.$ 14 million), or 67%, in finance income, for the year ended December 31, 2012 compared to the
year ended December 31, 2011, was due primarily to an increase of NIS 15 million in interest income, an increase of NIS 15 million from the realization of investments and from dividend income, a NIS 13 million gain from
revaluation of derivatives, primarily with respect to economic currency hedging transactions which was recognized in 2012 (in 2011 we recognized a loss).

Taxes on income

Taxes on income
amounted to NIS 758 million (U.S.$ 218 million) in the year ended December 31, 2012 compared to NIS 352 million in the year ended December 31, 2011. This change was due mainly to deferred tax expenses of NIS 738 million
primarily with respect to an increase in the value of investment property and investment property under development, compared to deferred tax expenses of NIS 326 million in the year ended December 31, 2011.

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.



53



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##### Table of Contents

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 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.

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, 2013, we received dividend payments in the amount of NIS 690 million (U.S.$ 199 million) from these
subsidiaries and affiliate. In 2012, we received dividend payments in the amount of NIS 675 million from these subsidiaries and affiliate and interest payments in the amount of NIS 9 million on account of debt securities that we held in
Citycon. In 2011, we received dividend payments in the amount of NIS 517 million from these subsidiaries and affiliate and interest payments in the amount of NIS 44 million on account of debt securities that we held in First Capital and
Citycon and a loan to Gazit America.

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, 2013, our available liquid assets on a consolidated basis, including short term investments, totaled
NIS 1.6 billion (U.S.$ 467 million). As of December 31, 2013, we had revolving credit lines on a consolidated basis in the total amount of NIS 9.8 billion (U.S.$ 2.8 billion), of which we had drawn a total of NIS 1.8 billion (U.S.$
0.5 billion) and had NIS 8.0 billion (U.S.$ 2.3 billion) available for immediate drawdown. In total, our liquid assets and approved unutilized credit facilities as of December 31, 2013 amounted to NIS 9.6 billion (U.S.$ 2.8 billion) on a
consolidated basis. As of December 31, 2013, we also had on a consolidated basis unencumbered investment property which was carried on our books at its fair value of NIS 38.4 billion (U.S.$ 11.0 billion). Our interest-bearing debt on
a consolidated basis was NIS 38.2 billion (U.S.$ 11.0 billion) (excluding NIS 1.2 billion (U.S.$ 352 million) of convertible debentures) as of December 31, 2013.

As of December 31, 2013, we had a working capital deficiency of NIS 1,813 million (U.S.$ 522 million) on a consolidated basis. We
believe that the above-mentioned sources, including our revolving, approved credit lines (under which NIS 8.0 billion (U.S.$ 2.3 billion) was available for immediate drawdown as of December 31, 2013) 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, 2013, the available liquid assets of Gazit-Globe and its private subsidiaries on a consolidated basis, including
short term investments, totaled NIS 641 million (U.S.$ 185 million). As of December 31, 2013, Gazit-Globe and its private subsidiaries had revolving credit lines on a consolidated basis in the total amount of NIS 4.2 billion (U.S.$ 1.2
billion), of which they had drawn a total of NIS 1.3 billion (U.S.$ 0.4 billion) and had NIS 2.9 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, 2013, amounted to NIS 3.5 billion (U.S.$ 1.0 billion) on a consolidated basis. As of December 31, 2013, 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 1.7 billion (U.S.$ 0.5 billion). The interest-bearing debt of Gazit-Globe and its private subsidiaries on a consolidated basis was NIS 14.7 billion (U.S.$ 4.2 billion) as of
December 31, 2013.



54



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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, 2013, Gazit-Globe and its private subsidiaries had outstanding debentures in the aggregate amount of NIS 10.8 billion (U.S.$ 3.1 billion) and indebtedness to financial institutions in the aggregate amount of NIS 3.9 billion (U.S.$
1.1 billion). As of December 31, 2012, Gazit-Globe and its private subsidiaries had outstanding debentures in the aggregate amount of NIS 9.7 billion (U.S.$ 2.8 billion) and indebtedness to financial institutions in the aggregate amount of NIS
5.5 billion (U.S.$ 1.6 billion).

The following table sets forth information regarding the credit facilities to which Gazit-Globe and its
private subsidiaries are party as of December 31, 2013:



|                           |  |              |  |                                            |       |  |                 |  |     |                                       |  |  |                                   |  |  |                             |       |  |  |  |     |  
|-------------------------- |  | ------------ |  | ------------------------------------------ | ----- |  | --------------- |  | --- | ------------------------------------- |  |  | --------------------------------- |  |  | --------------------------- | ----- |  |  |  | --- | -
|Facilities                 |  | Denomination |  | CarryingAmount ofLiability(NIS inmillions) |       |  | Maturity(Years) |  |     | AggregateAvailability(NIS inmillions) |  |  | AmountOutstanding(NIS inmillions) |  |  | WeightedAverageInterestRate |      
|Revolving Facilities       |  | Various(2)   |  |                                            | 1,266 |  |                 |  | 3.0 |                                       |  |  | 2,960                             |  |  |                             | 4,226 |  |  |  | 2.6 | %
|Term Loan                  |  | EUR          |  |                                            | 478   |  |                 |  | 5.1 |                                       |  |  | N/A                               |  |  |                             | N/A   |  |  |  | 3.0 | %
|Term Loans                 |  | Israeli CPI  |  |                                            | 327   |  |                 |  | 1.5 |                                       |  |  | N/A                               |  |  |                             | N/A   |  |  |  | 3.2 | %
|Term Loan                  |  | U.S.$        |  |                                            | 266   |  |                 |  | 7.8 |                                       |  |  | N/A                               |  |  |                             | N/A   |  |  |  | 5.5 | %
|Fixed-Rate mortgages       |  | U.S.$        |  |                                            | 1,012 |  |                 |  | 6.1 |                                       |  |  | N/A                               |  |  |                             | N/A   |  |  |  | 5.7 | %
|Floating-Rate mortgages    |  | NIS          |  |                                            | 61    |  |                 |  | 0.7 |                                       |  |  | N/A                               |  |  |                             | N/A   |  |  |  | 4.0 | %
|Floating-Rate mortgages(1) |  | EUR          |  |                                            | 512   |  |                 |  | 2.7 |                                       |  |  | N/A                               |  |  |                             | N/A   |  |  |  | 1.3 | %
|                           |  |              |  |                                            |       |  |                 |  |     |                                       |  |  |                                   |  |  |                             |       |  |  |  |     |  
|Total                      |  |              |  |                                            | 3,922 |  |                 |  |     |                                       |  |  |                                   |  |  |                             |       |  |  |  |     |  
|                           |  |              |  |                                            |       |  |                 |  |     |                                       |  |  |                                   |  |  |                             |       |  |  |  |     |  



|(1) | Effective fixed interest rate of 5.1% taking into account interest rate swap transactions.
|--- | ------------------------------------------------------------------------------------------

|(2) | NIS 429 million is denominated in EUR, NIS 164 million is denominated in C$ and NIS 630 million is denominated in U.S.$. and the remainder is denominated in NIS.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table sets forth information regarding Gazit-Globes outstanding debentures as of December 31, 2013:



|                                             |  |                      |       |  |                                  |  |        |                                 |  |  |                       |   |  |               |      |   |                                   |  |      |  |  |                            
|-------------------------------------------- |  | -------------------- | ----- |  | -------------------------------- |  | ------ | ------------------------------- |  |  | --------------------- | - |  | ------------- | ---- | - | --------------------------------- |  | ---- |  |  | ---------------------------
|Series                                       |  | Par ValueOutstanding |       |  | Balance intheFinancialStatements |  |        | Type of Interestand Annual Rate |  |  | EffectiveInterestRate |   |  | FinalMaturity |      |   | Linkage Basis
Terms/Denominations
|                                             |  | (NIS in millions)    |       |  | (NIS in millions)                |  |        |                                 |  |  |                       |   |  |               |      |   |                                  
|Series A                                     |  |                      | 219   |  |                                  |  | 158    |                                 |  |  | 6.5                   | % |  |               | 6.18 | % |                                   |  | 2017 |  |  | U.S. dollar                
|Series B                                     |  |                      | 170   |  |                                  |  | 149    |                                 |  |  | 6-month EURIBOR + 2   | % |  |               | 2.50 | % |                                   |  | 2016 |  |  | Euro                       
|Series C                                     |  |                      | 894   |  |                                  |  | 1,115  |                                 |  |  | 4.95                  | % |  |               | 4.88 | % |                                   |  | 2018 |  |  | Increase in the Israeli CPI
|Series D                                     |  |                      | 2,069 |  |                                  |  | 2,466  |                                 |  |  | 5.1                   | % |  |               | 5.02 | % |                                   |  | 2021 |  |  | Increase in the Israeli CPI
|Series E                                     |  |                      | 556   |  |                                  |  | 545    |                                 |  |  | 6-Month TELBOR + 0.7  | % |  |               | 2.08 | % |                                   |  | 2017 |  |  | None/NIS                   
|Series F                                     |  |                      | 570   |  |                                  |  | 565    |                                 |  |  | 6.4                   | % |  |               | 6.73 | % |                                   |  | 2016 |  |  | None/NIS                   
|Series I                                     |  |                      | 1,223 |  |                                  |  | 1,444  |                                 |  |  | 5.3                   | % |  |               | 5.58 | % |                                   |  | 2018 |  |  | Increase in the Israeli CPI
|Series J (Secured)                           |  |                      | 735   |  |                                  |  | 861    |                                 |  |  | 6.5                   | % |  |               | 5.76 | % |                                   |  | 2019 |  |  | Increase in the Israeli CPI
|Series K                                     |  |                      | 2,653 |  |                                  |  | 2,961  |                                 |  |  | 5.35                  | % |  |               | 4.35 | % |                                   |  | 2024 |  |  | Increase in the Israeli CPI
|Series L                                     |  |                      | 451   |  |                                  |  | 446    |                                 |  |  | 4.00                  | % |  |               | 4.14 | % |                                   |  | 2027 |  |  | Increase in the Israeli CPI
|Non-listed issued by wholly-owned subsidiary |  |                      | 33    |  |                                  |  | 40     |                                 |  |  | 4.57                  | % |  |               | 4.98 | % |                                   |  | 2015 |  |  | Increase in the Israeli CPI
|                                             |  |                      |       |  |                                  |  |        |                                 |  |  |                       |   |  |               |      |   |                                   |  |      |  |  |                            
|Total                                        |  |                      |       |  |                                  |  | 10,750 |                                 |  |  |                       |   |  |               |      |   |                                   |  |      |  |  |                            
|                                             |  |                      |       |  |                                  |  |        |                                 |  |  |                       |   |  |               |      |   |                                   |  |      |  |  |                            

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 of the debentures terms and maturity table see Note 41B(2) to our audited
consolidated financial statements included elsewhere in this Annual Report.



55



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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, including: (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 financial debt to value of total assets, based on consolidated financial
statements, not in excess of 75%, (iv) maintenance of a ratio of net financial debt 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 debt 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) 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
that 26% (20% on a diluted basis as defined in the agreement) of First Capitals share capital 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% from Citycons share capital, (xx) maintenance of the ratio
of pledged Equity One shares shall not be less than 20% of Equity Ones share capital on a fully diluted basis and the quantity of shares pledged to the bank and/or not pledged to another party (including shares held by subsidiaries of the
Company (directly and indirectly)) will be no less than 28% of Equity Ones share capital (or 20% if some of the amount of the credit facility outstanding is reduced), (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%, and (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%. As of December 31, 2013, 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.

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.



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##### Table of Contents

Equity One

The following table sets forth information regarding Equity Ones indebtedness as of December 31, 2013:



|                                                                            |  |              |  |  |                         |  |      |                                  |  |  |                                               |  |  |                          |           |  |  |  |     | 
|--------------------------------------------------------------------------- |  | ------------ |  |  | ----------------------- |  | ---- | -------------------------------- |  |  | --------------------------------------------- |  |  | ------------------------ | --------- |  |  |  | --- | 
|Debt Instrument                                                             |  | Denomination |  |  | AverageInterestRate (%) |  |      | AverageEffectiveInterestRate (%) |  |  | CarryingAmount ofLiability(U.S.$ inthousands) |  |  | RemainingMaturity(years) |          
|Unsecured debentures                                                        |  | U.S.$        |  |  |                         |  | 5.02 |                                  |  |  | 5.07                                          |  |  |                          | 726,688   |  |  |  | 5.3 | 
|Mortgages                                                                   |  | U.S.$        |  |  |                         |  | 5.99 |                                  |  |  | 5.26                                          |  |  |                          | 434,401   |  |  |  | 4.3 | 
|Unsecured Term Loan (U.S.$ 250 million)(1)                                  |  | U.S.$        |  |  |                         |  | 3.17 |                                  |  |  | 3.17                                          |  |  |                          | 248,557   |  |  |  | 5.1 | 
|Unsecured credit facilities: Bank Syndicate (U.S.$ 575 million)(2)          |  | U.S.$        |  |  |                         |  | 1.30 |                                  |  |  | 1.30                                          |  |  |                          | 90,079    |  |  |  | 1.8 | 
|Unsecured credit facilities: City National Bank of Florida
($ 5 million)(3) |  | U.S.$        |  |  |                         |  |     |                                  |  |  |                                              |  |  |                          |          |  |  |  | 0.9 | 
|                                                                            |  |              |  |  |                         |  |      |                                  |  |  |                                               |  |  |                          |           |  |  |  |     | 
|Total                                                                       |  |              |  |  |                         |  |      |                                  |  |  |                                               |  |  |                          | 1,499,725 |  |  |  |     | 
|                                                                            |  |              |  |  |                         |  |      |                                  |  |  |                                               |  |  |                          |           |  |  |  |     | 



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

|(2) | As of December 31, 2013, U.S.$ 413 million was the maximum availability of which U.S.$ 91 million was drawn.
|--- | ------------------------------------------------------------------------------------------------------------

|(3) | As of December 31, 2013, 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 liabilities to total assets value 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 Adjusted EBITDA to debt servicing (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 1.85x, (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, mezzanine debt, mortgage loans, equity securities and investments in unconsolidated joint ventures) to Equity Ones total assets not in excess of 35%, (vii) budgeted development
and redevelopment investments are not to exceed 20% of the total assets value, (viii) investments in mortgage loans and mezzanine loans are not to exceed 10 % of the total asset value, and (ix) a requirement that the tangible net
worth may not fall below U.S.$ 1.5 billion plus 75% of the proceeds of all equity issuances after September 2011. As of December 31, 2013, Equity One was in compliance with all of these covenants.

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.$ 323 million (NIS 1,121 million) and U.S.$ 325 million as of December 31, 2013 and December 31, 2012, respectively, and cash and cash equivalents in the amount of U.S.$ 25.6 million (NIS 89
million) and U.S.$ 27.4 million as of December 31, 2013 and December 31, 2012, respectively, 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, 2013:



|                                                |  |              |  |                         |      |  |                                  |  |      |                                            |  |  |                 |  |  |  |     | 
|----------------------------------------------- |  | ------------ |  | ----------------------- | ---- |  | -------------------------------- |  | ---- | ------------------------------------------ |  |  | --------------- |  |  |  | --- | 
|Debt Instrument                                 |  | Denomination |  | AverageInterestRate (%) |      |  | AverageEffectiveInterestRate (%) |  |      | CarryingAmount ofLiability(C$ inthousands) |  |  | Maturity(years) | 
|Unsecured debentures(1)                         |  | C$           |  |                         | 4.86 |  |                                  |  | 5.00 |                                            |  |  | 1,861,953       |  |  |  | 6.3 | 
|Unsecured convertible debentures                |  | C$           |  |                         | 5.08 |  |                                  |  | 6.35 |                                            |  |  | 374,012         |  |  |  | 4.6 | 
|Mortgages                                       |  | C$           |  |                         | 5.17 |  |                                  |  | 4.87 |                                            |  |  | 1,366,583       |  |  |  | 3.9 | 
|Unsecured credit facilities (C$ 600 million)(2) |  | C$           |  |                         |     |  |                                  |  |     |                                            |  |  |                |  |  |  | 2.5 | 
|Secured credit facilities (C$ 75 million)(2)    |  | C$           |  |                         |     |  |                                  |  |     |                                            |  |  |                |  |  |  | 1   | 
|                                                |  |              |  |                         |      |  |                                  |  |      |                                            |  |  |                 |  |  |  |     | 
|                                                |  |              |  |                         |      |  |                                  |  |      |                                            |  |  | 3,602,548       |  |  |  |     | 
|                                                |  |              |  |                         |      |  |                                  |  |      |                                            |  |  |                 |  |  |  |     | 



|(1) | After the reporting date, First Capital completed an offering in Canada of C$ 300 million par value (NIS 979 million) unsecured debentures (Series R) by way of an expansion of a listed series. The debentures bear a
fixed annual interest at the rate of 4.79%, and mature on August 30, 2024.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | As of December 31, 2013, the total availability for immediate drawdown amounted to C$ 631.6 million, net of letter of credits provided.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

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 servicing
(principal and interest payments) at a minimum level of 1.5x, (iv) a requirement that First Capitals average net worth 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, 2013, 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, 2013,
mainly unused and committed credit facilities available for immediate drawdown in the amount of C$ 631.6 million (NIS 2,062 million) and C$ 532 million as of December 31, 2013 and December 31, 2012, respectively, and cash and
cash equivalents in the amount of C$ 5.1 million (NIS 16 million) and C$ 70.1 million as of December 31, 2013 and December 31, 2012, respectively, 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.

Citycon

The following table sets forth
information regarding Citycons indebtedness as of December 31, 2013:



|                                           |  |              |     |     |                         |  |     |                                  |  |  |                                             |  |  |                 |           |  |  |  |     | 
|------------------------------------------ |  | ------------ | --- | --- | ----------------------- |  | --- | -------------------------------- |  |  | ------------------------------------------- |  |  | --------------- | --------- |  |  |  | --- | 
|Debt Instrument                            |  | Denomination |     |     | AverageInterestRate (%) |  |     | AverageEffectiveInterestRate (%) |  |  | CarryingAmount ofLiability(EUR inthousands) |  |  | Maturity(years) |          
|Unsecured debentures                       |  |              | EUR |     |                         |  | 3.9 |                                  |  |  | 4.1                                         |  |  |                 | 656,102   |  |  |  | 5.6 | 
|Mortgages                                  |  |              | SEK |     |                         |  | 3.7 |                                  |  |  | 3.7                                         |  |  |                 | 2,539     |  |  |  | 1.5 | 
|Other unsecured debts-variable interest(1) |  |              |    | (2) |                         |  | 2.2 |                                  |  |  | 2.2                                         |  |  |                 | 686,308   |  |  |  | 2.7 | 
|Other unsecured debts-fixed interest       |  |              |    | (2) |                         |  | 5.4 |                                  |  |  | 5.4                                         |  |  |                 | 117,241   |  |  |  | 3.8 | 
|                                           |  |              |     |     |                         |  |     |                                  |  |  |                                             |  |  |                 |           |  |  |  |     | 
|                                           |  |              |     |     |                         |  |     |                                  |  |  |                                             |  |  |                 | 1,462,190 |  |  |  |     | 
|                                           |  |              |     |     |                         |  |     |                                  |  |  |                                             |  |  |                 |           |  |  |  |     | 



|(1) | Citycon entered into interest rate swap transactions to pay fixed interest rates with respect of a notional amount of EUR 576.1 million of these variable interest loans.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | EUR 504.7 million is denominated in Euros, EUR 290 million is denominated in Swedish Krona, and EUR 9 million is denominated in Latvian Lat.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------

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 Eurobond issuance, Citycon has committed to maintain the
solvency ratio at below 65% and the secured solvency ratio at below 25%. As of December 31, 2013, 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 as
sources of finance.

In light of the resources that are available to Citycon, mainly unused and committed credit facilities in the amount
of EUR 380 million (NIS 1,817 million) and EUR 217 million as of December 31, 2013 and December 31, 2012, respectively, and cash and cash equivalents in the amount of EUR 38 million (NIS 182 million) and EUR 51 million
as of December 31, 2013 and December 31, 2012, 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 can be considered.



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Atrium

The following table sets forth information regarding Atriums indebtedness as of December 31, 2013:



|                              |  |              |  |                       |      |  |                                  |  |     |                                             |  |  |                 |  |  |          
|----------------------------- |  | ------------ |  | --------------------- | ---- |  | -------------------------------- |  | --- | ------------------------------------------- |  |  | --------------- |  |  | ---------
|Debt Instrument               |  | Denomination |  | AverageCouponRate (%) |      |  | AverageEffectiveInterestRate (%) |  |     | CarryingAmount ofLiability(EUR inthousands) |  |  | Maturity(years)
|Floating rate debentures      |  | EUR          |  |                       | 4.0  |  |                                  |  | 4.5 |                                             |  |  | 83,280          |  |  | 2017     
|Fixed rate debentures         |  | EUR          |  |                       | 4.04 |  |                                  |  | 4.3 |                                             |  |  | 386,522         |  |  | 2015-2020
|Floating rate debentures      |  | Czech Krona  |  |                       | 1.8  |  |                                  |  | 3.2 |                                             |  |  | 29,264          |  |  | 2015     
|Secured loans at fixed rate   |  | EUR          |  |                       | 3.1  |  |                                  |  | 3.2 |                                             |  |  | 48,579          |  |  | 2017     
|Secured loan at floating rate |  | EUR          |  |                       | 4.1  |  |                                  |  | 4.3 |                                             |  |  | 255,910         |  |  | 2016-2021
|                              |  |              |  |                       |      |  |                                  |  |     |                                             |  |  |                 |  |  |          
|                              |  |              |  |                       |      |  |                                  |  |     |                                             |  |  | 803,555         |  |  |          
|                              |  |              |  |                       |      |  |                                  |  |     |                                             |  |  |                 |  |  |          



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, 2013, Atrium is in compliance with all these covenants.

As of December 31, 2013 and
December 31, 2012, Atrium had cash and cash equivalents of EUR 305.6 million (NIS 1,461 million) and EUR 207.8 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, 2013:



|                            |  |                 |  |                       |  |                                  |  |                                          |         |  |               |          
|--------------------------- |  | --------------- |  | --------------------- |  | -------------------------------- |  | ---------------------------------------- | ------- |  | ------------- | ---------
|Debt Instrument             |  | Denomination    |  | AverageCouponRate (%) |  | AverageEffectiveInterestRate (%) |  | CarryingAmount ofLiability(NISthousands) |         |  | FinalMaturity
|Unsecured debentures        |  | NIS             |  | 6.57                  |  | 5.75                             |  |                                          | 99,048  |  |               | 2015     
|Unsecured debentures        |  | Israeli CPI     |  | 5.9                   |  | 5.5                              |  |                                          | 478,180 |  |               | 2014-2021
|Long term loans and credit  |  | NIS/Israeli CPI |  | 3.5-5.3               |  | 3.5-5.3                          |  |                                          | 8,305   |  |               | 2014-2015
|Short term loans and credit |  | NIS/Israeli CPI |  | 3.2-4.65              |  | 3.2-4.65                         |  |                                          | 82,794  |  |               | 2014     
|                            |  |                 |  |                       |  |                                  |  |                                          |         |  |               |          
|                            |  |                 |  |                       |  |                                  |  |                                          | 668,327 |  |               |          
|                            |  |                 |  |                       |  |                                  |  |                                          |         |  |               |          

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% (revised to 130% subsequent to the reporting date),
(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 (iv) the financing banks share shall not exceed 30% of the financial debt (including guarantees) of Dori Construction Ltd. As of
December 31, 2013, Dori Group and Dori Construction were not in compliance with certain covenants. For additional information refer to Notes 40h and 40k to our audited consolidated financial statements included elsewhere in this Annual Report.



Cash Flows

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



|                                             |  |                         |        |   |                   |  |        |      |  |  |              |   |  |              |     |   |  |  |     |  
|-------------------------------------------- |  | ----------------------- | ------ | - | ----------------- |  | ------ | ---- |  |  | ------------ | - |  | ------------ | --- | - |  |  | --- | -
|                                             |  | Year Ended December 31, |        |   | Increase/Decrease | 
|                                             |  | 2011                    |        |   | 2012              |  |        | 2013 |  |  | 2011 vs.2012 |   |  | 2012 vs.2013 |    
|                                             |  | (NIS in millions)       |        |   | (%)               | 
|Net cash provided by operating activities(1) |  |                         | 1,104  |   |                   |  | 1,368  |      |  |  | 1,189        |   |  |              | 24  |   |  |  | (13 | )
|Net cash used in investing activities(1)     |  |                         | (4,195 | ) |                   |  | (4,621 | )    |  |  | (2,208       | ) |  |              | 10  |   |  |  | (52 | )
|Net cash provided by financing activities    |  |                         | 4,017  |   |                   |  | 3,490  |      |  |  | 428          |   |  |              | (13 | ) |  |  | (88 | )
|Cash and cash equivalents, end of period     |  |                         | 1,539  |   |                   |  | 1,683  |      |  |  | 1,018        |   |  |              | 9   |   |  |  | (40 | )



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|(1) | Reclassified due to initial adoption of the Clarification to IAS 17 as stated above, see also Note 2a to our audited consolidated financial statements included elsewhere in this Annual Report.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 general and administrative expenses and net interest expense.

Net cash provided by operating activities totaled NIS 1,189 million (U.S.$ 343 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 timing differences with respect to working capital items and to a non-recurring dividend from a joint
venture recorded in 2012 amounted to NIS 282 million, which was offset by interest received due to unwinding of hedge transactions amounting to NIS 187 million and lower interest paid.



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Net cash provided by operating activities totaled NIS 1,368 million for the year ended
December 31, 2012 compared to NIS 1,104 million for the year ended December 31, 2011. The increase of NIS 264 million, or 24%, was due primarily to moderate improvement in the current operations of our subsidiaries, timing
differences with respect to working capital items and interest payments, and to non-recurring dividend from a joint venture amounted to NIS 282 million.

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.

Net
cash used in investing activities totaled NIS 2,208 million (U.S.$ 636 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 decrease
of NIS 2,413 million in cash used for investing activities, or 52%, was due primarily to a decrease of NIS 3,327 million (U.S.$ 959 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 (U.S.$ 65 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 (U.S.$ 291 million) in investments and loans to investees for the year ended 2013 compared with the investment in 2012.

Net cash used in investing activities totaled NIS 4,621 million for the year ended December 31, 2012 compared with NIS
4,195 million used in investing activities for the year ended December 31, 2011. The increase of NIS 426 million, or 10%, was due primarily to a higher use of cash in respect of the acquisition of investment properties, net of cash
flows from dispositions, for the year ended 2012 compared with the year ended 2011, offset by net investments in available for sale and other financial assets for the year ended 2012 compared with net proceeds from disposals in 2011, and a higher
amount of long term loans granted in the year ended 2012 compared to the year ended 2011.

Net Cash Provided by Financing Activities

Net cash provided by 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 provided by financing activities totaled NIS 428 million (US$ 123 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.

Net cash provided by financing activities totaled NIS 3,490 million for the year ended December 31, 2012 compared with NIS
4,017 million net cash provided by financing activities for the year ended December 31, 2011. The decrease of NIS 527 million, or 13%, is due primarily to the lower receipt of long-term loans, credit facilities and short-term
credit, lower issuances of shares by the Company, and repayment of larger amounts of long-term loans and debentures compared to the year ended December 31, 2011 offset by an increase of debenture issuances as well as capital issuances to
non-controlling interests.

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 issuance 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
| | - |  | --------------------------------------------------------------------------



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| |  |  | 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.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

2011. During the year ended December 31, 2011, we financed our activities primarily by:



| |  |  | the issuance of equity amounting to NIS 1,033 million, comprised of the issuance of equity amounting to NIS 319 million in Gazit-Globe, C$ 23 million of equity securities by First Capital, U.S.$
96 million of equity securities by Equity One and EUR 54 million of equity securities by Citycon;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | loans and proceeds from credit facilities net of repayments of long-term loans and credit facilities, amounting to NIS 3,063 million, comprised of NIS 1,687 million received by Gazit-Globe and its private
subsidiaries, U.S.$ 181 million repaid by Equity One, C$ 276 million received by First Capital, EUR 142 million received by Citycon and C$ 110 million received by Gazit America; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the issuance of debentures and convertible debentures, net of repayments, amounting to NIS 1,170 million, comprised of the net issuance of C$ 281 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 227 million and repayment of NIS 72 million by Dori Group.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

offset by:



| |  |  | acquisition of non-controlling interests amounting to NIS 384 million; and
| | - |  | --------------------------------------------------------------------------



| |  |  | dividend distributions amounting to NIS 865 million comprised of NIS 298 million paid by Gazit-Globe, U.S.$ 66 million paid by Equity One, C$ 69 million paid by First Capital and EUR
18 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. In accordance with this policy, in 2012 we announced that beginning in the
first quarter of 2013, the quarterly dividend declared would be at least NIS 0.43 per share each quarter and that the dividend for 2013 would therefore be at least NIS 1.72 per share. On April 22, 2013, Gazit-Globe paid a quarterly
cash dividend of NIS 0.43 (U.S.$ 0.12) per share. On July 2, 2013, Gazit-Globe paid a quarterly cash dividend of NIS 0.43 (U.S.$ 0.12) per share. On October 9, 2013, Gazit-Globe paid a quarterly cash dividend of NIS 0.43 (U.S.$
0.12) per share. On December 30, 2013, Gazit-Globe paid a quarterly cash dividend of NIS 0.43 (U.S.$ 0.12) per share. On April 23, 2014, Gazit-Globe will pay a quarterly cash dividend of NIS 0.45 (U.S.$ 0.13) per share.



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In November 2013, we announced that our minimum dividend to be declared in 2014 will not be less
than NIS 0.45 (U.S.$ 0.13) per share per quarter (NIS 1.80 (U.S.$ 0.52) per annum).

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, 2013. 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).

Assets Summary Table



|                       |  |                                                          |  |                          |       |  |                  |  |        |                |  |  |       |  |  |       |       |  |  |  |       | 
|---------------------- |  | -------------------------------------------------------- |  | ------------------------ | ----- |  | ---------------- |  | ------ | -------------- |  |  | ----- |  |  | ----- | ----- |  |  |  | ----- | 
|Name of Company/Region |  | Type of Security/Property                                |  | Holding(Number ofShares) |       |  | Book Value(1)(2) |  |        | MarketValue(3) | 
|                       |  |                                                          |  |                          |       |  | NIS              |  |        | U.S.$          |  |  | NIS   |  |  | U.S.$ |      
|                       |  |                                                          |  |                          |       |  | In millions      | 
|Equity One             |  | Shares (NYSE)                                            |  |                          | 53.2  |  |                  |  | 2,802  |                |  |  | 807   |  |  |       | 4,143 |  |  |  | 1,194 | 
|First Capital          |  | Shares (TSX)                                             |  |                          | 94.3  |  |                  |  | 4,899  |                |  |  | 1,412 |  |  |       | 5,449 |  |  |  | 1,570 | 
|Citycon(4)             |  | Shares (OMX)                                             |  |                          | 217.6 |  |                  |  | 2,891  |                |  |  | 833   |  |  |       | 2,663 |  |  |  | 767   | 
|Atrium                 |  | Shares (Euronext, VSX)                                   |  |                          | 149.3 |  |                  |  | 4,277  |                |  |  | 1,232 |  |  |       | 2,985 |  |  |  | 860   | 
|Dori Group(5)          |  | Shares (TASE)                                            |  |                          | 82.6  |  |                  |  | *) 99  |                |  |  | *) 28 |  |  |       | 164   |  |  |  | 47    | 
|Property in Europe     |  | Income-producing property                                |  |                          |      |  |                  |  | 900    |                |  |  | 259   |  |  |       |      |  |  |  |      | 
|Land in Europe(6)      |  | Property under development and land                      |  |                          |      |  |                  |  | 194    |                |  |  | 56    |  |  |       |      |  |  |  |      | 
|ProMed                 |  | Income-producing property                                |  |                          |      |  |                  |  | 1,935  |                |  |  | 558   |  |  |       |      |  |  |  |      | 
|Brazil                 |  | Income-producing property and property under development |  |                          |      |  |                  |  | 487    |                |  |  | 140   |  |  |       |      |  |  |  |      | 
|Israel(6)              |  | Income-producing property                                |  |                          |      |  |                  |  | 1,969  |                |  |  | 567   |  |  |       |      |  |  |  |      | 
|Land in Israel(6)      |  | Property under development and land                      |  |                          |      |  |                  |  | 197    |                |  |  | 57    |  |  |       |      |  |  |  |      | 
|                       |  |                                                          |  |                          |       |  |                  |  |        |                |  |  |       |  |  |       |       |  |  |  |       | 
|Total book value:      |  |                                                          |  |                          |       |  |                  |  | 20,650 |                |  |  | 5,949 |  |  |       |       |  |  |  |       | 
|                       |  |                                                          |  |                          |       |  |                  |  |        |                |  |  |       |  |  |       |       |  |  |  |       | 



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|(*) | Restated, refer to Note 2ee to our audited consolidated financial statements included elsewhere in this Annual Report.
|--- | ----------------------------------------------------------------------------------------------------------------------

|(1) | With respect to the book value of securities, this represents the investment in such securities as of December 31, 2013 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, 2013 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, 2013.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | For details regarding the acquisitions of additional CTY shares within the framework of right issuance after the reporting date, refer to Note 40a to our audited consolidated financial statements included elsewhere in
this Annual Report.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Represents economic interest in Dori Group.
|--- | -------------------------------------------

|(6) | Presented according to the proportionate consolidation method (82.5%).
|--- | ----------------------------------------------------------------------

The following table
presents information on the assets of Gazit-Globe and its subsidiaries and affiliates as of December 31, 2013, with each of our operating subsidiaries and affiliates being presented according to the equity method under IFRS.



|                  |  |                        |  |                          |       |  |               |  |        |                 |  |  |        |  |  |       |       |  |  |  |       | 
|----------------- |  | ---------------------- |  | ------------------------ | ----- |  | ------------- |  | ------ | --------------- |  |  | ------ |  |  | ----- | ----- |  |  |  | ----- | 
|Name of Company   |  | Type of Security       |  | Holding(Number ofShares) |       |  | Book Value(1) |  |        | Market Value(2) | 
|                  |  |                        |  |                          |       |  | NIS           |  |        | U.S.$           |  |  | NIS    |  |  | U.S.$ |      
|Equity One        |  | Shares (NYSE)          |  |                          | 53.2  |  |               |  | 2,802  |                 |  |  | 807    |  |  |       | 4,143 |  |  |  | 1,194 | 
|First Capital     |  | Shares (TSX)           |  |                          | 94.3  |  |               |  | 4,899  |                 |  |  | 1,412  |  |  |       | 5,449 |  |  |  | 1,570 | 
|Citycon(3)        |  | Shares (OMX)           |  |                          | 217.6 |  |               |  | 2,891  |                 |  |  | 833    |  |  |       | 2,663 |  |  |  | 767   | 
|Atrium            |  | Shares (Euronext, VSX) |  |                          | 149.3 |  |               |  | 4,277  |                 |  |  | 1,232  |  |  |       | 2,985 |  |  |  | 860   | 
|Gazit Germany     |  | Shares                 |  |                          |      |  |               |  | 261    |                 |  |  | 75     |  |  |       |      |  |  |  |      | 
|Gazit Development |  | Shares                 |  |                          |      |  |               |  | *) 559 |                 |  |  | *) 162 |  |  |       |      |  |  |  |      | 
|ProMed            |  | Shares                 |  |                          |      |  |               |  | 703    |                 |  |  | 203    |  |  |       |      |  |  |  |      | 
|Brazil            |  | Shares                 |  |                          |      |  |               |  | 435    |                 |  |  | 125    |  |  |       |      |  |  |  |      | 
|                  |  |                        |  |                          |       |  |               |  |        |                 |  |  |        |  |  |       |       |  |  |  |       | 
|Total book value: |  |                        |  |                          |       |  |               |  | 16,827 |                 |  |  | 4,849  |  |  |       |       |  |  |  |       | 
|                  |  |                        |  |                          |       |  |               |  |        |                 |  |  |        |  |  |       |       |  |  |  |       | 



|(*) | Restated, refer to Note 2ee to our audited consolidated financial statements included elsewhere in this Annual Report.
|--- | ----------------------------------------------------------------------------------------------------------------------

|(1) | This represents the book value of the investment as of December 31, 2013 according to the equity method under IFRS. The table presents the book value of such investment 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, 2013.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | For details regarding the acquisitions of additional CTY shares within the framework of right issuance after the reporting date, refer to Note 40a to our audited consolidated financial statements included elsewhere in
this Annual Report.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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, 2013. 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 its Private Subsidiaries |  |       | Consolidated | 
|In millions                                     |  | NIS            |        |     | U.S.$                                    |  |       | NIS          |  |  | U.S.$  |     |  | NIS |       |  | U.S.$ | 
|Debentures                                      |  |                | 11,016 | (2) |                                          |  | 3,174 |              |  |  | 11,016 | (2) |  |     | 3,174 |  |       |  | 23,070 | (3) |  |  | 6,646  | 
|Debts to financial institutions                 |  |                | 1,664  | (4) |                                          |  | 479   |              |  |  | 3,574  | (5) |  |     | 1,030 |  |       |  | 15,024 | (6) |  |  | 4,328  | 
|Other liabilities                               |  |                | 77     | (7) |                                          |  | 23    |              |  |  | 718    | (8) |  |     | 206   |  |       |  | 20,364 | (9) |  |  | 5,868  | 
|                                                |  |                |        |     |                                          |  |       |              |  |  |        |     |  |     |       |  |       |  |        |     |  |  |        | 
|Total liabilities and non-controlling interests |  |                | 12,757 |     |                                          |  | 3,676 |              |  |  | 15,308 |     |  |     | 4,410 |  |       |  | 58,458 |     |  |  | 16,842 | 



64



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|                                               |  |                |       |      |                                          |  |       |              |  |  |        |      |  |     |       |  |       |  |        |      |  |  |        | 
|---------------------------------------------- |  | -------------- | ----- | ---- | ---------------------------------------- |  | ----- | ------------ |  |  | ------ | ---- |  | --- | ----- |  | ----- |  | ------ | ---- |  |  | ------ | 
|                                               |  | Gazit-Globe(1) |       |      | Gazit-Globe and its Private Subsidiaries |  |       | Consolidated | 
|In millions                                    |  | NIS            |       |      | U.S.$                                    |  |       | NIS          |  |  | U.S.$  |      |  | NIS |       |  | U.S.$ | 
|Lessmonetary assets and other investments(10) |  |                | 3,732 | (11) |                                          |  | 1,075 |              |  |  | 2,460  | (12) |  |     | 709   |  |       |  | 4,534  | (13) |  |  | 1,306  | 
|                                               |  |                |       |      |                                          |  |       |              |  |  |        |      |  |     |       |  |       |  |        |      |  |  |        | 
|Liabilities, net                               |  |                | 9,025 |      |                                          |  | 2,601 |              |  |  | 12,848 |      |  |     | 3,701 |  |       |  | 53,924 |      |  |  | 15,536 | 
|                                               |  |                |       |      |                                          |  |       |              |  |  |        |      |  |     |       |  |       |  |        |      |  |  |        | 



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

|(2) | Represents NIS 22,231 million of debentures recorded as non-current liabilities and NIS 839 million of debentures recorded as current liabilities, in each case on our consolidated statements of financial
position as of December 31, 2013, minus NIS 12,320 million of debentures issued by public subsidiaries and affiliates, plus NIS 266 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, 2013.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Represents NIS 22,231 million of debentures recorded as non-current liabilities and NIS 839 million of debentures recorded as current liabilities, in each case on our consolidated statements of financial
position as of December 31, 2013.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Represents NIS 12,692 million of debt to financial institutions recorded as non-current liabilities and NIS 2,332 million of debt to financial institutions recorded as current liabilities, in each case on our
consolidated statements of financial position as of December 31, 2013, minus NIS 11,103 million of public subsidiary and affiliate debt to financial institutions, minus NIS 1,991 million of our operating private subsidiaries debt
to financial institutions, minus NIS 266 million Globes loan from financial institution.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Represents NIS 12,692 million of debt to financial institutions recorded as non-current liabilities and NIS 2,332 million of debt to financial institutions recorded as current liabilities, in each case on our
consolidated statements of financial position as of December 31, 2013, minus NIS 11,103 million of public subsidiary and affiliate debt to financial institutions, minus NIS 266 million Globes loan from financial institution
and minus NIS 81 million of debt to financial institutions of Gazit Development (reflecting the 17.5% minority interest in such debt).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Represents NIS 12,692 million of debt to financial institutions recorded as non-current liabilities and NIS 2,332 million of debt to financial institutions recorded as current liabilities, in each case on our
consolidated statements of financial position as of December 31, 2013.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Represents NIS 2,276 million of financial derivatives, trade payables, other accounts payable and current tax payable recorded as current liabilities, NIS 3,537 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 14,551 million of non-controlling interests, in each case on our
consolidated statements of financial position as of December 31, 2013, minus NIS 4,892 million of such liabilities of public subsidiaries and affiliates and our operating private subsidiaries, minus NIS 14,541 million of
non-controlling interests of our public subsidiaries and affiliates and our operating private subsidiaries, minus NIS 854 million of other adjustments attributable to our public subsidiaries and affiliates.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | Represents NIS 2,276 million of financial derivatives, trade payables, other accounts payable and current tax payable recorded as current liabilities, NIS 3,537 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 14,551 million of non-controlling interests, in each case on our
consolidated statements of financial position as of December 31, 2013, minus NIS 4,163 million of such liabilities of public subsidiaries and affiliates, minus NIS 59 million of such liabilities of Gazit Development (reflecting
the 17.5% minority interest in such liabilities), minus NIS 14,541 million of non-controlling interests of our public subsidiaries and affiliates, minus NIS 108 million of such liabilities of Gazit Development (reflecting the 17.5%
minority interest in such liabilities) and minus NIS 775 million of other adjustments attributable to our public subsidiaries and affiliates and the 17.5% minority interest in Gazit Development.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | Represents NIS 2,276 million of financial derivatives, trade payables, other accounts payable and current tax payable recorded as current liabilities, NIS 3,537 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 14,551 million of non-controlling interests, in each case on our
consolidated statements of financial position as of December 31, 2013.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(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 2,671 million of monetary assets recorded as current assets and NIS 1,863 million of monetary assets recorded as non-current assets, in each case on our consolidated statements of financial
position as of December 31, 2013, minus NIS 2,543 million of such assets of public subsidiaries and affiliates and our operating private subsidiaries, plus NIS 1,741 million of loans to our operating private subsidiaries.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(12) | Represents NIS 2,671 million of monetary assets recorded as current assets and NIS 1,863 million of monetary assets recorded as non-current assets, in each case on our consolidated statements of financial
position as of December 31, 2013, minus NIS 2,352 million of such assets of public subsidiaries and affiliates plus NIS 278 million of monetary assets of Gazit Development.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(13) | Represents NIS 2,671 million of monetary assets recorded as current assets and NIS 1,863 million of monetary assets recorded as non-current assets, in each case on our consolidated statements of financial
position as of December 31, 2013.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



65



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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, 2013:



|                                                                                              |  |                |        |   |                  |  |        |  
|--------------------------------------------------------------------------------------------- |  | -------------- | ------ | - | ---------------- |  | ------ | -
|                                                                                              |  | NIS inmillions |        |   | U.S.$ inmillions | 
|Book value according to the equity method under IFRS in the table above:                      |  |                | 16,827 |   |                  |  | 4,849  |  
|Liabilities, net                                                                              |  |                | (9,025 | ) |                  |  | (2,601 | )
|                                                                                              |  |                |        |   |                  |  |        |  
|Net Asset Value (NAV)                                                                         |  |                | 7,802  |   |                  |  | 2,248  |  
|                                                                                              |  |                |        |   |                  |  |        |  
|Equity attributable to equity holders of the Company in our consolidated financial statements |  |                | 7,802  |   |                  |  | 2,248  |  
|                                                                                              |  |                |        |   |                  |  |        |  

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, 2013:



|                                                                                              |  |                |         |   |                  |  |        |  
|--------------------------------------------------------------------------------------------- |  | -------------- | ------- | - | ---------------- |  | ------ | -
|                                                                                              |  | NIS inmillions |         |   | U.S.$ inmillions | 
|Book value of the investments in the table above:                                             |  |                | 20,650  |   |                  |  | 5,949  |  
|Liabilities, net                                                                              |  |                | (12,848 | ) |                  |  | (3,701 | )
|                                                                                              |  |                |         |   |                  |  |        |  
|Net Asset Value (NAV)                                                                         |  |                | 7,802   |   |                  |  | 2,248  |  
|                                                                                              |  |                |         |   |                  |  |        |  
|Equity attributable to equity holders of the Company in our consolidated financial statements |  |                | 7,802   |   |                  |  | 2,248  |  
|                                                                                              |  |                |         |   |                  |  |        |  

Additional information is presented below regarding our share in the income-producing properties owned by us
as of December 31, 2013, 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.
| | - |  | ----------------------------------------------------------------------



|                                                                                                   |  |                         |        |   |                                 |  |        |                 |  |  |                  |   |  |  |       |   |  |  |       |   |  |  |      |  
|-------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | - | ------------------------------- |  | ------ | --------------- |  |  | ---------------- | - |  |  | ----- | - |  |  | ----- | - |  |  | ---- | -
|                                                                                                   |  | Year Ended December 31, |        |   | Three Months Ended December 31, | 
|                                                                                                   |  | 2012                    |        |   | 2013                            |  |        | 2012            |  |  | 2013             |  
|                                                                                                   |  | NIS in millions         |        |   | U.S.$ inmillions                |  |        | NIS in millions |  |  | U.S.$ inmillions |  
|Rental income                                                                                      |  |                         | 5,249  |   |                                 |  | 5,146  |                 |  |  | 1,483            |   |  |  | 1,370 |   |  |  | 1,269 |   |  |  | 366  |  
|Property operating expenses                                                                        |  |                         | (1,705 | ) |                                 |  | (1,689 | )               |  |  | (487             | ) |  |  | (459  | ) |  |  | (414  | ) |  |  | (119 | )
|                                                                                                   |  |                         |        |   |                                 |  |        |                 |  |  |                  |   |  |  |       |   |  |  |       |   |  |  |      |  
|NOI for the period                                                                                 |  |                         | 3,544  |   |                                 |  | 3,457  |                 |  |  | 996              |   |  |  | 911   |   |  |  | 855   |   |  |  | 247  |  
|Lessminoritys share in NOI                                                                       |  |                         | (1,715 | ) |                                 |  | (1,687 | )               |  |  | (486             | ) |  |  | (455  | ) |  |  | (413  | ) |  |  | (119 | )
|AddCompanys share in NOI of jointly controlled companies                                         |  |                         | 333    |   |                                 |  | 332    |                 |  |  | 96               |   |  |  | 75    |   |  |  | 91    |   |  |  | 26   |  
|                                                                                                   |  |                         |        |   |                                 |  |        |                 |  |  |                  |   |  |  |       |   |  |  |       |   |  |  |      |  
|NOI for the periodOur proportionate share                                                         |  |                         | 2,162  |   |                                 |  | 2,102  |                 |  |  | 606              |   |  |  | 531   |   |  |  | 533   |   |  |  | 154  |  
|                                                                                                   |  |                         |        |   |                                 |  |        |                 |  |  |                  |   |  |  |       |   |  |  |       |   |  |  |      |  
|NOI based on our proportionate share in the NOI of our subsidiaries and affiliates for the year(1) |  |                         | 2,162  |   |                                 |  | 2,102  |                 |  |  | 606              |   |  |  | 2,124 |   |  |  | 2,132 |   |  |  | 616  |  
|                                                                                                   |  |                         |        |   |                                 |  |        |                 |  |  |                  |   |  |  |       |   |  |  |       |   |  |  |      |  



66



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|(1) | NOI for the fourth quarter of 2013 or 2012, 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, 2013 and 2012, 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 Ended December 31, |        |   | Three Months Ended December 31, | 
|                                                                                   |  | 2012                    |        |   | 2013                            |  |        | 2012            |  |  | 2013             |  
|                                                                                   |  | NIS in millions         |        |   | U.S.$ inmillions                |  |        | NIS in millions |  |  | U.S.$ inmillions |  
|Gross profit(2)                                                                    |  |                         | 3,584  |   |                                 |  | 3,441  |                 |  |  | 991              |   |  |  | 883  |   |  |  | 775  |   |  |  | 223  |  
|Revenues from sale of buildings, land and construction work
performed(1)(2)        |  |                         | (1,760 | ) |                                 |  | (1,672 | )               |  |  | (481             | ) |  |  | (425 | ) |  |  | (397 | ) |  |  | (114 | )
|Cost of buildings sold, land and construction work performed(1)(2)                 |  |                         | 1,720  |   |                                 |  | 1,688  |                 |  |  | 486              |   |  |  | 453  |   |  |  | 477  |   |  |  | 138  |  
|Non-controlling interests share in the NOI                                        |  |                         | (1,715 | ) |                                 |  | (1,687 | )               |  |  | (486             | ) |  |  | (455 | ) |  |  | (413 | ) |  |  | (119 | )
|Groups share in the NOI of jointly controlled companies                           |  |                         | 333    |   |                                 |  | 332    |                 |  |  | 96               |   |  |  | 75   |   |  |  | 91   |   |  |  | 26   |  
|                                                                                   |  |                         |        |   |                                 |  |        |                 |  |  |                  |   |  |  |      |   |  |  |      |   |  |  |      |  
|NOI based on our proportionate share in the NOI of our subsidiaries and affiliates |  |                         | 2,162  |   |                                 |  | 2,102  |                 |  |  | 606              |   |  |  | 531  |   |  |  | 533  |   |  |  | 154  |  
|                                                                                   |  |                         |        |   |                                 |  |        |                 |  |  |                  |   |  |  |      |   |  |  |      |   |  |  |      |  



|(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.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | As stated above, the data for each of the years ended December 31, 2013 and December 31, 2012 was restated to reflect the correction of an error. For further information, refer to Notes 2ee and 41 to our
audited consolidated financial statements included elsewhere in this Annual Report.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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, 2013. 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.

The following table presents the value of proportionately consolidated income-producing property based on NOI for the three months ended
December 31, 2013:



|                                                        |  |       |        |  |       |  |        |       |  |  |        |  |  |  |        | 
|------------------------------------------------------- |  | ----- | ------ |  | ----- |  | ------ | ----- |  |  | ------ |  |  |  | ------ | 
|Capitalization Rate:                                    |  | 6.50% |        |  | 7.00% |  |        | 7.50% |  |  | 8.00%  | 
|Value of income-producing property (NIS in millions)(1) |  |       | 32,799 |  |       |  | 30,456 |       |  |  | 28,426 |  |  |  | 26,649 | 
|(U.S.$ in millions)                                     |  |       | 9,449  |  |       |  | 8,774  |       |  |  | 8,190  |  |  |  | 7,678  | 



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

Properties under development, which are not yet
operating, 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, 2013, amounted to NIS 2,238 million (U.S.$ 645
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, 2013:



|                                                                                            |  |                 |        |   |                   |  |      |  
|------------------------------------------------------------------------------------------- |  | --------------- | ------ | - | ----------------- |  | ---- | -
|                                                                                            |  | NIS in millions |        |   | U.S.$ in millions | 
|Investment property under development                                                       |  |                 | 2,479  |   |                   |  | 714  |  
|Adjustments to properties under development(1)                                              |  |                 | (272   | ) |                   |  | (78  | )
|Non-controlling interests portion of such properties                                       |  |                 | (1,085 | ) |                   |  | (313 | )
|Groups share in such properties of jointly controlled companies                            |  |                 | 1,116  |   |                   |  | 322  |  
|                                                                                            |  |                 |        |   |                   |  |      |  
|Investment property under development (according to the proportionate consolidation method) |  |                 | 2,238  |   |                   |  | 645  |  
|                                                                                            |  |                 |        |   |                   |  |      |  



67



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|(1) | Adjustments to exclude the operating portion with respect to properties under development and to include a property which began to operate at the end of 2013 and thus has not yet produced income.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our liabilities, net of monetary assets (according to the proportionate consolidation method) as of December 31, 2013, amounted to NIS
24,090 million (U.S.$ 6,940 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, 2013:



|                                               |  |                             |        |     |              |  |       |     |  |  |        |     |  |  |        | 
|---------------------------------------------- |  | --------------------------- | ------ | --- | ------------ |  | ----- | --- |  |  | ------ | --- |  |  | ------ | 
|                                               |  | Proportionate Consolidation |        |     | Consolidated | 
|In millions                                    |  | NIS                         |        |     | U.S.$        |  |       | NIS |  |  | U.S.$  |    
|Debentures                                     |  |                             | 17,512 | (1) |              |  | 5,045 |     |  |  | 23,070 | (2) |  |  | 6,646  | 
|Debts to financial institutions                |  |                             | 9,377  | (3) |              |  | 2,702 |     |  |  | 15,024 | (4) |  |  | 4,328  | 
|Other liabilities                              |  |                             | 541    | (5) |              |  | 156   |     |  |  | 20,364 | (6) |  |  | 5,868  | 
|                                               |  |                             |        |     |              |  |       |     |  |  |        |     |  |  |        | 
|Total liabilities and non-controlling interest |  |                             | 27,430 |     |              |  | 7,903 |     |  |  | 58,458 |     |  |  | 16,842 | 
|Lessmonetary assets and other investments(7)  |  |                             | 3,340  | (8) |              |  | 963   |     |  |  | 4,534  | (9) |  |  | 1,306  | 
|                                               |  |                             |        |     |              |  |       |     |  |  |        |     |  |  |        | 
|Liabilities, net                               |  |                             | 24,090 |     |              |  | 6,940 |     |  |  | 53,924 |     |  |  | 15,536 | 
|                                               |  |                             |        |     |              |  |       |     |  |  |        |     |  |  |        | 



|(1) | Represents NIS 22,231 million of debentures recorded as non-current liabilities and NIS 839 million of debentures recorded as current liabilities, in each case on our consolidated statements of financial
position as of December 31, 2013, minus NIS 5,824 million of debentures which we do not proportionately consolidate, plus NIS 266 million Globes loan from financial institution.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Represents NIS 22,231 million of debentures recorded as non-current liabilities and NIS 839 million of debentures recorded as current liabilities, in each case on our consolidated statements of financial
position as of December 31, 2013.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Represents NIS 12,692 million of debt to financial institutions recorded as non-current liabilities and NIS 2,332 million of debt to financial institutions recorded as current liabilities, in each case on our
consolidated statements of financial position as of December 31, 2013, minus NIS 5,381 million of debt to financial institutions which we do not proportionately consolidate, minus NIS 266 million Globes loan from financial
institution.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Represents NIS 12,692 million of debt to financial institutions recorded as non-current liabilities and NIS 2,332 million of debt to financial institutions recorded as current liabilities, in each case on our
consolidated statements of financial position as of December 31, 2013.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Represents NIS 2,276 million of financial derivatives, trade payables, other accounts payable and current tax payable recorded as current liabilities, NIS 3,537 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 14,551 million of non-controlling interests, in each case on our
consolidated statements of financial position as of December 31, 2013, minus NIS 14,613 million of non-controlling interests plus our proportionately consolidated liabilities attributable to assets held for sale in the amount of NIS
34 million and our proportionately consolidated portion of convertible debentures in the amount of NIS 569 million, and excluding NIS 2,276 million of financial derivatives, trade payables, other accounts payable, current tax
payable and dividend payable recorded as current liabilities and NIS 3,537 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 2,276 million of financial derivatives, trade payables, other accounts payable and current tax payable recorded as current liabilities, NIS 3,537 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 14,551 million of non-controlling interests, in each case on our
consolidated statements of financial position as of December 31, 2013.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(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 2,671 million of monetary assets recorded as current assets and NIS 1,863 million of monetary assets recorded as non-current assets, in each case on our consolidated statements of financial
position as of December 31, 2013, minus NIS 698 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 1,010 million of trades and accounts receivables, plus NIS 305 million of loans to Gazit Development, plus NIS 99 million representing the net asset value of Dori Group and plus NIS
110 million of other investments.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | Represents NIS 2,671 million of monetary assets recorded as current assets and NIS 1,863 million of monetary assets recorded as non-current assets, in each case on our consolidated statements of financial
position as of December 31, 2013.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



68



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##### Table of Contents

Capitalization Rates

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



|                  |  |     |     |  |        |  |     |                           |  |  |                        |  |  |        |     |  |  |  |     | 
|----------------- |  | --- | --- |  | ------ |  | --- | ------------------------- |  |  | ---------------------- |  |  | ------ | --- |  |  |  | --- | 
|                  |  | USA |     |  | Canada |  |     | Northern andWesternEurope |  |  | Central-Eastern Europe |  |  | Israel |    
|                  |  | %   |    
|December 31, 2013 |  |     | 6.5 |  |        |  | 5.9 |                           |  |  | 6.3                    |  |  |        | 8.2 |  |  |  | 7.5 | 
|December 31, 2012 |  |     | 6.8 |  |        |  | 6.0 |                           |  |  | 6.3                    |  |  |        | 8.4 |  |  |  | 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.

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



|                                                     |  |                         |        |   |                  |  |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |       |  
|---------------------------------------------------- |  | ----------------------- | ------ | - | ---------------- |  | ------ | ---- |  |  | ------ | - |  | ---- | ------ | - | ---- |  | ------ | - |  |  | ----- | -
|                                                     |  | Year Ended December 31, |       
|                                                     |  | 2009(1)                 |        |   | 2010             |  |        | 2011 |  |  | 2012   |   |  | 2013 |        |   | 2013 | 
|                                                     |  | NIS in millions         |        |   | U.S.$ inmillions | 
|Rental income                                        |  |                         | 4,084  |   |                  |  | 4,147  |      |  |  | 4,718  |   |  |      | 5,249  |   |      |  | 5,146  |   |  |  | 1,483 |  
|Property operating expenses                          |  |                         | (1,369 | ) |                  |  | (1,341 | )    |  |  | (1,522 | ) |  |      | (1,705 | ) |      |  | (1,689 | ) |  |  | (487  | )
|Depreciation included in property operating expenses |  |                         | 14     |   |                  |  |       |      |  |  |       |   |  |      |       |   |      |  |       |   |  |  |      |  
|                                                     |  |                         |        |   |                  |  |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |       |  
|Net operating income                                 |  |                         | 2,729  |   |                  |  | 2,806  |      |  |  | 3,196  |   |  |      | 3,544  |   |      |  | 3,457  |   |  |  | 996   |  
|                                                     |  |                         |        |   |                  |  |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |       |  



|(1) | As stated above, amounts shown for 2009 were not retrospectively adjusted to reflect the adoption of IFRS 10, IFRS 11 and IAS 12 (Revised).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------

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



|                                                                            |  |                         |       |   |                  |  |       |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |      |  
|--------------------------------------------------------------------------- |  | ----------------------- | ----- | - | ---------------- |  | ----- | ---- |  |  | ------ | - |  | ---- | ------ | - | ---- |  | ------ | - |  |  | ---- | -
|                                                                            |  | Year Ended December 31, |      
|                                                                            |  | 2009(1)                 |       |   | 2010             |  |       | 2011 |  |  | 2012   |   |  | 2013 |        |   | 2013 | 
|                                                                            |  | NIS in millions         |       |   | U.S.$ inmillions | 
|Reconciliation of gross profit to NOI:                                      |  |                         |       |   |                  |  |       |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |      |  
|Gross Profit(3)                                                             |  |                         | 2,757 |   |                  |  | 2,806 |      |  |  | 3,230  |   |  |      | 3,584  |   |      |  | 3,441  |   |  |  | 991  |  
|Depreciation included in property operating expenses                        |  |                         | 14    |   |                  |  |      |      |  |  |       |   |  |      |       |   |      |  |       |   |  |  |     |  
|Revenues from sale of buildings, land and construction work
performed(2)(3) |  |                         | (596  | ) |                  |  |      |      |  |  | (1,001 | ) |  |      | (1,760 | ) |      |  | (1,672 | ) |  |  | (481 | )
|Cost of buildings sold, land and construction work performed(2)(3)          |  |                         | 554   |   |                  |  |      |      |  |  | 967    |   |  |      | 1,720  |   |      |  | 1,688  |   |  |  | 486  |  
|                                                                            |  |                         |       |   |                  |  |       |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |      |  
|NOI                                                                         |  |                         | 2,729 |   |                  |  | 2,806 |      |  |  | 3,196  |   |  |      | 3,544  |   |      |  | 3,457  |   |  |  | 996  |  
|                                                                            |  |                         |       |   |                  |  |       |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |      |  



|(1) | As stated above, amounts shown for 2009 were not retrospectively adjusted to reflect the adoption of IFRS 10, IFRS 11 and IAS 12 (Revised).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------

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

|(3) | As stated above, the data for each of the years ended December 31, 2013 and December 31, 2012 was restated to reflect the correction of an error. For further information, refer to Notes 2ee and 41 to our
audited consolidated financial statements included elsewhere in this Annual Report.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



69



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##### Table of Contents

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.

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



|                                                                        |  |                         |        |   |                  |  |       |      |  |  |        |   |  |      |        |   |      |  |       |   |  |  |      |  
|----------------------------------------------------------------------- |  | ----------------------- | ------ | - | ---------------- |  | ----- | ---- |  |  | ------ | - |  | ---- | ------ | - | ---- |  | ----- | - |  |  | ---- | -
|                                                                        |  | Year Ended December 31, |       
|                                                                        |  | 2009(2)                 |        |   | 2010             |  |       | 2011 |  |  | 2012   |   |  | 2013 |        |   | 2013 | 
|                                                                        |  | NIS in millions         |        |   | U.S.$ inmillions | 
|Reconciliation of net income to adjusted EBITDA(2)(3)(4):               |  |                         |        |   |                  |  |       |      |  |  |        |   |  |      |        |   |      |  |       |   |  |  |      |  
|Net income                                                              |  |                         | 700    |   |                  |  | 1,689 |      |  |  | 2,029  |   |  |      | 2,413  |   |      |  | 2,185 |   |  |  | 630  |  
|Depreciation                                                            |  |                         | 39     |   |                  |  | 21    |      |  |  | 28     |   |  |      | 34     |   |      |  | 34    |   |  |  | 10   |  
|Other adjustments(1)                                                    |  |                         | 42     |   |                  |  | 93    |      |  |  | 130    |   |  |      | 36     |   |      |  | 40    |   |  |  | 11   |  
|Valuation (gains) losses from investment property                       |  |                         | 1,922  |   |                  |  | (935  | )    |  |  | (1,692 | ) |  |      | (1,938 | ) |      |  | (962  | ) |  |  | (277 | )
|Other income                                                            |  |                         | (777   | ) |                  |  | (21   | )    |  |  | (115   | ) |  |      | (164   | ) |      |  | (218  | ) |  |  | (63  | )
|Other expenses                                                          |  |                         | 41     |   |                  |  | 46    |      |  |  | 110    |   |  |      | 47     |   |      |  | 74    |   |  |  | 21   |  
|Companys share in (earnings) losses of equity-accounted investees, net |  |                         | 268    |   |                  |  | (171  | )    |  |  | (334   | ) |  |      | (299   | ) |      |  | (149  | ) |  |  | (43  | )
|Companys share in adjusted EBITDA of equity-accounted investees        |  |                         |       |   |                  |  | 197   |      |  |  | 231    |   |  |      | 276    |   |      |  | 287   |   |  |  | 83   |  
|Finance expenses                                                        |  |                         | 1,793  |   |                  |  | 1,764 |      |  |  | 2,197  |   |  |      | 2,214  |   |      |  | 2,185 |   |  |  | 630  |  
|Finance income                                                          |  |                         | (1,551 | ) |                  |  | (525  | )    |  |  | (72    | ) |  |      | (120   | ) |      |  | (549  | ) |  |  | (158 | )
|Increase in value of financial investments                              |  |                         | (81    | ) |                  |  |      |      |  |  |       |   |  |      |       |   |      |  |      |   |  |  |     |  
|Taxes on income (tax benefit)                                           |  |                         | (142   | ) |                  |  | 390   |      |  |  | 352    |   |  |      | 758    |   |      |  | 265   |   |  |  | 76   |  
|                                                                        |  |                         |        |   |                  |  |       |      |  |  |        |   |  |      |        |   |      |  |       |   |  |  |      |  
|Adjusted EBITDA                                                         |  |                         | 2,254  |   |                  |  | 2,548 |      |  |  | 2,864  |   |  |      | 3,257  |   |      |  | 3,192 |   |  |  | 920  |  
|                                                                        |  |                         |        |   |                  |  |       |      |  |  |        |   |  |      |        |   |      |  |       |   |  |  |      |  



|(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 Group 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.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | As stated above, we have early adopted and implemented the New IFRSs, with the effective adoption date being January 1, 2010. Accordingly, the data shown above for the year ended December 31, 2009 is as
originally presented without any effect of the New IFRSs. Had the New IFRSs been applied to 2009, we estimate the impact on adjusted EBITDA would have been immaterial.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | As stated above, the data for each of the years ended December 31, 2013 and December 31, 2012 was restated to reflect the correction of an error. For further information, refer to Notes 2ee and 41 to our
audited consolidated financial statements included elsewhere in this Annual Report.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | As stated above, we have adopted the Clarification to IAS 12 and the Clarification to IAS 17, in these restated financial statements, with effective adoption date being January 1, 2011. Accordingly, the data shown
above for each of the years ended December 31, 2010 and December 31, 2009 is as originally presented without any effect of the Clarification to IAS 12 or the Clarification to IAS 17.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

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.

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, |       
|                                                                                                                        |  | 2011                    |        |   | 2012  |  |        | 2013 |  |  | 2013 |  
|In millions (except for per share
data)(1)(2)                                                                           |  | NIS                     |        |   | U.S.$ | 
|Net income attributable to equity holders of the Company                                                                |  |                         | 708    |   |       |  | 901    |      |  |  | 927  |   |  |  | 267  |  
|Adjustments:                                                                                                            |  |                         |        |   |       |  |        |      |  |  |      |   |  |  |      |  
|Fair value gain from investment property and investment property under development, net                                 |  |                         | (1,692 | ) |       |  | (1,938 | )    |  |  | (962 | ) |  |  | (277 | )
|Capital loss on sale of investment property                                                                             |  |                         | 63     |   |       |  | 5      |      |  |  | 52   |   |  |  | 15   |  
|Impairment of goodwill                                                                                                  |  |                         | 38     |   |       |  |       |      |  |  |     |   |  |  |     |  
|Changes in the fair value of financial instruments including derivatives, measured at fair value through profit or loss |  |                         | 179    |   |       |  | (36    | )    |  |  | (435 | ) |  |  | (125 | )
|Adjustments with respect to equity-accounted investees                                                                  |  |                         | (131   | ) |       |  | (43    | )    |  |  | 60   |   |  |  | 17   |  
|Loss from decrease in interest in investees                                                                             |  |                         | 1      |   |       |  | 4      |      |  |  | 11   |   |  |  | 3    |  
|Deferred taxes and current taxes with respect to disposal of properties                                                 |  |                         | 348    |   |       |  | 752    |      |  |  | 262  |   |  |  | 75   |  
|Acquisition costs recognized in profit or loss                                                                          |  |                         | 21     |   |       |  | 26     |      |  |  | 10   |   |  |  | 3    |  
|Gain from bargain purchase                                                                                              |  |                         | (102   | ) |       |  | (134   | )    |  |  | (173 | ) |  |  | (50  | )
|Loss from early redemption of interest-bearing liabilities and financial derivatives                                    |  |                         | 14     |   |       |  | 147    |      |  |  | 142  |   |  |  | 41   |  
|Non-controlling interests share in the above adjustments                                                               |  |                         | 633    |   |       |  | 643    |      |  |  | 375  |   |  |  | 108  |  
|                                                                                                                        |  |                         |        |   |       |  |        |      |  |  |      |   |  |  |      |  
|Total adjustments                                                                                                       |  |                         | (628   | ) |       |  | (574   | )    |  |  | (658 | ) |  |  | (190 | )
|                                                                                                                        |  |                         |        |   |       |  |        |      |  |  |      |   |  |  |      |  
|EPRA FFO                                                                                                                |  |                         | 80     |   |       |  | 327    |      |  |  | 269  |   |  |  | 77   |  
|Additional adjustments:(3)                                                                                              |  |                         |        |   |       |  |        |      |  |  |      |   |  |  |      |  
|CPI and currency exchange rate linkage differences                                                                      |  |                         | 133    |   |       |  | 94     |      |  |  | 152  |   |  |  | 44   |  
|Depreciation and amortization                                                                                           |  |                         | 15     |   |       |  | 16     |      |  |  | 16   |   |  |  | 5    |  
|Adjustments with respect to equity-accounted investees                                                                  |  |                         | 67     |   |       |  | 2      |      |  |  | 27   |   |  |  | 8    |  
|Other adjustments(4)                                                                                                    |  |                         | 110    |   |       |  | 94     |      |  |  | 121  |   |  |  | 35   |  
|                                                                                                                        |  |                         |        |   |       |  |        |      |  |  |      |   |  |  |      |  
|Total additional adjustments                                                                                            |  |                         | 325    |   |       |  | 206    |      |  |  | 316  |   |  |  | 92   |  
|                                                                                                                        |  |                         |        |   |       |  |        |      |  |  |      |   |  |  |      |  



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|                                                                                                                                                                |  |                         |         |  |       |  |         |      |  |  |         |  |  |  |         | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------- |  | ----- |  | ------- | ---- |  |  | ------- |  |  |  | ------- | 
|                                                                                                                                                                |  | Year Ended December 31, |        
|                                                                                                                                                                |  | 2011                    |         |  | 2012  |  |         | 2013 |  |  | 2013    | 
|In millions (except for per share
data)(1)(2)                                                                                                                   |  | NIS                     |         |  | U.S.$ | 
|Adjusted EPRA FFO                                                                                                                                               |  |                         | 405     |  |       |  | 533     |      |  |  | 585     |  |  |  | 169     | 
|                                                                                                                                                                |  |                         |         |  |       |  |         |      |  |  |         |  |  |  |         | 
|Basic net income per share                                                                                                                                      |  |                         | 4.57    |  |       |  | 5.46    |      |  |  | 5.41    |  |  |  | 1.56    | 
|                                                                                                                                                                |  |                         |         |  |       |  |         |      |  |  |         |  |  |  |         | 
|Diluted net income per share                                                                                                                                    |  |                         | 4.23    |  |       |  | 5.25    |      |  |  | 5.35    |  |  |  | 1.54    | 
|                                                                                                                                                                |  |                         |         |  |       |  |         |      |  |  |         |  |  |  |         | 
|EPRA FFO per share (basic and diluted)                                                                                                                          |  |                         | 0.52    |  |       |  | 1.98    |      |  |  | 1.57    |  |  |  | 0.45    | 
|                                                                                                                                                                |  |                         |         |  |       |  |         |      |  |  |         |  |  |  |         | 
|Adjusted EPRA FFO per share (basic)                                                                                                                             |  |                         | 2.62    |  |       |  | 3.23    |      |  |  | 3.42    |  |  |  | 0.98    | 
|                                                                                                                                                                |  |                         |         |  |       |  |         |      |  |  |         |  |  |  |         | 
|Adjusted EPRA FFO per share (diluted)                                                                                                                           |  |                         | 2.62    |  |       |  | 3.23    |      |  |  | 3.41    |  |  |  | 0.98    | 
|                                                                                                                                                                |  |                         |         |  |       |  |         |      |  |  |         |  |  |  |         | 
|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)(5) |  |                         | 154,456 |  |       |  | 164,912 |      |  |  | 171,103 |  |  |  | 171,103 | 
|                                                                                                                                                                |  |                         |         |  |       |  |         |      |  |  |         |  |  |  |         | 
|Diluted Net Income per share (in thousands of shares)(5)                                                                                                        |  |                         | 154,783 |  |       |  | 165,016 |      |  |  | 171,413 |  |  |  | 171,413 | 
|                                                                                                                                                                |  |                         |         |  |       |  |         |      |  |  |         |  |  |  |         | 



|(1) | As stated above, the data for each of the years ended December 31, 2013 and December 31, 2012 was restated to reflect the correction of an error. For further information, refer to Notes 2ee and 41 to our
audited consolidated financial statements included elsewhere in this annual report.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | As stated above, we have retrospectively adopted the Clarification to IAS 12 and the Clarification to IAS 17 in these restated financial statements, with effective adoption date being January 1, 2011. Accordingly,
the data shown above for each of the years ended December 31, 2010 and December 31, 2009 is as originally presented without any effect of the Clarification to IAS 12 or the Clarification to IAS 17.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Additional adjustments are presented net of non-controlling interests share.
|--- | -----------------------------------------------------------------------------

|(4) | Income and expenses adjustments including expenses arising from non-recurring expenses related to the termination of engagements with senior Group officers; with respect to 2011, income from the waiver of bonuses by our
chairman and executive vice chairman (including with respect to the expiry of the employment agreement with our chairman); 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.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Weighted average for each applicable period.
|--- | --------------------------------------------



|                                                                                                                        |  |                         |        |   |       |  |        |      |  |  |       |   |  |  |       |  
|----------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | - | ----- |  | ------ | ---- |  |  | ----- | - |  |  | ----- | -
|                                                                                                                        |  | Year Ended December 31, |       
|                                                                                                                        |  | 2011                    |        |   | 2012  |  |        | 2013 |  |  | 2013  |  
|Per share(1)(2)                                                                                                         |  | NIS                     |        |   | U.S.$ | 
|Net income attributable to equity holders of the Company                                                                |  |                         | 4.57   |   |       |  | 5.46   |      |  |  | 5.41  |   |  |  | 1.56  |  
|Adjustments:                                                                                                            |  |                         |        |   |       |  |        |      |  |  |       |   |  |  |       |  
|Fair value gain from investment property and investment property under development, net                                 |  |                         | (10.96 | ) |       |  | (11.75 | )    |  |  | (5.62 | ) |  |  | (1.62 | )
|Capital loss on sale of investment property                                                                             |  |                         | 0.41   |   |       |  | 0.03   |      |  |  | 0.30  |   |  |  | 0.09  |  
|Impairment of goodwill                                                                                                  |  |                         | 0.25   |   |       |  |       |      |  |  |      |   |  |  |      |  
|Changes in the fair value of financial instruments including derivatives, measured at fair value through profit or loss |  |                         | 1.16   |   |       |  | (0.22  | )    |  |  | (2.54 | ) |  |  | (0.74 | )
|Adjustments with respect to equity-accounted investees                                                                  |  |                         | (0.85  | ) |       |  | (0.26  | )    |  |  | 0.35  |   |  |  | 0.10  |  
|Loss from decrease in interest in investees                                                                             |  |                         |       | * |       |  | 0.02   |      |  |  | 0.07  |   |  |  | 0.02  |  
|Deferred taxes and current taxes with respect to disposal of properties                                                 |  |                         | 2.25   |   |       |  | 4.56   |      |  |  | 1.53  |   |  |  | 0.44  |  
|Acquisition costs recognized in profit or loss                                                                          |  |                         | 0.14   |   |       |  | 0.16   |      |  |  | 0.06  |   |  |  | 0.02  |  
|Gain from bargain purchase                                                                                              |  |                         | (0.66  | ) |       |  | (0.81  | )    |  |  | (1.01 | ) |  |  | (0.29 | )
|Loss from early redemption of interest-bearing liabilities and financial derivatives                                    |  |                         | 0.09   |   |       |  | 0.89   |      |  |  | 0.83  |   |  |  | 0.24  |  
|Non-controlling interests share in the above adjustments                                                               |  |                         | 4.1    |   |       |  | 3.9    |      |  |  | 2.19  |   |  |  | 0.63  |  
|                                                                                                                        |  |                         |        |   |       |  |        |      |  |  |       |   |  |  |       |  
|Total adjustments                                                                                                       |  |                         | (4.06  | ) |       |  | (3.48  | )    |  |  | (3.84 | ) |  |  | (1.11 | )
|                                                                                                                        |  |                         |        |   |       |  |        |      |  |  |       |   |  |  |       |  
|EPRA FFO                                                                                                                |  |                         | 0.52   |   |       |  | 1.98   |      |  |  | 1.57  |   |  |  | 0.45  |  
|                                                                                                                        |  |                         |        |   |       |  |        |      |  |  |       |   |  |  |       |  
|Additional adjustments:(3)                                                                                              |  |                         |        |   |       |  |        |      |  |  |       |   |  |  |       |  
|CPI and currency exchange rate linkage differences                                                                      |  |                         | 0.86   |   |       |  | 0.57   |      |  |  | 0.89  |   |  |  | 0.26  |  
|Depreciation and amortization                                                                                           |  |                         | 0.1    |   |       |  | 0.10   |      |  |  | 0.09  |   |  |  | 0.03  |  
|Adjustments with respect to equity-accounted investees                                                                  |  |                         | 0.43   |   |       |  | 0.01   |      |  |  | 0.16  |   |  |  | 0.04  |  
|Other adjustments(4)                                                                                                    |  |                         | 0.71   |   |       |  | 0.57   |      |  |  | 0.71  |   |  |  | 0.20  |  
|                                                                                                                        |  |                         |        |   |       |  |        |      |  |  |       |   |  |  |       |  
|Total additional adjustments                                                                                            |  |                         | 2.1    |   |       |  | 1.25   |      |  |  | 1.85  |   |  |  | 0.53  |  
|                                                                                                                        |  |                         |        |   |       |  |        |      |  |  |       |   |  |  |       |  
|Adjusted EPRA FFO                                                                                                       |  |                         | 2.62   |   |       |  | 3.23   |      |  |  | 3.42  |   |  |  | 0.98  |  
|                                                                                                                        |  |                         |        |   |       |  |        |      |  |  |       |   |  |  |       |  



72



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|* | Represents an amount lower than NIS 0.01.
|- | -----------------------------------------

|(1) | As stated above, the data for each of the years ended December 31, 2013 and December 31, 2012 was restated to reflect the correction of an error. For further information, refer to Notes 2ee and 41 to our
audited consolidated financial statements included elsewhere in this Annual Report.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | As stated above, we have retrospectively adopted the Clarification to IAS 12 and the Clarification to IAS 17 in these restated financial statements, with effective adoption date being January 1, 2011. Accordingly,
the data shown above for each of the years ended December 31, 2010 and December 31, 2009 is as originally presented without any effect of the Clarification to IAS 12 or the Clarification to IAS 17.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Additional adjustments are presented net of non-controlling interests share.
|--- | -----------------------------------------------------------------------------

|(4) | Income and expenses adjustments including expenses arising from non-recurring expenses related to the termination of engagements with senior Group officers; with respect to 2011, income from the waiver of bonuses by our
chairman and executive vice chairman (including with respect to the expiry of the employment agreement with our chairman); 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 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 the impact 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.

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.

In January 2014, EPRA published an update for the calculation of the EPRA
NAV and the EPRA NNNAV, which prescribes that financial derivatives used for currency hedging will not be excluded in calculating the EPRA NAV. Accordingly, in calculating the value of financial derivatives to be excluded in calculating the EPRA
NAV, the Company deducts from the total value of the cross-currency swap transactions the intrinsic value of these transactions. Following the said publication, the Company has retroactively adjusted the EPRA NAV calculation as of December 31,
2012 in the amount of NIS 655 million (NIS 3.8 per share) and as of December 31, 2011 in the amount of NIS 621 million (NIS 3.7 per share), which are the value of the financial derivatives used for currency hedging as of the
same dates.



73



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



|                                                                                                   |  |                    |         |   |         |  |         |      |  |  |         |   |  |  |         |  
|-------------------------------------------------------------------------------------------------- |  | ------------------ | ------- | - | ------- |  | ------- | ---- |  |  | ------- | - |  |  | ------- | -
|                                                                                                   |  | As of December 31, |        
|                                                                                                   |  | 2011(*)            |         |   | 2012(*) |  |         | 2013 |  |  | 2013    |  
|in millions                                                                                        |  | NIS                |         |   | U.S.$   | 
|EPRA NAV(1)(2)                                                                                     |  |                    |         |   |         |  |         |      |  |  |         |   |  |  |         |  
|Equity attributable to the equity holders of the Company, per the financial statements             |  |                    | 7,199   |   |         |  | 7,681   |      |  |  | 7,802   |   |  |  | 2,248   |  
|Adjustments for exclusion of fair value of derivatives(3)                                          |  |                    | (207    | ) |         |  | (83     | )    |  |  | (60     | ) |  |  | (17     | )
|Provision for tax on revaluation of investment property to fair value (net of minoritys share)(4) |  |                    | 1,538   |   |         |  | 2,203   |      |  |  | 2,158   |   |  |  | 622     |  
|Adjustments with respect to affiliates                                                             |  |                    | 232     |   |         |  | 235     |      |  |  | 300     |   |  |  | 86      |  
|                                                                                                   |  |                    |         |   |         |  |         |      |  |  |         |   |  |  |         |  
|Net asset valueEPRA NAV                                                                           |  |                    | 8,762   |   |         |  | 10,037  |      |  |  | 10,200  |   |  |  | 2,939   |  
|                                                                                                   |  |                    |         |   |         |  |         |      |  |  |         |   |  |  |         |  
|EPRA NAV per diluted share (in NIS)                                                                |  |                    | 53.1    |   |         |  | 60.7    |      |  |  | 57.9    |   |  |  | 16.7    |  
|                                                                                                   |  |                    |         |   |         |  |         |      |  |  |         |   |  |  |         |  
|Number of shares used to calculate EPRA NAV per share (in thousands of
shares)(5)                  |  |                    | 165,032 |   |         |  | 165,483 |      |  |  | 176,094 |   |  |  | 176,094 |  
|                                                                                                   |  |                    |         |   |         |  |         |      |  |  |         |   |  |  |         |  



|* | Retrospectively adjusted due to EPRA update of Best Practice Recommendation. See above for details.
|- | ---------------------------------------------------------------------------------------------------

|(1) | As stated above, the data as of December 31, 2013 and December 31, 2012 was restated to reflect the correction of an error. For further information, refer to Notes 2ee and 41 to our audited consolidated
financial statements included elsewhere in this Annual Report.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | As stated above, we have retrospectively adopted the Clarification to IAS 12 in these restated financial statements, with effective adoption date being January 1, 2011. For further information please refer to Note
2a to our audited consolidated financial statements included elsewhere in this Annual Report.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | 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 2m and 37b 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.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|(5) | Represents the number of issued shares (in thousands), excluding treasury shares held by the Company, on a fully diluted basis.
|--- | -------------------------------------------------------------------------------------------------------------------------------



|                                                                                                   |  |                    |      |   |         |  |      |      |  |  |      |   |  |  |      |  
|-------------------------------------------------------------------------------------------------- |  | ------------------ | ---- | - | ------- |  | ---- | ---- |  |  | ---- | - |  |  | ---- | -
|                                                                                                   |  | As of December 31, |     
|                                                                                                   |  | 2011(*)            |      |   | 2012(*) |  |      | 2013 |  |  | 2013 |  
|                                                                                                   |  | NIS                |      |   | U.S.$   | 
|EPRA NAVPer diluted Share(1)(2)                                                                   |  |                    |      |   |         |  |      |      |  |  |      |   |  |  |      |  
|Equity attributable to the equity holders of the Company, per the financial statements             |  |                    | 43.6 |   |         |  | 46.5 |      |  |  | 44.3 |   |  |  | 12.8 |  
|Adjustments for exclusion of fair value of derivatives(3)                                          |  |                    | (1.2 | ) |         |  | (0.5 | )    |  |  | (0.3 | ) |  |  | (0.1 | )
|Provision for tax on revaluation of investment property to fair value (net of minoritys share)(4) |  |                    | 9.3  |   |         |  | 13.3 |      |  |  | 12.2 |   |  |  | 3.5  |  
|Adjustments with respect to affiliates                                                             |  |                    | 1.4  |   |         |  | 1.4  |      |  |  | 1.7  |   |  |  | 0.5  |  
|                                                                                                   |  |                    |      |   |         |  |      |      |  |  |      |   |  |  |      |  
|Net asset valueEPRA NAV                                                                           |  |                    | 53.1 |   |         |  | 60.7 |      |  |  | 57.9 |   |  |  | 16.7 |  
|                                                                                                   |  |                    |      |   |         |  |      |      |  |  |      |   |  |  |      |  



|* | Retrospectively adjusted due to EPRA update of Best Practice Recommendation. See above for details.
|- | ---------------------------------------------------------------------------------------------------

|(1) | As stated above, the data as of December 31, 2013 and December 31, 2012 was restated to reflect the correction of an error. For further information, refer to Notes 2ee and 41 to our audited consolidated
financial statements included elsewhere in this Annual Report.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



74



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|(2) | As stated above, we have retrospectively adopted the Clarification to IAS 12 in these restated financial statements, with effective adoption date being January 1, 2011. For further information please refer to Note
2a to our audited consolidated financial statements included elsewhere in this Annual Report.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | 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 2m and 37b 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.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | 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, |        
|                                                                                    |  | 2011(*)            |         |   | 2012(*) |  |         | 2013 |  |  | 2013    |  
|in millions                                                                         |  | NIS                |         |   | U.S.$   | 
|EPRA NNNAV(1)(2)                                                                    |  |                    |         |   |         |  |         |      |  |  |         |   |  |  |         |  
|EPRA NAV                                                                            |  |                    | 8,762   |   |         |  | 10,037  |      |  |  | 10,200  |   |  |  | 2,939   |  
|Adjustment for addition of fair value of derivatives(3)                             |  |                    | 207     |   |         |  | 83      |      |  |  | 60      |   |  |  | 17      |  
|Adjustments of financial liabilities to fair value(4)                               |  |                    | (887    | ) |         |  | (1,495  | )    |  |  | (1,460  | ) |  |  | (420    | )
|Other adjustments to provision for deferred taxes(5)                                |  |                    | (1,050  | ) |         |  | (1,214  | )    |  |  | (1,124  | ) |  |  | (324    | )
|Adjustments with respect to affiliates                                              |  |                    | (251    | ) |         |  | (254    | )    |  |  | (315    | ) |  |  | (91     | )
|                                                                                    |  |                    |         |   |         |  |         |      |  |  |         |   |  |  |         |  
|Adjusted net asset valueEPRA NNNAV                                               |  |                    | 6,781   |   |         |  | 7,157   |      |  |  | 7,361   |   |  |  | 2,121   |  
|                                                                                    |  |                    |         |   |         |  |         |      |  |  |         |   |  |  |         |  
|EPRA NNNAV per diluted share (in NIS)                                               |  |                    | 41.1    |   |         |  | 43.3    |      |  |  | 41.8    |   |  |  | 12.0    |  
|                                                                                    |  |                    |         |   |         |  |         |      |  |  |         |   |  |  |         |  
|Number of shares used to calculate EPRA NNNAV per share (in thousands of
shares)(6) |  |                    | 165,032 |   |         |  | 165,483 |      |  |  | 176,094 |   |  |  | 176,094 |  
|                                                                                    |  |                    |         |   |         |  |         |      |  |  |         |   |  |  |         |  



|* | Retrospectively adjusted due to EPRA update of Best Practice Recommendation. See above for details.
|- | ---------------------------------------------------------------------------------------------------

|(1) | As stated above, the data as of December 31, 2013 and December 31, 2012 was restated to reflect the correction of an error. For further information, refer to Notes 2ee and 41 to our audited consolidated
financial statements included elsewhere in this Annual Report.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | As stated above, we have retrospectively adopted the Clarification to IAS 12 in these restated financial statements, with effective adoption date being January 1, 2011. For further information please refer to Note
2a to our audited consolidated financial statements included elsewhere in this Annual Report.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | 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 2m and 37b to our audited consolidated financial statements included elsewhere in this Annual Report.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | 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 2m and 37b to our audited consolidated financial
statements included elsewhere in this Annual Report.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | 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.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Represents the number of issued shares (in thousands), excluding treasury shares held by the Company, on a fully diluted basis.
|--- | -------------------------------------------------------------------------------------------------------------------------------



75



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|                                                        |  |                    |      |   |         |  |      |      |  |  |      |   |  |  |      |  
|------------------------------------------------------- |  | ------------------ | ---- | - | ------- |  | ---- | ---- |  |  | ---- | - |  |  | ---- | -
|                                                        |  | As of December 31, |     
|                                                        |  | 2011(*)            |      |   | 2012(*) |  |      | 2013 |  |  | 2013 |  
|                                                        |  | NIS                |      |   | U.S.$   | 
|EPRA NNNAVPer diluted Share(1)(2)                      |  |                    |      |   |         |  |      |     
|EPRA NAV                                                |  |                    | 53.1 |   |         |  | 60.7 |      |  |  | 57.9 |   |  |  | 16.7 |  
|Adjustment for addition of fair value of derivatives(3) |  |                    | 1.3  |   |         |  | 0.5  |      |  |  | 0.3  |   |  |  | 0.1  |  
|Adjustments of financial liabilities to fair value(4)   |  |                    | (5.4 | ) |         |  | (9.0 | )    |  |  | (8.2 | ) |  |  | (2.4 | )
|Other adjustments to provision for deferred taxes(5)    |  |                    | (6.4 | ) |         |  | (7.4 | )    |  |  | (6.4 | ) |  |  | (1.9 | )
|Adjustments with respect to affiliates                  |  |                    | (1.5 | ) |         |  | (1.5 | )    |  |  | (1.8 | ) |  |  | (0.5 | )
|                                                        |  |                    |      |   |         |  |      |      |  |  |      |   |  |  |      |  
|Adjusted net asset valueEPRA NNNAV                   |  |                    | 41.1 |   |         |  | 43.3 |      |  |  | 41.8 |   |  |  | 12.0 |  
|                                                        |  |                    |      |   |         |  |      |      |  |  |      |   |  |  |      |  



|* | Retrospectively adjusted due to EPRA update of Best Practice Recommendation. See above for details.
|- | ---------------------------------------------------------------------------------------------------

|(1) | As stated above, the data as of December 31, 2013 and December 31, 2012 was restated to reflect the correction of an error. For further information, refer to Notes 2ee and 41 to our audited consolidated
financial statements included elsewhere in this Annual Report.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | As stated above, we have retrospectively adopted the Clarification to IAS 12 in these restated financial statements, with effective adoption date being January 1, 2011. For further information please refer to Note
2a to our audited consolidated financial statements included elsewhere in this Annual Report.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | 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 2m and 37b to our audited consolidated financial statements included elsewhere in this Annual Report.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | 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 2m and 37b to our audited consolidated financial
statements included elsewhere in this Annual Report.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | 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.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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.



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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 right 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 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, 2013, Equity One, First Capital and Citycon were
consolidated based on our determination of effective control. Please see Note 2c 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.

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, 2013, we
wrote up the value of our properties on a consolidated basis by NIS 962 million (of which Gazit-Globes share was NIS 388 million). This compares to a write up in 2012 of NIS 1,938 million (of which Gazit-Globes share was NIS
962 million) and a write up in 2011 of NIS 1,692 million (of which Gazit-Globes share was NIS 861 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, as well as borrowing costs used to finance the land and the construction, direct incremental planning and construction costs, as well as brokerage
fees relating to agreements to lease the property and other incremental lease-up costs. As of December 31, 2013, 86% of our investment property under development and all Land for future development were measured at fair value.



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Fair value of investment property was determined by accredited independent appraisers with
respect to 60% of such investment properties for the year ended December 31, 2013 in fair value terms (of which 49% were performed at December 31, 2013). Fair value of investment property under development and land was determined by
accredited independent appraisers with respect to 45% of such investment properties during the year ended December 31, 2013 (39% of which were performed at December 31, 2013). 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 2013, 88% 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, 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 12c 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 12c and 13d 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.

Derivative Financial Instruments

We utilize derivative financial instruments, 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
derivative financial instrument activities. We have not entered into, and do not plan to enter into, derivative financial instruments for trading or speculative purposes. Additionally, we have a policy of entering into derivative contracts only with
major financial institutions.

Such derivative financial instruments 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 the statement of income. 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 discount rates and the expected exchange rates, interest rates and CPI rates. 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 settling 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 2013, refer to Note 37d 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, 2013 and were not applied to comparative figures. The initial implementation of IFRS 13 did not have material impact on fair value measurement. In
addition, the disclosures required by IFRS 13 are included in Note 37b 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.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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

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 adopted
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 9c 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 and deferred tax liabilities that should 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. As of December 31, 2013, we had NIS 106 million (U.S.$ 31 million) of deferred tax assets and NIS 3,276 million (U.S.$ 944 million) of deferred tax liabilities as compared to NIS 198 million
of deferred tax assets and NIS 3,380 million of deferred tax liabilities as of December 31, 2012. As for the adoption of the Clarification to IAS 12 in these restated financial statements, please see Note 2a and Note 41 to our audited
consolidated financial statements included elsewhere in this Annual Report.

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, since it is our 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 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 25b to our audited
consolidated financial statements included elsewhere in this Annual Report.



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Recently adopted Accounting Pronouncements

IAS 1Presentation of Financial Statements

In June 2011 the IASB published an amendment to IAS 1 (hereinafterthe Amendment). The Amendment modifies the presentation of other
comprehensive income. Under the Amendment, items which may be carried to profit or loss at later stage should be presented separately in other comprehensive income from items that can never be carried to profit or loss. The Amendment has been
applied retrospectively from January 1, 2013.

IFRS 13Fair Value Measurement

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 applied prospectively commencing January 1, 2013 and is not applied to comparative figures. The initial implementation of IFRS 13 did not have material impact on fair value measurement. In addition, the
disclosures required by IFRS 13 are included in the audited consolidated financial statements included elsewhere in this annual report.

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. We have adopted the Interpretation in these restated financial statements. The adoption of the Interpretation did not have a material impact on our consolidated financial statements.

Publication of clarification to IAS 17, Leases

In March 2014, the IFRIC published a clarification pursuant to which internal fixed costs are not to be considered as incremental costs for
the purposes of IAS 17, Leases. As a result of the aforesaid clarification, we classify internal costs that were incurred in the leasing of properties (primarily salary expenses) as part of General and administrative expenses, instead of
capitalizing them to Investment property and immediately include them as part of Fair value gain from investment property line item. We have retrospectively adopted the clarification in these restated financial statements
(see Note 2ee to our audited consolidated financial statements included elsewhere in this Annual Report). The reclassification impact totaled NIS 29 million, NIS 25 million and NIS 22 million in the years ended
December 31, 2013, December 31, 2012 and December 31, 2011, respectively. In addition, the Company reclassified the cash flow statements of the aforementioned periods in the same amounts, decreasing the cash flow provided by
operating activities with a corresponding decrease in the cash flow used in investing activities. It is clarified that the aforementioned reclassification has no effect on our net income and or financial position.

Publication of clarification to IAS 12, Income Taxes

In
July 2014, the IFRIC published a Clarification with regard to the accounting treatment of taxes on income in situations where an entity is holding single asset entities and where the manner in which the entity expects to realize the investment is by
selling the shares of the single asset entity, rather than by disposing of the asset itself (the Clarification). Through the publication date of the Clarification, we applied an interpretation pursuant to which we had provided for
deferred taxes only with respect to the temporary differences arising with respect to a sale of shares of the single asset entity, in accordance with the tax implications and the tax rate relevant to the customary practice on realizing the assets,
and deferred taxes were not provided with respect to temporary differences relating to a sale of the asset itself. As a result of implementing the Clarification, we also provide for deferred taxes with respect to the temporary differences that arose
in connection with the assets of the single asset entity (primarily investment property).

The Clarification was retrospectively implemented in these
restated financial statements with adjusting the comparative amounts. For the effect of the Clarification on our financial statements, refer to Note 41 to our audited consolidated financial statements included elsewhere in this Annual Report.

Recently Issued Accounting Pronouncements

IFRS
10Consolidated Financial Statements

The amendment to IFRS 10 that was published in October 2012 with regard to investment entities prescribes
that investment entities are not required to consolidate the financial statements of their subsidiaries, but rather to measure the investment therein at fair value through profit or loss. The amendment also specifies a specific disclosure
requirement for investment entities. The effective date of the amendment is January 1, 2014. In our opinion, the amendment is not expected to have an effect on the financial statements.



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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. We are examining the effect of the amendment on the financial statements.

IFRS 9Financial Instruments

During 2013, the IASB published three stages of IFRS 9 that include the treatment for the classification and measurement of financial assets,
derecognition, financial liabilities, and hedge accounting.



|1. | Financial assetsthe standard prescribes that, at the time of their initial recognition, all financial assets (including embedded instruments in which the host contract is a financial asset) will 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:
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) | The asset is held within the framework of a business model whose objective is to hold the assets in order to collect the contractual cash flows arising therefrom.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) | In accordance with the contractual terms of the financial asset, the entity is entitled, on specified dates, to receive cash flows that are solely payments of principal and interest on the principal outstanding.
Notwithstanding the aforesaid, an entity may, at the time of the initial recognition, designate a debt instrument that meets the two aforementioned conditions as measured at fair value through profit or loss, if doing so eliminates or significantly
reduces a measurement or recognition inconsistency (sometimes referred to as an accounting mismatch) that would otherwise arise therefrom. Financial assets that are equity instruments will be measured in subsequent periods at fair value,
with value changes recognized in profit or loss or in other comprehensive income (loss), in accordance with the Companys election with regard to each individual instrument (amounts recognized in other comprehensive income may not be
transferred subsequently to profit or loss). In the case of equity instruments held for trading, these must be measured at fair value through profit or loss.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2. | Derecognition and financial liabilitiespursuant to the provisions of the amendments, the provisions of IAS 39 are to continue to apply with regard to derecognition and with regard to financial liabilities for
which the fair value option has not been elected. Pursuant to the amendments, the amount of the change in the fair value of the liability  that is attributable to changes in the credit risk  is to be carried to other comprehensive
income. All the other changes in the fair value will be presented in profit or loss. If recognition in other comprehensive income of a change in the fair value of the liability, caused as a result of changes in the credit risk, would create an
accounting mismatch in profit or loss, said change should also be recognized in profit or loss and not in other comprehensive income.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|3. | Hedge accountingaccording to the amendments hedge accounting may be implemented for risk components of both hedged financial items and also hedged non-financial items, insofar as they are separately identifiable
and reliably measurable. Hedge effectiveness is to be tested solely on a qualitative basis and the quantitative 80%-125% range test is to be canceled. The testing focuses on the attainment of the hedging goals and the economic relationship between
the hedged item and the hedging instrument and the effect the credit risk has on the aforesaid relationship. The time value of an option, the forward points of a forward contract and the foreign currency basis spread may be excluded from the
designation of the financial instrument as being a hedging instrument and may be accounted for as hedging transaction costs. In other words, these amounts will be recognized as hedging transaction costs in other comprehensive income and will be
amortized to profit or loss over the hedge period.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The IASB has not prescribed mandatory implementation dates for the three stages referred
to above. Early adoption is permitted under certain conditions. We are examining the possible effect of the standard (including all stages thereof), but is currently unable to assess its effect, if any, on the financial statements.

Accounting Pronouncements adopted in 2012

The implementation and early adoption of the New IFRSs which are specified below in 2012 was effective starting from January 1, 2010,
according to the New IFRSs transition provisions. Accordingly, the data as of December 31, 2009 and for the year ended on the date included in this annual report is as originally presented without any effect of those standards.



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The main effect of implementing the New IFRSs derives from IFRS 11 with respect to the Group
investments in the companies Atrium, RSC and Ronson Europe N.V., which, under IAS 31, were accounted for according to the proportionate consolidation method, while, under IFRS 11, they constitute joint ventures and are thus accounted for according
to the equity method. In addition Dori Group which according to IAS 31 was proportionately consolidated through the date of acquiring the control stakeApril 17, 2011 was accounted for according to the equity method according to IFRS 11.

Details of the New IFRSs adopted in 2012 are set forth below:

IFRS 10Consolidated Financial Statements does not prescribe changes to the consolidation procedures but rather modifies the
definition of control for the purpose of consolidation and introduces a single consolidation model. According to IFRS 10, in order for an investor to control an investee, the investor must have power over the investee and exposure, or rights, to
variable returns from the investee. According to IFRS 10, when assessing the existence of control, potential voting rights should be considered only if they are substantive. IFRS 10 also prescribes that an investor may have control even if it holds
less than a majority of the investees voting rights (de facto control).

IFRS 11Joint Arrangements defines joint
arrangements as contractual arrangements over which two or more parties have joint control. IFRS 11 distinguishes between two types of joint arrangements:



| |  | Joint ventures in which the parties that have joint control of the arrangement have rights to the net assets of the arrangement. IFRS 11 requires joint ventures to be accounted for solely by using the equity method.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Joint operations in which the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. IFRS 11 requires the joint operations to be
accounted for using the proportionate consolidation method according to the relative share of the joint operation as determined in the joint arrangement.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

IAS 28RInvestments in Associates and Joint Ventures relate to the application of the equity method of accounting for investments
in joint ventures, as a result of the issuance of IFRS 11, and the guidance for transition from proportionate consolidation to the equity method of accounting for these investments. IAS 28R also prescribes that in the event of disposal of an
investment in an associate or joint venture, including a portion thereof, the portion that meets the criteria to be classified as held-for-sale is accounted for in accordance with IFRS 5. Any remaining portion is accounted for using the equity
method until the time of actual disposal.

IFRS 12Disclosure of Interests in Other Entities prescribes disclosure
requirements for the Companys investees, including subsidiaries, joint arrangements, associates and structured entities. IFRS 12 expands the disclosure requirements to include the judgments and assumptions used by management in determining the
existence of control, joint control or significant influence over investees, and in determining the type of joint arrangement. IFRS 12 also provides disclosure requirements for material investees.

IAS 12 amendmentIncome Taxes which relates to the recognition of deferred taxes for investment property measured at fair value.
According to the Amendment, the deferred taxes in respect of temporary difference for such assets should be measured based on the presumption that the temporary difference will be utilized in full through sale (rather than through continuing use).
This presumption is rebuttable if the investment property is depreciable for tax purposes and is held within the companys business model with the purpose of recovering substantially all of the underlying economic benefits by way of use and not
sale. In those cases, the other general provisions of IAS 12 apply in respect of the manner of utilization that is most expected.

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, 2013:



|                        |  |                        |            |  |                 |  |           |           |  |  |           |  |  |                  |           |  |  |  |           | 
|----------------------- |  | ---------------------- | ---------- |  | --------------- |  | --------- | --------- |  |  | --------- |  |  | ---------------- | --------- |  |  |  | --------- | 
|                        |  | Payments Due by Period |           
|Contractual Obligations |  | Total                  |            |  | Less than1 year |  |           | 2-3 years |  |  | 4-5 years |  |  | More than5 years |          
|                        |  | (NIS in thousands)     |           
|Credit facilities/loans |  |                        | 2,436,370  |  |                 |  | 98,536    |           |  |  | 1,174,106 |  |  |                  | 462,287   |  |  |  | 701,441   | 
|Mortgages               |  |                        | 1,526,760  |  |                 |  | 576,346   |           |  |  | 70,819    |  |  |                  | 382,056   |  |  |  | 497,539   | 
|Unsecured Debentures(1) |  |                        | 10,516,172 |  |                 |  | 276,093   |           |  |  | 1,964,762 |  |  |                  | 2,131,506 |  |  |  | 6,143,811 | 
|Operating leases        |  |                        | 120,644    |  |                 |  | 9,804     |           |  |  | 19,608    |  |  |                  | 6,051     |  |  |  | 85,181    | 
|Interest obligations    |  |                        | 3,582,084  |  |                 |  | 662,021   |           |  |  | 1,094,468 |  |  |                  | 779,850   |  |  |  | 1,045,745 | 
|Financial guarantees    |  |                        | 57,346     |  |                 |  | 29,596    |           |  |  | 8,030     |  |  |                  |          |  |  |  | 19,720    | 
|Purchase contracts      |  |                        | 17,911     |  |                 |  | 10,130    |           |  |  | 7,781     |  |  |                  |          |  |  |  |          | 
|                        |  |                        |            |  |                 |  |           |           |  |  |           |  |  |                  |           |  |  |  |           | 
|Total                   |  |                        | 18,257,287 |  |                 |  | 1,662,526 |           |  |  | 4,339,574 |  |  |                  | 3,761,750 |  |  |  | 8,493,437 | 
|                        |  |                        |            |  |                 |  |           |           |  |  |           |  |  |                  |           |  |  |  |           | 



|(1) | Includes a secured series amounting to NIS 861 million
|--- | ------------------------------------------------------

The following table summarizes
the contractual obligations of Equity One as of December 31, 2013:



|                         |  |                        |           |  |                 |  |         |           |  |  |           |  |  |                  |           |  |  |  |           | 
|------------------------ |  | ---------------------- | --------- |  | --------------- |  | ------- | --------- |  |  | --------- |  |  | ---------------- | --------- |  |  |  | --------- | 
|                         |  | Payments Due by Period |          
|Contractual Obligations  |  | Total                  |           |  | Less than1 year |  |         | 2-3 years |  |  | 4-5 years |  |  | More than5 years |          
|                         |  | (NIS in thousands)     |          
|Credit facilities/loans  |  |                        | 1,183,611 |  |                 |  |        |           |  |  | 315,861   |  |  |                  |          |  |  |  | 867,750   | 
|Mortgages                |  |                        | 1,493,068 |  |                 |  | 72,818  |           |  |  | 728,112   |  |  |                  | 458,512   |  |  |  | 233,626   | 
|Unsecured debentures     |  |                        | 2,537,773 |  |                 |  |        |           |  |  | 738,403   |  |  |                  | 758,070   |  |  |  | 1,041,300 | 
|Operating leases         |  |                        | 159,982   |  |                 |  | 6,151   |           |  |  | 11,496    |  |  |                  | 9,597     |  |  |  | 132,738   | 
|Construction commitments |  |                        | 293,032   |  |                 |  | 244,570 |           |  |  | 48,462    |  |  |                  |          |  |  |  |          | 
|Interest obligations     |  |                        | 1,141,620 |  |                 |  | 246,672 |           |  |  | 437,318   |  |  |                  | 229,925   |  |  |  | 227,705   | 
|Purchase contracts       |  |                        | 67,685    |  |                 |  | 67,685  |           |  |  |          |  |  |                  |          |  |  |  |          | 
|                         |  |                        |           |  |                 |  |         |           |  |  |           |  |  |                  |           |  |  |  |           | 
|Total                    |  |                        | 6,876,771 |  |                 |  | 637,896 |           |  |  | 2,279,652 |  |  |                  | 1,456,104 |  |  |  | 2,503,119 | 
|                         |  |                        |           |  |                 |  |         |           |  |  |           |  |  |                  |           |  |  |  |           | 



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The following table summarizes the contractual obligations of First Capital as of
December 31, 2013:



|                          |  |                        |            |  |                 |  |           |           |  |  |           |  |  |                  |           |  |  |  |           | 
|------------------------- |  | ---------------------- | ---------- |  | --------------- |  | --------- | --------- |  |  | --------- |  |  | ---------------- | --------- |  |  |  | --------- | 
|                          |  | Payments Due by Period |           
|Contractual Obligations   |  | Total                  |            |  | Less than1 year |  |           | 2-3 years |  |  | 4-5 years |  |  | More than5 years |          
|                          |  | (NIS in thousands)     |           
|Credit facilities/loans   |  |                        | 82,424     |  |                 |  | 82,424    |           |  |  |          |  |  |                  |          |  |  |  |          | 
|Mortgages                 |  |                        | 4,443,116  |  |                 |  | 893,201   |           |  |  | 1,402,754 |  |  |                  | 788,676   |  |  |  | 1,358,485 | 
|Unsecured debentures      |  |                        | 6,120,375  |  |                 |  | 326,420   |           |  |  | 408,025   |  |  |                  | 1,305,680 |  |  |  | 4,080,250 | 
|Convertible debentures(1) |  |                        | 1,282,560  |  |                 |  |          |           |  |  |          |  |  |                  | 548,115   |  |  |  | 734,445   | 
|Operating leases          |  |                        | 76,811     |  |                 |  | 3,196     |           |  |  | 6,411     |  |  |                  | 6,483     |  |  |  | 60,721    | 
|Construction commitments  |  |                        | 128,870    |  |                 |  | 116,254   |           |  |  | 12,616    |  |  |                  |          |  |  |  |          | 
|Interest obligations(1)   |  |                        | 2,974,458  |  |                 |  | 601,239   |           |  |  | 946,109   |  |  |                  | 725,490   |  |  |  | 701,620   | 
|Financial guarantees      |  |                        | 141,666    |  |                 |  |          |           |  |  |          |  |  |                  |          |  |  |  | 141,666   | 
|                          |  |                        |            |  |                 |  |           |           |  |  |           |  |  |                  |           |  |  |  |           | 
|Total                     |  |                        | 15,250,280 |  |                 |  | 2,022,734 |           |  |  | 2,775,915 |  |  |                  | 3,374,444 |  |  |  | 7,077,187 | 
|                          |  |                        |            |  |                 |  |           |           |  |  |           |  |  |                  |           |  |  |  |           | 



|(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.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table summarizes Citycons contractual obligations as of December 31,
2013:



|                         |  |                        |           |  |                 |  |           |           |  |  |           |  |  |                  |           |  |  |  |           | 
|------------------------ |  | ---------------------- | --------- |  | --------------- |  | --------- | --------- |  |  | --------- |  |  | ---------------- | --------- |  |  |  | --------- | 
|                         |  | Payments Due by Period |          
|Contractual Obligations  |  | Total                  |           |  | Less than1 year |  |           | 2-3 years |  |  | 4-5 years |  |  | More than5 years |          
|                         |  | (NIS in thousands)     |          
|Credit facilities/loans  |  |                        | 3,860,099 |  |                 |  | 582,468   |           |  |  | 1,977,482 |  |  |                  | 1,300,149 |  |  |  |          | 
|Mortgages                |  |                        | 12,141    |  |                 |  | 653       |           |  |  | 11,488    |  |  |                  |          |  |  |  |          | 
|Unsecured debentures     |  |                        | 3,163,217 |  |                 |  | 110,452   |           |  |  |          |  |  |                  | 661,815   |  |  |  | 2,390,950 | 
|Operating leases         |  |                        | 139,202   |  |                 |  | 11,056    |           |  |  | 30,938    |  |  |                  | 23,341    |  |  |  | 73,867    | 
|Construction commitments |  |                        | 1,022,158 |  |                 |  | 90,242    |           |  |  | 340,873   |  |  |                  | 591,043   |  |  |  |          | 
|Interest obligations     |  |                        | 1,227,255 |  |                 |  | 278,360   |           |  |  | 481,053   |  |  |                  | 288,521   |  |  |  | 179,321   | 
|Financial guarantees     |  |                        | 380,288   |  |                 |  | 81,178    |           |  |  | 104,029   |  |  |                  | 165,119   |  |  |  | 29,962    | 
|                         |  |                        |           |  |                 |  |           |           |  |  |           |  |  |                  |           |  |  |  |           | 
|Total                    |  |                        | 9,804,360 |  |                 |  | 1,154,409 |           |  |  | 2,945,863 |  |  |                  | 3,029,988 |  |  |  | 2,674,100 | 
|                         |  |                        |           |  |                 |  |           |           |  |  |           |  |  |                  |           |  |  |  |           | 

The following table summarizes Atriums contractual obligations as of December 31, 2013:



|                         |  |                        |           |  |                 |  |         |           |  |  |           |  |  |                  |           |  |  |  |           | 
|------------------------ |  | ---------------------- | --------- |  | --------------- |  | ------- | --------- |  |  | --------- |  |  | ---------------- | --------- |  |  |  | --------- | 
|                         |  | Payments Due by Period |          
|Contractual Obligations  |  | Total                  |           |  | Less than1 year |  |         | 2-3 years |  |  | 4-5 years |  |  | More than5 years |          
|                         |  | (NIS in thousands)     |          
|Mortgages                |  |                        | 1,468,287 |  |                 |  | 29,527  |           |  |  | 527,901   |  |  |                  | 402,184   |  |  |  | 508,675   | 
|Unsecured debentures     |  |                        | 2,415,864 |  |                 |  |        |           |  |  | 336,455   |  |  |                  | 405,744   |  |  |  | 1,673,665 | 
|Operating leases         |  |                        | 1,441,914 |  |                 |  | 39,411  |           |  |  | 59,470    |  |  |                  | 58,739    |  |  |  | 1,284,294 | 
|Construction commitments |  |                        | 40,817    |  |                 |  | 40,817  |           |  |  |          |  |  |                  |          |  |  |  |          | 
|Interest obligations     |  |                        | 874,088   |  |                 |  | 238,907 |           |  |  | 296,634   |  |  |                  | 195,614   |  |  |  | 142,933   | 
|                         |  |                        |           |  |                 |  |         |           |  |  |           |  |  |                  |           |  |  |  |           | 
|Total                    |  |                        | 6,240,970 |  |                 |  | 348,662 |           |  |  | 1,220,460 |  |  |                  | 1,062,281 |  |  |  | 3,609,567 | 
|                         |  |                        |           |  |                 |  |         |           |  |  |           |  |  |                  |           |  |  |  |           | 

The following table summarizes Dori Groups contractual obligations of as of December 31, 2013:



|                        |  |                        |         |  |                 |  |         |           |  |  |           |  |  |                  |         |  |  |  |         | 
|----------------------- |  | ---------------------- | ------- |  | --------------- |  | ------- | --------- |  |  | --------- |  |  | ---------------- | ------- |  |  |  | ------- | 
|                        |  | Payments Due by Period |        
|Contractual Obligations |  | Total                  |         |  | Less than1 year |  |         | 2-3 years |  |  | 4-5 years |  |  | More than5 years |        
|                        |  | (NIS in thousands)     |        
|Credit facilities/loans |  |                        | 91,099  |  |                 |  | 88,267  |           |  |  | 2,832     |  |  |                  |        |  |  |  |        | 
|Unsecured debentures    |  |                        | 574,374 |  |                 |  | 126,028 |           |  |  | 186,812   |  |  |                  | 127,936 |  |  |  | 133,598 | 
|Purchase contracts      |  |                        | 22,536  |  |                 |  | 22,536  |           |  |  |          |  |  |                  |        |  |  |  |        | 
|Interest obligations    |  |                        | 97,250  |  |                 |  | 30,965  |           |  |  | 37,691    |  |  |                  | 21,030  |  |  |  | 7,564   | 
|                        |  |                        |         |  |                 |  |         |           |  |  |           |  |  |                  |         |  |  |  |         | 
|Total                   |  |                        | 785,259 |  |                 |  | 267,796 |           |  |  | 227,335   |  |  |                  | 148,966 |  |  |  | 141,162 | 
|                        |  |                        |         |  |                 |  |         |           |  |  |           |  |  |                  |         |  |  |  |         | 



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The following table summarizes our contractual obligations on a consolidated basis as of
December 31, 2013:



|                           |  |                        |            |  |                 |  |           |           |  |  |            |  |  |                  |            |  |  |  |            | 
|-------------------------- |  | ---------------------- | ---------- |  | --------------- |  | --------- | --------- |  |  | ---------- |  |  | ---------------- | ---------- |  |  |  | ---------- | 
|                           |  | Payments Due by Period |           
|Contractual Obligations(1) |  | Total                  |            |  | Less than1 year |  |           | 2-3 years |  |  | 4-5 years  |  |  | More than5 years |           
|                           |  | (NIS in thousands)     |           
|Credit facilities/loans    |  |                        | 7,653,603  |  |                 |  | 851,695   |           |  |  | 3,470,281  |  |  |                  | 1,762,436  |  |  |  | 1,569,191  | 
|Mortgages                  |  |                        | 7,475,085  |  |                 |  | 1,543,018 |           |  |  | 2,213,173  |  |  |                  | 1,629,244  |  |  |  | 2,089,650  | 
|Unsecured debentures*)     |  |                        | 22,911,911 |  |                 |  | 838,993   |           |  |  | 3,298,002  |  |  |                  | 4,985,007  |  |  |  | 13,789,909 | 
|Convertible debentures**)  |  |                        | 1,282,560  |  |                 |  |          |           |  |  |           |  |  |                  | 548,115    |  |  |  | 734,445    | 
|Operating leases           |  |                        | 496,639    |  |                 |  | 30,207    |           |  |  | 68,453     |  |  |                  | 45,472     |  |  |  | 352,507    | 
|Construction commitments   |  |                        | 1,444,060  |  |                 |  | 451,066   |           |  |  | 401,951    |  |  |                  | 591,043    |  |  |  |           | 
|Interest obligations       |  |                        | 9,022,667  |  |                 |  | 1,819,257 |           |  |  | 2,996,639  |  |  |                  | 2,044,816  |  |  |  | 2,161,955  | 
|Financial guarantees       |  |                        | 579,300    |  |                 |  | 110,774   |           |  |  | 112,059    |  |  |                  | 165,119    |  |  |  | 191,348    | 
|Purchase contracts         |  |                        | 108,132    |  |                 |  | 100,351   |           |  |  | 7,781      |  |  |                  |           |  |  |  |           | 
|                           |  |                        |            |  |                 |  |           |           |  |  |            |  |  |                  |            |  |  |  |            | 
|Total                      |  |                        | 50,973,957 |  |                 |  | 5,745,361 |           |  |  | 12,568,339 |  |  |                  | 11,771,252 |  |  |  | 20,889,005 | 
|                           |  |                        |            |  |                 |  |           |           |  |  |            |  |  |                  |            |  |  |  |            | 



|(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.
|--- | -------------------------------------------------------------



|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)              |  | 64  |  | Chairman of the Board                                       |  | 2016             
|Arie Mientkavich               |  | 71  |  | Deputy Chairman of the Board                                |  | 2016             
|Dor J. Segal (2)               |  | 52  |  | Executive Vice Chairman of the Board                        |  | 2015             
|Aharon Soffer                  |  | 43  |  | President                                                   |  | November 2016    
|Gil Kotler                     |  | 48  |  | Senior Executive Vice President and Chief Financial Officer |  | October 2016     
|Yair Orgler (1)(2)(3)(4)(5)(6) |  | 74  |  | Director                                                    |  | November 2016    
|Haim Ben-Dor (1)(3)(4)(6)      |  | 75  |  | Director                                                    |  | 2015             
|Shaiy Pilpel (1)(3)(4)         |  | 64  |  | Director                                                    |  | 2014             
|Noga Knaz (1)(3)(4)(5)(6)      |  | 47  |  | Director                                                    |  | September 2014   
|Gary Epstein                   |  | 66  |  | Director                                                    |  | 2014             
|Douglas Sesler                 |  | 52  |  | Director                                                    |  | 2014             
|Ronnie Bar-On (1)(3)(5)        |  | 65  |  | Director                                                    |  | May 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. 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 subsidiaries Gazit Globe Israel (Development) Ltd and 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. 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.



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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. Since August 2000, Mr. Segal has served as chief executive officer, president and vice chairman of the board of First Capital. Mr. Segal also serves as deputy 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 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 also serves as a director of Atrium, and as executive chairman of ProMed Properties and Gazit Senior Care Inc. 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 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.



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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 private real estate investor
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.

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, as well as a director of
Migdal Makefet Pension Funds. 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.

B. Compensation

The
following table presents information for the year ended December 31, 2013 regarding compensation accrued in our financial statements for our chairman, executive vice chairman and president, the CEOs of two our investees and the president of one
of those investees as of December 31, 2013.



|                                                                          |  |                    |       |     |                     |  |       |                    |  |  |                   |      |  |       |     |     |       |  |        |     |  |  |       | 
|------------------------------------------------------------------------- |  | ------------------ | ----- | --- | ------------------- |  | ----- | ------------------ |  |  | ----------------- | ---- |  | ----- | --- | --- | ----- |  | ------ | --- |  |  | ----- | 
|Name and Position                                                         |  | Salary             |       |     | Bonus               |  |       | Share-BasedPayment |  |  | OtherCompensation |      |  | Total |     |     | Total | 
|                                                                          |  | (NIS in thousands) |       |     | (U.S.$ inthousands) | 
|Jeffrey Olson(1)CEO of Equity One                                         |  |                    | 4,507 |     |                     |  | 2,904 |                    |  |  | 5,481             | (2)  |  |       |    |     |       |  | 12,892 |     |  |  | 3,714 | 
|                                                                          |  |                    |       |     |                     | 
|Chaim KatzmanChairman of the Board                                        |  |                    | 5,216 |     |                     |  |      |                    |  |  | 7,331             | (4)  |  |       |    |     |       |  | 12,547 | (3) |  |  | 3,615 | 
|                                                                          |  |                    |       |     |                     | 
|Thomas CaputoPresident of Equity One                                      |  |                    | 3,375 |     |                     |  | 1,966 |                    |  |  | 3,777             | (10) |  |       |    |     |       |  | 9,118  |     |  |  | 2,627 | 
|                                                                          |  |                    |       |     |                     | 
|Rachel LavineCEO of Atrium                                                |  |                    | 3,727 |     |                     |  | 1,799 | (6)                |  |  | 1,606             |      |  |       |    |     |       |  | 7,132  |     |  |  | 2,055 | 
|                                                                          |  |                    |       |     |                     | 
|Dor J. SegalExecutive Vice Chairman of the Board                          |  |                    | 2,631 | (5) |                     |  | 1,668 | (7)                |  |  | 2,532             | (8)  |  |       | 215 | (9) |       |  | 7,046  |     |  |  | 2,030 | 
|                                                                          |  |                    |       |     |                     | 
|Aharon SofferPresident                                                    |  |                    | 2,445 |     |                     |  | 480   | (11)               |  |  | 1,323             |      |  |       |    |     |       |  | 4,248  |     |  |  | 1,224 | 
|                                                                          |  |                    |       |     |                     | 
|Gil KotlerSenior Executive Vice President and Chief Financial Officer     |  |                    | 2,223 |     |                     |  |      |                    |  |  | 1,464             |      |  |       |    |     |       |  | 3,687  |     |  |  | 1,063 | 
|                                                                          |  |                    |       |     |                     | 
|Eran BallanFormer Senior Executive Vice President and General
Counsel(12) |  |                    | 1,922 |     |                     |  |      |                    |  |  | 1,414             |      |  |       |    |     |       |  | 3,336  |     |  |  | 961   | 
|                                                                          |  |                    |       |     |                     | 
|Arie MientkavichDeputy Chairman of the Board                              |  |                    | 1,446 |     |                     |  | 500   | (13)               |  |  | 612               |      |  |       |    |     |       |  | 2,558  |     |  |  | 737   | 



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|(1) | On March 19, 2014, Equity One announced that Mr. Olson will not renew his employment contract when his current term expires on December 31, 2014 but will continue to serve as CEO through the end of his
term.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Consists of amounts recognized as an expense on our income statement for the year ended December 31, 2013 with respect to the vesting of share options and restricted stock units granted to Mr. Olson.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Mr. Katzman did not receive compensation from Gazit-Globe for 2013. This amount includes his annual compensation as chairman of the board of First Capital, fees earned by Mr. Katzman as chairman of the board
of Citycon, negligible benefits received by Mr. Katzman as chairman of the board of Equity One, and compensation received by Mr. Katzman as chairman of the board of Atrium.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Consists of amounts recognized as an expense on our income statement for the year ended December 31, 2013 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) | Consists of the salary received by Mr. Segal as president and chief executive officer of First Capital. Mr. Segal did not receive compensation from Gazit-Globe for 2013.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Consists of the minimum guaranteed bonus for Ms. Lavine under her employment agreement. The actual amount has not yet been published by Atrium as of the date hereof.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Consists of the annual bonus received by Mr. Segal as president and chief executive officer of First Capital.
|--- | -------------------------------------------------------------------------------------------------------------

|(8) | Consists of amounts recognized as an expense on our income statement for the year ended December 31, 2013 with respect to the vesting of share options and restricted shares granted to Mr. Segal by First
Capital and restricted shares granted to Mr. Segal by Equity One. Does not include 65,000 share options that were granted by First Capital to Mr. Segal in March 2014 which are exercisable into 65,000 shares, at an exercise price of C$
17.77 per share, as well as 25,000 restricted units that are convertible into 25,000 shares of First Capital at the share price on the grant date of C$ 17.75.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | Consists of directors fees earned from Equity One.
|--- | ---------------------------------------------------

|(10) | Consists of amounts recognized as an expense on our income statement for the year ended December 31, 2013 with respect to the vesting of share options and restricted stock units granted to Mr. Caputo.
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(11) | In March 2013, Gazit-Globes board of directors approved (after receiving compensation committee approval) an annual bonus for Mr. Soffer in the amount of NIS 1,600,000, all but NIS 480,000 of which was paid
in April 2013. The remaining NIS 480,000 specified in the table comprises only the component of that total bonus amount which was paid following shareholders approval at the Companys general meeting in May 2013.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(12) | Mr. Ballan served in this position until February 2013.
|---- | -------------------------------------------------------

|(13) | Consists of an amount of NIS 500,000 approved by the shareholders at the Companys general meeting held in May 2013 for services which were provided by Mr. Meintkavich during 2012.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 are parties to a chairman compensation agreement for the period beginning on January 1, 2011 through
December 31, 2014, which replaced the previous chairman compensation agreement, which was entered into in October 2006. The chairman compensation agreement renews automatically for one-year periods after December 31, 2014; provided that
either party may terminate the agreement prior to the end of each such one-year period. Mr. Katzman is 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 will be 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).



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First Capital Chairman Compensation Agreement

Mr. Katzman and First Capital are parties to a chairman compensation agreement which remains in effect as long as Mr. Katzman serves
as chairman of First Capitals board of directors. Mr. Katzman is 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
while he remains chairman. 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 will be 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.

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. In addition, in November 2013, Mr. Katzman was allotted 200,000 share options with an exercise price of EUR
4.38 per share. 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 is entitled to annual compensation of EUR 165,000 and
EUR 500-700 per meeting (the latter applies only up until March 2013, after which Mr. Katzman was no longer entitled to per-meeting compensation). In 2013, Mr. Katzman received total compensation in the amount of EUR 170,200 from
Citycon.

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

Mr. Segal and First Capital are party to an employment agreement that provides for annual cash compensation (C$ 750,000, including
related costs, in 2013). Pursuant to the employment agreement, Mr. Segal is 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. Upon
termination of the employment agreement, Mr. Segal will receive severance payments in amounts varying in accordance with the circumstances of the termination of the employment agreement and comprising a maximum payment equivalent to 2.99 times
his total annual compensation (including benefits and the value of any restricted stock he received) and the vesting of all stock options and restricted share units he holds at that time will accelerate.

Compensation from Equity One

With respect to his appointment to the board of directors of Equity One, Mr. Segal receives 3,300 restricted shares for every year of his
service, with this being within the overall compensation framework for members of Equity Ones board of directors. With respect to 2013, Mr. Segal also received directors fees in cash from Equity One in the amount of U.S.$ 59,500.

Aharon Soffer

We 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, 2013) 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.



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Arie Mientkavich

We 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, 2013), 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 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. In addition, under the new 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

We 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, 2013 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, 2013, 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, 2013, 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.



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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.

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 Messrs. Katzman and Mientkavich 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 September 2014 and May 2016 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.



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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 and re-elected in 2011, 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, 2014, 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
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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;
| | - |  | ----------------------------------------------------------------------



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| |  |  | 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
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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.



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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 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.



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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.

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.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | 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 least80% 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 and Dr. Pilpel.

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.

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.



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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,
2013, we employed, through our various subsidiaries and a jointly-controlled company, a total of 1,775 individuals. Of this number, 59 individuals were employed directly by Gazit-Globe and its wholly-owned subsidiaries.

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, 2013, 2012 and 2011:



|                               |  |                    |       |     |      |  |       |      |  |  |       | 
|------------------------------ |  | ------------------ | ----- | --- | ---- |  | ----- | ---- |  |  | ----- | 
|                               |  | As of December 31, |      
|Entity                         |  | 2011               |       |     | 2012 |  |       | 2013 | 
|Gazit-Globe (including ProMed) |  |                    | 59    |     |      |  | 64    |      |  |  | 59    | 
|Equity One                     |  |                    | 181   |     |      |  | 177   |      |  |  | 168   | 
|First Capital                  |  |                    | 341   |     |      |  | 397   |      |  |  | 416   | 
|Citycon                        |  |                    | 136   |     |      |  | 129   |      |  |  | 127   | 
|Atrium                         |  |                    | 329   |     |      |  | 351   |      |  |  | 358   | 
|Gazit Germany                  |  |                    | 15    |     |      |  | 9     |      |  |  | 10    | 
|Gazit Development              |  |                    | 66    |     |      |  | 70    |      |  |  | 66    | 
|Dori Group                     |  |                    | 680   |     |      |  | 560   |      |  |  | 554   | 
|Gazit Brazil                   |  |                    | 39    |     |      |  | 35    |      |  |  | 17    | 
|                               |  |                    |       |     |      |  |       |      |  |  |       | 
|Total                          |  |                    | 2,708 | (1) |      |  | 1,792 |      |  |  | 1,775 | 
|                               |  |                    |       |     |      |  |       |      |  |  |       | 



|(1) | Includes employees that worked for Gazit America and Royal Senior Care for which separate line items are not shown.
|--- | -------------------------------------------------------------------------------------------------------------------

E. Share Ownership

The following table
sets forth information regarding the beneficial ownership of our outstanding ordinary shares as of April 10, 2014 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, 2014, 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 175,890,554 ordinary shares outstanding as of April 10, 2014 (excluding treasury shares).



|                                                |  |                           |            |     |            |  |      |  
|----------------------------------------------- |  | ------------------------- | ---------- | --- | ---------- |  | ---- | -
|                                                |  | Shares Beneficially Owned |           
|                                                |  | Number                    |            |     | Percentage | 
|Directors and executive officers:               |  |                           |            |     |            |  |      |  
|Chaim Katzman                                   |  |                           | 88,915,571 | (1) |            |  | 50.6 | %
|Arie Mientkavich                                |  |                           | 155,675    | (2) |            |  |      | *
|Dor J. Segal                                    |  |                           | 720,000    | (3) |            |  |      | *
|Aharon Soffer                                   |  |                           | 72,993     | (4) |            |  |      | *
|Eran Ballan                                     |  |                           | 36,322     | (5) |            |  |      | *
|Gil Kotler                                      |  |                           | 57,267     | (6) |            |  |      | *
|Yair Orgler                                     |  |                           |           |     |            |  |      | *
|Haim Ben-Dor                                    |  |                           | 74,933     |     |            |  |      | *
|Shaiy Pilpel                                    |  |                           |           |     |            |  |      | *
|Noga Knaz                                       |  |                           | 4,800      | (7) |            |  |      | *
|Gary Epstein                                    |  |                           |           |     |            |  |     |  
|Douglas Sesler                                  |  |                           |           |     |            |  |     |  
|Ronnie Bar-On                                   |  |                           |           |     |            |  |     |  
|All directors and executive officers as a group |  |                           | 90,037,561 | (8) |            |  | 51.2 | %



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|* | 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 55,675 ordinary shares and options to purchase 100,000 ordinary shares exercisable within 60 days of April 10, 2014. Does not include options to purchase 143,678 ordinary shares, 15,816 restricted share
units, and 35,786 performance-based restricted share units not exercisable within 60 days of April 10, 2014.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Consists of Mr. Segals direct share holdings alone. Does not include the 88,915,571 ordinary shares held by Norstar, of which Mr. Segal and his spouse, Erica Ottosson, may be deemed beneficial owners.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Does not include options to purchase 382,306 ordinary shares, 42,711 restricted share units, and 96,988 performance-based restricted share units not exercisable within 60 days of April 10, 2014.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Consists of 4,461 ordinary shares and options to purchase 31,861 ordinary shares exercisable within 60 days of April 10, 2014. Does not include options to purchase 63,723 ordinary shares, 8,921 restricted share
units, and 29,470 performance-based restricted share units not exercisable within 60 days of April 10, 2014. Mr. Ballan served as Senior Executive Vice President and General Counsel until February 2013. As of the date hereof, the Company
and Mr. Ballan remain in negotiations regarding the terms of Mr. Ballans departure which could in turn affect the vesting schedule of his unexercised Company securities.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Consists of 25,406 ordinary shares and options to purchase 31,861 ordinary shares exercisable within 60 days of April 10, 2014. Does not include options to purchase 63,723 ordinary shares, 8,921 restricted share
units, and 29,470 performance-based restricted share units not exercisable within 60 days of April 10, 2014.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Consists of options to purchase 4,800 ordinary shares exercisable within 60 days of April 10, 2014.
|--- | ---------------------------------------------------------------------------------------------------

|(8) | Consists of 89,869,039 ordinary shares and options to purchase 212,272 ordinary shares exercisable within 60 days of April 10, 2014. Does not include options to purchase 653,430 ordinary shares, 76,369 RSUs, and
191,714 PSUs not exercisable within 60 days of April 10, 2014.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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.



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Following are details of the grants in the last three years under the Plan and the 2011 Share
Incentive Plan:



|                  |  |                       |         |     |                              |  |        |                              |  |  |       | 
|----------------- |  | --------------------- | ------- | --- | ---------------------------- |  | ------ | ---------------------------- |  |  | ----- | 
|Issuance Date     |  | Numberof ShareOptions |         |     | ExercisePrice perShare (NIS) |  |        | FairValue atIssuance(NIS)(1) | 
|February 24, 2010 |  |                       | 729,500 | (2) |                              |  | 39.02  | (6)                          |  |  | 15.40 | 
|April 28, 2010    |  |                       | 50,000  | (3) |                              |  | 38.93  | (6)                          |  |  | 14.14 | 
|May 23, 2010      |  |                       | 17,600  | (4) |                              |  | 38.04  |                              |  |  | 9.50  | 
|August 17, 2010   |  |                       | 4,800   | (5) |                              |  | 35.12  |                              |  |  | 9.45  | 
|February 5, 2013  |  |                       | 522,203 | (7) |                              |  | 48.647 |                              |  |  | 13.34 | 
|September 3, 2013 |  |                       | 143,678 | (8) |                              |  | 46.92  |                              |  |  | 9.5   | 
|November 1, 2013  |  |                       | 382,306 | (9) |                              |  | 47.11  |                              |  |  | 10.8  | 



|(1) | Calculated based on the binomial method.
|--- | ----------------------------------------

|(2) | These share options were issued to certain of our employees including our former Senior Executive Vice President and Chief Financial Officer Mr. Gadi Cunia who received 100,000 share options. The share options vest
1/4 annually beginning on the first anniversary of the grant date and are exercisable until the fifth anniversary of the grant date. On termination of Mr. Cunias employment with the Company, the vesting period of all of his share options
was accelerated.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | These share options were issued to Mr. Cunia. The share options vest 1/4 annually beginning on the first anniversary of the grant date and are exercisable until the fifth anniversary of the grant date. On
termination of Mr. Cunias employment with the Company, the vesting period of all of his share options was accelerated.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | These share options were issued to our former director, Eli Shahar, and have since expired on December 8, 2011.
|--- | ---------------------------------------------------------------------------------------------------------------

|(5) | These share options were issued to Ms. Knaz. The share options vested fully on the first anniversary of the grant date and are exercisable until the fourth anniversary of the grant date.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | The stated exercise price per share is the original exercise price; the actual exercise price is adjusted annually based on the Israeli consumer price index.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | 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.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | 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.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | 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 ofRestrictedShareUnits |        |     | FairValue atIssuance(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.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(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-BasedRestrictedShare Units |         |     | FairValue atIssuance(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 | 



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|(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.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(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 273,961 share options and 42,778 RSUs (as of December 31, 2013).



|ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
|------- | -------------------------------------------------

A. Major Shareholders

As of April 10, 2014, our major shareholders were as follows:



|                                    |  |                           |            |  |            |  |      |  
|----------------------------------- |  | ------------------------- | ---------- |  | ---------- |  | ---- | -
|                                    |  | Shares Beneficially Owned |           
|                                    |  | Number                    |            |  | Percentage | 
|Principal shareholders:             |  |                           |            |  |            |  |      |  
|Norstar Holdings Inc.(1)            |  |                           | 88,915,571 |  |            |  | 50.6 | %
|Psagot Investment House Ltd.(2)     |  |                           | 10,329,079 |  |            |  | 5.9  | %
|Mawer Investment Management Ltd.(3) |  |                           | 10,034,532 |  |            |  | 5.7  | %



|(1) | As of April 10, 2014, Chaim Katzman, holds 28.0% 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 18.8% of the outstanding shares of Norstar; Dor J. Segal holds 9.4% of the outstanding shares of Norstar and Erica Ottosson (Mr. Segals spouse) holds 6.2% 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 (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 69% of our outstanding share capital. Most 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 19, 2014. 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, 2014 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, 2013, we had 17 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 15.5% 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 15.5% held by U.S. record holders, more than two-thirds (or 11.9% of our total outstanding ordinary shares) are held by Norstar (a Panamanian company) through the Depositary Trust
Company. In addition, both the foregoing 11.9% of our outstanding ordinary shares held by Norstar through a U.S. record holder, and the remaining 38.7% 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.



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B. Related Party Transactions

Norstar Shareholders Agreement

On
January 30, 2013, Mr. Katzman, together with related parties (collectively, the Katzman Group) Mr. Segal, and Ms. Ottosson, together with related parties (collectively, the Segal Group), entered into a
shareholders agreement (the Shareholders Agreement), with respect to their outstanding shares in Norstar. The Shareholders Agreement provided that (i) each member of the Katzman Group will vote, subject to certain conditions, all of
its shares and any other voting securities of Norstar over which it has voting control for the election to Norstars board of directors of two directors designated by the Segal Group and that (ii) each member of the Segal Group will vote
all of its shares and any other voting securities of Norstar over which it has voting control for nominees to the Board of Directors as directed in writing by a representative of the Katzman Group. The Shareholders Agreement also provides that if
any member of the Katzman Group or any member of the Segal Group proposes to sell, other than pursuant to an open-market transaction or a de minimis transaction (each involving less than 2% of Norstars outstanding stock per calendar quarter),
any of its shares of Norstar, each member of the other group shall have tag-along rights to require their shares of Norstars stock be sold alongside the sellers shares and for the same terms. 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.

First Capital

Gazit-Globe is party to a
shareholders agreement with Alony-Hetz, dated January 9, 2011, in connection with Gazit-Globes holdings in First Capital, which replaced a stockholders agreement with Alony-Hetz that had been in place since November 2000. As of
January 9, 2011, Alony-Hetz held 12.7% of First Capitals share capital and Gazit-Globe held 48.8%. Gazit-Globe has agreed to support the election of a specified number of the representatives of Alony-Hetz to First Capitals board of
directors. Alony-Hetz is entitled to appoint two directors to First Capitals board of directors, so long as Alony-Hetz holds at least 7% of its issued share capital and one director to First Capitals board of directors, so long as it
holds less than 7%, but not less than 3% of its issued share capital. Alony-Hetz loses its right to appoint two directors if, for 60 consecutive days, it owns less than 7% of First Capitals issued share capital. Pursuant to the
shareholders agreement, Alony-Hetz has agreed to vote all of its First Capital shares in favor of our nominees for First Capitals board of directors. Under the agreement, Gazit-Globe has a drag along right, which is triggered when
Gazit-Globe or any affiliate sells its shares of First Capital to a third party for a minimum price of C$ 20.00 per share. Gazit-Globe also has a right of first offer and Alony-Hetz has a tag along right. The shareholders agreement
also provides that, in the event that either of the parties, or the offeror, acquires additional securities in First Capital, the offeror will then offer the other party, or the offeree, the opportunity to acquire a proportionate part of those
securities. Alony-Hetz has agreed not to take certain enumerated actions to interfere with the way that First Capital is managed or engage in an attempt to acquire control of First Capital. The shareholders agreement terminates on
January 9, 2021 or the earliest of (i) Alony-Hetzs holdings in First Capitals shares representing less than 3% of First Capitals issued capital for 90 consecutive days, (ii) all of Gazit-Globes holdings in
First Capitals shares representing less than 20% of First Capitals issued capital for 90 consecutive days, and (iii) a determination by one of the parties to terminate the agreement upon a change of control of the other party.

In January 2013, the Company agreed to waive, under certain conditions, the right of first offer it has been given by Alony-Hetz under the
shareholders agreement. At that date, part of Alony-Hetzs holdings in First Capital were pledged in favor of a loan taken by Alony-Hetz from a bank and served as collateral in the event of immediate repayment of the loan. In the event that the
pledge on Alony-Hetzs interests in FCR is realized, Gazit-Globe will not have the first right of offer vis-à-vis Alony-Hetz with respect to First Capital shares and the shareholders agreement will be void with respect to these specific
shares.

Gazit Development

In
August 2013, Gazit Development issued undertook a rights offering, issuing 6.5 million share options for no consideration. The share options are exercisable over a three-year period at an exercise price of NIS 44.01 and bear interest at a rate
of 6.7%, linked to the Israeli consumer price index and subject to adjustments. Immediately after the grant, Gazit-Globe exercised all share options that were allotted to it in consideration for NIS 214 million, thereby increasing its holdings
in Gazit Development by 7.5% to an aggregate 82.5%. The cash consideration was used by Gazit Development to reduce amounts owed to Gazit-Globe under outstanding loans.

Gazit Development finances the majority of its activities through loans provided to it by Gazit-Globe. As of December 31, 2013,
Gazit-Globe had outstanding loans to Gazit Development of NIS 1.7 billion of which (1) NIS 1.6 billion is linked to changes in the Israeli CPI and bears interest at an annual rate of 4.0%7.2%, (2) NIS 81 million is denominated
in Euros and bears interest at an annual rate of Euribor plus 2.5% and 6.4% and (3) NIS 24 million is not linked and bears interest at an annual rate of the Israeli Prime plus 1.6%. These loans include NIS 852 million, excluding
interest receivable, extended by Gazit-Globe to Gazit Development under a debenture allotment agreement entered into with Gazit-Globe in August 2009. Under this agreement, Gazit-Globe agreed to extend to Gazit Development credit equal to the amounts
raised by Gazit-Globe within the framework of the issuance of the Series J debentures in February 2009 that were secured by collateral provided by Gazit Development. Under the terms of the agreement, Gazit-Globe will extend to Gazit Development
additional credit equal to any amount that Gazit-Globe raises in any extension of the debentures back to back with the terms of the credit to be extended to Gazit-Globe under the debentures, as issued, other than with regard to the interest rate.



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In February 2014, Gazit Development granted U. Dori Construction Ltd. a revolving credit
facility for an amount of up to NIS 75 million until February 2015.

Citycon

On March 8, 2013, Citycon completed a rights issuance for approximately 114 million shares at a price of  1.75 per share,
in consideration for an aggregate amount of  200 million. Gazit-Globe participated in the rights issuance, acquiring approximately 56.1 million common shares, for approximately  98.1 million.

Atrium

On August 27, 2013,
Gazit-Globe entered into an agreement to purchase 20,416,463 additional Atrium ordinary shares from an entity forming part of the consortium managed by CPI, at a price of 4.3 Euros per share for a total consideration of approximately EUR
87.8 million in an off-market transaction. Following the completion of the aforementioned acquisition, we hold 39.8% of the issued and outstanding shares and voting rights of Atrium (39.6% of the issued and outstanding shares and voting rights
on a fully diluted basis). For further information, please see Note 9c to our audited consolidated financial statements included elsewhere in this Annual Report.

See also Item 6Directors, Senior Management and EmployeesEmployment and Consultant Agreements and Note 9 and Note
20(b) 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 Litigation

On
June 19, 2011, the Company announced that a settlement agreement had been reached relating to a number of ongoing legal proceedings between the Company, Atrium, and Meinl Bank (as well as other related parties, and former and current officers
of the parties), the most significant of which was a lawsuit in the amount of EUR 1.2 billion filed by Meinl Bank in 2010 against the Company and other parties in a Jersey Island court, which sought recognition as a derivative action. At the center
of the dispute were transactions executed between Atrium and the Company and CPI during 2009, which the plaintiffs claimed were not in the best interest of Atrium, caused it damages and resulted in unjust enrichment to the Company and CPI, and in
which the defendants acted in violation of applicable law. It should be noted, that the lawsuit followed a claim filed by Atrium in August 2010 in the High Court of Justice in England, against Meinl Bank and against its controlling shareholder,
Julius Meinl and other affiliated parties, in an amount over  2 billion, for losses such parties caused to Atrium in connection with their management of Atrium prior to the Companys acquisition of interests in Atrium. The settlement
agreement did not prescribe that any payment whatsoever was to be made by any particular party to any other party with respect to alleged losses.

Notwithstanding the settlement and dismissal, the Company can provide no assurance that the Company or Atrium will not be subject to any
further claims similar to those addressed in the derivative action by former shareholders of Meinl or by others. However, an independent committee of the Atrium board comprising directors with no personal involvement in the derivative action has
separately investigated the matters alleged in the derivative action. This committee, which established its own procedures and took independent legal advice, determined that there was no basis for the claims made against directors of Atrium in the
derivative action and no benefit to Atrium in pursuing the action. As Atrium reported in its annual financial reports for the year ending December 31, 2013, 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 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 criminal investigation proceedings against Atrium based on the Austrian Corporate Criminal Liability Act. This legislation, which came into force in 2006, is of uncertain application. Atriums management believes a finding of
liability on its part would be inappropriate. Accordingly, Atrium intends to actively defend the proceedings.



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In addition, Atrium 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.

Current Legal Proceedings

Set forth below is a description of material litigation to which we are a party, as of December 31, 2013. Although there can be no
assurance as to the ultimate outcome, we intend to vigorously defend the matters described below. The final outcome of any litigation, however, cannot be predicted with certainty, and an adverse resolution of this matter could have a material
adverse effect on our business, financial condition, results of operations or cash flows.

Israeli Tax Matters

In September 2013, the Company and the Israel Tax Authority (ITA) entered into an income tax assessment agreement covering the years 2004
through 2011. As part of the assessment agreement, the Company paid NIS 29 million (including interest and CPI adjustment) and the balances of the Companys tax losses and credits as of December 31, 2011 were also revised, various
costs of the Companys investments in subsidiaries were also revised.

As a result of the agreement, the balances of the
Companys losses as of December 31, 2011 consisted of a balance of NIS 262 million with respect to capital losses carried forward to 2012 and a balance of NIS 395 million with respect of losses under Section 29(1) of the
Israeli Income Tax Ordinance carried forward to 2012.

Disputed VAT assessments

In March 2008, the Company received VAT assessments for 2006, 2007 and part of 2005, while in April 2010, the Company received VAT assessments
for the period starting January 2008 through October 2009 (inclusive), in which the VAT authorities limited the input of VAT deductions for these periods by a total of NIS 6 million and NIS 5.3 million, respectively. The Company appealed
these VAT assessments to the ITA but the appeal was rejected. On November 11, 2013 the Company appealed these rejections to the District Court.

The Company estimates that the provision for this matter recognized in its financial statements covers its exposure with respect to the
disputed VAT assessments.

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 arising in the ordinary course of business, which collectively are not expected to have a material adverse effect on our business, financial condition, and results of operations or cash flows.

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, 2011, 2012 and 2013, we paid our shareholders cash dividends in the amount of NIS
1.56 (U.S.$ 0.45), NIS 1.60 (U.S.$ 0.46) and NIS 1.72 (U.S.$ 0.50) per ordinary share, respectively, representing 59.5%, 49.5%, and 50.9% respectively, of our adjusted EPRA FFO for the applicable period, and have retained the remainder of such
income to fund our business.



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B. Significant Changes

None.



|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, 2013. 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:                    |  |                         |       |  |                         |  |       |      |  |  |       |  |  |  |       | 
|2013                       |  |                         | 51.58 |  |                         |  | 43.87 |      |  |  | 14.86 |  |  |  | 12.64 | 
|2012                       |  |                         | 48.50 |  |                         |  | 35.60 |      |  |  | 13.97 |  |  |  | 10.26 | 
|2011                       |  |                         | 47.40 |  |                         |  | 31.39 |      |  |  | 13.66 |  |  |  | 9.04  | 
|2010                       |  |                         | 46.52 |  |                         |  | 32.31 |      |  |  | 13.40 |  |  |  | 9.31  | 
|2009                       |  |                         | 39.10 |  |                         |  | 15.09 |      |  |  | 11.26 |  |  |  | 4.35  | 
|Quarterly:                 |  |                         |       |  |                         |  |       |      |  |  |       |  |  |  |       | 
|First Quarter 2014         |  |                         | 46.29 |  |                         |  | 43.60 |      |  |  | 13.34 |  |  |  | 12.56 | 
|Fourth Quarter 2013        |  |                         | 48.36 |  |                         |  | 45.25 |      |  |  | 13.93 |  |  |  | 13.04 | 
|Third Quarter 2013         |  |                         | 49.35 |  |                         |  | 43.87 |      |  |  | 14.22 |  |  |  | 12.64 | 
|Second Quarter 2013        |  |                         | 51.58 |  |                         |  | 46.01 |      |  |  | 14.86 |  |  |  | 13.26 | 
|First Quarter 2013         |  |                         | 50.50 |  |                         |  | 47.49 |      |  |  | 14.55 |  |  |  | 13.68 | 
|Fourth Quarter 2012        |  |                         | 48.50 |  |                         |  | 42.07 |      |  |  | 13.97 |  |  |  | 12.12 | 
|Third Quarter 2012         |  |                         | 42.77 |  |                         |  | 36.10 |      |  |  | 12.32 |  |  |  | 10.40 | 
|Second Quarter 2012        |  |                         | 40.49 |  |                         |  | 36.81 |      |  |  | 11.67 |  |  |  | 10.61 | 
|First Quarter 2012         |  |                         | 39.74 |  |                         |  | 35.60 |      |  |  | 11.45 |  |  |  | 11.26 | 
|Most Recent Six Months(1): |  |                         |       |  |                         |  |       |      |  |  |       |  |  |  |       | 
|March 2014                 |  |                         | 46.29 |  |                         |  | 44.55 |      |  |  | 13.34 |  |  |  | 12.83 | 
|February 2014              |  |                         | 45.12 |  |                         |  | 43.60 |      |  |  | 13.00 |  |  |  | 12.56 | 
|January 2014               |  |                         | 46.18 |  |                         |  | 43.77 |      |  |  | 13.30 |  |  |  | 12.61 | 
|December 2013              |  |                         | 47.74 |  |                         |  | 46.08 |      |  |  | 13.75 |  |  |  | 13.28 | 
|November 2013              |  |                         | 48.30 |  |                         |  | 46.00 |      |  |  | 13.92 |  |  |  | 13.25 | 
|October 2013               |  |                         | 48.36 |  |                         |  | 45.25 |      |  |  | 13.93 |  |  |  | 13.04 | 



|(1) | For the month through April 10, 2014, the high was NIS 45.26 (U.S.$ 13.02) and the low was NIS 44.05 (U.S.$ 12.71).
|--- | -------------------------------------------------------------------------------------------------------------------



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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:                    |  |                         |       |  |     |  |       | 
|2013                       |  |                         | 14.24 |  |     |  | 12.05 | 
|2012                       |  |                         | 13.18 |  |     |  | 9.00  | 
|2011 (since December 14th) |  |                         | 9.75  |  |     |  | 8.83  | 
|Quarterly:                 |  |                         |       |  |     |  |       | 
|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 | 
|Fourth Quarter 2012        |  |                         | 13.18 |  |     |  | 10.83 | 
|Third Quarter 2012         |  |                         | 11.05 |  |     |  | 9.00  | 
|Second Quarter 2012        |  |                         | 10.86 |  |     |  | 9.54  | 
|First Quarter 2012         |  |                         | 10.60 |  |     |  | 9.30  | 
|Most Recent Six Months(1): |  |                         |       |  |     |  |       | 
|March 2014                 |  |                         | 13.26 |  |     |  | 12.84 | 
|February 2014              |  |                         | 13.09 |  |     |  | 12.23 | 
|January 2014               |  |                         | 13.27 |  |     |  | 12.55 | 
|December 2013              |  |                         | 13.62 |  |     |  | 13.14 | 
|November 2013              |  |                         | 13.77 |  |     |  | 12.88 | 
|October 2013               |  |                         | 13.83 |  |     |  | 12.83 | 



|(1) | For the month through April 10, 2014, the high was U.S.$ 13.13 and the low was U.S.$ 12.62.
|--- | -------------------------------------------------------------------------------------------

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, 2013. 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:                                  |  |                         |       |  |                         |  |       |      |  |  |       |  |  |  |       | 
|2013 (since October 16th)                |  |                         | 14.55 |  |                         |  | 13.50 |      |  |  | 13.68 |  |  |  | 12.70 | 
|Quarterly:                               |  |                         |       |  |                         |  |       |      |  |  |       |  |  |  |       | 
|First Quarter 2014                       |  |                         | 14.69 |  |                         |  | 13.75 |      |  |  | 13.81 |  |  |  | 12.93 | 
|Fourth Quarter 2013 (since October 16th) |  |                         | 14.55 |  |                         |  | 13.50 |      |  |  | 13.68 |  |  |  | 12.70 | 
|Most Recent Six Months(1):               |  |                         |       |  |                         |  |       |      |  |  |       |  |  |  |       | 
|March 2014                               |  |                         | 14.69 |  |                         |  | 14.10 |      |  |  | 13.81 |  |  |  | 13.26 | 
|February 2014                            |  |                         | 14.50 |  |                         |  | 13.84 |      |  |  | 13.64 |  |  |  | 13.02 | 
|January 2014                             |  |                         | 14.50 |  |                         |  | 13.75 |      |  |  | 13.64 |  |  |  | 12.93 | 
|December 2013                            |  |                         | 14.55 |  |                         |  | 13.70 |      |  |  | 13.68 |  |  |  | 12.88 | 
|November 2013                            |  |                         | 14.30 |  |                         |  | 13.60 |      |  |  | 13.45 |  |  |  | 12.79 | 
|October 2013 (since October 16th)        |  |                         | 14.35 |  |                         |  | 13.50 |      |  |  | 13.50 |  |  |  | 12.70 | 



|(1) | For the month through April 10, 2014, the high was C$ 14.43 and the low was C$ 13.74.
|--- | -------------------------------------------------------------------------------------



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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.
| | - |  | ------------------------------------------------------------



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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;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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 adverse to 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.



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.



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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.

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.

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.



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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 was 25% in both 2013 and 2012 and 24% in 2011. 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 enhance tax collection. Changes included increasing the corporate tax rate from 25% to
26.5% (from 2014 onward), and changes to the taxation on the revaluation of gains effective from August 1, 2013. The provisions regarding the revaluation gains will become effective only after the publication of regulations defining what will
be considered retained earnings which were not subject to corporate tax as well as with respect to the avoidance of double taxation on those retained earnings derived from overseas assets.

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 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.

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 shares or voting power in 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.

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 however, the tax rate will not 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).



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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 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).

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.

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 earnings distributed by such corporations were subject to Israeli tax.

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) shares or rights to shares in an Israeli resident company, or (iii) represent,
directly or indirectly, rights to assets 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. Such exemption is not applicable to a person whose gains from selling or otherwise disposing of the shares are deemed to be business income.

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 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. The U.S.-Israel Treaty does not require the grant of such credit against any U.S. state or local taxes.



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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 or deduct 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, 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.

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;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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.



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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 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.



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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.

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.



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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 2013. 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, 2013. 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.

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.



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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.

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.



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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) are generated in U.S. dollars, Canadian dollars and Euros. For the year ended December 31, 2013, 33.1% of our rental income were earned in Canadian dollars,
30.0% in Euros, 21.7% in U.S. dollars, 7.7% in Swedish Krona and 3.1% in NIS. Our income from development and construction of residential projects activity is primarily generated in NIS (NIS 16 million of gross loss during 2013). 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 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 (%) | 
|2013 vs. 2012 |  |                                      | (6.4 | ) |                    |  | (9.1 | )                   |  |  | (3.2 | )
|2012 vs. 2011 |  |                                      | 7.8  |   |                    |  | 6.6  |                     |  |  | (0.5 | )
|2011 vs. 2010 |  |                                      | (4.1 | ) |                    |  | (0.2 | )                   |  |  | 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 2013. 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 140 million in 2013.
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 128 million in 2013.



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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, 2013, we had the following foreign currency hedge portfolio:



|                    |  |                    |  |                                 |       |  |                         |  |             |                            |  |  |     | 
|------------------- |  | ------------------ |  | ------------------------------- | ----- |  | ----------------------- |  | ----------- | -------------------------- |  |  | --- | 
|Transaction Type    |  | Currency           |  | NotionalAmounts(NIS inmillions) |       |  | AverageDurationin Years |  |             | Fair Value(NIS inmillions) | 
|Cross-currency swap |  | EUR-NIS            |  |                                 | 2,613 |  |                         |  | 5.8         |                            |  |  | 218 | 
|Cross-currency swap |  | U.S.$-NIS          |  |                                 | 825   |  |                         |  | 4.9         |                            |  |  | 80  | 
|Cross-currency swap |  | C$-NIS             |  |                                 | 1,584 |  |                         |  | 5.2         |                            |  |  | 392 | 
|Cross-currency swap |  | BRL-NIS            |  |                                 | 273   |  |                         |  | 4.0         |                            |  |  | 80  | 
|Forward contracts   |  | Various currencies |  |                                 | 3,946 |  |                         |  | Less than 1 |                            |  |  | 1   | 
|Call option         |  | NIS-C$             |  |                                 | 294   |  |                         |  |            |                            |  |  | 1   | 
|                    |  |                    |  |                                 |       |  |                         |  |             |                            |  |  |     | 
|Total               |  |                    |  |                                 | 9,535 |  |                         |  |             |                            |  |  | 772 | 
|                    |  |                    |  |                                 |       |  |                         |  |             |                            |  |  |     | 

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 income would have decreased and, assuming a decrease of 1% in the CPI, our pre-tax income would have increased, by NIS 103 million and NIS 86 million as of December 31, 2013 and December 31, 2012,
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 56 million and NIS 43 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 2013 and 2012 in
the Consumer Price Index or similar inflation indices.

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.



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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, 2013, we had the following interest rate hedge portfolio:



|                                   |  |               |  |                                |       |  |                     |          |                  |       |                          |  |     |                           |  |  |      |  
|---------------------------------- |  | ------------- |  | ------------------------------ | ----- |  | ------------------- | -------- | ---------------- | ----- | ------------------------ |  | --- | ------------------------- |  |  | ---- | -
|Transaction Type                   |  | Denomination  |  | NotionalAmount(NIS inmillions) |       |  | Interest
Receivable |          | Interest
Payable |       | AverageEffectiveDuration |  |     | FairValue(NIS inmillions) | 
|Interest rate swaps fixed/variable |  | U.S.$         |  |                                | 868   |  |                     | variable |                  | fixed |                          |  | 5.1 |                           |  |  | 10   |  
|Interest rate swaps fixed/variable |  | C$            |  |                                | 273   |  |                     | variable |                  | fixed |                          |  | 7.9 |                           |  |  | 6    |  
|Interest rate swaps fixed/variable |  |              |  |                                | 2,138 |  |                     | variable |                  | fixed |                          |  | 2.9 |                           |  |  | (147 | )
|Interest rate swaps fixed/variable |  | Swedish Krona |  |                                | 1,125 |  |                     | variable |                  | fixed |                          |  | 2.6 |                           |  |  | (34  | )
|                                   |  |               |  |                                |       |  |                     |          |                  |       |                          |  |     |                           |  |  |      |  
|                                   |  |               |  |                                | 4,404 |  |                     |          |                  |       |                          |  |     |                           |  |  | (165 | )
|                                   |  |               |  |                                |       |  |                     |          |                  |       |                          |  |     |                           |  |  |      |  

As of December 31, 2013 and 2012, 90% and 87% of our interest bearing liabilities, respectively (80% and
73% 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 VariableInterest                      |    
|Impact on Pre-Tax Income (Loss)
for the Year of a 1% Increase in Interest Rate |  | U.S.$Interest                                                                 |     |   | C$Interest |  |     | Interest |  |  | NISInterest |  
|                                                                               |  | NIS in millions                                                               |    
|December 31, 2013                                                              |  |                                                                               | (22 | ) |            |  | (7  | )         |  |  | (23         | ) |  |  | (3  | )
|December 31, 2012                                                              |  |                                                                               | (21 | ) |            |  | (14 | )         |  |  | (32         | ) |  |  | (3  | )
|                                                                               | 
|                                                                               |  | Sensitivity analysis for derivativesAbsolute changes in Consumer Price Index |    
|Effect on pre-tax income (loss)                                                |  | +2%                                                                           |     |   | +1%        |  |     | -1%       |  |  | -2%         |  
|                                                                               |  | NIS in millions                                                               |    
|December 31, 2011                                                              |  |                                                                               | 94  |   |            |  | 47  |           |  |  | (47         | ) |  |  | (95 | )
|December 31, 2012                                                              |  |                                                                               | 87  |   |            |  | 43  |           |  |  | (44         | ) |  |  | (88 | )

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, 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 interest on 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  |  



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|                                            |  |                                                                         |    |  |     |  |    |     |  |  |     |   |  |  |     |  
|------------------------------------------- |  | ----------------------------------------------------------------------- | -- |  | --- |  | -- | --- |  |  | --- | - |  |  | --- | -
|                                            |  | Sensitivity Analysis for DerivativesAbsolute changes in Interest Rates |   
|Effect on Pre-Tax Equity (Accounting Hedge) |  | +2%                                                                     |    |  | +1% |  |    | -1% |  |  | -2% |  
|                                            |  | NIS in millions                                                         |   
|December 31, 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 interest on Swedish Krona         |  |                                                                         | 51 |  |     |  | 26 |     |  |  | (27 | ) |  |  | (45 | )

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, 2013 and December 31, 2012 was NIS 220 million (U.S.$ 63 million) and NIS 101 million, respectively. This exposure is not hedged.



|ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
|-------- | ------------------------------------------------------

Not applicable.



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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.



|ITEM 15. | CONTROLS AND PROCEDURES.
|-------- | ------------------------

Disclosure Controls and Procedures

Our President and Chief Financial Officer, after reevaluating 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, due to a material weakness in our internal control over financial reporting discussed below, our disclosure controls and
procedures were not 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 has reevaluated the effectiveness of the internal control over financial reporting as of December 31,
2013. 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 (COSO) (1992). Based on such evaluation, management has
concluded that, as of December 31, 2013, our internal control over financial reporting was not effective due to a material weakness in our internal control over financial reporting that was discovered when our subsidiary Dori Construction
carried out an examination of its anticipated revenues and project costs estimates ahead of the publishing of its second quarter 2014 financial statements. As a result of the examination, Dori Construction determined that there is a material
deviation between their new estimates and their estimates prior to the examination. This material deviation existed in prior reporting periods as well, beginning in the fourth quarter of 2012. Accordingly, Dori Construction and, consequently, the
Company, were compelled to restate and refile their financial statements as of December 31, 2013 and for the year then ended (immaterial corrections were made to the financial statements as of December 31, 2012 which were accordingly not
refiled) and as of March 31, 2014 for the three months then ended. For further information regarding the error, the various components that comprise the estimates that were subject to the material deviation, and its impact on our financial
statements, please see Note 2ee and Note 41 to our audited consolidated financial statements included elsewhere in this Annual Report.



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The effectiveness of the Companys and its subsidiaries internal control over
financial reporting as of December 31, 2013 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 as of
September 10, 2014 herein expresses an adverse opinion on the Companys and its subsidiaries internal control over financial reporting.

Remediation

The board of directors of
Dori Construction has established a special committee to review the process of estimating anticipated revenues and project costs. The special committee was granted extensive powers to examine any matter it deems pertinent to its review and has
appointed independent legal counsel, accounting consultants, and an independent engineering inspector to assist it in its task. As of the date of this amendment, the special committee had not yet completed its investigation and the identification of
the reasons for the material deviation and is considering appointing an independent external examiner to assist in the review. The board of directors of Dori Construction has instructed management to remediate the material weakness no later than by
the date of its annual financial statements for December 31, 2014.

In addition, Dori Construction is currently in the process of
implementing a new enterprise resource planning information system to improve both the availability and reliability of its business information which it believes will assist in improving its internal control over financial reporting process.

The Companys audit committee and board of directors have received updates from management regarding the examination of the internal
control over financial reporting process at Dori Construction with respect to the preparation of its restated financial statements and concerning the remediation process. At the request of Companys audit committee and board of directors,
management will continue to track the remediation process until the reason for the material deviation in the estimated anticipated revenues and project costs is both identified and corrected.

Attestation Report of the Registered Public Accounting Firm

The Companys and its subsidiaries internal control over financial reporting as of December 31, 2013 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-4
of this annual report.

Changes in Internal Control over Financial Reporting

Other than as disclosed above, there were no changes to the Companys internal control over financial reporting that occurred during the
period covered by this annual report that have materially affected, or are 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.



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|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 2013 and 2012
were pre-approved by the audit committee in accordance with these procedures.

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, 2013 and 2012:



|                   |  |                      |       |  |      |   |       | 
|------------------ |  | -------------------- | ----- |  | ---- | - | ----- | 
|                   |  | 2013                 |       |  | 2012 |  
|                   |  | (U.S.$ in thousands) |      
|Audit Fees         |  | $                    | 4,408 |  |      | $ | 4,168 | 
|Audit-Related Fees |  |                      | 891   |  |      |   | 651   | 
|Tax Fees           |  |                      | 910   |  |      |   | 1,176 | 
|                   |  |                      |       |  |      |   |       | 
|Total              |  | $                    | 6,209 |  |      | $ | 5,995 | 
|                   |  |                      |       |  |      |   |       | 

The audit fees for the years ended December 31, 2013 and 2012 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, 2013, and the Israeli Securities
Regulations as of December 31, 2013 and 2012, 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, 2013 and 2012 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, 2013 and 2012 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.



127



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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 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.



|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.



|                                                                                            |  |              
|------------------------------------------------------------------------------------------- |  | -------------
|Consolidated Financial Statements                                                           |  | Page         
|                                                                                            | 
|Reports of Independent Registered Public Accounting Firm                                    |  | F-2  F-5    
|                                                                                            | 
|Consolidated Statements of Financial Position                                               |  | F-6  F-7    
|                                                                                            | 
|Consolidated Statements of Income                                                           |  | F-8          
|                                                                                            | 
|Consolidated Statements of Comprehensive Income                                             |  | F-9          
|                                                                                            | 
|Consolidated Statements of Changes in Equity                                                |  | F-10  F-13  
|                                                                                            | 
|Consolidated Statements of Cash Flow                                                        |  | F-14  F-16  
|                                                                                            | 
|Notes to Consolidated Financial Statements                                                  |  | F-17  F-152 
|                                                                                            | 
|Appendix A to Consolidated Financial StatementsList of major Group investees               |  | F-153        
|                                                                                            | 
|Appendix B to Consolidated Financial StatementsSchedule III of Rule 5-04 of Regulation
S-X |  | F-154  F-155



128



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|                                                                                                 |  |              
|------------------------------------------------------------------------------------------------ |  | -------------
|Consolidated Financial Statements                                                                |  | Page         
|                                                                                                 | 
|Report of other Auditor                                                                          |  | F-147        
|                                                                                                 | 
|Financial Statements of Atrium European Real Estate Limited for the year ended December 31,
2013 |  | F-156  F-230
|                                                                                                 | 
|Financial Statements of Atrium European Real Estate Limited for the year ended December 31,
2012 |  | F-231  F-303



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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, 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  |  | 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)  ̈ +                                                                                                                                  
|     | 
|4.9  |  | 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) +                                                                                   
|     | 
|4.10 |  | 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) +                                                                                                                                               
|     | 
|4.11 |  | 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) +                                                                                                                                           
|     | 
|4.12 |  | 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) +                                         
|     | 
|4.13 |  | 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) +                                      
|     | 
|4.14 |  | 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) +                        
|     | 
|4.15 |  | 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) +                                                                 
|     | 
|4.16 |  | 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) +                                                                               



130



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|     |  |                                                                                                                                                                                                                                                                                                                                                                        
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|No.  |  | Description                                                                                                                                                                                                                                                                                                                                                            
|     | 
|4.17 |  | Loan Agreement among Silver Maple (2001), Inc., the registrant and Bank Leumi USA, dated March 19, 2013 (incorporated by reference to Exhibit 4.17 to our Annual Report on Form 20-F that was filed with the SEC on April 22, 2013)
+                                                                                                                                  
|     | 
|4.18 |  | Loan Agreement among Ficus, Inc., the registrant and Bank Leumi USA, dated March 19, 2013 (incorporated by reference to Exhibit 4.18 to our Annual Report on Form 20-F that was filed with the SEC on April 22, 2013) +                                                                                                                                                
|     | 
|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)                                                                                                                     
|     | 
|8.1  |  | List of subsidiaries of the Registrant (incorporated by reference to Exhibit 8.1 to our Annual Report on Form 20-F that was filed with the SEC on April 16, 2014)                                                                                                                                                                                                      
|     | 
|10.1 |  | Consent of Kost Forer Gabbay & Kasierer                                                                                                                                                                                                                                                                                                                                
|     | 
|10.2 |  | Consent of KPMG Channel Islands Limited                                                                                                                                                                                                                                                                                                                                
|     | 
|10.3 |  | Consent of Deloitte LLP                                                                                                                                                                                                                                                                                                                                                
|     | 
|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.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------



131



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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 SofferTitle:

President


Date: September 23, 2014



132



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GAZIT-GLOBE LTD.

CONSOLIDATED FINANCIAL STATEMENTS - RESTATED

AS OF DECEMBER 31, 2013

INDEX



|                                                                                              |  |              
|--------------------------------------------------------------------------------------------- |  | -------------
|                                                                                              |  | Page         
|                                                                                              | 
|Reports of Independent Registered Public Accounting Firm                                      |  | F-2  F-5    
|                                                                                              | 
|Consolidated Statements of Financial Position                                                 |  | F-6  F-7    
|                                                                                              | 
|Consolidated Statements of Income                                                             |  | F-8          
|                                                                                              | 
|Consolidated Statements of Comprehensive Income                                               |  | F-9          
|                                                                                              | 
|Consolidated Statements of Changes in Equity                                                  |  | F-10  F-13  
|                                                                                              | 
|Consolidated Statements of Cash Flow                                                          |  | F-14  F-16  
|                                                                                              | 
|Notes to Consolidated Financial Statements                                                    |  | F-17  F-152 
|                                                                                              | 
|Appendix A to Consolidated Financial Statements - List of Major Group Investees               |  | F-153        
|                                                                                              | 
|Appendix B to Consolidated Financial Statements - Schedule III of rule 5-04 of regulation S-X |  | F-154  F-155







---

##### 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, 2013 and 2012 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, 2013. Our audits also included the
financial statement schedule of investment property information. 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 subsidiary, First Capital Realty, Inc. (FCR),
whose revenues constitute approximately 33% of total consolidated revenues for the year ended December 31, 2011. We also 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 4,312 million and NIS 3,872 million as of December, 31, 2013 and 2012, respectively, and the Companys share in its earnings amounted to NIS 132 million, NIS 165
million and NIS 220 million for the years ended December 31, 2013, 2012 and 2011, respectively. The financial statements of those companies were audited by other auditors, whose reports have been furnished to us, and our opinion, insofar
as it relates to amounts included for those companies, before considering the adjustments described below to the 2011 financial statements of FCR, is based on the reports 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 reports of the other auditors, the consolidated financial statements
referred to above present fairly, in all material respects, the consolidated financial position of the Company and subsidiaries as of December 31, 2013 and 2012 and the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 2013, 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 of
investment property information, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

Without qualifying our above opinion, we hereby draw your attention to the matter discussed in Note 2ee to the financial statements
regarding the restatement of the financial statements as of December 31, 2013 and for the year then ended in order to retrospectively reflect the amendment in the estimated revenues and costs to completion of a subsidiarys construction
projects.

In 2012 the Company adopted retrospectively International Financial Reporting Standard (IFRS) 10 and IFRS 11 and certain
improvements to International Accounting Standard 12. As part of our audit of the consolidated financial statements of Gazit Globe, Ltd. we also audited the adjustments, including reclassification adjustments due to a clarification to IAS 17 in
2014, that were applied to retroactively adjust the amounts included for FCR for the period ended December 31, 2011. In our opinion, such adjustments are appropriate and have been properly applied. We were not engaged to audit, review or
perform any procedures to the consolidated statements of income, comprehensive income, changes in equity and cash flows of FCR for the year ended December 31, 2011, other than with respect to the adjustments described above.



F-2



---

##### Table of Contents

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, 2013, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (1992 framework) and our report dated September 10, 2014 expressed an adverse opinion due to the existence of a material weakness.



|                   |  |                                 
|------------------ |  | --------------------------------
|Tel-Aviv, Israel   |  | KOST FORER GABBAY & KASIERER    
|September 10, 2014 |  | A Member of Ernst & Young Global



F-3



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##### Table of Contents

|     |  |                                         |  |                           
|---- |  | --------------------------------------- |  | --------------------------
|LOGO |  | Kost Forer Gabbay & Kasierer            |  | Tel: +972-3-6232525       
|     |  | 3 Aminadav St. Tel-Aviv 6706703,
Israel |  | 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, 2013, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 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 report dated March 25, 2014, we
expressed an unqualified opinion that Gazit Globe, Ltd. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on the COSO criteria. Management has subsequently
determined that a deficiency in controls related to the process of income recognition and costs and revenues estimation in construction projects, and has further concluded that such deficiency represented a material weakness as of
December 31, 2013. As a result, management has revised its assessment, as presented in the accompanying Managements Report on Internal Control Over Financial Reporting; to conclude that Gazit Globe, Ltd. and subsidiaries internal control
over financial reporting was not effective as of December 31, 2013. Accordingly, our present opinion on the effectiveness of Gazit Globe, Ltd. and subsidiaries internal control over financial reporting as of December 31, 2013, as
expressed herein, is different from that expressed in our previous report.

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 the companys annual or interim financial statements will not be prevented or detected on a timely basis.



F-4



---

##### Table of Contents

The following material weakness has been identified and included in managements assessment.
Management has identified a material weakness in controls related to the Subsidiarys process of income recognition and costs and revenues estimation in construction projects. 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, 2013 and 2012, 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, 2013. This material weakness was considered in determining the nature, timing and extent of audit tests applied in our audit of
the 2013 consolidated financial statements, and this report does not affect our report dated September 10, 2014, which expressed an unqualified opinion thereon based on our audits and the reports of the other auditors. Additionally, our report
included an emphasis of matter regarding the restatement of the financial statements as of December 31, 2013 and for the year then ended in order to retroactively reflect the amendment in the estimated revenues and costs to completion of a
subsidiarys construction projects.

In our opinion, because of the effect of the material weakness described above on the
achievement of the objectives of the control criteria, the Company and subsidiaries have not maintained effective internal control over financial reporting as of December 31, 2013, based on the COSO criteria.



|                   |  |                                 
|------------------ |  | --------------------------------
|Tel-Aviv, Israel   |  | KOST FORER GABBAY & KASIERER    
|September 10, 2014 |  | A Member of Ernst & Young Global



F-5



---

##### Table of Contents

GAZIT-GLOBE LTD.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION





|                                               |  |      |  |                                     |        |  |              |  |        |         |  |  |        | 
|---------------------------------------------- |  | ---- |  | ----------------------------------- | ------ |  | ------------ |  | ------ | ------- |  |  | ------ | 
|                                               |  |      |  | Conveniencetranslation
(Note 2d(1)) |        |  |              | 
|                                               |  |      |  | December 31,                        |        |  | December 31, | 
|                                               |  |      |  | 2013                                |        |  | *) 2013      |  |        | *) 2012 | 
|                                               |  | Note |  | U.S. dollars                        |        |  | NIS          | 
|                                               |  |      |  | In millions                         |       
|                                               |  |     
|ASSETS                                         |  |      |  |                                     |        | 
|                                               |  |     
|CURRENT ASSETS                                 |  |      |  |                                     |        | 
|                                               |  |      |  |                                    
|Cash and cash equivalents                      |  | 3    |  |                                     | 293    |  |              |  | 1,018  |         |  |  | 1,683  | 
|Short-term investments and loans               |  | 4a   |  |                                     | 145    |  |              |  | 504    |         |  |  | 538    | 
|Marketable securities                          |  | 4b   |  |                                     | 29     |  |              |  | 100    |         |  |  | 101    | 
|Financial derivatives                          |  | 37d  |  |                                     | 11     |  |              |  | 39     |         |  |  | 81     | 
|Trade receivables                              |  | 5    |  |                                     | 199    |  |              |  | 689    |         |  |  | 716    | 
|Other accounts receivable                      |  | 6    |  |                                     | 87     |  |              |  | 302    |         |  |  | 216    | 
|Inventory of buildings and apartments for sale |  | 7    |  |                                     | 200    |  |              |  | 692    |         |  |  | 712    | 
|Income taxes receivable                        |  |      |  |                                     | 5      |  |              |  | 19     |         |  |  | 15     | 
|                                               |  |      |  |                                     |        |  |              |  |        |         |  |  |        | 
|                                               |  |      |  |                                    
|                                               |  |      |  |                                     | 969    |  |              |  | 3,363  |         |  |  | 4,062  | 
|Assets classified as held for sale             |  | 8    |  |                                     | 176    |  |              |  | 611    |         |  |  | 1,482  | 
|                                               |  |      |  |                                     |        |  |              |  |        |         |  |  |        | 
|                                               |  |      |  |                                    
|                                               |  |      |  |                                     | 1,145  |  |              |  | 3,974  |         |  |  | 5,544  | 
|                                               |  |      |  |                                     |        |  |              |  |        |         |  |  |        | 
|                                               |  |     
|NON-CURRENT ASSETS                             |  |      |  |                                     |        | 
|                                               |  |      |  |                                    
|Equity-accounted investees                     |  | 9    |  |                                     | 1,702  |  |              |  | 5,907  |         |  |  | 4,713  | 
|Other investments, loans and receivables       |  | 10   |  |                                     | 190    |  |              |  | 659    |         |  |  | 713    | 
|Available-for-sale financial assets            |  | 11   |  |                                     | 125    |  |              |  | 435    |         |  |  | 339    | 
|Financial derivatives                          |  | 37d  |  |                                     | 221    |  |              |  | 769    |         |  |  | 929    | 
|Investment property                            |  | 12   |  |                                     | 15,358 |  |              |  | 53,309 |         |  |  | 55,465 | 
|Investment property under development          |  | 13   |  |                                     | 714    |  |              |  | 2,479  |         |  |  | 2,806  | 
|Non-current inventory                          |  | 7    |  |                                     | 7      |  |              |  | 23     |         |  |  | 23     | 
|Fixed assets, net                              |  | 14   |  |                                     | 46     |  |              |  | 160    |         |  |  | 187    | 
|Intangible assets, net                         |  | 15   |  |                                     | 31     |  |              |  | 106    |         |  |  | 117    | 
|Deferred taxes                                 |  | 25m  |  |                                     | 31     |  |              |  | 106    |         |  |  | 198    | 
|                                               |  |      |  |                                     |        |  |              |  |        |         |  |  |        | 
|                                               |  |      |  |                                    
|                                               |  |      |  |                                     | 18,425 |  |              |  | 63,953 |         |  |  | 65,490 | 
|                                               |  |      |  |                                     |        |  |              |  |        |         |  |  |        | 
|                                               |  |      |  |                                    
|                                               |  |      |  |                                     | 19,570 |  |              |  | 67,927 |         |  |  | 71,034 | 
|                                               |  |      |  |                                     |        |  |              |  |        |         |  |  |        | 



|*) | Restated and retrospectively adjusted, refer to Notes 2a, 2ee and 41.
|-- | ---------------------------------------------------------------------

The accompanying notes are an integral
part of these consolidated financial statements.



F-6



---

##### Table of Contents

GAZIT-GLOBE LTD.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION





|                                                              |  |      |  |                                     |        |   |              |  |        |          |  |  |        |  
|------------------------------------------------------------- |  | ---- |  | ----------------------------------- | ------ | - | ------------ |  | ------ | -------- |  |  | ------ | -
|                                                              |  |      |  | Conveniencetranslation
(Note 2d(1)) |        |   |              | 
|                                                              |  |      |  | December 31,                        |        |   | December 31, | 
|                                                              |  |      |  | 2013                                |        |   | (** 2013     |  |        | (** 2012 | 
|                                                              |  | Note |  | U.S. dollars                        |        |   | NIS          | 
|                                                              |  |      |  | In millions                         |       
|LIABILITIES AND EQUITY                                        |  |      |  |                                     |        |  
|CURRENT LIABILITIES                                           |  |      |  |                                     |        |  
|Credit from banks and others                                  |  | 16   |  |                                     | 74     |   |              |  | 257    |          |  |  | 351    |  
|Current maturities of non-current liabilities                 |  | 17   |  |                                     | 840    |   |              |  | 2,914  |          |  |  | 2,382  |  
|Financial derivatives                                         |  | 37d  |  |                                     | 9      |   |              |  | 32     |          |  |  | 12     |  
|Trade payables                                                |  | 18   |  |                                     | 271    |   |              |  | 940    |          |  |  | 917    |  
|Other accounts payable                                        |  | 19   |  |                                     | 366    |   |              |  | 1,272  |          |  |  | 1,268  |  
|Advances from customers and buyers of apartments              |  | 7    |  |                                     | 77     |   |              |  | 267    |          |  |  | 257    |  
|Income taxes payable                                          |  |      |  |                                     | 9      |   |              |  | 32     |          |  |  | 47     |  
|                                                              |  |      |  |                                     |        |   |              |  |        |          |  |  |        |  
|                                                              |  |      |  |                                    
|                                                              |  |      |  |                                     | 1,646  |   |              |  | 5,714  |          |  |  | 5,234  |  
|Liabilities attributed to assets held for sale                |  | 8    |  |                                     | 21     |   |              |  | 73     |          |  |  | 168    |  
|                                                              |  |      |  |                                     |        |   |              |  |        |          |  |  |        |  
|                                                              |  |      |  |                                    
|                                                              |  |      |  |                                     | 1,667  |   |              |  | 5,787  |          |  |  | 5,402  |  
|                                                              |  |      |  |                                     |        |   |              |  |        |          |  |  |        |  
|NON-CURRENT LIABILITIES                                       |  |      |  |                                     |        |  
|Debentures                                                    |  | 20   |  |                                     | 6,405  |   |              |  | 22,231 |          |  |  | 18,500 |  
|Convertible debentures                                        |  | 21   |  |                                     | 352    |   |              |  | 1,221  |          |  |  | 1,197  |  
|Interest-bearing loans from financial institutions and others |  | 22   |  |                                     | 3,656  |   |              |  | 12,692 |          |  |  | 19,433 |  
|Financial derivatives                                         |  | 37d  |  |                                     | 49     |   |              |  | 169    |          |  |  | 472    |  
|Other liabilities                                             |  | 23   |  |                                     | 57     |   |              |  | 198    |          |  |  | 353    |  
|Deferred taxes                                                |  | 25m  |  |                                     | 944    |   |              |  | 3,276  |          |  |  | 3,380  |  
|                                                              |  |      |  |                                     |        |   |              |  |        |          |  |  |        |  
|                                                              |  |      |  |                                    
|                                                              |  |      |  |                                     | 11,463 |   |              |  | 39,787 |          |  |  | 43,335 |  
|                                                              |  |      |  |                                     |        |   |              |  |        |          |  |  |        |  
|EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY          |  | 27   |  |                                     |        |  
|Share capital                                                 |  |      |  |                                     | 66     |   |              |  | 229    |          |  |  | 219    |  
|Share premium                                                 |  |      |  |                                     | 1,235  |   |              |  | 4,288  |          |  |  | 3,805  |  
|Retained earnings                                             |  |      |  |                                     | 1,487  |   |              |  | 5,160  |          |  |  | 4,531  |  
|Foreign currency translation reserve                          |  |      |  |                                     | (576   | ) |              |  | (2,000 | )        |  |  | (913   | )
|Other reserves                                                |  |      |  |                                     | 42     |   |              |  | 146    |          |  |  | 60     |  
|Loans granted for purchase of Companys shares *)             |  |      |  |                                     |       |   |              |  |       |          |  |  |       |  
|Treasury shares                                               |  |      |  |                                     | (6     | ) |              |  | (21    | )        |  |  | (21    | )
|                                                              |  |      |  |                                     |        |   |              |  |        |          |  |  |        |  
|                                                              |  |      |  |                                    
|                                                              |  |      |  |                                     | 2,248  |   |              |  | 7,802  |          |  |  | 7,681  |  
|Non-controlling interests                                     |  | 27i  |  |                                     | 4,192  |   |              |  | 14,551 |          |  |  | 14,616 |  
|                                                              |  |      |  |                                     |        |   |              |  |        |          |  |  |        |  
|                                                              |  |      |  |                                    
|Total equity                                                  |  |      |  |                                     | 6,440  |   |              |  | 22,353 |          |  |  | 22,297 |  
|                                                              |  |      |  |                                     |        |   |              |  |        |          |  |  |        |  
|                                                              |  |      |  |                                    
|                                                              |  |      |  |                                     | 19,570 |   |              |  | 67,927 |          |  |  | 71,034 |  
|                                                              |  |      |  |                                     |        |   |              |  |        |          |  |  |        |  



|*) | Represents an amount of less than NIS 1 million.
|-- | ------------------------------------------------

|**) | Restated and retrospectively adjusted, refer to Notes 2a, 2ee and 41.
|--- | ---------------------------------------------------------------------

The accompanying notes are an integral
part of these consolidated financial statements.



F-7



---

##### Table of Contents

GAZIT-GLOBE LTD.

CONSOLIDATED STATEMENTS OF INCOME





|                                                                                        |  |      |  |                                          |       |   |                        |  |        |         |  |  |         |   |  |  |        |  
|--------------------------------------------------------------------------------------- |  | ---- |  | ---------------------------------------- | ----- | - | ---------------------- |  | ------ | ------- |  |  | ------- | - |  |  | ------ | -
|                                                                                        |  |      |  | Conveniencetranslation(Note 2d(1))       |       |   |                        | 
|                                                                                        |  |      |  | Year ended
December 31,                  |       |   | Year endedDecember 31, | 
|                                                                                        |  |      |  | 2013                                     |       |   | *) 2013                |  |        | *) 2012 |  |  | *) 2011 |  
|                                                                                        |  |      |  | U.S. dollars                             |       |   | NIS                    | 
|                                                                                        |  | Note |  | (In millions, except for per share data) |      
|                                                                                        |  |      |  |                                          |      
|Rental income                                                                           |  | 30   |  |                                          | 1,483 |   |                        |  | 5,146  |         |  |  | 5,249   |   |  |  | 4,718  |  
|Property operating expenses                                                             |  | 31   |  |                                          | 487   |   |                        |  | 1,689  |         |  |  | 1,705   |   |  |  | 1,522  |  
|                                                                                        |  |      |  |                                          |       |   |                        |  |        |         |  |  |         |   |  |  |        |  
|                                                                                        |  |      |  |                                          |      
|Net operating rental income                                                             |  |      |  |                                          | 996   |   |                        |  | 3,457  |         |  |  | 3,544   |   |  |  | 3,196  |  
|                                                                                        |  |      |  |                                          |       |   |                        |  |        |         |  |  |         |   |  |  |        |  
|                                                                                        |  |      |  |                                          |      
|Revenues from sale of buildings, land and construction work performed                   |  | 32   |  |                                          | 481   |   |                        |  | 1,672  |         |  |  | 1,760   |   |  |  | 1,001  |  
|Cost of buildings sold, land and construction work performed                            |  | 32   |  |                                          | 486   |   |                        |  | 1,688  |         |  |  | 1,720   |   |  |  | 967    |  
|                                                                                        |  |      |  |                                          |       |   |                        |  |        |         |  |  |         |   |  |  |        |  
|                                                                                        |  |      |  |                                          |      
|Gross profit (loss) from sale of buildings, land and construction work performed        |  |      |  |                                          | (5    | ) |                        |  | (16    | )       |  |  | 40      |   |  |  | 34     |  
|                                                                                        |  |      |  |                                          |       |   |                        |  |        |         |  |  |         |   |  |  |        |  
|                                                                                        |  |      |  |                                          |      
|Total gross profit                                                                      |  |      |  |                                          | 991   |   |                        |  | 3,441  |         |  |  | 3,584   |   |  |  | 3,230  |  
|                                                                                        |  |      |  |                                          |       |   |                        |  |        |         |  |  |         |   |  |  |        |  
|                                                                                        |  |      |  |                                          |      
|Fair value gain from investment property and investment property under development, net |  |      |  |                                          | 277   |   |                        |  | 962    |         |  |  | 1,938   |   |  |  | 1,692  |  
|General and administrative expenses                                                     |  | 33   |  |                                          | (176  | ) |                        |  | (610   | )       |  |  | (673    | ) |  |  | (755   | )
|Other income                                                                            |  | 34a  |  |                                          | 63    |   |                        |  | 218    |         |  |  | 164     |   |  |  | 115    |  
|Other expenses                                                                          |  | 34b  |  |                                          | (21   | ) |                        |  | (74    | )       |  |  | (47     | ) |  |  | (110   | )
|Companys share in earnings of equity-accounted investees, net                          |  | 9b   |  |                                          | 43    |   |                        |  | 149    |         |  |  | 299     |   |  |  | 334    |  
|                                                                                        |  |      |  |                                          |       |   |                        |  |        |         |  |  |         |   |  |  |        |  
|                                                                                        |  |      |  |                                          |      
|Operating income                                                                        |  |      |  |                                          | 1,177 |   |                        |  | 4,086  |         |  |  | 5,265   |   |  |  | 4,506  |  
|                                                                                        |  |      |  |                                          |      
|Finance expenses                                                                        |  | 35a  |  |                                          | (629  | ) |                        |  | (2,185 | )       |  |  | (2,214  | ) |  |  | (2,197 | )
|Finance income                                                                          |  | 35b  |  |                                          | 158   |   |                        |  | 549    |         |  |  | 120     |   |  |  | 72     |  
|                                                                                        |  |      |  |                                          |       |   |                        |  |        |         |  |  |         |   |  |  |        |  
|                                                                                        |  |      |  |                                          |      
|Income before taxes on income                                                           |  |      |  |                                          | 706   |   |                        |  | 2,450  |         |  |  | 3,171   |   |  |  | 2,381  |  
|Taxes on income                                                                         |  | 25n  |  |                                          | 76    |   |                        |  | 265    |         |  |  | 758     |   |  |  | 352    |  
|                                                                                        |  |      |  |                                          |       |   |                        |  |        |         |  |  |         |   |  |  |        |  
|                                                                                        |  |      |  |                                          |      
|Net income                                                                              |  |      |  |                                          | 630   |   |                        |  | 2,185  |         |  |  | 2,413   |   |  |  | 2,029  |  
|                                                                                        |  |      |  |                                          |       |   |                        |  |        |         |  |  |         |   |  |  |        |  
|                                                                                        |  |      |  |                                          |      
|Attributable to:                                                                        |  |      |  |                                          |       |   |                        |  |        |         |  |  |         |   |  |  |        |  
|Equity holders of the Company                                                           |  |      |  |                                          | 267   |   |                        |  | 927    |         |  |  | 901     |   |  |  | 708    |  
|Non-controlling interests                                                               |  |      |  |                                          | 363   |   |                        |  | 1,258  |         |  |  | 1,512   |   |  |  | 1,321  |  
|                                                                                        |  |      |  |                                          |       |   |                        |  |        |         |  |  |         |   |  |  |        |  
|                                                                                        |  |      |  |                                          |      
|                                                                                        |  |      |  |                                          | 630   |   |                        |  | 2,185  |         |  |  | 2,413   |   |  |  | 2,029  |  
|                                                                                        |  |      |  |                                          |       |   |                        |  |        |         |  |  |         |   |  |  |        |  
|                                                                                        |  |      |  |                                          |      
|Net earnings per share attributable to equity holders of the Company:                   |  | 36   |  |                                          |       |   |                        |  |        |         |  |  |         |   |  |  |        |  
|Basic net earnings                                                                      |  |      |  |                                          | 1.56  |   |                        |  | 5.41   |         |  |  | 5.46    |   |  |  | 4.57   |  
|                                                                                        |  |      |  |                                          |       |   |                        |  |        |         |  |  |         |   |  |  |        |  
|                                                                                        |  |      |  |                                          |      
|Diluted net earnings                                                                    |  |      |  |                                          | 1.54  |   |                        |  | 5.35   |         |  |  | 5.25    |   |  |  | 4.23   |  
|                                                                                        |  |      |  |                                          |       |   |                        |  |        |         |  |  |         |   |  |  |        |  



|*) | Restated, reclassified and retrospectively adjusted. Refer to Notes 2a, 2ee and 41.
|-- | -----------------------------------------------------------------------------------

The accompanying notes
are an integral part of these consolidated financial statements.



F-8



---

##### Table of Contents

GAZIT-GLOBE LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME





|                                                                                                      |  |                                    |      |   |                        |  |        |      |  |  |       |   |  |  |       |  
|----------------------------------------------------------------------------------------------------- |  | ---------------------------------- | ---- | - | ---------------------- |  | ------ | ---- |  |  | ----- | - |  |  | ----- | -
|                                                                                                      |  | Conveniencetranslation(Note 2d(1)) |      |   |                        |  |        |      |  |  |       |  
|                                                                                                      |  | Year ended
December 31,            |      |   | Year endedDecember 31, | 
|                                                                                                      |  | 2013                               |      |   | 2013                   |  |        | 2012 |  |  | 2011  |  
|                                                                                                      |  | U.S. dollars                       |      |   | NIS                    | 
|                                                                                                      |  | (In millions)                      |     
|                                                                                                      |  |                                    |      |  
|Net income                                                                                            |  |                                    | 630  |   |                        |  | 2,185  |      |  |  | 2,413 |   |  |  | 2,029 |  
|                                                                                                      |  |                                    |      |   |                        |  |        |      |  |  |       |   |  |  |       |  
|                                                                                                      |  |                                    |      |  
|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)                                         |  |                                    | (704 | ) |                        |  | (2,443 | )    |  |  | (416  | ) |  |  | 1,131 |  
|Realization of exchange differences on translation of equity-accounted foreign operations             |  |                                    |     |   |                        |  |       |      |  |  | 3     |   |  |  | 12    |  
|Net gains (losses) on cash flow hedges (1)                                                            |  |                                    | 69   |   |                        |  | 239    |      |  |  | (100  | ) |  |  | (139  | )
|Net gains (losses) on available-for-sale financial assets                                             |  |                                    | (1   | ) |                        |  | (4     | )    |  |  | 37    |   |  |  | (39   | )
|                                                                                                      |  |                                    |      |   |                        |  |        |      |  |  |       |   |  |  |       |  
|                                                                                                      |  |                                    |      |  
|                                                                                                      |  |                                    | (636 | ) |                        |  | (2,208 | )    |  |  | (476  | ) |  |  | 965   |  
|                                                                                                      |  |                                    |      |   |                        |  |        |      |  |  |       |   |  |  |       |  
|Items not to be reclassified to profit or loss:                                                       |  |                                    |      |   |                        |  |        |      |  |  |       |   |  |  |       |  
|                                                                                                      |  |                                    |      |  
|Gain (loss) on revaluation of fixed assets in joint venture                                           |  |                                    | (2   | ) |                        |  | (6     | )    |  |  | 10    |   |  |  | 28    |  
|                                                                                                      |  |                                    |      |   |                        |  |        |      |  |  |       |   |  |  |       |  
|                                                                                                      |  |                                    |      |  
|Total other comprehensive income (loss)                                                               |  |                                    | (638 | ) |                        |  | (2,214 | )    |  |  | (466  | ) |  |  | 993   |  
|                                                                                                      |  |                                    |      |   |                        |  |        |      |  |  |       |   |  |  |       |  
|                                                                                                      |  |                                    |      |  
|Total comprehensive income (loss)                                                                     |  |                                    | (8   | ) |                        |  | (29    | )    |  |  | 1,947 |   |  |  | 3,022 |  
|                                                                                                      |  |                                    |      |   |                        |  |        |      |  |  |       |   |  |  |       |  
|                                                                                                      |  |                                    |      |  
|Attributable to:                                                                                      |  |                                    |      |   |                        |  |        |      |  |  |       |   |  |  |       |  
|Equity holders of the Company (2)                                                                     |  |                                    | (13  | ) |                        |  | (46    | )    |  |  | 715   |   |  |  | 1,216 |  
|Non-controlling interests                                                                             |  |                                    | 5    |   |                        |  | 17     |      |  |  | 1,232 |   |  |  | 1,806 |  
|                                                                                                      |  |                                    |      |   |                        |  |        |      |  |  |       |   |  |  |       |  
|                                                                                                      |  |                                    |      |  
|                                                                                                      |  |                                    | (8   | ) |                        |  | (29    | )    |  |  | 1,947 |   |  |  | 3,022 |  
|                                                                                                      |  |                                    |      |   |                        |  |        |      |  |  |       |   |  |  |       |  
|                                                                                                      |  |                                    |      |  
|(1)    Includes Groups share in other comprehensive loss of investees according to the equity method |  |                                    | (5   | ) |                        |  | (19    | )    |  |  | (3    | ) |  |  | (9    | )
|                                                                                                      |  |                                    |      |   |                        |  |        |      |  |  |       |   |  |  |       |  
|                                                                                                      |  |                                    |      |  
|(2)    Breakdown of total comprehensive income (loss) attributable to equity holders of the Company:  |  |                                    |      |   |                        |  |        |      |  |  |       |   |  |  |       |  
|                                                                                                      |  |                                    |      |  
|Net income                                                                                            |  |                                    | 267  |   |                        |  | 927    |      |  |  | 901   |   |  |  | 708   |  
|Exchange differences on translation of foreign operations                                             |  |                                    | (313 | ) |                        |  | (1,087 | )    |  |  | (189  | ) |  |  | 569   |  
|Realization of exchange differences on translation of equity-accounted foreign operations             |  |                                    |     |   |                        |  |       |      |  |  | 2     |   |  |  | 12    |  
|Net gains (losses) on cash flow hedges                                                                |  |                                    | 36   |   |                        |  | 123    |      |  |  | (48   | ) |  |  | (66   | )
|Net gains (losses) on available-for-sale financial assets                                             |  |                                    | (1   | ) |                        |  | (3     | )    |  |  | 39    |   |  |  | (35   | )
|Gain (loss) on revaluation of fixed assets in joint venture                                           |  |                                    | (2   | ) |                        |  | (6     | )    |  |  | 10    |   |  |  | 28    |  
|                                                                                                      |  |                                    |      |   |                        |  |        |      |  |  |       |   |  |  |       |  
|                                                                                                      |  |                                    |      |  
|                                                                                                      |  |                                    | (13  | ) |                        |  | (46    | )    |  |  | 715   |   |  |  | 1,216 |  
|                                                                                                      |  |                                    |      |   |                        |  |        |      |  |  |       |   |  |  |       |  



|*) | For further details regarding other comprehensive income and related tax impact, see Note 27g.
|-- | ----------------------------------------------------------------------------------------------

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 ***)





|                                                                                                |  |                                                      |      |  |              |  |       |                  |  |  |                                   |   |  |                  |      |   |                               |  |    |                |  |  |       |  |  |                          |    |   |             |  |       |   |  |  |       |   |  |  |       |  
|----------------------------------------------------------------------------------------------- |  | ---------------------------------------------------- | ---- |  | ------------ |  | ----- | ---------------- |  |  | --------------------------------- | - |  | ---------------- | ---- | - | ----------------------------- |  | -- | -------------- |  |  | ----- |  |  | ------------------------ | -- | - | ----------- |  | ----- | - |  |  | ----- | - |  |  | ----- | -
|                                                                                                |  | Convenience translation into U.S. dollars as of      |      |  |              |  |       |                  | 
|                                                                                                |  | Equity attributable to equity holders of the Company |      |  |              |  |       |                  | 
|                                                                                                |  | Sharecapital                                         |      |  | Sharepremium |  |       | Retainedearnings |  |  | Foreigncurrencytranslationreserve |   |  | Otherreserves**) |      |   | Loansgranted topurchaseshares |  |    | Treasuryshares |  |  | Total |  |  | Non-controllinginterests |    |   | Totalequity | 
|                                                                                                |  |                                                      |      |  |              |  |       |                  |  | 
|Balance as of January 1, 2013                                                                   |  |                                                      | 63   |  |              |  | 1,096 |                  |  |  | 1,306                             |   |  |                  | (263 | ) |                               |  | 17 |                |  |  | *)   |  |  |                          | (6 | ) |             |  | 2,213 |   |  |  | 4,211 |   |  |  | 6,424 |  
|                                                                                                |  |                                                      |      |  |              |  |       |                  |  | 
|Net income                                                                                      |  |                                                      |     |  |              |  |      |                  |  |  | 267                               |   |  |                  |     |   |                               |  |   |                |  |  |      |  |  |                          |   |   |             |  | 267   |   |  |  | 363   |   |  |  | 630   |  
|Other comprehensive income (loss)                                                               |  |                                                      |     |  |              |  |      |                  |  |  |                                  |   |  |                  | (313 | ) |                               |  | 33 |                |  |  |      |  |  |                          |   |   |             |  | (280  | ) |  |  | (358  | ) |  |  | (638  | )
|                                                                                                |  |                                                      |      |  |              |  |       |                  |  |  |                                   |   |  |                  |      |   |                               |  |    |                |  |  |       |  |  |                          |    |   |             |  |       |   |  |  |       |   |  |  |       |  
|                                                                                                |  |                                                      |      |  |              |  |       |                  |  | 
|Total comprehensive income (loss)                                                               |  |                                                      |     |  |              |  |      |                  |  |  | 267                               |   |  |                  | (313 | ) |                               |  | 33 |                |  |  |      |  |  |                          |   |   |             |  | (13   | ) |  |  | 5     |   |  |  | (8    | )
|                                                                                                |  |                                                      |      |  |              |  |       |                  |  | 
|Issue of shares net of issuance expenses                                                        |  |                                                      | 3    |  |              |  | 138   |                  |  |  |                                  |   |  |                  |     |   |                               |  |   |                |  |  |      |  |  |                          |   |   |             |  | 141   |   |  |  |      |   |  |  | 141   |  
|Exercise of share options into Companys shares                                                 |  |                                                      | *)  |  |              |  | 1     |                  |  |  |                                  |   |  |                  |     |   |                               |  | (1 | )              |  |  |      |  |  |                          |   |   |             |  | *)   |   |  |  |      |   |  |  | *)   |  
|Revaluation of loans to purchase shares                                                         |  |                                                      |     |  |              |  |      |                  |  |  | *)                               |   |  |                  |     |   |                               |  |   |                |  |  | *)   |  |  |                          |   |   |             |  |      |   |  |  |      |   |  |  |      |  
|Repayment of loans to purchase shares                                                           |  |                                                      |     |  |              |  |      |                  |  |  |                                  |   |  |                  |     |   |                               |  |   |                |  |  | *)   |  |  |                          |   |   |             |  | *)   |   |  |  |      |   |  |  | *)   |  
|Realization of fixed assets revaluation reserve in joint venture                                |  |                                                      |     |  |              |  |      |                  |  |  |                                  |   |  |                  |     |   |                               |  |   |                |  |  |      |  |  |                          |   |   |             |  |      |   |  |  |      |   |  |  |      |  
|Cost of share-based payment                                                                     |  |                                                      |     |  |              |  |      |                  |  |  |                                  |   |  |                  |     |   |                               |  | 3  |                |  |  |      |  |  |                          |   |   |             |  | 3     |   |  |  | 6     |   |  |  | 9     |  
|Dividend paid                                                                                   |  |                                                      |     |  |              |  |      |                  |  |  | (86                               | ) |  |                  |     |   |                               |  |   |                |  |  |      |  |  |                          |   |   |             |  | (86   | ) |  |  |      |   |  |  | (86   | )
|Capital issuance to non-controlling interests                                                   |  |                                                      |     |  |              |  |      |                  |  |  |                                  |   |  |                  |     |   |                               |  | (9 | )              |  |  |      |  |  |                          |   |   |             |  | (9    | ) |  |  | 180   |   |  |  | 171   |  
|Acquisition of non-controlling interests                                                        |  |                                                      |     |  |              |  |      |                  |  |  |                                  |   |  |                  |     |   |                               |  | (1 | )              |  |  |      |  |  |                          |   |   |             |  | (1    | ) |  |  | (10   | ) |  |  | (11   | )
|Issue, redemption and re-purchase of convertible debentures and warrants expiry in subsidiaries |  |                                                      |     |  |              |  |      |                  |  |  |                                  |   |  |                  |     |   |                               |  |   |                |  |  |      |  |  |                          |   |   |             |  |      |   |  |  | (2    | ) |  |  | (2    | )
|Dividend to non-controlling interests                                                           |  |                                                      |     |  |              |  |      |                  |  |  |                                  |   |  |                  |     |   |                               |  |   |                |  |  |      |  |  |                          |   |   |             |  |      |   |  |  | (198  | ) |  |  | (198  | )
|                                                                                                |  |                                                      |      |  |              |  |       |                  |  |  |                                   |   |  |                  |      |   |                               |  |    |                |  |  |       |  |  |                          |    |   |             |  |       |   |  |  |       |   |  |  |       |  
|                                                                                                |  |                                                      |      |  |              |  |       |                  |  | 
|Balance as of December 31, 2013                                                                 |  |                                                      | 66   |  |              |  | 1,235 |                  |  |  | 1,487                             |   |  |                  | (576 | ) |                               |  | 42 |                |  |  | *)   |  |  |                          | (6 | ) |             |  | 2,248 |   |  |  | 4,192 |   |  |  | 6,440 |  
|                                                                                                |  |                                                      |      |  |              |  |       |                  |  |  |                                   |   |  |                  |      |   |                               |  |    |                |  |  |       |  |  |                          |    |   |             |  |       |   |  |  |       |   |  |  |       |  



|*) | Represents an amount of less than NIS 1 million.
|-- | ------------------------------------------------

|**) | For additional details regarding other reserves, see Note 27f.
|--- | --------------------------------------------------------------

|***) | Restated and retrospectively adjusted. Refer to Notes 2a, 2ee and 41.
|---- | ---------------------------------------------------------------------

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; Restated ***)                       |     
|                                                                                                |  |                                                      |      |  |              |  |       |                  |  | 
|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 into Companys shares                                                 |  |                                                      | *)  |  |              |  | 4     |                  |  |  |                                  |   |  |                  |       |   |                               |  | (4  | )              |  |  |      |  |  |                          |    |   |             |  | *)   |   |  |  |       |   |  |  | *)    |  
|Revaluation of loans to purchase shares                                                         |  |                                                      |     |  |              |  |      |                  |  |  | *)                               |   |  |                  |       |   |                               |  |    |                |  |  | *)   |  |  |                          |    |   |             |  |      |   |  |  |       |   |  |  |       |  
|Repayment of loans to purchase shares                                                           |  |                                                      |     |  |              |  |      |                  |  |  |                                  |   |  |                  |       |   |                               |  |    |                |  |  | *)   |  |  |                          |    |   |             |  | *)   |   |  |  |       |   |  |  | *)    |  
|Realization of fixed assets revaluation reserve in joint venture                                |  |                                                      |     |  |              |  |      |                  |  |  |                                  |   |  |                  |       |   |                               |  |    |                |  |  |      |  |  |                          |    |   |             |  |      |   |  |  |       |   |  |  |       |  
|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, redemption and re-purchase of convertible debentures and warrants expiry in subsidiaries |  |                                                      |     |  |              |  |      |                  |  |  |                                  |   |  |                  |       |   |                               |  |    |                |  |  |      |  |  |                          |    |   |             |  |      |   |  |  | (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 27f.
|--- | --------------------------------------------------------------

|***) | Restated and retrospectively adjusted. Refer to Notes 2a, 2ee and 41.
|---- | ---------------------------------------------------------------------

The accompanying notes are an integral
part of these consolidated financial statements.



F-11



---

##### 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; Restated ***)                       |    
|                                                                   |  |                                                      |     |  |              |  |       |                  |  | 
|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 and expiration of share options issued by the Company     |  |                                                      | 1   |  |              |  | 18    |                  |  |  |                                  |   |  |                  |     |   |                               |  | (16  | )              |  |  |      |  |  |                          |    |   |             |  | 3     |   |  |  |       |   |  |  | 3      |  
|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 27f.
|--- | --------------------------------------------------------------

|***) | Restated and retrospectively adjusted. Refer to Notes 2a, 2ee and 41.
|---- | ---------------------------------------------------------------------

The accompanying notes are an integral
part of these consolidated financial statements.



F-12



---

##### 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; Retrospectively adjusted ***)       |     
|                                                                                                                          |  |                                                      |      |  |              |  |       |                  |  | 
|Balance as of January 1, 2011                                                                                             |  |                                                      | 208  |  |              |  | 3,474 |                  |  |  | 3,321                             |   |  |                  | (1,307 | ) |                               |  | 220 |                |  |  | (4    | ) |  |                          | (21 | ) |             |  | 5,891 |   |  |  | 9,100  |   |  |  | 14,991 |  
|                                                                                                                          |  |                                                      |      |  |              |  |       |                  |  | 
|Net income                                                                                                                |  |                                                      |     |  |              |  |      |                  |  |  | 708                               |   |  |                  |       |   |                               |  |    |                |  |  |      |   |  |                          |    |   |             |  | 708   |   |  |  | 1,321  |   |  |  | 2,029  |  
|Other comprehensive income                                                                                                |  |                                                      |     |  |              |  |      |                  |  |  |                                  |   |  |                  | 581    |   |                               |  | (73 | )              |  |  |      |   |  |                          |    |   |             |  | 508   |   |  |  | 485    |   |  |  | 993    |  
|                                                                                                                          |  |                                                      |      |  |              |  |       |                  |  |  |                                   |   |  |                  |        |   |                               |  |     |                |  |  |       |   |  |                          |     |   |             |  |       |   |  |  |        |   |  |  |        |  
|                                                                                                                          |  |                                                      |      |  |              |  |       |                  |  | 
|Total comprehensive income (loss)                                                                                         |  |                                                      |     |  |              |  |      |                  |  |  | 708                               |   |  |                  | 581    |   |                               |  | (73 | )              |  |  |      |   |  |                          |    |   |             |  | 1,216 |   |  |  | 1,806  |   |  |  | 3,022  |  
|                                                                                                                          |  |                                                      |      |  |              |  |       |                  |  | 
|Issue of shares net of issue expenses                                                                                     |  |                                                      | 10   |  |              |  | 303   |                  |  |  |                                  |   |  |                  |       |   |                               |  |    |                |  |  |      |   |  |                          |    |   |             |  | 313   |   |  |  |       |   |  |  | 313    |  
|Exercise and expiration of share options issued by the Company                                                            |  |                                                      | *)  |  |              |  | 10    |                  |  |  |                                  |   |  |                  |       |   |                               |  | (8  | )              |  |  |      |   |  |                          |    |   |             |  | 2     |   |  |  |       |   |  |  | 2      |  
|Revaluation of loans to purchase shares                                                                                   |  |                                                      |     |  |              |  |      |                  |  |  | *)                               |   |  |                  |       |   |                               |  |    |                |  |  | *)   |   |  |                          |    |   |             |  |      |   |  |  |       |   |  |  |       |  
|Repayment of loans to purchase shares                                                                                     |  |                                                      |     |  |              |  |      |                  |  |  |                                  |   |  |                  |       |   |                               |  |    |                |  |  | 4     |   |  |                          |    |   |             |  | 4     |   |  |  |       |   |  |  | 4      |  
|Waiver of salary by controlling shareholder, net                                                                          |  |                                                      |     |  |              |  |      |                  |  |  |                                  |   |  |                  |       |   |                               |  | 64  |                |  |  |      |   |  |                          |    |   |             |  | 64    |   |  |  |       |   |  |  | 64     |  
|Realization of fixed asset revaluation reserve in joint venture and initially consolidated investment revaluation reserve |  |                                                      |     |  |              |  |      |                  |  |  | 4                                 |   |  |                  |       |   |                               |  | (4  | )              |  |  |      |   |  |                          |    |   |             |  |      |   |  |  |       |   |  |  |       |  
|Cost of share-based payment                                                                                               |  |                                                      |     |  |              |  |      |                  |  |  |                                  |   |  |                  |       |   |                               |  | 7   |                |  |  |      |   |  |                          |    |   |             |  | 7     |   |  |  | 49     |   |  |  | 56     |  
|Dividend declared                                                                                                         |  |                                                      |     |  |              |  |      |                  |  |  | (241                              | ) |  |                  |       |   |                               |  |    |                |  |  |      |   |  |                          |    |   |             |  | (241  | ) |  |  |       |   |  |  | (241   | )
|Capital issuance to non-controlling interests                                                                             |  |                                                      |     |  |              |  |      |                  |  |  |                                  |   |  |                  |       |   |                               |  | (11 | )              |  |  |      |   |  |                          |    |   |             |  | (11   | ) |  |  | 1,196  |   |  |  | 1,185  |  
|Acquisition of non-controlling interests                                                                                  |  |                                                      |     |  |              |  |      |                  |  |  |                                  |   |  |                  |       |   |                               |  | (46 | )              |  |  |      |   |  |                          |    |   |             |  | (46   | ) |  |  | (339   | ) |  |  | (385   | )
|Non-controlling interests in initially consolidated companies                                                             |  |                                                      |     |  |              |  |      |                  |  |  |                                  |   |  |                  |       |   |                               |  |    |                |  |  |      |   |  |                          |    |   |             |  |      |   |  |  | 928    |   |  |  | 928    |  
|Conversion and re-purchase of convertible debentures in subsidiary                                                        |  |                                                      |     |  |              |  |      |                  |  |  |                                  |   |  |                  |       |   |                               |  |    |                |  |  |      |   |  |                          |    |   |             |  |      |   |  |  | 2      |   |  |  | 2      |  
|Dividend to non-controlling interests                                                                                     |  |                                                      |     |  |              |  |      |                  |  |  |                                  |   |  |                  |       |   |                               |  |    |                |  |  |      |   |  |                          |    |   |             |  |      |   |  |  | (545   | ) |  |  | (545   | )
|                                                                                                                          |  |                                                      |      |  |              |  |       |                  |  |  |                                   |   |  |                  |        |   |                               |  |     |                |  |  |       |   |  |                          |     |   |             |  |       |   |  |  |        |   |  |  |        |  
|                                                                                                                          |  |                                                      |      |  |              |  |       |                  |  | 
|Balance as of December 31, 2011                                                                                           |  |                                                      | 218  |  |              |  | 3,787 |                  |  |  | 3,792                             |   |  |                  | (726   | ) |                               |  | 149 |                |  |  | *)   |   |  |                          | (21 | ) |             |  | 7,199 |   |  |  | 12,197 |   |  |  | 19,396 |  
|                                                                                                                          |  |                                                      |      |  |              |  |       |                  |  |  |                                   |   |  |                  |        |   |                               |  |     |                |  |  |       |   |  |                          |     |   |             |  |       |   |  |  |        |   |  |  |        |  



|*) | Represents an amount of less than NIS 1 million.
|-- | ------------------------------------------------

|**) | For additional details regarding other reserves, see Note 27f.
|--- | --------------------------------------------------------------

|***) | Retrospectively adjusted. Refer to Note 2a.
|---- | -------------------------------------------

The accompanying notes are an integral part of these consolidated
financial statements.



F-13



---

##### Table of Contents

GAZIT-GLOBE LTD.

CONSOLIDATED STATEMENTS OF CASH FLOW





|                                                                                                                    |  |                                    |      |   |                        |  |        |         |  |  |         |   |  |  |        |  
|------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------- | ---- | - | ---------------------- |  | ------ | ------- |  |  | ------- | - |  |  | ------ | -
|                                                                                                                    |  | Conveniencetranslation(Note 2d(1)) |      |   |                        | 
|                                                                                                                    |  | Year ended
December 31,            |      |   | Year endedDecember 31, | 
|                                                                                                                    |  | 2013                               |      |   | *) 2013                |  |        | *) 2012 |  |  | *) 2011 |  
|                                                                                                                    |  | U.S. dollars                       |      |   | NIS                    | 
|                                                                                                                    |  | (In millions)                      |     
|                                                                                                                    |  |                                    |     
|Cash flows from operating activities:                                                                               |  |                                    |      |   |                        |  |        |         |  |  |         |  
|Net income                                                                                                          |  |                                    | 630  |   |                        |  | 2,185  |         |  |  | 2,413   |   |  |  | 2,029  |  
|                                                                                                                    |  |                                    |      |   |                        |  |        |         |  |  |         |   |  |  |        |  
|                                                                                                                    |  |                                    |     
|Adjustments required to present net cash provided by operating activities:                                          |  |                                    |      |   |                        |  |        |         |  |  |         |  
|Adjustments to the profit or loss items:                                                                            |  |                                    |      |   |                        |  |        |         |  |  |         |  
|                                                                                                                    |  |                                    |      |  
|Finance expenses, net                                                                                               |  |                                    | 471  |   |                        |  | 1,636  |         |  |  | 2,094   |   |  |  | 2,125  |  
|Companys share in earnings of equity-accounted investees, net                                                      |  |                                    | (43  | ) |                        |  | (149   | )       |  |  | (299    | ) |  |  | (334   | )
|Fair value gain from investment property and investment property under development, net                             |  |                                    | (277 | ) |                        |  | (962   | )       |  |  | (1,938  | ) |  |  | (1,692 | )
|Depreciation and amortization (including goodwill impairment)                                                       |  |                                    | 10   |   |                        |  | 34     |         |  |  | 34      |   |  |  | 67     |  
|Taxes on income                                                                                                     |  |                                    | 76   |   |                        |  | 265    |         |  |  | 758     |   |  |  | 352    |  
|Impairment loss of other assets                                                                                     |  |                                    | 1    |   |                        |  | 2      |         |  |  | 7       |   |  |  | 7      |  
|Capital loss, net                                                                                                   |  |                                    | 15   |   |                        |  | 53     |         |  |  | 5       |   |  |  | 64     |  
|Change in employee benefit liability, net                                                                           |  |                                    |     |   |                        |  |       |         |  |  | (2      | ) |  |  | 3      |  
|Loss from decrease in holding interest and disposal of investees, net                                               |  |                                    | 3    |   |                        |  | 11     |         |  |  |        |   |  |  | 1      |  
|Gain from bargain purchase (Note 34b)                                                                               |  |                                    | (57  | ) |                        |  | (198   | )       |  |  | (134    | ) |  |  | (102   | )
|Cost of share-based payment                                                                                         |  |                                    | 12   |   |                        |  | 41     |         |  |  | 47      |   |  |  | 56     |  
|Salary expenses carried to capital reserve                                                                          |  |                                    |     |   |                        |  |       |         |  |  |        |   |  |  | 105    |  
|                                                                                                                    |  |                                    |      |   |                        |  |        |         |  |  |         |   |  |  |        |  
|                                                                                                                    |  |                                    |      |  
|                                                                                                                    |  |                                    | 211  |   |                        |  | 733    |         |  |  | 572     |   |  |  | 652    |  
|                                                                                                                    |  |                                    |      |   |                        |  |        |         |  |  |         |   |  |  |        |  
|Changes in assets and liabilities items:                                                                            |  |                                    |      |   |                        |  |        |         |  |  |         |  
|                                                                                                                    |  |                                    |      |  
|Increase in trade receivables and other accounts receivable                                                         |  |                                    | (40  | ) |                        |  | (138   | )       |  |  | (40     | ) |  |  | (185   | )
|Decrease (increase) in inventories of buildings and land less advances from customers and buyers of apartments, net |  |                                    | (4   | ) |                        |  | (13    | )       |  |  | 57      |   |  |  | (78    | )
|Increase (decrease) in trade and other accounts payable                                                             |  |                                    | (16  | ) |                        |  | (54    | )       |  |  | (104    | ) |  |  | 53     |  
|Increase in tenants security deposits, net                                                                         |  |                                    | 2    |   |                        |  | 8      |         |  |  | 4       |   |  |  | 14     |  
|                                                                                                                    |  |                                    |      |   |                        |  |        |         |  |  |         |   |  |  |        |  
|                                                                                                                    |  |                                    |      |  
|                                                                                                                    |  |                                    | (58  | ) |                        |  | (197   | )       |  |  | (83     | ) |  |  | (196   | )
|                                                                                                                    |  |                                    |      |   |                        |  |        |         |  |  |         |   |  |  |        |  
|                                                                                                                    |  |                                    |      |  
|Net cash provided by operating activities before interest, dividend and taxes                                       |  |                                    | 783  |   |                        |  | 2,721  |         |  |  | 2,902   |   |  |  | 2,485  |  
|                                                                                                                    |  |                                    |      |   |                        |  |        |         |  |  |         |   |  |  |        |  
|                                                                                                                    |  |                                    |     
|Cash received and paid during the year for:                                                                         |  |                                    |      |   |                        |  |        |         |  |  |         |  
|                                                                                                                    |  |                                    |      |  
|Interest paid                                                                                                       |  |                                    | (531 | ) |                        |  | (1,843 | )       |  |  | (1,964  | ) |  |  | (1,536 | )
|Interest received (Note 37d)                                                                                        |  |                                    | 63   |   |                        |  | 218    |         |  |  | 54      |   |  |  | 31     |  
|Dividend received                                                                                                   |  |                                    | 45   |   |                        |  | 155    |         |  |  | 395     |   |  |  | 96     |  
|Taxes paid                                                                                                          |  |                                    | (20  | ) |                        |  | (69    | )       |  |  | (44     | ) |  |  | (10    | )
|Taxes received                                                                                                      |  |                                    | 2    |   |                        |  | 7      |         |  |  | 25      |   |  |  | 38     |  
|                                                                                                                    |  |                                    |      |   |                        |  |        |         |  |  |         |   |  |  |        |  
|                                                                                                                    |  |                                    |      |  
|                                                                                                                    |  |                                    | (441 | ) |                        |  | (1,532 | )       |  |  | (1,534  | ) |  |  | (1,381 | )
|                                                                                                                    |  |                                    |      |   |                        |  |        |         |  |  |         |   |  |  |        |  
|                                                                                                                    |  |                                    |      |  
|Net cash provided by operating activities                                                                           |  |                                    | 342  |   |                        |  | 1,189  |         |  |  | 1,368   |   |  |  | 1,104  |  
|                                                                                                                    |  |                                    |      |   |                        |  |        |         |  |  |         |   |  |  |        |  



|*) | Restated, reclassified and retrospectively adjusted. Refer to Notes 2a and 2ee.
|-- | -------------------------------------------------------------------------------

The accompanying notes are an
integral part of these consolidated financial statements.



F-14



---

##### Table of Contents

GAZIT-GLOBE LTD.

CONSOLIDATED STATEMENTS OF CASH FLOW





|                                                                                         |  |                                    |          |   |                        |  |            |      |  |  |            |   |  |  |            |  
|---------------------------------------------------------------------------------------- |  | ---------------------------------- | -------- | - | ---------------------- |  | ---------- | ---- |  |  | ---------- | - |  |  | ---------- | -
|                                                                                         |  | Conveniencetranslation(Note 2d(1)) |          |   |                        | 
|                                                                                         |  | Year ended
December 31,            |          |   | Year endedDecember 31, | 
|                                                                                         |  | 2013                               |          |   | 2013                   |  |            | 2012 |  |  | 2011       |  
|                                                                                         |  | U.S. dollars                       |          |   | NIS                    | 
|                                                                                         |  | (In millions)                      |         
|Cash flows from investing activities:                                                    |  |                                    |          |   |                        |  |            |     
|                                                                                         |  |                                    |          |  
|Acquisition of initially consolidated subsidiary (a)                                     |  |                                    |         |   |                        |  |           |      |  |  |           |   |  |  | 92         |  
|Initial consolidation of investment previously accounted for using the equity method (b) |  |                                    |         |   |                        |  |           |      |  |  |           |   |  |  | 20         |  
|Proceeds from sale of investees (Note 9i)                                                |  |                                    | 16       |   |                        |  | 54         |      |  |  | 12         |   |  |  |           |  
|Investment and loans to investees                                                        |  |                                    | (367     | ) |                        |  | (1,275     | )    |  |  | (266       | ) |  |  | (104       | )
|Acquisition, construction and development of investment property                         |  |                                    | **) (863 | ) |                        |  | **) (2,994 | )    |  |  | **) (5,667 | ) |  |  | **) (6,427 | )
|Investments in fixed assets                                                              |  |                                    | (14      | ) |                        |  | (50        | )    |  |  | (49        | ) |  |  | (34        | )
|Proceeds from sale of investment property                                                |  |                                    | 615      |   |                        |  | 2,136      |      |  |  | 1,482      |   |  |  | 2,880      |  
|Proceeds from sale of fixed assets                                                       |  |                                    | 11       |   |                        |  | 38         |      |  |  |           |   |  |  |           |  
|Grant of long-term loans                                                                 |  |                                    | (52      | ) |                        |  | (181       | )    |  |  | (583       | ) |  |  | (280       | )
|Collection of long-term loans                                                            |  |                                    | 95       |   |                        |  | 329        |      |  |  | 79         |   |  |  | 103        |  
|Short-term investments, net                                                              |  |                                    | (9       | ) |                        |  | (30        | )    |  |  | (20        | ) |  |  | 50         |  
|Investment in financial assets                                                           |  |                                    | (99      | ) |                        |  | (345       | )    |  |  | (743       | ) |  |  | (1,001     | )
|Proceeds from sale of financial assets                                                   |  |                                    | 31       |   |                        |  | 110        |      |  |  | 1,134      |   |  |  | 506        |  
|                                                                                         |  |                                    |          |   |                        |  |            |      |  |  |            |   |  |  |            |  
|                                                                                         |  |                                    |          |  
|Net cash used in investing activities                                                    |  |                                    | (636     | ) |                        |  | (2,208     | )    |  |  | (4,621     | ) |  |  | (4,195     | )
|                                                                                         |  |                                    |          |   |                        |  |            |      |  |  |            |   |  |  |            |  
|                                                                                         |  |                                   
|Cash flows from financing activities:                                                    |  |                                    |          |   |                        |  |            |     
|                                                                                         |  |                                    |          |  
|Issue of shares net of issuance expenses                                                 |  |                                    | 141      |   |                        |  | 489        |      |  |  |           |   |  |  | 313        |  
|Repayment of loans granted for purchase of Companys shares                              |  |                                    | *)      |   |                        |  | *)        |      |  |  | *)        |   |  |  | 4          |  
|Exercise of share options into Companys shares                                          |  |                                    | *)      |   |                        |  | *)        |      |  |  | 3          |   |  |  | 2          |  
|Capital issuance to non-controlling interests, net                                       |  |                                    | 154      |   |                        |  | 536        |      |  |  | 1,832      |   |  |  | 714        |  
|Acquisition of non-controlling interests                                                 |  |                                    | (29      | ) |                        |  | (102       | )    |  |  | (263       | ) |  |  | (384       | )
|Dividend paid to equity holders of the Company                                           |  |                                    | (86      | ) |                        |  | (298       | )    |  |  | (264       | ) |  |  | (298       | )
|Dividend paid to non-controlling interests                                               |  |                                    | (201     | ) |                        |  | (698       | )    |  |  | (653       | ) |  |  | (567       | )
|Receipt of long-term loans                                                               |  |                                    | 412      |   |                        |  | 1,429      |      |  |  | 6,140      |   |  |  | 6,574      |  
|Repayment of long-term loans                                                             |  |                                    | (1,389   | ) |                        |  | (4,820     | )    |  |  | (6,042     | ) |  |  | (5,518     | )
|Receipt (repayment) of long-term credit facilities from banks, net                       |  |                                    | (312     | ) |                        |  | (1,084     | )    |  |  | (169       | ) |  |  | 1,805      |  
|Short-term credit from banks and others, net                                             |  |                                    | (24      | ) |                        |  | (83        | )    |  |  | (85        | ) |  |  | 202        |  
|Repayment and early redemption of debentures and convertible debentures                  |  |                                    | (394     | ) |                        |  | (1,366     | )    |  |  | (3,177     | ) |  |  | (1,024     | )
|Issue of debentures and convertible debentures, net of issuance expenses                 |  |                                    | 1,738    |   |                        |  | 6,033      |      |  |  | 6,168      |   |  |  | 2,194      |  
|Unwinding of hedging transactions (Note 37d)                                             |  |                                    | 113      |   |                        |  | 392        |      |  |  |           |   |  |  |           |  
|                                                                                         |  |                                    |          |   |                        |  |            |      |  |  |            |   |  |  |            |  
|                                                                                         |  |                                    |          |  
|Net cash provided by financing activities                                                |  |                                    | 123      |   |                        |  | 428        |      |  |  | 3,490      |   |  |  | 4,017      |  
|                                                                                         |  |                                    |          |   |                        |  |            |      |  |  |            |   |  |  |            |  
|                                                                                         |  |                                    |          |  
|Exchange differences on balances of cash and cash equivalents                            |  |                                    | (21      | ) |                        |  | (74        | )    |  |  | (93        | ) |  |  | (79        | )
|                                                                                         |  |                                    |          |   |                        |  |            |      |  |  |            |   |  |  |            |  
|                                                                                         |  |                                    |          |  
|Increase (decrease) in cash and cash equivalents                                         |  |                                    | (192     | ) |                        |  | (665       | )    |  |  | 144        |   |  |  | 847        |  
|Cash and cash equivalents at the beginning of the year                                   |  |                                    | 485      |   |                        |  | 1,683      |      |  |  | 1,539      |   |  |  | 692        |  
|                                                                                         |  |                                    |          |   |                        |  |            |      |  |  |            |   |  |  |            |  
|                                                                                         |  |                                    |          |  
|Cash and cash equivalents at the end of the year                                         |  |                                    | 293      |   |                        |  | 1,018      |      |  |  | 1,683      |   |  |  | 1,539      |  
|                                                                                         |  |                                    |          |   |                        |  |            |      |  |  |            |   |  |  |            |  



|*) | Represents an amount of less than NIS 1 million.
|-- | ------------------------------------------------

|**) | Reclassified, refer to Note 2a.
|--- | -------------------------------

The accompanying notes are an integral part of these consolidated financial
statements.



F-15



---

##### Table of Contents

GAZIT-GLOBE LTD.

CONSOLIDATED STATEMENTS OF CASH FLOW





|                                                                                             |  |                                    |    |  |                        |  |    |      |  |  |      |  |  |  |        |  
|-------------------------------------------------------------------------------------------- |  | ---------------------------------- | -- |  | ---------------------- |  | -- | ---- |  |  | ---- |  |  |  | ------ | -
|                                                                                             |  | Conveniencetranslation(Note 2d(1)) |    |  |                        | 
|                                                                                             |  | Year ended
December 31,            |    |  | Year endedDecember 31, | 
|                                                                                             |  | 2013                               |    |  | 2013                   |  |    | 2012 |  |  | 2011 | 
|                                                                                             |  | U.S. dollars                       |    |  | NIS                    | 
|                                                                                             |  | (In millions)                      |   
|(a)    Acquisition of initially consolidated subsidiaries:                                   |  |                                    |    |  |                        |  |    |      |  |  |      | 
|                                                                                             |  |                                    |   
|Working capital (excluding cash and cash equivalents):                                       |  |                                    |    |  |                        |  |    |      |  |  |      | 
|Current assets                                                                               |  |                                    |   |  |                        |  |   |      |  |  |     |  |  |  | (14    | )
|Assets held for sale                                                                         |  |                                    |   |  |                        |  |   |      |  |  |     |  |  |  | (465   | )
|Current liabilities                                                                          |  |                                    |   |  |                        |  |   |      |  |  |     |  |  |  | 311    |  
|                                                                                             |  |                                    |    |  |                        |  |    |      |  |  |      |  |  |  |        |  
|                                                                                             |  |                                    |    | 
|                                                                                             |  |                                    |   |  |                        |  |   |      |  |  |     |  |  |  | (168   | )
|                                                                                             |  |                                    |    |  |                        |  |    |      |  |  |      |  |  |  |        |  
|                                                                                             |  |                                    |    | 
|Investment property and other non-current assets                                             |  |                                    |   |  |                        |  |   |      |  |  |     |  |  |  | (1,791 | )
|Non-current liabilities                                                                      |  |                                    |   |  |                        |  |   |      |  |  |     |  |  |  | 1,066  |  
|Non-controlling interests in initially consolidated subsidiary                               |  |                                    |   |  |                        |  |   |      |  |  |     |  |  |  | 742    |  
|Issue of shares to non-controlling interests in EQY                                          |  |                                    |   |  |                        |  |   |      |  |  |     |  |  |  | 265    |  
|Goodwill                                                                                     |  |                                    |   |  |                        |  |   |      |  |  |     |  |  |  | (22    | )
|                                                                                             |  |                                    |    |  |                        |  |    |      |  |  |      |  |  |  |        |  
|                                                                                             |  |                                    |    | 
|Increase in cash and cash equivalents                                                        |  |                                    |   |  |                        |  |   |      |  |  |     |  |  |  | 92     |  
|                                                                                             |  |                                    |    |  |                        |  |    |      |  |  |      |  |  |  |        |  
|                                                                                             |  |                                    |   
|(b)    Initial consolidation of investment previously accounted for using the equity method: |  |                                    |    |  |                        |  |    |      |  |  |      | 
|                                                                                             |  |                                    |   
|Working capital (excluding cash and cash equivalents):                                       |  |                                    |    |  |                        |  |    |      |  |  |      | 
|Current assets                                                                               |  |                                    |   |  |                        |  |   |      |  |  |     |  |  |  | (1,051 | )
|Current liabilities                                                                          |  |                                    |   |  |                        |  |   |      |  |  |     |  |  |  | 980    |  
|                                                                                             |  |                                    |    |  |                        |  |    |      |  |  |      |  |  |  |        |  
|                                                                                             |  |                                    |   |  |                        |  |   |      |  |  |     |  |  |  | (71    | )
|                                                                                             |  |                                    |    | 
|Non-current assets                                                                           |  |                                    |   |  |                        |  |   |      |  |  |     |  |  |  | (518   | )
|Non-current liabilities                                                                      |  |                                    |   |  |                        |  |   |      |  |  |     |  |  |  | 315    |  
|Non-controlling interests                                                                    |  |                                    |   |  |                        |  |   |      |  |  |     |  |  |  | 186    |  
|Realization of investment accounted for using the equity method                              |  |                                    |   |  |                        |  |   |      |  |  |     |  |  |  | 107    |  
|Loss on revaluation of previous investment                                                   |  |                                    |   |  |                        |  |   |      |  |  |     |  |  |  | (25    | )
|Gain from bargain purchase                                                                   |  |                                    |   |  |                        |  |   |      |  |  |     |  |  |  | 26     |  
|                                                                                             |  |                                    |    |  |                        |  |    |      |  |  |      |  |  |  |        |  
|                                                                                             |  |                                    |    | 
|Increase in cash and cash equivalents                                                        |  |                                    |   |  |                        |  |   |      |  |  |     |  |  |  | 20     |  
|                                                                                             |  |                                    |    |  |                        |  |    |      |  |  |      |  |  |  |        |  
|                                                                                             |  |                                   
|(c)    Significant non-cash transactions:                                                    |  |                                    |    |  |                        |  |    |     
|                                                                                             |  |                                    |    | 
|Conversion and interest payment of convertible debentures for subsidiarys shares            |  |                                    | 19 |  |                        |  | 67 |      |  |  | 321  |  |  |  | 206    |  
|                                                                                             |  |                                    |    |  |                        |  |    |      |  |  |      |  |  |  |        |  
|                                                                                             |  |                                    |    | 
|Acquisition of subsidiarys shares in exchange for issuance of shares by subsidiary          |  |                                    |   |  |                        |  |   |      |  |  | 106  |  |  |  | 265    |  
|                                                                                             |  |                                    |    |  |                        |  |    |      |  |  |      |  |  |  |        |  
|                                                                                             |  |                                    |    | 
|Dividend payable to non-controlling interests                                                |  |                                    | 22 |  |                        |  | 77 |      |  |  | 87   |  |  |  | 65     |  
|                                                                                             |  |                                    |    |  |                        |  |    |      |  |  |      |  |  |  |        |  

The accompanying notes are an integral part of these consolidated financial statements.



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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 medical office buildings sector in United States, as well as in the development and construction primarily of residential projects in Israel and in Central-Eastern Europe. Furthermore, the Group continues to seek and realize business
opportunities by acquiring properties and/or companies that operates within its core business or in similar fields, (including with partners), both in regions where it currently operates and also in new regions.

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 subsidiaries (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).                                                                                                                                                                                                                                                                                    
|                            |  |  
|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, 2013.                                                                                                                                                                                                                                                                                                 



| | c. | The Companys restated financial statements as of December 31, 2013 were approved by the Companys board of directors on September 10, 2014.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|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

IAS 1 - Presentation of Financial Statements

In June 2011 the IASB published an amendment to IAS 1 (hereinafter - the Amendment). The Amendment modifies the presentation of other
comprehensive income. Under the Amendment, items which may be carried to profit or loss at later stage should be presented separately in other comprehensive income from items that can never be carried to profit or loss.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







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



The Amendment has been applied retrospectively from January 1, 2013.

IFRS 13 - Fair Value Measurement

IFRS 13 establishes guidance for the measurement of fair value, to the extent that such measurement is required according to IFRS.

For the definition of fair value according to IFRS 13, see Section N below.

The measurement guidance and new disclosures applied prospectively commencing January 1, 2013 and is not applied to comparative figures.
The initial implementation of IFRS 13 did not have material impact on fair value measurement.

In addition, the disclosures required by
IFRS 13 are included in these annual financial statements.

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 Group adopted the Interpretation effective from January 1, 2014. The adoption of the Interpretation in these restated financial statements did not have a material impact on the consolidated financial statements.

Publication of clarification to IAS 17, Leases

In March 2014, the IFRIC published a clarification pursuant to which internal fixed costs are not to be considered as incremental costs and are
thus not to be considered as incremental costs for the purposes of IAS 17, Leases. As a result of the aforesaid clarification, the Group classifies internal costs that were incurred in the leasing of properties (primarily salary expenses) as part of
General and administrative expenses, instead of capitalizing them to Investment property and immediately amortizing them to fair value gain from investment property line item. The Group has retrospectively implemented the
clarification in these restated financial statements (see Note 2ee). The reclassification impact totaled NIS 29 million, NIS 25 million and NIS 22 million in the years ended December 31, 2013, December 31, 2012 and
December 31, 2011, respectively. In addition, the Company reclassified the cash flow statements of the aforementioned periods in the same amounts, decreasing the cash flow provided by operating activities with a corresponding decrease in the
cash flow used in investing activities. It is clarified that the aforementioned reclassification has no effect on the Groups net income and or financial position.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







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



Publication of clarification to IAS 12, Income Taxes

In July 2014, the IFRIC published a Clarification with regard to the accounting treatment of taxes on income in situations where an entity is
holding single asset entities and where the manner in which the entity expects to realize the investment is by selling the shares of the single asset entity, rather than by disposing of the asset itself (the Clarification). Through the
publication date of the Clarification, the Group applied an interpretation pursuant to which the Group provided for deferred taxes only with respect to the temporary differences arising with respect to a sale of shares of the single asset entity, in
accordance with the tax implications and the tax rate relevant to the customary practice on realizing the assets, and deferred taxes were not provided with respect to temporary differences relating to a sale of the asset itself. As a result of
implementing the Clarification, the Group also provides for deferred taxes with respect to the temporary differences that arose in connection with the assets of the single asset entity (primarily investment property).

The Clarification was retrospectively implemented in these restated financial statements (see Note 2ee) with adjusting the comparative amounts.

As to the impact of implementing the Clarification on the financial statements, refer to Note 41.



| | 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                                                                |  | Consolidation of financial statements or application of the equity method  refer to Note 2c and Note 9d, e and f
|                                                                                |  |                                                                                                                                                                                      | 
|                                                                                |  |                                                                                                                                                                                     |  | Degree to which the other holdings are diversified                                                                                                                       |  |                                                                                                                  
|                                                                                |  |                                                                                                                                                                                      | 
|                                                                                |  |                                                                                                                                                                                     |  | Voting patterns at prior meetings of shareholders                                                                                                                        |  |                                                                                                                  
|                                                                                |  |                                                                                                                                                                                     
|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?                                                                                              |  | Measurement of investment property under construction at cost or at fair value  refer to Note 13                
|                                                                                |  |                                                                                                                                                                                      | 
|                                                                                |  |                                                                                                                                                                                     |  | 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? |  |                                                                                                                  
|                                                                                |  |                                                                                                                                                                                      | 
|                                                                                |  |                                                                                                                                                                                     |  | Has a major percentage of the leasable areas been preleased to tenants?                                                                                                  |  |                                                                                                                  
|                                                                                |  |                                                                                                                                                                                     
|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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GAZIT-GLOBE LTD.

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                                                                              |  | Main Considerations                                                                                                                                                                                                                                                                         |  | 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 assumptions |  | 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 and Note 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 25v                                                                                                                                    
|                                                                                   |  |                                                                                                                                                                                                                                                                                            
|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  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, refer to Note 2y                                                                                             



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







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



| | 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.

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.
| | -- | --------------------------------------------------------------------------------------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







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



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, 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 and also its ability to
appoint the majority of the directors and indirectly, the senior management of CTY. As of December 31, 2013, the Group holds 49.3% of CTYs share capital and voting rights.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 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 of 45.2% 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 and also its ability to appoint the
majority of directors and indirectly, the senior management of EQY. In addition, the Company has voting agreement with third party, see Note 9d7.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 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 - 45.2% 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 and also 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 1.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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.

Non-controlling interests are directly recognized as the difference between the proceeds received and the carrying amount of the acquired
interest. The difference 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 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.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







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



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, 2013 have been translated into
U.S. dollars, at the representative rate of exchange on December 31, 2013 (U.S.$ 1 = NIS 3.471). 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 presented (including comparative data) 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, 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).
| | -- | -------------------------------------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







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



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).



| | 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 work 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.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







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



| | 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.

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.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







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



| | 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.



| | 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 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.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







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



| | 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.



| | 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.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







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



| | 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 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. | Put option granted to non-controlling interests
| | -- | -----------------------------------------------

When the Group grants non-controlling
interests a put option to sell part or all of their interests in a subsidiary during a certain period, on the date of grant, the non-controlling interests are classified as a financial liability. The Group remeasures the financial liability at the
end of each reporting period based on the estimated present value of the consideration to be transferred upon the exercise of the put option, and concurrently the non-controlling interests are accounted for as if they are held by the Group. Any
changes in the liability are recorded in profit or loss. If the option is exercised in subsequent periods, the consideration paid upon exercise is treated as settlement of the liability. If the option expires, the liability is derecognized and an
increase/decrease in equity in respect of transactions with non-controlling interests is recognized in respect of the disposal of a portion of the investment in the subsidiary without loss of control.



| | 10. | 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.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







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



| | 11. | 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.

The amount of the reversal, as abovementioned, is
recognized as profit or loss up to the amount of any previous impairment.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







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



| | 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 settling 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 as a financing activity, in respect of the cash flows representing the hedge of the principal component, and as an 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 2013, refer to Note 37d.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







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



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.

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 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.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







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



| | n. | 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 costs relating to the acquisition are recognized immediately as an expense in profit or loss and are not part of the acquisition cost.

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 fair value and 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.

Upon the disposal of a subsidiary resulting in loss of control, the Company:



| |  |  | derecognizes the subsidiarys assets (including goodwill) and liabilities;
| | - |  | --------------------------------------------------------------------------



| |  |  | derecognizes the carrying amount of non-controlling interests;
| | - |  | --------------------------------------------------------------



| |  |  | derecognizes the foreign currency translation reserves that were carried to equity;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | recognizes the fair value of the consideration received;
| | - |  | --------------------------------------------------------



| |  |  | recognizes any resulting difference (surplus or deficit) as gain or loss; and
| | - |  | -----------------------------------------------------------------------------



| |  |  | reclassifies the components previously recognized in other comprehensive income in the same manner that would have been required had the Company directly realized the respective assets or liabilities.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







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



| | o. | 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.



| | p. | 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 incremental 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.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







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



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, as well as borrowing costs used to finance construction, direct incremental planning and development
costs and incremental 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 and by professional internal appraisers. For further details
refer to Notes 12 and 13.

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.



| | q. | 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         |  |               
|Mechanical systems                               |  | 6.67-8.33 |  | (mainly 8.33%)
|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.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







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



| | r. | 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.



| | s. | 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.

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.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







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



| | t. | 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.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







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



| | 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 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.



| | u. | 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.



| | v. | 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.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







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



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.

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.

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).

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.



| | w. | 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.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







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



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.



| | x. | 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.



| | 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.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







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



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.



| | y. | 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).



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







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



An expected loss on a contract is recognized immediately irrespective of the stage of
completion and classified within cost of revenues.



| | z. | 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.



| | aa. | 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.



| | bb. | 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 borrowing 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.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







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



| | cc. | 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.
| | -- | -----------------------------------------------------------



| | dd. | Disclosure of new IFRSs in the period prior to their adoption
| | --- | --------------------------------------------------------------

IFRS 10,
Consolidated Financial Statements

The amendment to IFRS 10 that was published in October 2012 with regard to investment entities
prescribes that investment entities are not required to consolidate the financial statements of their subsidiaries, but rather to measure the investment therein at fair value through profit or loss. The amendment also specifies a specific disclosure
requirement for investment entities. The effective date of the amendment is January 1, 2014. In the Companys opinion, the amendment is not expected to have an effect on the 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. The Company examines the effect of the
amendment on the financial statements.

Amendments to IAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and
Financial Liabilities(the IAS 32 Amendments)

The IAS 32 Amendments clarify, inter alia, the meaning of the term
currently has a legally enforceable right of set-off.

The IAS 32 Amendments will be applied retroactively and are effective for
annual periods beginning on or after January 1, 2014.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







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



In the Companys estimation, the IAS 32 Amendments are not expected to have a material
effect on the financial statements.

IFRS 9, Financial Instruments

During 2013, the IASB published three stages of IFRS 9 that include the treatment for the classification and measurement of financial assets,
derecognition, financial liabilities, and hedge accounting.



| | 1. | Financial assets
| | -- | ----------------

The standard prescribes that, at the time of their initial
recognition, all financial assets (including embedded instruments in which the host contract is a financial asset) will 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:



| | a) | The asset is held within the framework of a business model whose objective is to hold the assets in order to collect the contractual cash flows arising therefrom.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) | In accordance with the contractual terms of the financial asset, the entity is entitled, on specified dates, to receive cash flows that are solely payments of principal and interest on the principal outstanding.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Notwithstanding the aforesaid, an entity may, at the time of the initial recognition, designate a debt instrument that
meets the two aforementioned conditions as measured at fair value through profit or loss, if doing so eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as an accounting mismatch) that
would otherwise arise therefrom.

Financial assets that are equity instruments will be measured in subsequent periods at fair value, with
value changes recognized in profit or loss or in other comprehensive income (loss), in accordance with the Companys election with regard to each individual instrument (amounts recognized in other comprehensive income may not be transferred
subsequently to profit or loss). In the case of equity instruments held for trading, these must be measured at fair value through profit or loss.



| | 2. | Derecognition and financial liabilities
| | -- | ---------------------------------------

Pursuant to the provisions of the amendments,
the provisions of IAS 39 are to continue to apply with regard to derecognition and with regard to financial liabilities for which the fair value option has not been elected.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







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



Pursuant to the amendments, the amount of the change in the fair value of the liability
 that is attributable to changes in the credit risk  is to be carried to other comprehensive income. All the other changes in the fair value will be presented in profit or loss. If recognition in other comprehensive income of a change in
the fair value of the liability, caused as a result of changes in the credit risk, would create an accounting mismatch in profit or loss, said change should also be recognized in profit or loss and not in other comprehensive income.



| | 3. | Hedge accounting
| | -- | ----------------

According to the amendments hedge accounting may be implemented for
risk components of both hedged financial items and also hedged non-financial items, insofar as they are separately identifiable and reliably measurable.

Hedge effectiveness is to be tested solely on a qualitative basis and the quantitative 80%-125% range test is to be canceled. The testing
focuses on the attainment of the hedging goals and the economic relationship between the hedged item and the hedging instrument and the effect the credit risk has on the aforesaid relationship.

The time value of an option, the forward points of a forward contract and the foreign currency basis spread may be excluded from the
designation of the financial instrument as being a hedging instrument and may be accounted for as hedging transaction costs. In other words, these amounts will be recognized as hedging transaction costs in other comprehensive income and will be
amortized to profit or loss over the hedge period.

The IASB has not prescribed mandatory implementation dates for the three stages
referred to above. Early adoption is permitted under certain conditions.

The Company is examining the possible effect of the standard
(including all stages thereof), but is currently unable to assess its effect, if any, on the financial statements.

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 for annual periods beginning on or after January 1, 2014. The appropriate disclosures will be included in the
financial statements of the Company upon the initial adoption of the Amendments.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







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



| | ee. | Restatement
| | --- | -----------

As part of the process of preparing the financial statements of U. Dori
Construction Ltd. (thereof: Dori Construction) for the period ended June 30, 2014, Dori Construction performed a comprehensive examination of its estimates of anticipated revenues and costs of its projects. The results of the aforesaid
examination indicated a material deviation in the estimates of anticipated revenues and costs of the projects of Dori Construction, compared with the existing estimates through that date. In light of the aforesaid, the board of directors of Dori
Construction appointed a special committee and granted it extensive powers in order, inter alia, to supervise the process of examining and verifying the estimates of anticipated revenues and costs of Dori Constructions projects. Within this
framework, an independent, external engineering inspector was appointed, who conducted independent testing of the various estimates of Dori Constructions projects and also tested the reasonableness of the assumptions and estimates of the
anticipated revenues and costs that Dori Construction had used in its aforesaid examination.

As a result of the aforesaid examinations, a
material deviation was discovered in the estimates of anticipated revenues and costs of the projects of Dori Construction, compared to the existing estimates in a net amount of NIS 441 million. Dori Construction reported in its financial statements
that the differences in the project estimates arose, inter alia, from delays in the construction and engineering failures that increased construction costs, cash flow problems that caused delays in payments to contractors and suppliers and which
also caused a delay in completion of construction projects and the accrual of additional overhead expenses, as well as from under-pricing the projects and also from changes in the estimate of warranty provision.

In light of the deviation in the estimate of the anticipated revenues and costs in its various projects, Dori Construction reviewed the
allocation of the amounts to the prior reporting periods. Following the aforesaid review, Dori Construction reached the conclusion that the financial statements for prior reporting periods, beginning from the fourth quarter of 2012, needed to be
corrected. As a result of the aforesaid, the Company is restating its financial statements as of December 31, 2013 and for the year then ended in order to retrospectively reflect therein the effect of correcting the error in the estimates of
the anticipated revenues and costs of Dori Construction and of the profit resulting therefrom. Furthermore, the comparative numbers for the year 2012 were adjusted as an immaterial correction. As to the impact of correcting the error on the
financial statements, refer to Note 41 below.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED 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.

The Company analyzed the impact of the new legislation on the financial statements as of December 31, 2013, specifically the impact of
deferred taxes in account of investees that are included in the Law initiation and concluded it is not material, as the temporary difference resulting from those investees is either not material or can be offset against carry-forward tax losses,
that deferred taxes were not provided for, as applicable.



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



| | a. | Composition
| | -- | -----------



|                                       |  |                 |       |  |      |  |       | 
|-------------------------------------- |  | --------------- | ----- |  | ---- |  | ----- | 
|                                       |  | December 31     |      
|                                       |  | 2013            |       |  | 2012 | 
|                                       |  | NIS in millions |      
|                                       |  |                
|Cash in banks and on hand              |  |                 | 476   |  |      |  | 794   | 
|Cash equivalents - short-term deposits |  |                 | 542   |  |      |  | 889   | 
|                                       |  |                 |       |  |      |  |       | 
|                                       |  |                
|                                       |  |                 | 1,018 |  |      |  | 1,683 | 
|                                       |  |                 |       |  |      |  |       | 



| | b. | Part of the cash in banks bears floating interest based on daily bank deposits rates (as of the reporting date  up to 0.42%).
| | -- | ------------------------------------------------------------------------------------------------------------------------------



| | c. | Deposits earn annual interest at the rate of 0.42% - 1.73%, based on their respective term.
| | -- | -------------------------------------------------------------------------------------------



| | d. | As for the linkage basis of cash and cash equivalents, refer to Note 37.
| | -- | ------------------------------------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 4A:- | SHORT-TERM DEPOSITS AND LOANS
|--------- | -----------------------------



| | a. | Composition
| | -- | -----------



|                                                |  |                 |     |  |      |  |     | 
|----------------------------------------------- |  | --------------- | --- |  | ---- |  | --- | 
|                                                |  | December 31     |    
|                                                |  | 2013            |     |  | 2012 | 
|                                                |  | NIS in millions |    
|Loans:                                          |  |                 |     |  |      |  |     | 
|Current maturities of long-term loans           |  |                 | 57  |  |      |  | 170 | 
|Loans (1)                                       |  |                 | 161 |  |      |  | 135 | 
|                                                |  |                 |     |  |      |  |     | 
|                                                |  |                
|                                                |  |                 | 218 |  |      |  | 305 | 
|                                                |  |                 |     |  |      |  |     | 
|Deposits:                                       |  |                 |     |  |      |  |     | 
|Escrow designated for property acquisitions (2) |  |                 | 37  |  |      |  | 31  | 
|Restricted cash in banks (3)                    |  |                 | 152 |  |      |  | 156 | 
|Bank deposits (4)                               |  |                 | 45  |  |      |  | 28  | 
|Purchase contract deposits and others           |  |                 | 52  |  |      |  | 18  | 
|                                                |  |                 |     |  |      |  |     | 
|                                                |  |                
|                                                |  |                 | 286 |  |      |  | 233 | 
|                                                |  |                 |     |  |      |  |     | 
|                                                |  |                
|                                                |  |                 | 504 |  |      |  | 538 | 
|                                                |  |                 |     |  |      |  |     | 



|(1) | Includes C$ 24.5 million (NIS 80 million) loans granted by FCR, secured by properties, bear an average annual interest rate of 9.5 % and payable in 2014. In addition, includes loans receivable from sale of
apartments in FCR of C$ 24.8 million (NIS 81 million) that bear annual interest rate of 3%.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | A non-interest bearing escrow which is designated for the acquisition of replacement properties in tax-free exchanges pursuant to the tax laws in the U.S..
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Restricted cash in banks includes pledged deposits with respect to residential projects, amounting to NIS 118 million, bear an annual interest rate of 0.69%-0.93% and other restricted cash in FCR amounted to NIS 34
million.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Bank deposits bear an annual interest rate of up to 0.2% based on the respective term of the deposits.
|--- | ------------------------------------------------------------------------------------------------------



| | b. | As for the linkage basis of short-term investments and loans, refer to Note 37.
| | -- | -------------------------------------------------------------------------------



|NOTE 4b:- | MARKETABLE SECURITIES
|--------- | ---------------------



|                                             |  |                 |     |  |      |  |     | 
|-------------------------------------------- |  | --------------- | --- |  | ---- |  | --- | 
|                                             |  | December 31     |    
|                                             |  | 2013            |     |  | 2012 | 
|                                             |  | NIS in millions |    
|Fair value through profit or loss securities |  |                 |     |  |      |  |     | 
|                                             |  |                
|Shares                                       |  |                 | 69  |  |      |  | 69  | 
|Debentures                                   |  |                 | 22  |  |      |  |    | 
|Participation certificates in trust funds    |  |                 |    |  |      |  | 18  | 
|                                             |  |                 |     |  |      |  |     | 
|                                             |  |                
|                                             |  |                 | 91  |  |      |  | 87  | 
|                                             |  |                 |     |  |      |  |     | 
|                                             |  |                
|Securities available for sale (Note 11)      |  |                 | 9   |  |      |  | 14  | 
|                                             |  |                 |     |  |      |  |     | 
|                                             |  |                
|                                             |  |                 | 100 |  |      |  | 101 | 
|                                             |  |                 |     |  |      |  |     | 



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 5:- | TRADE RECEIVABLES
|-------- | -----------------



| | a. | Composition
| | -- | -----------



|                                                            |  |                 |       |  |         |  |       | 
|----------------------------------------------------------- |  | --------------- | ----- |  | ------- |  | ----- | 
|                                                            |  | December 31     |      
|                                                            |  | *) 2013         |       |  | *) 2012 | 
|                                                            |  | NIS in millions |      
|                                                            |  |                
|Open accounts (1)                                           |  |                 | 192   |  |         |  | 202   | 
|Checks receivable                                           |  |                 | 11    |  |         |  | 16    | 
|Receivables for construction contracts (2)                  |  |                 | 486   |  |         |  | 498   | 
|                                                            |  |                 |       |  |         |  |       | 
|                                                            |  |                
|                                                            |  |                 | 689   |  |         |  | 716   | 
|                                                            |  |                 |       |  |         |  |       | 
|                                                            |  |                
|(1)    Net of allowance for doubtful accounts (see e below) |  |                 | 46    |  |         |  | 45    | 
|                                                            |  |                 |       |  |         |  |       | 
|                                                            |  |                
|(2)    Receivables for construction contracts               |  |                 |       |  |         |  |       | 
|                                                            |  |                
|Costs incurred plus recognized profits                      |  |                 | 3,864 |  |         |  | 4,160 | 
|Less - progress billings                                    |  |                 | 3,378 |  |         |  | 3,662 | 
|                                                            |  |                 |       |  |         |  |       | 
|                                                            |  |                
|                                                            |  |                 | 486   |  |         |  | 498   | 
|                                                            |  |                 |       |  |         |  |       | 



|*) | Restated, refer to Notes 2ee and 41.
|-- | ------------------------------------



| | b. | Trade receivables do not bear interest. As for the linkage basis of trade receivables, refer to Note 37.
| | -- | --------------------------------------------------------------------------------------------------------



| | c. | In 2013 and 2012, 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, excluding amount due to 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.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | e. | Movement in allowance for doubtful accounts:
| | -- | --------------------------------------------



|                             |  |                 |     |   |      |  |      |  
|---------------------------- |  | --------------- | --- | - | ---- |  | ---- | -
|                             |  | December 31     |    
|                             |  | 2013            |     |   | 2012 | 
|                             |  | NIS in millions |    
|                             |  |                
|At the beginning of the year |  |                 | 45  |   |      |  | 41   |  
|Charge for the year          |  |                 | 26  |   |      |  | 22   |  
|Write down of accounts       |  |                 | (21 | ) |      |  | (18  | )
|Translation differences      |  |                 | (4  | ) |      |  | *)  |  
|                             |  |                 |     |   |      |  |      |  
|                             |  |                
|At the end of the year       |  |                 | 46  |   |      |  | 45   |  
|                             |  |                 |     |   |      |  |      |  



|*) | Represents an amount of less than NIS 1 million.
|-- | ------------------------------------------------



F-49



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 6:- | OTHER ACCOUNTS RECEIVABLE
|-------- | -------------------------



| | a. | Composition
| | -- | -----------



|                                        |  |                 |     |  |      |  |     | 
|--------------------------------------- |  | --------------- | --- |  | ---- |  | --- | 
|                                        |  | December 31     |    
|                                        |  | 2013            |     |  | 2012 | 
|                                        |  | NIS in millions |    
|                                        |  |                
|Government institutions *) **)          |  |                 | 57  |  |      |  | 70  | 
|Prepaid expenses                        |  |                 | 89  |  |      |  | 74  | 
|Receivables from sale of real estate    |  |                 | 17  |  |      |  |    | 
|Finance lease receivable                |  |                 | 4   |  |      |  |    | 
|Employees                               |  |                 | 1   |  |      |  | 1   | 
|Interest receivable from joint ventures |  |                 | 30  |  |      |  |    | 
|Advances to suppliers                   |  |                 | 5   |  |      |  | 2   | 
|Co-owners in investees                  |  |                 | 13  |  |      |  | 15  | 
|Others                                  |  |                 | 86  |  |      |  | 54  | 
|                                        |  |                 |     |  |      |  |     | 
|                                        |  |                
|                                        |  |                 | 302 |  |      |  | 216 | 
|                                        |  |                 |     |  |      |  |     | 



|*) | Primarily consists of prepaid property taxes and indirect taxes receivable.
|-- | ---------------------------------------------------------------------------

|**) | Restated, refer to Notes 2ee and 41.
|--- | ------------------------------------



| | b. | As for the linkage basis of other accounts receivable, refer to Note 37.
| | -- | ------------------------------------------------------------------------



|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 of buildings*) |     |  | Advances from customersand apartment buyers | 
|            |  | December 31              |     |  | December 31                                 | 
|            |  | 2013                     |     |  | 2012                                        |  |     | 2013 |  |  | 2012 | 
|            |  | NIS in millions          |    
|            |  |                          |     | 
|Israel **)  |  |                          | 589 |  |                                             |  | 561 |      |  |  | 266  |  |  |  | 249 | 
|Canada ***) |  |                          | 70  |  |                                             |  | 125 |      |  |  |     |  |  |  |    | 
|Others      |  |                          | 33  |  |                                             |  | 26  |      |  |  | 1    |  |  |  | 8   | 
|            |  |                          |     |  |                                             |  |     |      |  |  |      |  |  |  |     | 
|            |  |                          |     | 
|Total       |  |                          | 692 |  |                                             |  | 712 |      |  |  | 267  |  |  |  | 257 | 
|            |  |                          |     |  |                                             |  |     |      |  |  |      |  |  |  |     | 



|*) | As of the reporting date, NIS 21 million represents completed apartments.
|-- | -------------------------------------------------------------------------

|**) | Restated, refer to Notes 2ee and 41.
|--- | ------------------------------------

|***) | Advances are held in escrow and are not under the Groups control. Relating to the advances, the Group received a mortgage loan outstanding in the amount of C$ 8.8 million (NIS 29 million) which bears an
annual effective interest rate of 1%.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-50



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 7:- | INVENTORY OF BUILDINGS AND APARTMENTS FOR SALE (Cont.)
|-------- | ------------------------------------------------------



| | b. | Expected settlement of current inventory and advances from customers:
| | -- | ---------------------------------------------------------------------



|                    |  |                        |     |  |                                             |  |     |      |  |  |      |  |  |  |     | 
|------------------- |  | ---------------------- | --- |  | ------------------------------------------- |  | --- | ---- |  |  | ---- |  |  |  | --- | 
|                    |  | Inventory of buildings |     |  | Advances from customersand apartment buyers | 
|                    |  | December 31            |     |  | December 31                                 | 
|                    |  | 2013                   |     |  | 2012                                        |  |     | 2013 |  |  | 2012 | 
|                    |  | NIS in millions        |    
|                    |  |                        |     | 
|Within 12 months *) |  |                        | 396 |  |                                             |  | 420 |      |  |  | 235  |  |  |  | 231 | 
|More than 12 months |  |                        | 296 |  |                                             |  | 292 |      |  |  | 32   |  |  |  | 26  | 
|                    |  |                        |     |  |                                             |  |     |      |  |  |      |  |  |  |     | 
|                    |  |                        |     | 
|                    |  |                        | 692 |  |                                             |  | 712 |      |  |  | 267  |  |  |  | 257 | 
|                    |  |                        |     |  |                                             |  |     |      |  |  |      |  |  |  |     | 



|*) | Restated, refer to Notes 2ee and 41.
|-- | ------------------------------------



| | c. | Write down of inventory:
| | -- | ------------------------

There was inventory write down in 2013 of NIS 19 million
(in 2012 the write down amounted to NIS 1 million).



| | d. | Details on sale contracts signed by the Group (100%)
| | -- | ----------------------------------------------------

During 2013, the Group signed 126
sale contracts (108 sale contracts during 2012), with total consideration estimated at NIS 195 million (NIS 138 million during 2012).

In addition, until December 31, 2013, the Group signed 845 sale contracts on a cumulative basis, with total consideration estimated at
NIS 1,010 million.



| | e. | As of December 31, 2013 and 2012 cost of inventory includes capitalized borrowing costs in the amount of NIS 10 million and NIS 7 million, respectively.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------



| | f. | Non-current inventory in Israel comprises mainly land plots. As of December 31, 2013 and 2012 the non-current inventory balance totals NIS 23 million. For several of the land plots the Group has submitted
applications to rezone the land for residential purposes.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | g. | As for charges, refer to Note 29.
| | -- | ---------------------------------



F-51



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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     |    
|                       |  | 2013            |     |  | 2012 | 
|                       |  | NIS in millions |    
|                       |  |                
|Investment property *) |  |                 | 548 |  |      |  | 1,438 | 
|Lands                  |  |                 | 63  |  |      |  | 44    | 
|                       |  |                 |     |  |      |  |       | 
|                       |  |                
|                       |  |                 | 611 |  |      |  | 1,482 | 
|                       |  |                 |     |  |      |  |       | 



|*) | Balance of assets held for sale is mainly comprised of income producing properties in EQY and FCR, that are not core properties in these entities.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------



| | 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 fair value adjustments)
| | -- | ---------------------------------------------------------------------------------------------------------------



|                                    |  |                 |        |  |      |  |       | 
|----------------------------------- |  | --------------- | ------ |  | ---- |  | ----- | 
|                                    |  | December 31     |       
|                                    |  | 2013            |        |  | 2012 | 
|                                    |  | NIS in millions |       
|                                    |  |                
|Joint venture - ATR (see section c) |  |                 | 4,277  |  |      |  | 3,845 | 
|Other joint ventures                |  |                 | *) 835 |  |      |  | 684   | 
|Associates                          |  |                 | 52     |  |      |  | 41    | 
|                                    |  |                 |        |  |      |  |       | 
|                                    |  |                
|                                    |  |                 | 5,164  |  |      |  | 4,570 | 
|Loans (1)                           |  |                 | 743    |  |      |  | 143   | 
|                                    |  |                 |        |  |      |  |       | 
|                                    |  |                
|                                    |  |                 | 5,907  |  |      |  | 4,713 | 
|                                    |  |                 |        |  |      |  |       | 



|*) | Retrospectively adjusted, refer to Notes 2a and 41.
|-- | ---------------------------------------------------

|(1) | Includes loans linked to the Israeli CPI at an amount of NIS 175 million that bear interest rates of 4.1%-8.5%. Maturity dates of the aforementioned loans have yet to be determined. In addition loans of 
119 million (NIS 568 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 1.4% and mature on May 2016.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-52



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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 |      
|                                 |  | 2013                   |       |   | 2012 |  |     | 2011 | 
|                                 |  | NIS in millions        |      
|                                 |  |                        |      
|Net income - ATR (see section c) |  |                        | 127   |   |      |  | 159 |      |  |  | 214 | 
|Net income (other than ATR)      |  |                        | *) 21 |   |      |  | 87  |      |  |  | 79  | 
|Other comprehensive income       |  |                        | (26   | ) |      |  | 10  |      |  |  | 31  | 
|                                 |  |                        |       |   |      |  |     |      |  |  |     | 
|                                 |  |                        |      
|Comprehensive income             |  |                        | 122   |   |      |  | 256 |      |  |  | 324 | 
|                                 |  |                        |       |   |      |  |     |      |  |  |     | 

Associates



|                           |  |                        |   |  |      |  |    |      |  |  |    | 
|-------------------------- |  | ---------------------- | - |  | ---- |  | -- | ---- |  |  | -- | 
|                           |  | Year ended December 31 |  
|                           |  | 2013                   |   |  | 2012 |  |    | 2011 | 
|                           |  | NIS in millions        |  
|                           |  |                        |  
|Net income                 |  |                        | 1 |  |      |  | 53 |      |  |  | 41 | 
|Other comprehensive income |  |                        | 1 |  |      |  |   |      |  |  |   | 
|                           |  |                        |   |  |      |  |    |      |  |  |    | 
|                           |  |                        |  
|Comprehensive income       |  |                        | 2 |  |      |  | 53 |      |  |  | 41 | 
|                           |  |                        |   |  |      |  |    |      |  |  |    | 



|*) | Retrospectively adjusted, refer to Notes 2a and 41.
|-- | ---------------------------------------------------

Additional information regarding
investees.



| | c. | Investment in ATR (a jointly controlled entity)
| | -- | -----------------------------------------------



| | 1. | As of December 31, 2013, the Company owns 39.8% interest in ATRs share capital and voting rights (39.6% 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, 2013, the market price of ATR share was  4.18 and ATR has approximately 374.9 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, 2013, about 52.1 million shares of
ATR, representing 13.9% of the share capital and voting rights of ATR, see also Note 26a(2).



F-53



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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 ATR (100%)
| | -- | ----------------------------------------------

Summarized statement of financial
position -



|                                                           |  |                 |        |   |      |  |        |  
|---------------------------------------------------------- |  | --------------- | ------ | - | ---- |  | ------ | -
|                                                           |  | December 31     |       
|                                                           |  | 2013            |        |   | 2012 | 
|                                                           |  | NIS in millions |       
|                                                           |  |                
|Cash and cash equivalents                                  |  |                 | 1,431  |   |      |  | 930    |  
|Other current assets (excluding cash and cash equivalents) |  |                 | 238    |   |      |  | 307    |  
|Non-current assets *)                                      |  |                 | 14,288 |   |      |  | 13,833 |  
|Current financial liabilities                              |  |                 | (26    | ) |      |  | (369   | )
|Other current liabilities                                  |  |                 | (394   | ) |      |  | (323   | )
|Non-current liabilities *)                                 |  |                 | (4,729 | ) |      |  | (3,178 | )
|                                                           |  |                 |        |   |      |  |        |  
|                                                           |  |                
|Net assets                                                 |  |                 | 10,808 |   |      |  | 11,200 |  
|                                                           |  |                 |        |   |      |  |        |  



|*) | Including fair value adjustments upon acquisition (see section 3 below).
|-- | ------------------------------------------------------------------------

Summarized
statements of the comprehensive income -



|                                                    |  |                        |       |   |      |  |       |      |  |  |       | 
|--------------------------------------------------- |  | ---------------------- | ----- | - | ---- |  | ----- | ---- |  |  | ----- | 
|                                                    |  | Year ended December 31 |      
|                                                    |  | 2013                   |       |   | 2012 |  |       | 2011 | 
|                                                    |  | NIS in millions        |      
|                                                    |  |                        |      
|Revenues                                            |  |                        | 1,345 |   |      |  | 1,324 |      |  |  | 1,198 | 
|                                                    |  |                        |      
|Finance expenses, net                               |  |                        | 206   |   |      |  | 118   |      |  |  | 251   | 
|Taxes on income                                     |  |                        | 71    |   |      |  | 99    |      |  |  | 132   | 
|                                                    |  |                        |      
|Net income *)                                       |  |                        | 365   |   |      |  | 475   |      |  |  | 689   | 
|                                                    |  |                        |      
|Other comprehensive income (loss)                   |  |                        | (34   | ) |      |  | (41   | )    |  |  | 2     | 
|                                                    |  |                        |       |   |      |  |       |      |  |  |       | 
|                                                    |  |                        |      
|Total comprehensive income                          |  |                        | 331   |   |      |  | 434   |      |  |  | 691   | 
|                                                    |  |                        |       |   |      |  |       |      |  |  |       | 
|                                                    |  |                        |      
|Dividends received from ATR                         |  |                        | 139   |   |      |  | 107   |      |  |  | 79    | 
|                                                    |  |                        |       |   |      |  |       |      |  |  |       | 
|                                                    |  |                        |      
|*)      Includes fair value adjustment amortization |  |                        | (1    | ) |      |  | 5     |      |  |  | 23    | 
|                                                    |  |                        |       |   |      |  |       |      |  |  |       | 



F-54



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 9:- | INVESTMENTS IN INVESTEES (Cont.)
|-------- | --------------------------------



| | 3. | Reconciliation of summarized net assets of ATR to the Groups investment in ATR
| | -- | -------------------------------------------------------------------------------



|                                                        |  |                 |        |   |      |  |        |  
|------------------------------------------------------- |  | --------------- | ------ | - | ---- |  | ------ | -
|                                                        |  | December 31     |       
|                                                        |  | 2013            |        |   | 2012 | 
|                                                        |  | NIS in millions |       
|                                                        |  |                
|Net assets (see above)                                  |  |                 | 10,808 |   |      |  | 11,200 |  
|Non-controlling interests in ATRs financial statements |  |                 | (17    | ) |      |  | (9     | )
|Fair value adjustments upon acquisition                 |  |                 | 34     |   |      |  | 29     |  
|                                                        |  |                 |        |   |      |  |        |  
|                                                        |  |                
|Adjusted net assets                                     |  |                 | 10,825 |   |      |  | 11,220 |  
|                                                        |  |                
|Interest in ATR                                         |  |                 | 39.8   | % |      |  | 34.5   | %
|                                                        |  |                 |        |   |      |  |        |  
|Share in ATRs net assets                               |  |                 | 4,311  |   |      |  | 3,874  |  
|Fair value adjustments upon acquisition                 |  |                 | (34    | ) |      |  | (29    | )
|                                                        |  |                 |        |   |      |  |        |  
|                                                        |  |                
|Carrying amount in the financial statements             |  |                 | 4,277  |   |      |  | 3,845  |  
|                                                        |  |                 |        |   |      |  |        |  
|                                                        |  |                
|Market value of the investment in ATR shares            |  |                 | 2,985  |   |      |  | 2,823  |  
|                                                        |  |                 |        |   |      |  |        |  



| | 4. | The outstanding share options of ATR as of December 31, 2013
| | -- | ------------------------------------------------------------



|                                                    |  |                                  |      |  |                |           |                                |  |       | 
|--------------------------------------------------- |  | -------------------------------- | ---- |  | -------------- | --------- | ------------------------------ |  | ----- | 
|Series                                              |  | Averageexerciseprice pershare *) |      |  | Expirationdate |           | Number ofoptions (inthousands) | 
|                                                    |  |                                  |     
|Options to employees and officers (2009-2013 plans) |  |                                 | 4.03 |  |                | 2014-2023 |                                |  | 6,769 | 



|*) | As of December 31, 2013, 2,360 thousand share options are fully vested; These options includes 327 thousands share options granted to the Chairman of the Board, see Note 38e.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

ATR operates a share plan for directors, as a substitute for cash compensation, at the directors discretion. As of the reporting date,
45 thousand shares were granted under the plan.



| | 5. | Additional information about the investment in ATR:
| | -- | ---------------------------------------------------

ATR is a property real estate investment
company focused on the acquisition, management and development of supermarket-anchored shopping centers 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, 2013 amounted to  2,356 million (NIS 11.3 billion) and  584 million (NIS 2.8 billion) of investment property under development and lands. The average yield
implied in the valuations of ATRs properties as of December 31, 2013 and 2012 was 8.2% and 8.4%, respectively.



F-55



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 9:- | INVESTMENTS IN INVESTEES (Cont.)
|-------- | --------------------------------



During 2013 the Company purchased approximately 20.4 million ATR shares from an
investor forming part of the consortium managed by CPI in consideration for  87.8 million (NIS 417 million) in an off-market transaction. As a result of the transaction, the Companys interest in ATR increased from 34.4% to 39.9% and
the Company recognized a gain from bargain purchase at an amount of  36.5 million (NIS 173 million) presented in other income line item.

During 2012 the Company purchased approximately 11 million ATR shares through Vienna stock exchange trades, in consideration for
 39.6 million (NIS 195 million). As a result of the purchases, the Companys interest in ATR increased from 31.6% to 34.5% and the Company recognized a gain from bargain purchase at the amount of  27.2 million (NIS 134
million), presented in other income line item.

As for lawsuits filed against ATR and other lawsuits with regards to the investment in
ATR, and the engagement in a compromise agreement refer to Note 26d.

The Company is attaching the financial statements of ATR which are
prepared according to IFRS as published by IASB. The presentation currency of ATRs financial statements is Euro (as of the reporting date the Euro exchange rate was NIS 4.7819).

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 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, 2013, the Company owns a 45.2% interest in EQYs share capital and a 44.8% interest in EQYs voting rights (40.1% 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, 2013 the market price of EQYs share was U.S.$ 22.44 and EQY has approximately 117.6 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-56



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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     |       
|                              |  | 2013            |        |   | 2012 | 
|                              |  | NIS in millions |       
|                              |  |                
|Current assets                |  |                 | 269    |   |      |  | 718    |  
|Non-current assets *)         |  |                 | 14,078 |   |      |  | 14,291 |  
|Current liabilities           |  |                 | (263   | ) |      |  | (387   | )
|Non-current liabilities *)    |  |                 | (5,492 | ) |      |  | (6,243 | )
|                              |  |                 |        |   |      |  |        |  
|                              |  |                
|Net assets                    |  |                 | 8,592  |   |      |  | 8,379  |  
|                              |  |                 |        |   |      |  |        |  
|                              |  |                
|Allocated to:                 |  |                 |        |   |      |  |        |  
|Equity holders of the Company |  |                 | 3,413  |   |      |  | 3,306  |  
|Non-controlling interests     |  |                 | 5,179  |   |      |  | 5,073  |  
|                              |  |                 |        |   |      |  |        |  
|                              |  |                
|                              |  |                 | 8,592  |   |      |  | 8,379  |  
|                              |  |                 |        |   |      |  |        |  



|*) | Includes goodwill and adjustment for deferred tax liability.
|-- | ------------------------------------------------------------

Summarized statements of
comprehensive income -



|                                            |  |                        |       |  |      |  |       |      |  |  |       | 
|------------------------------------------- |  | ---------------------- | ----- |  | ---- |  | ----- | ---- |  |  | ----- | 
|                                            |  | Year ended December 31 |      
|                                            |  | 2013                   |       |  | 2012 |  |       | 2011 | 
|                                            |  | NIS in millions        |      
|                                            |  |                        |      
|Revenues                                    |  |                        | 1,210 |  |      |  | 1,261 |      |  |  | 1,236 | 
|                                            |  |                        |      
|Net income *)                               |  |                        | 1,075 |  |      |  | 748   |      |  |  | 507   | 
|                                            |  |                        |       |  |      |  |       |      |  |  |       | 
|                                            |  |                        |      
|Other comprehensive income (loss)           |  |                        | 37    |  |      |  | (25   | )    |  |  | 1     | 
|                                            |  |                        |       |  |      |  |       |      |  |  |       | 
|                                            |  |                        |      
|Total comprehensive income                  |  |                        | 1,112 |  |      |  | 723   |      |  |  | 508   | 
|                                            |  |                        |       |  |      |  |       |      |  |  |       | 
|                                            |  |                        |      
|Allocated to:                               |  |                        |       |  |      |  |       |      |  |  |       | 
|Equity holders of the Company               |  |                        | 505   |  |      |  | 321   |      |  |  | 203   | 
|Non-controlling interest                    |  |                        | 607   |  |      |  | 402   |      |  |  | 305   | 
|                                            |  |                        |       |  |      |  |       |      |  |  |       | 
|                                            |  |                        |      
|                                            |  |                        | 1,112 |  |      |  | 723   |      |  |  | 508   | 
|                                            |  |                        |       |  |      |  |       |      |  |  |       | 
|Dividends paid to non-controlling interests |  |                        | 246   |  |      |  | 251   |      |  |  | 232   | 
|                                            |  |                        |       |  |      |  |       |      |  |  |       | 



|*) | Includes adjustments for deferred tax expenses, see Note 25b.
|-- | -------------------------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 9:- | INVESTMENTS IN INVESTEES (Cont.)
|-------- | --------------------------------



Summarized cash flows statements -



|                                                 |  |                        |      |   |      |  |        |      |  |  |      |  
|------------------------------------------------ |  | ---------------------- | ---- | - | ---- |  | ------ | ---- |  |  | ---- | -
|                                                 |  | Year ended December 31 |     
|                                                 |  | 2013                   |      |   | 2012 |  |        | 2011 | 
|                                                 |  | NIS in millions        |     
|                                                 |  |                        |     
|Cash flows from operating activities             |  |                        | 484  |   |      |  | 589    |      |  |  | 392  |  
|Cash flows from investing activities             |  |                        | 440  |   |      |  | (1,249 | )    |  |  | (93  | )
|Cash flows from financing activities             |  |                        | (930 | ) |      |  | 721    |      |  |  | (392 | )
|                                                 |  |                        |      |   |      |  |        |      |  |  |      |  
|                                                 |  |                        |     
|Increase (decrease) in cash and cash equivalents |  |                        | (6   | ) |      |  | 61     |      |  |  | (93  | )
|                                                 |  |                        |      |   |      |  |        |      |  |  |      |  



| | 3. | Share options of EQY outstanding as of December 31, 2013
| | -- | --------------------------------------------------------



|                                  |  |                                |       |  |                |           |                                          |  |       | 
|--------------------------------- |  | ------------------------------ | ----- |  | -------------- | --------- | ---------------------------------------- |  | ----- | 
|Series                            |  | Averageexercise priceper share |       |  | Expirationdate |           | Number ofexercisableshares inthousands*) | 
|                                  |  |                                |      
|Options to employees and officers |  | $                              | 21.53 |  |                | 2014-2023 |                                          |  | 2,985 | 



|*) | Includes all the share options granted to employees and officers, including 159 thousand options that are unvested.
|-- | -------------------------------------------------------------------------------------------------------------------



| | 4. | EQY has issued restricted shares to directors, officers and employees with various restriction periods (including to the Chairman of the Board and the Executive Vice Chairman of the Board, see Note 38e). As of the
reporting date, the share capital of EQY includes 857 thousand restricted shares (units) that are unvested. These units bear voting rights and are entitled to receive dividends. In addition, EQY issued 800 thousand restricted
shares to EQY executives subject to performance vesting conditions, that do not bear voting rights and rights to receive dividends and their vesting date will be on December 31, 2014.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. | As a result of the arrangement with Gazit America Inc. (GAA) and FCR (see section e6 below), the Companys interest in EQY increased from 43.3% to 46.7%.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| | 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.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 9:- | INVESTMENTS IN INVESTEES (Cont.)
|-------- | --------------------------------



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 in connection with the aforesaid Units, 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).



| | f. | Investment in FCR (a subsidiary)
| | -- | --------------------------------



| | 1. | As of December 31, 2013, the Company owns 45.2% interest in FCRs share capital and voting rights ( 41.2% on a fully diluted basis). FCRs shares are listed for trading on the Toronto Stock Exchange
(TSX). As of December 31, 2013 the market price of FCRs share was C$ 17.71 and FCR has approximately 208.4 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.



| | 2. | Summarized financial information of FCR
| | -- | ---------------------------------------

Summarized statements of financial position -



|                              |  |                 |         |   |      |  |         |  
|----------------------------- |  | --------------- | ------- | - | ---- |  | ------- | -
|                              |  | December 31     |        
|                              |  | 2013            |         |   | 2012 | 
|                              |  | NIS in millions |        
|                              |  |                
|Current assets                |  |                 | 1,111   |   |      |  | 1,811   |  
|Non-current assets *)         |  |                 | 23,723  |   |      |  | 25,491  |  
|Current liabilities           |  |                 | (2,009  | ) |      |  | (1,854  | )
|Non-current liabilities       |  |                 | (11,940 | ) |      |  | (13,193 | )
|                              |  |                 |         |   |      |  |         |  
|                              |  |                
|Net assets                    |  |                 | 10,885  |   |      |  | 12,255  |  
|                              |  |                 |         |   |      |  |         |  
|                              |  |                
|Allocated to:                 |  |                 |         |   |      |  |         |  
|Equity holders of the company |  |                 | 4,899   |   |      |  | 5,544   |  
|Non-controlling interests     |  |                 | 5,986   |   |      |  | 6,711   |  
|                              |  |                 |         |   |      |  |         |  
|                              |  |                
|                              |  |                 | 10,885  |   |      |  | 12,255  |  
|                              |  |                 |         |   |      |  |         |  



|*) | Includes goodwill.
|-- | ------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 9:- | INVESTMENTS IN INVESTEES (Cont.)
|-------- | --------------------------------



Summarized statements of comprehensive income -



|                                            |  |                        |       |  |      |  |       |      |  |  |       | 
|------------------------------------------- |  | ---------------------- | ----- |  | ---- |  | ----- | ---- |  |  | ----- | 
|                                            |  | Year ended December 31 |      
|                                            |  | 2013                   |       |  | 2012 |  |       | 2011 | 
|                                            |  | NIS in millions        |      
|                                            |  |                        |      
|Revenues                                    |  |                        | 2,319 |  |      |  | 2,237 |      |  |  | 1,893 | 
|Net income                                  |  |                        | 756   |  |      |  | 1,517 |      |  |  | 1,818 | 
|                                            |  |                        |       |  |      |  |       |      |  |  |       | 
|                                            |  |                        |      
|Other comprehensive income (loss)           |  |                        | 13    |  |      |  | (7    | )    |  |  | 16    | 
|                                            |  |                        |       |  |      |  |       |      |  |  |       | 
|                                            |  |                        |      
|Total comprehensive income                  |  |                        | 769   |  |      |  | 1,510 |      |  |  | 1,834 | 
|                                            |  |                        |       |  |      |  |       |      |  |  |       | 
|                                            |  |                        |      
|Allocated to:                               |  |                        |       |  |      |  |       |      |  |  |       | 
|Equity holders of the Company               |  |                        | 349   |  |      |  | 727   |      |  |  | 909   | 
|Non-controlling interests                   |  |                        | 420   |  |      |  | 783   |      |  |  | 925   | 
|                                            |  |                        |       |  |      |  |       |      |  |  |       | 
|                                            |  |                        |      
|                                            |  |                        | 769   |  |      |  | 1,510 |      |  |  | 1,834 | 
|                                            |  |                        |       |  |      |  |       |      |  |  |       | 
|Dividends paid to non-controlling interests |  |                        | 335   |  |      |  | 320   |      |  |  | 249   | 
|                                            |  |                        |       |  |      |  |       |      |  |  |       | 

Summarized statements of cash flows -



|                                                 |  |                        |        |   |      |  |        |      |  |  |        |  
|------------------------------------------------ |  | ---------------------- | ------ | - | ---- |  | ------ | ---- |  |  | ------ | -
|                                                 |  | Year ended December 31 |       
|                                                 |  | 2013                   |        |   | 2012 |  |        | 2011 | 
|                                                 |  | NIS in millions        |       
|                                                 |  |                        |       
|Cash flows from operating activities             |  |                        | 728    |   |      |  | 706    |      |  |  | 614    |  
|Cash flows from investing activities             |  |                        | (1,188 | ) |      |  | (1,721 | )    |  |  | (1,815 | )
|Cash flows from financing activities             |  |                        | 253    |   |      |  | 1,275  |      |  |  | 1,097  |  
|                                                 |  |                        |        |   |      |  |        |      |  |  |        |  
|                                                 |  |                        |       
|Increase (decrease) in cash and cash equivalents |  |                        | (207   | ) |      |  | 260    |      |  |  | (104   | )
|                                                 |  |                        |        |   |      |  |        |      |  |  |        |  



| | 3. | FCRs share options outstanding as of December 31, 2013
| | -- | -------------------------------------------------------



|                                                  |  |                                |       |  |                |           |                                        |  |       | 
|------------------------------------------------- |  | ------------------------------ | ----- |  | -------------- | --------- | -------------------------------------- |  | ----- | 
|Series                                            |  | Averageexercise priceper share |       |  | Expirationdate |           | Number ofexercisableshares inthousands | 
|                                                  |  |                                |      
|Share options to employees and officers in FCR *) |  | $                              | 16.37 |  |                | 2014-2023 |                                        |  | 5,968 | 
|Share options (see 6 below)                       |  |                                |       |  |                |           |                                        |  |       | 



|*) | Includes all of the share options granted to employees and officers of FCR, and the Executive Vice Chairman of the Board (see Notes 38e). These options are exercisable to 2,025 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, 622 thousand units are available to be granted (regarding units that were granted to related parties, see Notes 38e). As of the reporting date, 679 thousand share units that were granted are outstanding unvested.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. | In August 2012, FCR completed a public offering in Canada of 2.5 million units (Units) at a price of C$ 18.75 per Unit, and for total consideration of C$ 46.9 million (NIS 179 million). Each
Unit consists of one FCRs common share and one common share purchase warrant (Warrant). Each Warrant was exercisable for a period of one year into one FCRs common share at an exercise price of C$ 19.75 per share and
expired in August 2013.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 6. | In August 2012, the Company completed a plan of arrangement with GAA a traded subsidiary in Toronto stock exchange, and FCR. The arrangement included the purchase of all common shares of GAA and securities convertible
to GAA common shares which were not already owned by the Company which constituted 26.9% of GAAs outstanding share capital, for cash consideration of C$ 24.6 million (NIS 94 million) and by approximately 1.5 million common shares of
FCR issued by FCR to GAA. As part of the arrangement FCR purchased 100% of a wholly-owned subsidiary of GAA, ProMed Properties (CA) Inc. (ProMed CA), which owns medical office and retail properties in Canada and assumed GAAs
indebtedness related to ProMed CAs properties. The payment for the acquisition of ProMed CA was settled by FCR by the issuance of 5.5 million FCRs common shares to GAA. Following the arrangement GAA was delisted and became a private
company. As a result of the arrangement the companys interest in FCR increased from 49.3% to 49.9%. The Group recognized a decreased in equity at amount of C$ 18 million ( NIS 70 million) which was carried to capital reserve from
transactions with non-controlling interests.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 7. | In September 2012, FCR issued to the public in Canada 12.5 million units (Units) at a price of C$ 19.22 per Unit, and for total gross consideration of C$ 240.3 million (NIS 960 million). Each
Unit consists of one FCRs common share and quarter (1/4) common share purchase warrant (Warrant). The Warrants were exercisable through one year at an exercise price of C$ 19.75 per share and expired in August 2013.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As a result of those offerings, the Companys interest in FCR decreased from 49.9% to 45.6% (including the GAA
arrangement impact) and the Group recognized an increase in equity at an amount of C$ 24.1 million (NIS 93 million), which was carried to capital reserve from transactions with non-controlling interests.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 9:- | INVESTMENTS IN INVESTEES (Cont.)
|-------- | --------------------------------



| | g. | Investment in CTY (a subsidiary)
| | -- | --------------------------------



| | 1. | As of December 31, 2013, the Company owns 49.3% interest in CTYs share capital and voting rights. CTYs shares are listed for trading on the Helsinki Stock Exchange, Finland (OMX). As of
December 31, 2013 the market price of CTY share was  2.56 and CTY has 441.3 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 financial information of CTY *)
| | -- | ------------------------------------------

Summarized statements of financial position
-



|                                        |  |                 |        |   |      |  |        |  
|--------------------------------------- |  | --------------- | ------ | - | ---- |  | ------ | -
|                                        |  | December 31     |       
|                                        |  | 2013            |        |   | 2012 | 
|                                        |  | NIS in millions |       
|                                        |  |                
|Current assets                          |  |                 | 367    |   |      |  | 398    |  
|Non-current assets (including goodwill) |  |                 | 13,854 |   |      |  | 13,476 |  
|Current liabilities                     |  |                 | (1,108 | ) |      |  | (1,032 | )
|Non-current liabilities                 |  |                 | (6,994 | ) |      |  | (7,939 | )
|                                        |  |                 |        |   |      |  |        |  
|                                        |  |                
|Net assets                              |  |                 | 6,119  |   |      |  | 4,903  |  
|                                        |  |                 |        |   |      |  |        |  
|                                        |  |                
|Allocated to:                           |  |                 |        |   |      |  |        |  
|Equity holders of the company           |  |                 | 2,891  |   |      |  | 2,268  |  
|Non-controlling interests               |  |                 | 3,228  |   |      |  | 2,635  |  
|                                        |  |                 |        |   |      |  |        |  
|                                        |  |                
|                                        |  |                 | 6,119  |   |      |  | 4,903  |  
|                                        |  |                 |        |   |      |  |        |  



|*) | The summarized financial information of CTY was retrospectively adjusted due to implementation of clarification of IAS 12. Refer to Note 2a.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 9:- | INVESTMENTS IN INVESTEES (Cont.)
|-------- | --------------------------------



Summarized statements of comprehensive income -



|                                            |  |                        |       |  |      |  |       |      |  |  |        |  
|------------------------------------------- |  | ---------------------- | ----- |  | ---- |  | ----- | ---- |  |  | ------ | -
|                                            |  | Year ended December 31 |      
|                                            |  | 2013                   |       |  | 2012 |  |       | 2011 | 
|                                            |  | NIS in millions        |      
|                                            |  |                        |      
|Revenues                                    |  |                        | 1,193 |  |      |  | 1,185 |      |  |  | 1,081  |  
|Net income *)                               |  |                        | 491   |  |      |  | 351   |      |  |  | **) 43 |  
|                                            |  |                        |       |  |      |  |       |      |  |  |        |  
|                                            |  |                        |      
|Other comprehensive income (loss)           |  |                        | 162   |  |      |  | (56   | )    |  |  | (131   | )
|                                            |  |                        |       |  |      |  |       |      |  |  |        |  
|                                            |  |                        |      
|Total comprehensive income (loss)           |  |                        | 653   |  |      |  | 295   |      |  |  | (88    | )
|                                            |  |                        |       |  |      |  |       |      |  |  |        |  
|                                            |  |                        |      
|Allocated to:                               |  |                        |       |  |      |  |       |      |  |  |        |  
|Equity holders of the Company               |  |                        | 322   |  |      |  | 142   |      |  |  | (62    | )
|Non-controlling interests                   |  |                        | 331   |  |      |  | 153   |      |  |  | (26    | )
|                                            |  |                        |       |  |      |  |       |      |  |  |        |  
|                                            |  |                        |      
|                                            |  |                        | 653   |  |      |  | 295   |      |  |  | (88    | )
|                                            |  |                        |       |  |      |  |       |      |  |  |        |  
|                                            |  |                        |      
|Dividends paid to non-controlling interests |  |                        | 116   |  |      |  | 107   |      |  |  | 89     |  
|                                            |  |                        |       |  |      |  |       |      |  |  |        |  



|*) | Retrospectively adjusted, refer to Notes 2a.
|-- | --------------------------------------------

|**) | Includes goodwill impairment.
|--- | -----------------------------

Summarized cash flow statements -



|                                                              |  |                        |      |   |      |  |      |      |  |  |        |  
|------------------------------------------------------------- |  | ---------------------- | ---- | - | ---- |  | ---- | ---- |  |  | ------ | -
|                                                              |  | Year ended December 31 |     
|                                                              |  | 2013                   |      |   | 2012 |  |      | 2011 | 
|                                                              |  | NIS in millions        |     
|                                                              |  |                        |     
|Cash flows from operating activities                          |  |                        | 272  |   |      |  | 305  |      |  |  | 329    |  
|Cash flows from investing activities                          |  |                        | (808 | ) |      |  | (520 | )    |  |  | (1,011 | )
|Cash flows from financing activities                          |  |                        | 477  |   |      |  | 11   |      |  |  | 1,038  |  
|Exchange differences on balances of cash and cash equivalents |  |                        | (3   | ) |      |  | 4    |      |  |  | 3      |  
|                                                              |  |                        |      |   |      |  |      |      |  |  |        |  
|                                                              |  |                        |     
|Increase (decrease) in cash and cash equivalents              |  |                        | (62  | ) |      |  | (200 | )    |  |  | 359    |  
|                                                              |  |                        |      |   |      |  |      |      |  |  |        |  



| | 3. | The share options of CTY outstanding as of December 31, 2013
| | -- | ------------------------------------------------------------



|                                                   |  |                                   |      |  |                |      |                                        |  |       | 
|-------------------------------------------------- |  | --------------------------------- | ---- |  | -------------- | ---- | -------------------------------------- |  | ----- | 
|Series                                             |  | Averageexercise priceper share *) |      |  | Expirationdate |      | Number ofexercisableshares inthousands | 
|                                                   |  |                                   |     
|Options to plan employees and officers (2011 plan) |  |                                  | 2.69 |  |                | 2018 |                                        |  | 7,418 | 



|*) | The exercise price and exchange ratio are adjusted for right issue, dividend distribution and return of equity. As of the reporting date, 3,310 share options that are exercisable into 3,894 shares are not vested.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 9:- | INVESTMENTS IN INVESTEES (Cont.)
|-------- | --------------------------------



| | 4. | During 2013, the Company purchased an additional 2.1 million CTY shares in consideration for  5 million (NIS 25 million). As a result of the purchase, the Companys interest in CTY increased to
49.4% and the Company recognized an equity increase at an amount of NIS 5 million.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. | In March 2013 CTY issued to its shareholders by way of a rights issuance 114.4 million shares, which represented 35% of CTYs total share capital and voting rights, in gross consideration for 
200 million (NIS 962 million).
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company purchased as part of the rights issuance approximately 56.1 million
shares in consideration for  98.1 million (NIS 472 million). There was no material change in the Companys interest in CTY due to the Companys participation in the rights issuance.



| | 6. | In January 2013 CTY completed, together with Canada Pension Plan Investment Board (CPPIB) at equal portions, the purchase of a shopping center in Stockholm, Sweden, at a price of  530 million (NIS
2.5 billion), through an equity-accounted joint venture. The purchase was financed by the joint venture with a secured 5 year loan of  265 million (NIS 1.2 billion) and with equity.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | h. | 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 builds a private power station for the production
of electricity.

As of December 31, 2013, Gazit Development holds 73.9% 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 61.0%. The market price of Dori Group share as of the reporting date was NIS 1.98. The number of Dori Groups shares outstanding
as of the reporting date is 135.5 million.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 9:- | INVESTMENTS IN INVESTEES (Cont.)
|-------- | --------------------------------



For additional information regarding the restatement of the Companys and Doris
Group financial statements refer to Note 2ee, 40h and 41. For information regarding submission of a scheme for investment in Doris Group equity by Gazit Development, refer to Note 40i.



| | i. | Investment in RSC (a jointly controlled entity)
| | -- | -----------------------------------------------

As part of the Companys
investments in the senior housing facilities sector in the United States, the Company indirectly held a joint venture that was accounted for using the equity method (60%) in the property company and (50%) in the joint venture that managed
them).

In August 2012, RSC sold 12 wholly-owned senior housing facilities for a total consideration of U.S.$ 230 million. As a result
of the sale, the Company recognized a pre-tax gain of NIS 63 million that was recorded in the companys share in earnings of equity accounted investees. In addition, the Company reclassified NIS 102 million from fixed assets
revaluation reserve net of tax, to retained earnings.

As of December 2012, the balance of the Companys investments in these
companies amounted to NIS 57 million. In April 2013, the Company sold its remaining interest in RSC activity to its partner, which included 50% interest in a senior housing facility and 60% interest in land, in consideration for U.S.$ 15
million (NIS 54 million). Following this sale, the Company has no activity in senior housing facilities in the United States.



| | k. | Supplementary information for operational subsidiaries owned by the Company:
| | -- | ----------------------------------------------------------------------------



|                                              |  |                         |  |                                           |      |  |                          |  |        |       |  |  |       | 
|--------------------------------------------- |  | ----------------------- |  | ----------------------------------------- | ---- |  | ------------------------ |  | ------ | ----- |  |  | ----- | 
|December 31, 2013                             |  | Country ofincorporation |  | Holding stakein equity andin votingrights |      |  | 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. (1) (2) |  | Israel                  |  |                                           | 82.5 |  |                          |  | *) 559 |       |  |  | 1,741 | 
|Gazit Brazil Ltd.                             |  | Brazil                  |  |                                           | 100  |  |                          |  | 435    |       |  |  |      | 
|                                              |  |                         |  |                                          
|December 31, 2012                             |  | Country ofincorporation |  | Holding stakein equity andin votingrights |      |  | Investmentcarryingamount |  |        | Loans | 
|                                              |  |                         |  | %                                         |      |  | NIS in millions          | 
|                                              |  |                         |  |                                          
|ProMed Properties Inc.                        |  | USA                     |  |                                           | 100  |  |                          |  | 834    |       |  |  |      | 
|Gazit Germany Beteilingungs GmbH & Co. KG     |  | Germany                 |  |                                           | 100  |  |                          |  | 261    |       |  |  |      | 
|Gazit Globe Israel (Development) Ltd.         |  | Israel                  |  |                                           | 75   |  |                          |  | *) 401 |       |  |  | 1,936 | 
|Gazit Brazil Ltd.                             |  | Brazil                  |  |                                           | 100  |  |                          |  | 376    |       |  |  | 130   | 



|*) | Restated, refer to Note 2ee.
|-- | ----------------------------



F-65



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 9:- | INVESTMENTS IN INVESTEES (Cont.)
|-------- | --------------------------------



|(1) | Regarding the Companys Board of Directors approval for granting a loan to Gazit Development, for submission of a scheme for investment in Doris Group equity at amount of NIS 200 million, a commitment to
inject equity to Dori Group by Gazit Development and the issuance of warrants by Gazit Development by means of right issuance after the reporting date, referred to Notes 40i, 40j, 40k and 40l.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | In August 2013, Gazit Development issued 6.5 million warrants for no consideration, by way of a rights issuance. Each warrant is exercisable up to three years from the issuance date into one share of Gazit
Development, at an exercise price of NIS 44.01, which bears interest at an annual rate of 6.7% and is linked to the Israeli Consumer Price Index. At the issuance date, the Company exercised all warrants issued to it in consideration for NIS
214 million, settled as a decrease in the loans granted by the Company to Gazit Development.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Following the rights
issuance and the warrants exercise by the Company, the interest in Gazit Development increased from 75% to approximately 82.5% (75% on fully diluted basis). There was no material impact on the Companys shareholders equity.



| | l. | 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 a requirement that the investee have sufficient accumulated earnings or that certain solvency requirements are met before a distribution can be made. The Group does not consider any of these customary conditions to be a
significant restriction.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | m. | For pledging of part of the shares of investees to secure Group liabilities, refer to Note 29.
| | -- | ----------------------------------------------------------------------------------------------



|NOTE 10: | OTHER INVESTMENTS, LOANS AND RECEIVABLES
|-------- | ----------------------------------------



| | a. | Composition
| | -- | -----------



|                                               |  |                 |     |  |      |  |     | 
|---------------------------------------------- |  | --------------- | --- |  | ---- |  | --- | 
|                                               |  | December 31     |    
|                                               |  | 2013            |     |  | 2012 | 
|                                               |  | NIS in millions |    
|                                               |  |                
|Loan held to maturity (1) (2)                  |  |                 | 268 |  |      |  | 600 | 
|Loans to co-owners in development projects (3) |  |                 | 225 |  |      |  | 74  | 
|Finance lease receivable                       |  |                 | 81  |  |      |  |    | 
|Tenants                                        |  |                 | 5   |  |      |  | 8   | 
|Other non-current deposits (4) (5)             |  |                 | 50  |  |      |  | 120 | 
|Governmental institutions                      |  |                 | 79  |  |      |  | 79  | 
|Others                                         |  |                 | 8   |  |      |  | 2   | 
|                                               |  |                 |     |  |      |  |     | 
|                                               |  |                
|                                               |  |                 | 716 |  |      |  | 883 | 
|Less - current maturities                      |  |                 | 57  |  |      |  | 170 | 
|                                               |  |                 |     |  |      |  |     | 
|                                               |  |                
|                                               |  |                 | 659 |  |      |  | 713 | 
|                                               |  |                 |     |  |      |  |     | 



F-66



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 10: | OTHER INVESTMENTS, LOANS AND RECEIVABLES (Cont.)
|-------- | ------------------------------------------------



|(1) | A loan that was granted by EQY with original principal balance of U.S.$ 95.0 million (NIS 330 million) which as of the reporting date the outstanding balance is NIS 189 million. The loan is secured by retail
property, an apartment building and an assisted living facility (the asset). The loan bore annual interest of 5.0%, and matured on January 15, 2014. The loan was granted by EQY as a bridge loan as part of an agreement to purchase
the asset by EQY in consideration for U.S.$ 140 million that was complete in January 2014, at that date the loan was repaid and the rights in the assets were granted to EQY.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | A C$ 17 million bond (NIS 57 million) held to maturity is used as collateral to a loan assigned to FCR as part of a property acquisition. The Bond bears effective interest rate of 1.25% and matures in November
2014.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Loans and mortgages amounted to C$ 68 million (NIS 222 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 interest rate of 6.3% and are secured by the partners rights in the properties.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Includes a non-interest bearing deposit of approximately U.S.$ 5 million (approximately NIS 17 million), used to secure aircraft lease payments by a subsidiary (refer to Note 26a(3)).
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Includes deposits of approximately NIS 22 million in favor of mortgage providers, in order to ensure performance of renovations and payment of property taxes on the mortgaged properties, in order to maintain their
value. The deposits bear an annual interest rate of 0.2%-0.3%.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | Maturity dates
| | -- | --------------



|                                    |  |                 |     |  |      |  |     | 
|----------------------------------- |  | --------------- | --- |  | ---- |  | --- | 
|                                    |  | December 31     |    
|                                    |  | 2013            |     |  | 2012 | 
|                                    |  | NIS in millions |    
|                                    |  |                
|Year 1  current maturities         |  |                 | 57  |  |      |  | 170 | 
|Year 1  used for asset acquisition |  |                 | 214 |  |      |  |    | 
|Year 2                              |  |                 | 91  |  |      |  | 484 | 
|Year 3                              |  |                 | 53  |  |      |  | 40  | 
|Year 4                              |  |                 | 106 |  |      |  | 21  | 
|Year 5                              |  |                 | 3   |  |      |  | 97  | 
|Year 6 and thereafter               |  |                 | 189 |  |      |  | 15  | 
|Undetermined                        |  |                 | 3   |  |      |  | 56  | 
|                                    |  |                 |     |  |      |  |     | 
|                                    |  |                
|                                    |  |                 | 716 |  |      |  | 883 | 
|                                    |  |                 |     |  |      |  |     | 



| | c. | As for the linkage basis of other investments, loans and receivable, refer to Note 37.
| | -- | --------------------------------------------------------------------------------------



F-67



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 11:- | AVAILABLE-FOR-SALE FINANCIAL ASSETS
|--------- | -----------------------------------

Composition



|                                                    |  |                 |     |  |      |  |     | 
|--------------------------------------------------- |  | --------------- | --- |  | ---- |  | --- | 
|                                                    |  | December 31     |    
|                                                    |  | 2013            |     |  | 2012 | 
|                                                    |  | NIS in millions |    
|                                                    |  |                
|Securities traded in Europe                         |  |                 | 120 |  |      |  |    | 
|Shares traded in the U.S. and Canada                |  |                 | 9   |  |      |  | 14  | 
|Participating units in private equity funds (1) (2) |  |                 | 315 |  |      |  | 339 | 
|                                                    |  |                 |     |  |      |  |     | 
|                                                    |  |                
|                                                    |  |                 | 444 |  |      |  | 353 | 
|                                                    |  |                 |     |  |      |  |     | 
|                                                    |  |                
|Classified within current assets                    |  |                 | 9   |  |      |  | 14  | 
|Classified within non-current assets                |  |                 | 435 |  |      |  | 339 | 
|                                                    |  |                 |     |  |      |  |     | 
|                                                    |  |                
|                                                    |  |                 | 444 |  |      |  | 353 | 
|                                                    |  |                 |     |  |      |  |     | 



|(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, 2013, the
Companys outstanding investment commitment amounted to approximately U.S.$ 15 million (approximately NIS 51 million). As of December 31, 2013 approximately U.S.$ 13.3 million (NIS 50 million) were paid cumulatively to the
Company resulting from projects realization by the Fund).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of December 31, 2013, the Fund has investment agreements
for 13 projects with a total investment of U.S.$ 527 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 303 million and NIS 318 million as of December 31, 2013 and 2012,
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 15 million,
and vice versa.



|(2) | A wholly-owned U.S. subsidiary of the Company invested in three American investment funds a total of approximately U.S.$ 3.6 million (NIS 14 million). As of the reporting date, the Company subsidiarys
outstanding investment commitment in these funds amounted to U.S.$ 0.9 million (NIS 3 million).
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-68



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 12:- | INVESTMENT PROPERTY
|--------- | -------------------



| | a. | Movement
| | -- | --------



|                                                         |  |                 |          |   |      |  |          |  
|-------------------------------------------------------- |  | --------------- | -------- | - | ---- |  | -------- | -
|                                                         |  | December 31     |         
|                                                         |  | 2013            |          |   | 2012 | 
|                                                         |  | NIS in millions |         
|                                                         |  |                
|Balance as of January 1                                  |  |                 | 55,465   |   |      |  | 51,014   |  
|                                                         |  |                
|Acquisitions and capital expenditures                    |  |                 | *) 2,576 |   |      |  | *) 5,012 |  
|Transfer from investment property under development, net |  |                 | 367      |   |      |  | 375      |  
|Dispositions                                             |  |                 | (410     | ) |      |  | (1,428   | )
|Transfer to assets classified as held for sale           |  |                 | (857     | ) |      |  | (927     | )
|Transfer to fixed assets                                 |  |                 |         |   |      |  | (22      | )
|Valuation gains, net                                     |  |                 | *) 996   |   |      |  | *) 1,761 |  
|Foreign exchange differences                             |  |                 | (4,828   | ) |      |  | (320     | )
|                                                         |  |                 |          |   |      |  |          |  
|                                                         |  |                
|Balance as of December 31                                |  |                 | 53,309   |   |      |  | 55,465   |  
|                                                         |  |                 |          |   |      |  |          |  



|*) | Reclassified, refer to Note 2a.
|-- | -------------------------------



| | 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 (49% as of December 31, 2013 and 60% during 2013 - in fair value terms) with recognized professional expertise and vast experience as to the location and category of
the property being valued 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 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 2013,
there were no transfers of investment property from level 3 and to level 3.



F-69



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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 |  |     | NorthernandWesternEurope |  |  | Israel | 
|Average cap rates                                              |  | %     |     
|                                                               |  |       |      | 
|December 31, 2013                                              |  |       | 6.5  |  |        |  | 5.9 |                          |  |  | 6.3    |  |  |  | 7.5   | 
|December 31, 2012                                              |  |       | 6.8  |  |        |  | 6.0 |                          |  |  | 6.3    |  |  |  | 7.5   | 
|                                                               |  |       |      | 
|Monthly average market rent per square meters (including fees) |  | U.S.$ |      |  | C$     |  |     | EUR                      |  |  | NIS    | 
|                                                               |  |       |      | 
|December 31, 2013                                              |  |       | 17.8 |  |        |  |    |                          |  |  | 24.5   |  |  |  | 130.0 | 
|December 31, 2012                                              |  |       | 15.6 |  |        |  |    |                          |  |  | 24.3   |  |  |  | 128.0 | 

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 |  |       | NorthernandWesternEurope |  |  | Israel |  
|December 31, 2013                                   |  | NIS in millions |     
|                                                    |  |                 |      |  
|Increase of 25 basis points in capitalization rate  |  |                 | (535 | ) |        |  | (888  | )                        |  |  | (511   | ) |  |  | (74 | )
|Decrease of 25 basis point in capitalization rate   |  |                 | 576  |   |        |  | 967   |                          |  |  | 551    |   |  |  | 79  |  
|Increase of 5% in net operating rental income (NOI) |  |                 | 756  |   |        |  | 1,182 |                          |  |  | 688    |   |  |  | 114 |  
|Increase of 5% in average market rent               |  |                 | 907  |   |        |  |      |                          |  |  | 937    |   |  |  | 130 |  



| | d. | Ownership rights
| | -- | ----------------

As of December 31, 2013, ownership rights of the properties
(excluding in Israel) are registered under the name of the investees, in accordance with the registration regulations in their respective countries of residence, except for 15 properties with aggregate fair value of NIS 2.3 billion held under
an operating lease (2012 - 14 properties valued at NIS 3.1 billion) and five properties with aggregate fair value of NIS 1.2 billion held under a finance lease (2012 - 6 properties valued at NIS 1.4 billion).



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 12:- | INVESTMENT PROPERTY (Cont.)
|--------- | ---------------------------



Israeli subsidiaries hold five properties under capitalized land leases from the Israel Lands
Administration with aggregate fair value of NIS 840 million (2012 - five leased properties with a value of NIS 806 million). The leases expire between 2043 and 2058. The Group has an extension option for additional 49 years with respect to
three of these properties.

As for liabilities relating to lease agreements of investment property, refer to Note 23.



| | e. | As for charges, refer to Note 29.
| | -- | ---------------------------------



|NOTE 13:- | INVESTMENT PROPERTY UNDER DEVELOPMENT
|--------- | -------------------------------------



| | a. | Movement and composition
| | -- | ------------------------



|                                                |  |                 |       |   |      |  |       |  
|----------------------------------------------- |  | --------------- | ----- | - | ---- |  | ----- | -
|                                                |  | December 31     |      
|                                                |  | 2013            |       |   | 2012 | 
|                                                |  | NIS in millions |      
|                                                |  |                
|Balance as of January 1                         |  |                 | 2,806 |   |      |  | 2,198 |  
|                                                |  |                
|Acquisitions and development costs              |  |                 | 582   |   |      |  | 880   |  
|Transfers to investment property, net           |  |                 | (367  | ) |      |  | (375  | )
|Transfers to assets classified as held for sale |  |                 | (100  | ) |      |  | (8    | )
|Dispositions                                    |  |                 | (107  | ) |      |  | (22   | )
|Valuation gains (losses), net                   |  |                 | (34   | ) |      |  | 177   |  
|Foreign exchange differences                    |  |                 | (301  | ) |      |  | (44   | )
|                                                |  |                 |       |   |      |  |       |  
|                                                |  |                
|Balance as of December 31                       |  |                 | 2,479 |   |      |  | 2,806 |  
|                                                |  |                 |       |   |      |  |       |  
|                                                |  |                
|Composition:                                    |  |                 |       |   |      |  |       |  
|                                                |  |                
|Land for future development                     |  |                 | 968   |   |      |  | 1,032 |  
|Investment property under development           |  |                 | 1,511 |   |      |  | 1,774 |  
|                                                |  |                 |       |   |      |  |       |  
|                                                |  |                
|                                                |  |                 | 2,479 |   |      |  | 2,806 |  
|                                                |  |                 |       |   |      |  |       |  



| | 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 209
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.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-71



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 13:- | INVESTMENT PROPERTY UNDER DEVELOPMENT (Cont.)
|--------- | ---------------------------------------------



Lands for future development are measured at fair value, using primarily the Comparative
Method (88.1% 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.

When using the Comparative Method the Group and the
external appraisers rely on market prices, applying necessary adjustments, to the extent that such information is available. However, when such information is not available, the Group uses valuation techniques (mainly the Residual method) based on
current market yields to which necessary adjustments are applied.

The investment property under development and lands are measured at
level 3 according to the fair value hierarchy. In 2013 there were no transfers of investment property under development and lands from level 3 and to level 3.

As of December 31, 2013, the fair value of approximately 39% of the investment property under development and lands has been assessed by
independent external appraisers (approximately 45% during 2013), and the remainder was performed internally using standard valuation techniques, inter alia, based on market inputs received from the independent appraisers.



| | c. | During 2013, the Group capitalized to property under development borrowing costs amounting to NIS 95 million (in 2012 - NIS 117 million) and direct incremental costs, including payroll expenses, amounting to
NIS 21 million (in 2012 - NIS 25 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 |  |     | NorthernandWesternEurope |  |  | Israel |  
|December 31, 2013                                             |  | NIS in millions |   
|                                                              |  |                 |    |  
|Increase of 5% in estimated project cost to complete          |  |                 | (7 | ) |        |  | (2  | )                        |  |  | (9     | ) |  |  | (1 | )
|Increase of 5% in estimated net operating rental income (NOI) |  |                 | 6  |   |        |  | 29  |                          |  |  | 15     |   |  |  |   |  
|Increase of 25 basis points in the capitalization rate        |  |                 | (5 | ) |        |  | (26 | )                        |  |  | (11    | ) |  |  |   |  
|Decrease of 25 basis points in the capitalization rate        |  |                 | 6  |   |        |  | 28  |                          |  |  | 12     |   |  |  |   |  



F-72



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 13:- | INVESTMENT PROPERTY UNDER DEVELOPMENT (Cont.)
|--------- | ---------------------------------------------



| | e. | As of December 31, 2013, Israeli resident subsidiaries own three land plots (2012-three land plots) under capitalized leases with a total value of NIS 82 million (2012  NIS 84 million) for periods of
49-98 years which expire between 2048-2107, with an extension option with respect to two land plots. Foreign subsidiaries hold four land plots under leasehold (2012  three land plots) in aggregate value of NIS 177 million (2012  NIS
57 million).
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | f. | As for charges, refer to Note 29.
| | -- | ---------------------------------



|NOTE 14:- | FIXED ASSETS, NET
|--------- | -----------------

Fixed assets include mainly office buildings partly in use by the
Group, which are not defined as investment property, construction equipment and others.



| | a. | Movement
| | -- | --------



|                                      |  |                 |     |   |      |  |     |  
|------------------------------------- |  | --------------- | --- | - | ---- |  | --- | -
|                                      |  | December 31     |    
|                                      |  | 2013            |     |   | 2012 | 
|                                      |  | NIS in millions |    
|                                      |  |                
|Cost:                                 |  |                 |     |   |      |  |     |  
|                                      |  |                
|Balance as of January 1               |  |                 | 430 |   |      |  | 368 |  
|Acquisitions                          |  |                 | 50  |   |      |  | 49  |  
|Transfers to investment property, net |  |                 |    |   |      |  | 22  |  
|Disposals                             |  |                 | (77 | ) |      |  | (5  | )
|Foreign exchange differences          |  |                 | (19 | ) |      |  | (4  | )
|                                      |  |                 |     |   |      |  |     |  
|                                      |  |                
|Balance as of December 31             |  |                 | 384 |   |      |  | 430 |  
|                                      |  |                 |     |   |      |  |     |  
|                                      |  |                
|Accumulated depreciation:             |  |                 |     |   |      |  |     |  
|Balance as of January 1               |  |                 | 243 |   |      |  | 211 |  
|Depreciation                          |  |                 | 34  |   |      |  | 34  |  
|Disposals                             |  |                 | (44 | ) |      |  | (1  | )
|Foreign exchange differences          |  |                 | (9  | ) |      |  | (1  | )
|                                      |  |                 |     |   |      |  |     |  
|                                      |  |                
|Balance as of December 31             |  |                 | 224 |   |      |  | 243 |  
|                                      |  |                 |     |   |      |  |     |  
|                                      |  |                
|Depreciated cost as of December 31    |  |                 | 160 |   |      |  | 187 |  
|                                      |  |                 |     |   |      |  |     |  



| | b. | As for charges, refer to Note 29.
| | -- | ---------------------------------



F-73



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 15:- | GOODWILL AND OTHER INTANGIBLE ASSETS
|--------- | ------------------------------------

Composition and movement



|                                                |  |                 |     |   |               |  |    |                  |  |  |       |   |  |       |      |   |  |  |      |  
|----------------------------------------------- |  | --------------- | --- | - | ------------- |  | -- | ---------------- |  |  | ----- | - |  | ----- | ---- | - |  |  | ---- | -
|                                                |  | Goodwill (1)    |     |   | Brandname (2) |  |    | Orderbacklog (3) |  |  | Other |   |  | Total |     
|                                                |  | NIS in millions |    
|Cost:                                           |  |                 |     |   |               |  |    |                  |  |  |       |   |  |       |      |   |  |  |      |  
|Balance as of January 1, 2012                   |  |                 | 283 |   |               |  | 15 |                  |  |  | 80    |   |  |       | 8    |   |  |  | 386  |  
|Additions                                       |  |                 |    |   |               |  |   |                  |  |  |      |   |  |       | 3    |   |  |  | 3    |  
|Foreign exchange differences                    |  |                 | 1   |   |               |  |   |                  |  |  |      |   |  |       | *)  |   |  |  | 1    |  
|                                                |  |                 |     |   |               |  |    |                  |  |  |       |   |  |       |      |   |  |  |      |  
|                                                |  |                 |     |   |              
|Balance as of December 31, 2012                 |  |                 | 284 |   |               |  | 15 |                  |  |  | 80    |   |  |       | 11   |   |  |  | 390  |  
|Additions                                       |  |                 |    |   |               |  |   |                  |  |  |      |   |  |       | 4    |   |  |  | 4    |  
|Write off                                       |  |                 | (21 | ) |               |  |   |                  |  |  | (80   | ) |  |       |     |   |  |  | (101 | )
|Foreign exchange differences                    |  |                 | (21 | ) |               |  |   |                  |  |  |      |   |  |       | (2   | ) |  |  | (23  | )
|                                                |  |                 |     |   |               |  |    |                  |  |  |       |   |  |       |      |   |  |  |      |  
|                                                |  |                 |     |   |              
|Balance as of December 31, 2013                 |  |                 | 242 |   |               |  | 15 |                  |  |  |      |   |  |       | 13   |   |  |  | 270  |  
|                                                |  |                 |     |   |               |  |    |                  |  |  |       |   |  |       |      |   |  |  |      |  
|                                                |  |                 |     |   |              
|Accumulated amortization and impairment losses: |  |                 |     |   |               |  |    |                  |  |  |       |   |  |       |      |   |  |  |      |  
|                                                |  |                 |     |   |              
|Balance as of January 1, 2012                   |  |                 | 182 |   |               |  | 1  |                  |  |  | 32    |   |  |       | 2    |   |  |  | 217  |  
|Amortization                                    |  |                 |    |   |               |  | 1  |                  |  |  | 48    |   |  |       | 5    |   |  |  | 54   |  
|Foreign Exchange differences                    |  |                 | 2   |   |               |  |   |                  |  |  |      |   |  |       | *)  |   |  |  | 2    |  
|                                                |  |                 |     |   |               |  |    |                  |  |  |       |   |  |       |      |   |  |  |      |  
|                                                |  |                 |     |   |              
|Balance as of December 31, 2012                 |  |                 | 184 |   |               |  | 2  |                  |  |  | 80    |   |  |       | 7    |   |  |  | 273  |  
|Amortization                                    |  |                 |    |   |               |  | 2  |                  |  |  |      |   |  |       | 2    |   |  |  | 4    |  
|Write off                                       |  |                 | (21 | ) |               |  |   |                  |  |  | (80   | ) |  |       |     |   |  |  | (101 | )
|Foreign Exchange differences                    |  |                 | (11 | ) |               |  |   |                  |  |  |      |   |  |       | (1   | ) |  |  | (12  | )
|                                                |  |                 |     |   |               |  |    |                  |  |  |       |   |  |       |      |   |  |  |      |  
|                                                |  |                 |     |   |              
|Balance as of December 31, 2013                 |  |                 | 152 |   |               |  | 4  |                  |  |  |      |   |  |       | 8    |   |  |  | 164  |  
|                                                |  |                 |     |   |               |  |    |                  |  |  |       |   |  |       |      |   |  |  |      |  
|                                                |  |                 |     |   |              
|Net carrying amount                             |  |                 |     |   |               |  |    |                  |  |  |       |   |  |       |      |   |  |  |      |  
|                                                |  |                 |     |   |              
|As of December 31, 2013                         |  |                 | 90  |   |               |  | 11 |                  |  |  |      |   |  |       | 5    |   |  |  | 106  |  
|                                                |  |                 |     |   |               |  |    |                  |  |  |       |   |  |       |      |   |  |  |      |  
|                                                |  |                 |     |   |              
|As of December 31, 2012                         |  |                 | 100 |   |               |  | 13 |                  |  |  |      |   |  |       | 4    |   |  |  | 117  |  
|                                                |  |                 |     |   |               |  |    |                  |  |  |       |   |  |       |      |   |  |  |      |  



|*) | Represents an amount of less than NIS 1 million.
|-- | ------------------------------------------------

|(1) | Goodwill has been predominantly recognized due to the acquisition of non-controlling interests, and through the Groups participation in share offerings, in transactions occurring before December 31, 2009 in
EQY and FCR and also due to the acquisition of CapCo by EQY (refer to Note 9d(6)). Each of the above companies is considered a separate cash-generating unit (CGU) for impairment purposes and for each, the recoverable amount was determined as of the
reporting date. In respect of FCR and EQY including CapCo, the recoverable amount is determined based on the market price of the shares.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-74



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 15:- | GOODWILL AND OTHER INTANGIBLE ASSETS (Cont.)
|--------- | --------------------------------------------



The carrying amount of goodwill by cash-generating units:



|                  |  |                 |    |  |     |  |   |     |  |  |       |  |  |  |     | 
|----------------- |  | --------------- | -- |  | --- |  | - | --- |  |  | ----- |  |  |  | --- | 
|                  |  | EQY             |    |  | CTY |  |   | FCR |  |  | Total | 
|                  |  | NIS in millions |   
|                  |  |                 |    | 
|December 31, 2013 |  |                 | 47 |  |     |  | 5 |     |  |  | 38    |  |  |  | 90  | 
|                  |  |                 |    |  |     |  |   |     |  |  |       |  |  |  |     | 
|                  |  |                 |    | 
|December 31, 2012 |  |                 | 51 |  |     |  | 5 |     |  |  | 44    |  |  |  | 100 | 
|                  |  |                 |    |  |     |  |   |     |  |  |       |  |  |  |     | 



|(2) | A brand name recognized in a business combination which is attributed to the brand name U. Dori (in Israel). The brand name is amortized on a straight-line basis over 10 years according to its estimated
useful life. The amortization is attributed to the general and administration expenses.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | An Order Backlog which was recognized for projects of Dori Group that were performed during 2011 and 2012, reflected their economic value as of the acquisition date of Dori Group, and was fully amortized on a straight
line basis through December 31, 2012. The amortization was attributed to the cost of construction work performed.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|NOTE 16:- | CREDIT FROM BANKS AND OTHERS
|--------- | ----------------------------



| | a. | Composition
| | -- | -----------



|                                               |  |                 |  |                              |     |  |                 |  |     |      |  |  |     | 
|---------------------------------------------- |  | --------------- |  | ---------------------------- | --- |  | --------------- |  | --- | ---- |  |  | --- | 
|                                               |  |                 |  | Weightedaverage interestrate |     |  |                 | 
|                                               |  |                 |  | December 31                  |     |  | December 31     | 
|                                               |  | Denomination    |  | *) 2013                      |     |  | 2013            |  |     | 2012 | 
|                                               |  |                 |  | %                            |     |  | NIS in millions | 
|                                               |  |                 |  |                             
|Credit from banks:                             |  | CPI Linked NIS  |  |                              | 4.4 |  |                 |  | 85  |      |  |  | 59  | 
|                                               |  | Unlinked NIS *) |  |                              | 3.9 |  |                 |  | 79  |      |  |  | 42  | 
|                                               |  | U.S. $ *)       |  |                              |    |  |                 |  | 3   |      |  |  | 28  | 
|Credit from financial institutions and others: |  |  *)            |  |                              | 0.8 |  |                 |  | 4   |      |  |  | 160 | 
|                                               |  | C$              |  |                              | 1.2 |  |                 |  | 86  |      |  |  | 62  | 
|                                               |  |                 |  |                              |     |  |                 |  |     |      |  |  |     | 
|                                               |  |                 |  |                             
|Total short-term credit                        |  |                 |  |                              |     |  |                 |  | 257 |      |  |  | 351 | 
|                                               |  |                 |  |                              |     |  |                 |  |     |      |  |  |     | 



|*) | Floating interest.
|-- | ------------------



| | b. | As for charges, see Note 29.
| | -- | ----------------------------



F-75



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 17:- | CURRENT MATURITIES OF NON-CURRENT LIABILITIES
|--------- | ---------------------------------------------

Composition



|                                              |  |                 |  |             |       |  |  |  |       | 
|--------------------------------------------- |  | --------------- |  | ----------- | ----- |  |  |  | ----- | 
|                                              |  | Refer toNote    |  | December 31 |      
|                                              |  | 2013            |  |             | 2012  | 
|                                              |  | NIS in millions | 
|                                              |  |                 | 
|Current maturities of debentures              |  | 20              |  |             | 839   |  |  |  | 827   | 
|Current maturities of convertible debentures  |  | 21              |  |             |      |  |  |  | 193   | 
|Current maturities of non-current liabilities |  | 22              |  |             | 2,075 |  |  |  | 1,362 | 
|                                              |  |                 |  |             |       |  |  |  |       | 
|                                              |  |                 | 
|                                              |  |                 |  |             | 2,914 |  |  |  | 2,382 | 
|                                              |  |                 |  |             |       |  |  |  |       | 



|NOTE 18:- | TRADE PAYABLES
|--------- | --------------



| | a. | Composition
| | -- | -----------



|                                      |  |                 |     |  |      |  |     | 
|------------------------------------- |  | --------------- | --- |  | ---- |  | --- | 
|                                      |  | December 31     |    
|                                      |  | 2013            |     |  | 2012 | 
|                                      |  | NIS in millions |    
|                                      |  |                
|Open accounts and accrued expenses *) |  |                 | 790 |  |      |  | 847 | 
|Checks payable                        |  |                 | 150 |  |      |  | 70  | 
|                                      |  |                 |     |  |      |  |     | 
|                                      |  |                
|                                      |  |                 | 940 |  |      |  | 917 | 
|                                      |  |                 |     |  |      |  |     | 



|*) | Restated, refer to Note 2ee and 41.
|-- | -----------------------------------



| | 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     |       
|                                              |  | 2013            |        |  | 2012 | 
|                                              |  | NIS in millions |       
|                                              |  |                
|Interest payable                              |  |                 | 405    |  |      |  | 370    | 
|Government institutions                       |  |                 | 84     |  |      |  | 100    | 
|Deferred income and deposits from tenants     |  |                 | 166    |  |      |  | 183    | 
|Employees                                     |  |                 | *) 58  |  |      |  | 63     | 
|Dividend payable to non-controlling interests |  |                 | 77     |  |      |  | 87     | 
|Payables for real estate transactions         |  |                 | 149    |  |      |  | 102    | 
|Warranty provision                            |  |                 | *) 16  |  |      |  | 20     | 
|Commitment to purchase marketable securities  |  |                 | 26     |  |      |  | 62     | 
|Accrued expenses                              |  |                 | *) 119 |  |      |  | *) 103 | 
|Other payables                                |  |                 | 172    |  |      |  | 178    | 
|                                              |  |                 |        |  |      |  |        | 
|                                              |  |                
|                                              |  |                 | 1,272  |  |      |  | 1,268  | 
|                                              |  |                 |        |  |      |  |        | 



|*) | Restated, refer to Note 2ee and 41.
|-- | -----------------------------------



| | b. | As for linkage basis of other accounts payable, see Note 37.
| | -- | ------------------------------------------------------------



F-76



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 20:- | DEBENTURES
|--------- | ----------



| | a. | Composition
| | -- | -----------



|                                                      |  |      |                |              |  |                            |       |  |                     |  |      |                       |  |  |                 |  |  |  |        |  |  |  |        | 
|----------------------------------------------------- |  | ---- | -------------- | ------------ |  | -------------------------- | ----- |  | ------------------- |  | ---- | --------------------- |  |  | --------------- |  |  |  | ------ |  |  |  | ------ | 
|                                                      |  | Item |                | Denomination |  | Outstandingpar valueamount |       |  | NominalInterestrate |  |      | Effectiveinterestrate |  |  | Carrying amount | 
|                                                      |  |      |                |              |  | December 31                |      
|                                                      |  |      |                |              |  | 2013                       |       |  | 2012                | 
|                                                      |  |      | NISin millions |              |  | %                          |       |  | %                   |  |      | NISin millions        | 
|                                                      |  |      |                |              |  |                            |      
|Debentures (series A)                                 |  |      |                | U.S.$        |  |                            | 219   |  |                     |  | 6.50 |                       |  |  | 6.18            |  |  |  | 158    |  |  |  | 212    | 
|Debentures (series B)                                 |  |      |                |  **)        |  |                            | 170   |  |                     |  | 2.39 |                       |  |  | 2.50            |  |  |  | 149    |  |  |  | 153    | 
|Debentures (series C) *)                              |  |      |                | Israeli CPI  |  |                            | 894   |  |                     |  | 4.95 |                       |  |  | 4.88            |  |  |  | 1,115  |  |  |  | 1,251  | 
|Debentures (series D) *)                              |  |      |                | Israeli CPI  |  |                            | 2,069 |  |                     |  | 5.10 |                       |  |  | 5.02            |  |  |  | 2,466  |  |  |  | 2,421  | 
|Debentures (series E) *)                              |  |      |                | NIS**)       |  |                            | 556   |  |                     |  | 1.58 |                       |  |  | 2.08            |  |  |  | 545    |  |  |  | 543    | 
|Debentures (series F) *)                              |  |      |                | NIS          |  |                            | 570   |  |                     |  | 6.40 |                       |  |  | 6.73            |  |  |  | 565    |  |  |  | 847    | 
|Debentures (series I) *)                              |  |      |                | Israeli CPI  |  |                            | 1,223 |  |                     |  | 5.30 |                       |  |  | 5.58            |  |  |  | 1,444  |  |  |  | 1,668  | 
|Debentures (series J)                                 |  |      |                | Israeli CPI  |  |                            | 735   |  |                     |  | 6.50 |                       |  |  | 5.76            |  |  |  | 861    |  |  |  | 850    | 
|Debentures (series K)*)                               |  | b1   |                | Israeli CPI  |  |                            | 2,653 |  |                     |  | 5.35 |                       |  |  | 4.35            |  |  |  | 2,961  |  |  |  | 1,716  | 
|Debentures (Series L) *)                              |  | b2   |                | Israeli CPI  |  |                            | 451   |  |                     |  | 4.00 |                       |  |  | 4.14            |  |  |  | 446    |  |  |  |       | 
|Non-listed debentures of a wholly owned subsidiary *) |  |      |                | Israeli CPI  |  |                            | 33    |  |                     |  | 4.57 |                       |  |  | 4.98            |  |  |  | 40     |  |  |  | 59     | 
|EQY debentures                                        |  |      |                | U.S.$        |  |                            | 2,537 |  |                     |  | 5.02 |                       |  |  | 5.07            |  |  |  | 2,522  |  |  |  | 2,707  | 
|FCR debentures                                        |  | c    |                | C$           |  |                            | 6,120 |  |                     |  | 4.86 |                       |  |  | 5.00            |  |  |  | 6,079  |  |  |  | 5,508  | 
|CTY debentures                                        |  | d    |                |             |  |                            | 3,163 |  |                     |  | 4.05 |                       |  |  | 4.07            |  |  |  | 3,137  |  |  |  | 931    | 
|Dori Group debentures                                 |  |      |                | NIS **)      |  |                            | 100   |  |                     |  | 5.73 |                       |  |  | 6.57            |  |  |  | 100    |  |  |  | 100    | 
|Dori Group debentures                                 |  | e1   |                | Israeli CPI  |  |                            | 358   |  |                     |  | 7.27 |                       |  |  | 5.81            |  |  |  | 389    |  |  |  | 361    | 
|Dori Construction debentures                          |  | e2   |                | Israeli CPI  |  |                            | 90    |  |                     |  | 4.50 |                       |  |  | 4.13            |  |  |  | 93     |  |  |  |       | 
|                                                      |  |      |                |              |  |                            |       |  |                     |  |      |                       |  |  |                 |  |  |  |        |  |  |  |        | 
|                                                      |  |      |                |              |  |                            |      
|                                                      |  |      |                |              |  |                            |       |  |                     |  |      |                       |  |  |                 |  |  |  | 23,070 |  |  |  | 19,327 | 
|Less - current maturities of debentures               |  |      |                |              |  |                            |       |  |                     |  |      |                       |  |  |                 |  |  |  | 839    |  |  |  | 827    | 
|                                                      |  |      |                |              |  |                            |       |  |                     |  |      |                       |  |  |                 |  |  |  |        |  |  |  |        | 
|                                                      |  |      |                |              |  |                            |      
|                                                      |  |      |                |              |  |                            |       |  |                     |  |      |                       |  |  |                 |  |  |  | 22,231 |  |  |  | 18,500 | 
|                                                      |  |      |                |              |  |                            |       |  |                     |  |      |                       |  |  |                 |  |  |  |        |  |  |  |        | 



|*) | As for cross- currency swap transactions entered in respect of part of the debentures, see Note 37d.
|-- | ----------------------------------------------------------------------------------------------------

|**) | Floating interest.
|--- | ------------------

Maturity dates



|                          |  |                   |     |  |        |  |       |        |  |  |        |  |  |        |       |  |                      |  |       |       |  |  |        |  |  |  |        | 
|------------------------- |  | ----------------- | --- |  | ------ |  | ----- | ------ |  |  | ------ |  |  | ------ | ----- |  | -------------------- |  | ----- | ----- |  |  | ------ |  |  |  | ------ | 
|                          |  | December 31, 2013 |    
|                          |  | Year 1            |     |  | Year 2 |  |       | Year 3 |  |  | Year 4 |  |  | Year 5 |       |  | Year 6 andthereafter |  |       | Total | 
|Denomination              |  | NIS in millions   |    
|                          |  |                   |     |  |        |  |      
|NIS                       |  |                   | 33  |  |        |  | 350   |        |  |  | 282    |  |  |        | 545   |  |                      |  |      |       |  |  |       |  |  |  | 1,210  | 
|NIS linked to Israeli CPI |  |                   | 283 |  |        |  | 680   |        |  |  | 668    |  |  |        | 243   |  |                      |  | 1,453 |       |  |  | 6,488  |  |  |  | 9,815  | 
|U.S.$                     |  |                   | 39  |  |        |  | 413   |        |  |  | 405    |  |  |        | 797   |  |                      |  |      |       |  |  | 1,026  |  |  |  | 2,680  | 
|C$                        |  |                   | 326 |  |        |  | 408   |        |  |  |       |  |  |        | 816   |  |                      |  | 490   |       |  |  | 4,039  |  |  |  | 6,079  | 
|                         |  |                   | 158 |  |        |  | 50    |        |  |  | 50     |  |  |        | 660   |  |                      |  |      |       |  |  | 2,368  |  |  |  | 3,286  | 
|                          |  |                   |     |  |        |  |       |        |  |  |        |  |  |        |       |  |                      |  |       |       |  |  |        |  |  |  |        | 
|                          |  |                   |     |  |        |  |      
|                          |  |                   | 839 |  |        |  | 1,901 |        |  |  | 1,405  |  |  |        | 3,061 |  |                      |  | 1,943 |       |  |  | 13,921 |  |  |  | 23,070 | 
|                          |  |                   |     |  |        |  |       |        |  |  |        |  |  |        |       |  |                      |  |       |       |  |  |        |  |  |  |        | 



| | b. | Additional information on the Companys debentures
| | -- | --------------------------------------------------



| | 1. | In the months June and December of 2013, the Company issued to the public NIS 1,038 million par value unsecured debentures (series K), by way of an expansion of a listed series for net consideration of NIS 1,227
million.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The parent company purchased, as part of the issuance, NIS 85 million par value unsecured debentures (series
K) for consideration of NIS 101 million.



F-77



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 20:- | DEBENTURES (Cont.)
|--------- | ------------------



As part of the issuance of the debentures (series K), 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.



| | 2. | On October 26, 2013 the Company completed by way of a shelf prospectus, the initial issuance of NIS 451 million par value unsecured debentures (series L) for net consideration of NIS 446 million. The
debentures are linked to an increase in the Israeli CPI, bear an annual fixed interest rate of 4%, are payable every June 30 and December 31 and mature as follows: On June 30, 2023 10% of the principle will mature, on June 30, of
each year 2024 and 2025 15% of the principle will mature, and on June 30 of each year 2026 and 2027 30% of the principle will mature.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 54 million par value unsecured debentures (series L) for
consideration of NIS 54 million.



| | 3. | On May 13, 2013, S&P Maalot upgraded the Companys credit rating for all the series of outstanding debentures to ilAA- from ilA+, with a stable outlook. All series of outstanding corporate debentures are
rated Aa3 by Midroog, with a stable outlook
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | For a charge recorded to secure repayment of debentures (series J), see Note 29b.
| | -- | ---------------------------------------------------------------------------------



F-78



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 20:- | DEBENTURES (Cont.)
|--------- | ------------------



| | c. | FCR debentures
| | -- | --------------



| | 1. | In August 2013, FCR issued to the public in Canada C$ 50 million par value (NIS 172 million) unsecured debentures (series O), by way of an expansion of a listed series. The debentures bear an annual interest
rate of 4.43% and are payable in one instalment on January 31, 2022.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | In May 2013, FCR issued to the public in Canada C$ 300 million par value (NIS 1,053 million) unsecured debentures (series Q) by way of an expansion of a listed series. The debentures bear an annual interest
rate of 3.90% and are payable in one instalment on October 30, 2023.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | In January 2013, FCR issued to the public in Canada C$ 100 million par value (NIS 359 million) unsecured debentures (series P), by way of an expansion of a listed series. The debentures bear a fixed annual interest
rate of 3.95% and are payable in one installment on December 5, 2022.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | d. | CTY debentures
| | -- | --------------



| | 1. | In June 2013, CTY issued to the public  500 million par value (NIS 2,360 million) unsecured debentures that bear an annual interest rate of 3.75% and mature on June 24, 2020.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Within the framework of the debenture offering, CTY committed to maintain a ratio of 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 net proceeds of the offering, inter alia, to early redeem bank loans and unwind hedging transactions
that hedged interest rate risks. As a result, the Group reclassified  24.9 million (NIS 118 million) from other comprehensive income to finance expense as part of net income.



| | 2. | In May 2013, S&P initially assigned CTYs long-term credit rating to investment grade level of BBB- with a stable outlook.
| | -- | --------------------------------------------------------------------------------------------------------------------------

In May 2013, Moodys initially assigned CTYs long-term credit rating to investment grade level of Baa3, with a stable outlook.



F-79



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 20:- | DEBENTURES (Cont.)
|--------- | ------------------



| | e. | Dori Group debentures
| | -- | ---------------------



| | 1. | In October 2013, Dori Group made an offering of NIS 78 million par value of debentures (series G). These debentures are CPI-linked and bear annual interest at a rate of 2.9%. Principal payments are due as follows:
four equal yearly payments of 10% of the principal on September 30 of the years 2016-2019 (inclusive) and two equal yearly payments of 30% of the principal on September 30 of the years 2020-2021 (inclusive). Within the framework of the
debenture offering, 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.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | In April 2013, Dori Construction made an offering of NIS 82 million par value of debentures (series A). These debentures are CPI-linked and bear annual interest at a rate of 4.5%. Principal payments are due in
eight equal yearly payments on March 31 of the years 2014-2021 (inclusive). Within the framework of the debenture offering, 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 (Series A), other than under the circumstances specified in the trust deed.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of the Reporting Date, Dori Group and Dori Construction are in compliance with the aforesaid covenants. As for a none-compliance with
covenants and its remedy after the reporting date, refer to Note 40k.



|NOTE 21:- | CONVERTIBLE DEBENTURES
|--------- | ----------------------



| | a. | Composition
| | -- | -----------



|                             |  |      |  |              |  |                            |       |  |                     |  |         |                       |  |  |                 |  |  |  |       |  |  |  |       | 
|---------------------------- |  | ---- |  | ------------ |  | -------------------------- | ----- |  | ------------------- |  | ------- | --------------------- |  |  | --------------- |  |  |  | ----- |  |  |  | ----- | 
|                             |  |      |  |              |  | Outstandingpar valueamount |       |  | NominalInterestrate |  |         | Effectiveinterestrate |  |  | Carrying amount | 
|                             |  |      |  |              |  |                            |       |  | December 31         | 
|                             |  |      |  |              |  |                            |       |  | 2013                |  |         | 2012                  | 
|                             |  | Item |  | Denomination |  | NISin millions             |       |  | %                   |  |         | %                     |  |  | NISin millions  | 
|                             |  |      |  |              |  |                            |      
|FCR (series C,D,E,F,G,H,I,J) |  | c    |  | C$           |  |                            | 1,283 |  |                     |  | *) 5.08 |                       |  |  | *) 6.35         |  |  |  | 1,221 |  |  |  | 1,197 | 
|CTY (series 2006)            |  |      |  |             |  |                            |      |  |                     |  |         |                       |  |  |                 |  |  |  |      |  |  |  | 193   | 
|                             |  |      |  |              |  |                            |       |  |                     |  |         |                       |  |  |                 |  |  |  |       |  |  |  |       | 
|                             |  |      |  |              |  |                            |      
|                             |  |      |  |              |  |                            |       |  |                     |  |         |                       |  |  |                 |  |  |  | 1,221 |  |  |  | 1,390 | 
|Less - current maturities    |  |      |  |              |  |                            |       |  |                     |  |         |                       |  |  |                 |  |  |  |      |  |  |  | 193   | 
|                             |  |      |  |              |  |                            |       |  |                     |  |         |                       |  |  |                 |  |  |  |       |  |  |  |       | 
|                             |  |      |  |              |  |                            |      
|                             |  |      |  |              |  |                            |       |  |                     |  |         |                       |  |  |                 |  |  |  | 1,221 |  |  |  | 1,197 | 
|                             |  |      |  |              |  |                            |       |  |                     |  |         |                       |  |  |                 |  |  |  |       |  |  |  |       | 



|*) | Weighted average interest rate.
|-- | -------------------------------



F-80



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 21:- | CONVERTIBLE DEBENTURES (Cont.)
|--------- | ------------------------------



| | b. | Additional information
| | -- | ----------------------

Below is information about the outstanding series of FCR
unsecured convertible debentures, as of December 31, 2013:



|                  |  |              |  |                     |      |  |                       |  |             |                          |  |                            |  |  |                      |  |  |     
|----------------- |  | ------------ |  | ------------------- | ---- |  | --------------------- |  | ----------- | ------------------------ |  | -------------------------- |  |  | -------------------- |  |  | ----
|Issue date/series |  | Denomination |  | Nominalinterestrate |      |  | Effectiveinterestrate |  |             | Conversionprice pershare |  | Outstandingpar valueamount |  |  | Year offinalmaturity
|                  |  |              |  | %                   |      |  | C$                    |  | C$ millions |                          |  |                           
|                  |  |              |  |                     |      | 
|2009 D            |  | C$           |  |                     | 5.70 |  |                       |  | 6.88        |                          |  | 18.75                      |  |  | 42.9                 |  |  | 2017
|2011 E            |  | C$           |  |                     | 5.40 |  |                       |  | 6.90        |                          |  | 22.62                      |  |  | 57.5                 |  |  | 2019
|2011 F            |  | C$           |  |                     | 5.25 |  |                       |  | 6.07        |                          |  | 23.77                      |  |  | 57.5                 |  |  | 2019
|2011 G            |  | C$           |  |                     | 5.25 |  |                       |  | 6.66        |                          |  | 23.25                      |  |  | 50.0                 |  |  | 2018
|2012 H            |  | C$           |  |                     | 4.95 |  |                       |  | 6.51        |                          |  | 23.75                      |  |  | 75.0                 |  |  | 2017
|2012 I            |  | C$           |  |                     | 4.75 |  |                       |  | 6.19        |                          |  | 26.75-27.75                |  |  | 52.5                 |  |  | 2019
|2013J             |  | C$           |  |                     | 4.45 |  |                       |  | 5.34        |                          |  | 26.75-27.75                |  |  | 57.5                 |  |  | 2020
|                  |  |              |  |                     |      |  |                       |  |             |                          |  |                            |  |  |                      |  |  |     
|                  |  |              |  |                     |      | 
|                  |  |              |  |                     |      |  |                       |  |             |                          |  |                            |  |  | 392.9                |  |  |     
|                  |  |              |  |                     |      |  |                       |  |             |                          |  |                            |  |  |                      |  |  |     

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 will be in FCR shares.

During 2013, FCR paid all of its convertible
debentures interest payments through issuance of 1.1 million shares of FCR, according to its aforementioned policy.



|NOTE 22:- | INTEREST-BEARING LOANS FROM FINANCIAL INSTITUTIONS AND OTHERS
|--------- | -------------------------------------------------------------



| | a. | Composition
| | -- | -----------



|                             |  |                      |     |  |                    |  |     |       |  |  |         |  |  |      |       |  |              |  |       |       |  |  |       |  |  |  |    |  |  |  |        | 
|---------------------------- |  | -------------------- | --- |  | ------------------ |  | --- | ----- |  |  | ------- |  |  | ---- | ----- |  | ------------ |  | ----- | ----- |  |  | ----- |  |  |  | -- |  |  |  | ------ | 
|                             |  | In NIS -linked toCPI |     |  | In NIS -non-linked |  |     | In C$ |  |  | In US $ |  |  | In  |       |  | SwedishKrona |  |       | Other |  |  | Total | 
|                             |  | NIS in millions      |    
|December 31, 2013            |  |                      |     |  |                    |  |     |       |  |  |         |  |  |      |       |  |              |  |       |       |  |  |       |  |  |  |    |  |  |  |        | 
|                             |  |                      |     |  |                    |  |     |      
|Banks                        |  |                      | 328 |  |                    |  | 48  |       |  |  | 4,547   |  |  |      | 4,311 |  |              |  | 3,329 |       |  |  | 1,387 |  |  |  | 42 |  |  |  | 13,992 | 
|Other financial institutions |  |                      |    |  |                    |  |    |       |  |  |        |  |  |      | 266   |  |              |  | 509   |       |  |  |      |  |  |  |   |  |  |  | 775    | 
|                             |  |                      |     |  |                    |  |     |       |  |  |         |  |  |      |       |  |              |  |       |       |  |  |       |  |  |  |    |  |  |  |        | 
|                             |  |                      |     |  |                    |  |     |      
|                             |  |                      | 328 |  |                    |  | 48  |       |  |  | 4,547   |  |  |      | 4,577 |  |              |  | 3,838 |       |  |  | 1,387 |  |  |  | 42 |  |  |  | 14,767 | 
|Net of current maturities    |  |                      | 18  |  |                    |  | 4   |       |  |  | 830     |  |  |      | 427   |  |              |  | 745   |       |  |  | 50    |  |  |  | 1  |  |  |  | 2,075  | 
|                             |  |                      |     |  |                    |  |     |       |  |  |         |  |  |      |       |  |              |  |       |       |  |  |       |  |  |  |    |  |  |  |        | 
|                             |  |                      |     |  |                    |  |     |      
|                             |  |                      | 310 |  |                    |  | 44  |       |  |  | 3,717   |  |  |      | 4,150 |  |              |  | 3,093 |       |  |  | 1,337 |  |  |  | 41 |  |  |  | 12,692 | 
|                             |  |                      |     |  |                    |  |     |       |  |  |         |  |  |      |       |  |              |  |       |       |  |  |       |  |  |  |    |  |  |  |        | 
|December 31, 2012            |  |                      |     |  |                    |  |     |       |  |  |         |  |  |      |       |  |              |  |       |       |  |  |       |  |  |  |    |  |  |  |        | 
|                             |  |                      |     |  |                    |  |     |      
|Total                        |  |                      | 346 |  |                    |  | 222 |       |  |  | 6,428   |  |  |      | 5,485 |  |              |  | 5,419 |       |  |  | 2,851 |  |  |  | 44 |  |  |  | 20,795 | 
|                             |  |                      |     |  |                    |  |     |       |  |  |         |  |  |      |       |  |              |  |       |       |  |  |       |  |  |  |    |  |  |  |        | 
|                             |  |                      |     |  |                    |  |     |      
|Net of current maturities    |  |                      | 328 |  |                    |  | 222 |       |  |  | 5,574   |  |  |      | 5,276 |  |              |  | 5,267 |       |  |  | 2,723 |  |  |  | 43 |  |  |  | 19,433 | 
|                             |  |                      |     |  |                    |  |     |       |  |  |         |  |  |      |       |  |              |  |       |       |  |  |       |  |  |  |    |  |  |  |        | 



F-81



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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 (Cont.)
|--------- | ---------------------------------------------------------------------



The composition of classification of loans by fixed or variable interest rate:



|                                             |  |                      |     |  |                    |  |     |       |  |  |         |  |  |      |       |  |              |  |       |       |  |  |       |  |  |  |     |  |  |  |       | 
|-------------------------------------------- |  | -------------------- | --- |  | ------------------ |  | --- | ----- |  |  | ------- |  |  | ---- | ----- |  | ------------ |  | ----- | ----- |  |  | ----- |  |  |  | --- |  |  |  | ----- | 
|                                             |  | In NIS -linked toCPI |     |  | In NIS -non-linked |  |     | In C$ |  |  | In US $ |  |  | In  |       |  | SwedishKrona |  |       | Other |  |  | Total | 
|                                             |  | NIS in millions      |    
|December 31, 2013                            |  |                      |     |  |                    |  |     |       |  |  |         |  |  |      |       |  |              |  |       |       |  |  |       |  |  |  |     |  |  |  |       | 
|                                             |  |                      |     |  |                    |  |     |      
|Fixed interest rate                          |  |                      | 328 |  |                    |  | 7   |       |  |  | 4,291   |  |  |      | 2,775 |  |              |  | 511   |       |  |  | 61    |  |  |  |    |  |  |  | 7,973 | 
|                                             |  |                      |     |  |                    |  |     |       |  |  |         |  |  |      |       |  |              |  |       |       |  |  |       |  |  |  |     |  |  |  |       | 
|                                             |  |                      |     |  |                    |  |     |      
|Weighted average effective interest rate (%) |  |                      | 3.2 |  |                    |  | 4.0 |       |  |  | 4.9     |  |  |      | 5.8   |  |              |  | 5.5   |       |  |  | 3.9   |  |  |  |    |  |  |  |       | 
|                                             |  |                      |     |  |                    |  |     |       |  |  |         |  |  |      |       |  |              |  |       |       |  |  |       |  |  |  |     |  |  |  |       | 
|                                             |  |                      |     |  |                    |  |     |      
|Variable interest rate                       |  |                      |    |  |                    |  | 41  |       |  |  | 256     |  |  |      | 1,802 |  |              |  | 3,327 |       |  |  | 1,326 |  |  |  | 42  |  |  |  | 6,794 | 
|                                             |  |                      |     |  |                    |  |     |       |  |  |         |  |  |      |       |  |              |  |       |       |  |  |       |  |  |  |     |  |  |  |       | 
|                                             |  |                      |     |  |                    |  |     |      
|Weighted average effective interest rate (%) |  |                      |    |  |                    |  | 4.0 |       |  |  | 3.0     |  |  |      | 2.6   |  |              |  | 1.9   |       |  |  | 2.8   |  |  |  | 1.9 |  |  |  |       | 
|                                             |  |                      |     |  |                    |  |     |       |  |  |         |  |  |      |       |  |              |  |       |       |  |  |       |  |  |  |     |  |  |  |       | 



| | b. | Maturity dates
| | -- | --------------



|                            |  |                      |     |  |                    |  |    |       |  |  |         |  |  |      |       |  |              |  |       |       |  |  |       |  |  |  |    |  |  |  |        | 
|--------------------------- |  | -------------------- | --- |  | ------------------ |  | -- | ----- |  |  | ------- |  |  | ---- | ----- |  | ------------ |  | ----- | ----- |  |  | ----- |  |  |  | -- |  |  |  | ------ | 
|                            |  | In NIS -linked toCPI |     |  | In NIS -non-linked |  |    | In C$ |  |  | In US $ |  |  | In  |       |  | SwedishKrona |  |       | Other |  |  | Total | 
|                            |  | NIS in millions      |    
|December 31, 2013           |  |                      |     |  |                    |  |    |       |  |  |         |  |  |      |       |  |              |  |       |       |  |  |       |  |  |  |    |  |  |  |        | 
|                            |  |                      |     |  |                    |  |    |      
|Year 1 - current maturities |  |                      | 18  |  |                    |  | 4  |       |  |  | 830     |  |  |      | 427   |  |              |  | 745   |       |  |  | 50    |  |  |  | 1  |  |  |  | 2,075  | 
|                            |  |                      |     |  |                    |  |    |       |  |  |         |  |  |      |       |  |              |  |       |       |  |  |       |  |  |  |    |  |  |  |        | 
|                            |  |                      |     |  |                    |  |    |      
|Year 2                      |  |                      | 310 |  |                    |  | 44 |       |  |  | 808     |  |  |      | 639   |  |              |  | 292   |       |  |  | 11    |  |  |  | 1  |  |  |  | 2,105  | 
|Year 3                      |  |                      |    |  |                    |  |   |       |  |  | 743     |  |  |      | 1,094 |  |              |  | 176   |       |  |  | 888   |  |  |  | 40 |  |  |  | 2,941  | 
|Year 4                      |  |                      |    |  |                    |  |   |       |  |  | 338     |  |  |      | 277   |  |              |  | 625   |       |  |  |      |  |  |  |   |  |  |  | 1,240  | 
|Year 5                      |  |                      |    |  |                    |  |   |       |  |  | 458     |  |  |      | 318   |  |              |  | 1,523 |       |  |  | 438   |  |  |  |   |  |  |  | 2,737  | 
|Year 6 and thereafter       |  |                      |    |  |                    |  |   |       |  |  | 1,370   |  |  |      | 1,822 |  |              |  | 477   |       |  |  |      |  |  |  |   |  |  |  | 3,669  | 
|                            |  |                      |     |  |                    |  |    |       |  |  |         |  |  |      |       |  |              |  |       |       |  |  |       |  |  |  |    |  |  |  |        | 
|                            |  |                      |     |  |                    |  |    |      
|                            |  |                      | 310 |  |                    |  | 44 |       |  |  | 3,717   |  |  |      | 4,150 |  |              |  | 3,093 |       |  |  | 1,337 |  |  |  | 41 |  |  |  | 12,692 | 
|                            |  |                      |     |  |                    |  |    |       |  |  |         |  |  |      |       |  |              |  |       |       |  |  |       |  |  |  |    |  |  |  |        | 
|                            |  |                      |     |  |                    |  |    |      
|                            |  |                      | 328 |  |                    |  | 48 |       |  |  | 4,547   |  |  |      | 4,577 |  |              |  | 3,838 |       |  |  | 1,387 |  |  |  | 42 |  |  |  | 14,767 | 
|                            |  |                      |     |  |                    |  |    |       |  |  |         |  |  |      |       |  |              |  |       |       |  |  |       |  |  |  |    |  |  |  |        | 



| | c. | As for charges, refer to Note 29.
| | -- | ---------------------------------



| | d. | Contractual restrictions and financial covenants
| | -- | ------------------------------------------------

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 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.
| | -- | -------------------------------------------------------------------------------------------------------



F-82



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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 (Cont.)
|--------- | ---------------------------------------------------------------------



| | c) | Ratio of net financial debt to value of total assets, based on consolidated financial statements, shall not exceed 75%.
| | -- | -----------------------------------------------------------------------------------------------------------------------



| | d) | Ratio of net financial debt 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) | Ratio of CTYs equity (including equity loans, but excluding minority interests, the fair value of derivatives and the tax effect thereof) to CTYs total assets shall not be less than 30%.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | j) | Ratio of CTYs EBITDA (with certain adjustments) to CTYs net financial expenses shall not be less than 1.6.
| | -- | ------------------------------------------------------------------------------------------------------------



| | k) | Ratio of CTY shares used as collateral shall not be less than 30% from CTYs share capital.
| | -- | -------------------------------------------------------------------------------------------



| | l) | 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.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | m) | 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.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-83



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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 (Cont.)
|--------- | ---------------------------------------------------------------------



| | n) | 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%).
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | o) | Ratio of FCRs EBITDA to FCRs finance expenses shall not be less than 1.55 or 1.75 over three consecutive quarters.
| | -- | --------------------------------------------------------------------------------------------------------------------



| | p) | 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.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | q) | 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 (or 20% if a portion of the credit facility will be repaid), and ratio of EQY
shares used as collateral to bank shall not be less than 20% from EQYs fully diluted share capital.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | r) | 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.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | s) | 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%.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | t) | 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.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | u) | Ratio of EQYs EBITDA to EQYs finance expenses shall not be less than 1.65.
| | -- | ----------------------------------------------------------------------------



| | v) | 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 liabilities to value of total assets shall not exceed 60%.
| | -- | -------------------------------------------------------------------------



| | b) | Ratio of secured debt to value of total assets shall not exceed 40%.
| | -- | --------------------------------------------------------------------



| | c) | Ratio of mortgage receivables and mezzanine debt investments to total assets value shall not exceed 10%.
| | -- | --------------------------------------------------------------------------------------------------------



| | d) | Ratio of EBITDA to debt service (principal and interest payments) shall not be less than 1.50.
| | -- | ----------------------------------------------------------------------------------------------



| | e) | Ratio of NOI from unpledged assets to interest on unsecured debt shall not be less than 1.85.
| | -- | ---------------------------------------------------------------------------------------------



| | f) | 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
shall not exceed 35%.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | g) | Ratio of unsecured debt to unsecured assets shall not exceed 60%.
| | -- | -----------------------------------------------------------------



| | h) | Tangible net worth shall not be less than approximately U.S.$ 1.5 billion plus 75% of the proceeds received from issuances of equity after September 2011.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| | i) | Total development and redevelopment budgeted costs shall be less than 20% of the total assets value.
| | -- | ----------------------------------------------------------------------------------------------------



| | 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%.
| | -- | -----------------------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 22:- | INTEREST-BEARING LOANS FROM FINANCIAL INSTITUTIONS AND OTHERS (Cont.)
|--------- | ---------------------------------------------------------------------



| | 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) | The ratio of secured debt outstanding to total debt shall not exceed 7.5%.
| | -- | --------------------------------------------------------------------------



| | d) | Change of control in CTY, as defined in the financing agreement.
| | -- | ----------------------------------------------------------------



| | 5. | Gazit Development
| | -- | -----------------

Shareholders equity shall not be less than NIS 180
million linked to the Israeli CPI 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.



| | 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 equity to total assets at Dori Group of no less than 15%, on the basis of consolidated financial statements; 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% (after the reporting date the ratio was updated to 130%); 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; 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.



| | 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.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 22:- | INTEREST-BEARING LOANS FROM FINANCIAL INSTITUTIONS AND OTHERS (Cont.)
|--------- | ---------------------------------------------------------------------



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, 2013, the Company and its subsidiaries, except for Dori Construction, were in compliance
with all the aforementioned covenants.

As for failure to comply with certain covenants and its remedy after the reporting date by Gazit
Development, Dori Group and Dori Construction refer to Notes 40h and 40k.



|NOTE 23:- | OTHER LIABILITIES
|--------- | -----------------



| | a. | Composition
| | -- | -----------



|                                                          |  |                 |     |  |      |  |     | 
|--------------------------------------------------------- |  | --------------- | --- |  | ---- |  | --- | 
|                                                          |  | December 31     |    
|                                                          |  | 2013            |     |  | 2012 | 
|                                                          |  | NIS in millions |    
|                                                          |  |                
|Tenants security deposits (1)                            |  |                 | 41  |  |      |  | 46  | 
|Leasing liabilities for investment properties             |  |                 | 91  |  |      |  | 90  | 
|Put option to acquire additional rights in joint ventures |  |                 | 3   |  |      |  | 84  | 
|Deferred purchase price of investment property            |  |                 |    |  |      |  | 75  | 
|Employee benefit liabilities, net (Note 24)               |  |                 | 7   |  |      |  | 7   | 
|Other liabilities                                         |  |                 | 56  |  |      |  | 51  | 
|                                                          |  |                 |     |  |      |  |     | 
|                                                          |  |                
|                                                          |  |                 | 198 |  |      |  | 353 | 
|                                                          |  |                 |     |  |      |  |     | 



|(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, the
Canadian dollar or the Euro.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | As for the linkage basis of other financial liabilities, refer to Note 37.
| | -- | --------------------------------------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|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.



|NOTE 25:- | TAXES ON INCOME
|--------- | ---------------



| | a. | Tax laws applicable to the Group in Israel
| | -- | ------------------------------------------

Income Tax (Inflationary Adjustments)
Law, 1985

In accordance with the law, up until the end of the tax year 2007, the results for tax purposes in Israel are adjusted for
changes in the Israeli CPI.

In February 2008, the Israeli Parliament passed an amendment to the Inflationary Adjustments Law, which limits
the application of the law from the year 2008 and thereafter. From 2008 onwards, the results for tax purposes are measured in nominal values, excluding certain adjustments for changes in the Israeli CPI carried out in the periods proceeding
December 31, 2007.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 25:- | TAXES ON INCOME (Cont.)
|--------- | -----------------------



| | 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 (25% in 2013) 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 24% for 2011 and 25% for 2012 and 2013. 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, increasing the corporate tax rate from 25% to 26.5% starting from January 1, 2014 and
the taxation of revaluation gains which is subject to future regulation. As of the reporting date the above mentioned regulation had not been instated.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 25:- | TAXES ON INCOME (Cont.)
|--------- | -----------------------



The deferred tax balances included in the financial statements as of December 31, 2013
are calculated according to the tax rates in effect at the reporting date, and take into account the effects which could result from changes in the law.

An entity is liable to tax on a real capital gain at the corporate tax rate applicable in the year of the sale.



| | 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 - 45.2%). 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%.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 25:- | TAXES ON INCOME (Cont.)
|--------- | -----------------------



| | d. | Taxation in Finland
| | -- | -------------------

The corporate tax rate in Finland in 2013 is 24.5%. In 2014 the tax
rate decreased to 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.



| | 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 2009.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 25:- | TAXES ON INCOME (Cont.)
|--------- | -----------------------



In September 2013, the Company and the Israel Tax Authority (ITA) entered into an income tax
assessments agreement for the years 2004-2011. As part of the assessments agreement, the Company paid NIS 29 million (including interest and CPI adjustment) and the balances of the Companys tax losses and credits as of December 31,
2011 were also updated, various costs of the Companys investments in subsidiaries were revised.

As a result of the agreement, the
balances of the Companys losses as of December 31, 2011 consisted of a balance of NIS 262 million with respect to capital losses carried forward to 2012 and a balance of NIS 395 million with respect of losses under
Section 29(1) of the Israeli Income Tax Ordinance carried forward to 2012.



| | j. | Subsidiaries disputed tax assessments
| | -- | -------------------------------------

On August 5, 2012, an indirectly-owned
subsidiary was issued tax orders for the years 2006-2010. According to the tax orders, the ITA disallowed the deduction of expenses in a total amount of approximately NIS 90 million for the years under the assessments, inter alia, with respect
to finance expenses as well as other expenses. The subsidiary has lodged an appeal against these tax orders with the District Court. On February 21, 2013, an assessments agreement was signed between a subsidiary and the assessing ITA to which
the subsidiary will bear a tax liability of NIS 4.5 million, including interest and linkage, thereby closing the assessments for the 2006-2010 tax years. On March 18, 2013 the assessments agreement has been approved by a court ruling. It
should be noted that the assessments agreement does not cover the dispute with respect to the indirectly-held subsidiaries, as described below. The resolution of this issue is pending on the ruling of the District Court. 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 the 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 June 2012, two
indirectly-owned subsidiaries were issued with tax orders 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. Should the position of the ITA prevail in full, a nominal tax liability
will be created for the subsidiary of approximately NIS 49.5 million.

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.

In the opinion of the subsidiaries, the provision in the financial statements covers the exposure pertaining to the disputed tax assessments.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 25:- | TAXES ON INCOME (Cont.)
|--------- | -----------------------



| | 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 to 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, 2013
| | -- | -------------------------------------------------------------

The Company and its
wholly-owned Israeli resident subsidiaries have carry-forward losses for tax purposes (also refer to Note 25i above). With respect to the tax benefit associated with such losses, the Group has recognized deferred tax assets amounting to NIS
45 million as of the reporting date (2012 - NIS 149 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 524 million. With respect to the
tax benefit associated with these losses, deferred tax assets were recognized, amounting to NIS 102 million (2012 - NIS 81 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 246 million, of which a
recognized deferred tax asset represents approximately NIS 50 million (2012 - NIS 58 million) primarily offsetting the deferred tax liability. The carry-forward losses may be utilized over a 20-year period, which expires between 2014 and
2033.

The Companys wholly-owned U.S. resident subsidiary has carry-forward non deductible interest amounting to NIS 279 million
that can be offset under certain restrictions against future tax gains, of which deferred tax assets were recognized in the amount of NIS 104 million (2012 - NIS 121 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 124 million (2012 - NIS 108 million), for which deferred tax assets have been recognized at an amount of NIS 16 million.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 25:- | TAXES ON INCOME (Cont.)
|--------- | -----------------------



| | m. | Deferred taxes, net:
| | -- | --------------------

The composition and movement in deferred taxes are as follows:



|                                                                  |  |                                                   |        |   |                     |  |         |        |  |  |       |   |  |  |        |  
|----------------------------------------------------------------- |  | ------------------------------------------------- | ------ | - | ------------------- |  | ------- | ------ |  |  | ----- | - |  |  | ------ | -
|                                                                  |  | Investmentproperties anddepreciablefixedassets *) |        |   | Carry-forwardlosses |  |         | Others |  |  | Total |  
|                                                                  |  | NIS in millions                                   |       
|                                                                  |  |                                                   |        |  
|Balance as of January 1, 2011                                     |  |                                                   | (2,062 | ) |                     |  | 274     |        |  |  | (88   | ) |  |  | (1,876 | )
|                                                                  |  |                                                   |        |  
|Carried to foreign currency translation reserve                   |  |                                                   | (105   | ) |                     |  | 17      |        |  |  | (2    | ) |  |  | (90    | )
|Amounts carried to other comprehensive income                     |  |                                                   |       |   |                     |  |        |        |  |  | 51    |   |  |  | 51     |  
|Amounts carried to other capital reserves                         |  |                                                   | 62     |   |                     |  | (41     | )      |  |  | (30   | ) |  |  | (9     | )
|Initially consolidated companies and increase in holding interest |  |                                                   | (231   | ) |                     |  | 36      |        |  |  | (28   | ) |  |  | (223   | )
|Amounts carried to income statement                               |  |                                                   | (476   | ) |                     |  | 106     |        |  |  | 44    |   |  |  | (326   | )
|                                                                  |  |                                                   |        |   |                     |  |         |        |  |  |       |   |  |  |        |  
|                                                                  |  |                                                   |        |  
|Balance as of December 31, 2011                                   |  |                                                   | (2,812 | ) |                     |  | 392     |        |  |  | (53   | ) |  |  | (2,473 | )
|                                                                  |  |                                                   |        |  
|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 income                     |  |                                                   |       |   |                     |  |        |        |  |  | (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 | )
|                                                                  |  |                                                   |        |   |                     |  |         |        |  |  |       |   |  |  |        |  



|*) | Restated and retrospectively adjusted, refer to Notes 2a and 2ee.
|-- | -----------------------------------------------------------------

The deferred taxes are
calculated at tax rates ranging between 13.1% and 42.9% (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.

Deferred
taxes are presented as follows



|                                  |  |                 |        |   |      |  |        |  
|--------------------------------- |  | --------------- | ------ | - | ---- |  | ------ | -
|                                  |  | December 31     |       
|                                  |  | 2013            |        |   | 2012 | 
|                                  |  | NIS in millions |       
|                                  |  |                
|Within non-current assets         |  |                 | 106    |   |      |  | 198    |  
|Within non-current liabilities *) |  |                 | (3,276 | ) |      |  | (3,380 | )
|                                  |  |                 |        |   |      |  |        |  
|                                  |  |                
|                                  |  |                 | (3,170 | ) |      |  | (3,182 | )
|                                  |  |                 |        |   |      |  |        |  



|*) | Restated and retrospectively adjusted, refer to Notes 2a, 2ee and 41.
|-- | ---------------------------------------------------------------------



F-94



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 25:- | TAXES ON INCOME (Cont.)
|--------- | -----------------------



| | n. | Taxes on income included in the income statements
| | -- | -------------------------------------------------



|                                |  |                        |     |  |      |  |     |      |  |  |     | 
|------------------------------- |  | ---------------------- | --- |  | ---- |  | --- | ---- |  |  | --- | 
|                                |  | Year ended December 31 |    
|                                |  | 2013                   |     |  | 2012 |  |     | 2011 | 
|                                |  | NIS in millions        |    
|                                |  |                        |    
|Current taxes *)                |  |                        | 53  |  |      |  | 19  |      |  |  | 24  | 
|Taxes in respect of prior years |  |                        | 9   |  |      |  | 1   |      |  |  | 2   | 
|Deferred taxes **) ***)         |  |                        | 203 |  |      |  | 738 |      |  |  | 326 | 
|                                |  |                        |     |  |      |  |     |      |  |  |     | 
|                                |  |                        |    
|                                |  |                        | 265 |  |      |  | 758 |      |  |  | 352 | 
|                                |  |                        |     |  |      |  |     |      |  |  |     | 



|*) | Current income taxes include withholding tax from interest paid by foreign subsidiaries to the Company, as well as current tax expenses of foreign subsidiaries.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

|**) | The expense for 2013 is net of deferred income tax at an amount of NIS 72 million due to Companys estimation of its ability to offset tax losses in the future against future gains.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|***) | Restated and retrospectively adjusted, refer to Notes 2a and 2ee.
|---- | -----------------------------------------------------------------



| | o. | Taxes on income relates to other comprehensive income and to other equity items
| | -- | -------------------------------------------------------------------------------

With
respect of tax on income relates to other comprehensive income and other equity line items, see Notes 25m and 27g.



F-95



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 25:- | TAXES ON INCOME (Cont.)
|--------- | -----------------------



| | p. | Below is the reconciliation between the statutory tax rate and the effective tax rate *):
| | -- | -----------------------------------------------------------------------------------------



|                                                                                                                   |  |                        |       |   |      |  |       |      |  |  |       |  
|------------------------------------------------------------------------------------------------------------------ |  | ---------------------- | ----- | - | ---- |  | ----- | ---- |  |  | ----- | -
|                                                                                                                   |  | Year ended December 31 |      
|                                                                                                                   |  | 2013                   |       |   | 2012 |  |       | 2011 | 
|                                                                                                                   |  | NIS in millions        |      
|                                                                                                                   |  |                        |      
|Income before taxes on income                                                                                      |  |                        | 2,450 |   |      |  | 3,171 |      |  |  | 2,381 |  
|                                                                                                                   |  |                        |       |   |      |  |       |      |  |  |       |  
|                                                                                                                   |  |                        |      
|Statutory tax rate                                                                                                 |  |                        | 25    | % |      |  | 25    | %    |  |  | 24    | %
|                                                                                                                   |  |                        |       |   |      |  |       |      |  |  |       |  
|                                                                                                                   |  |                        |      
|Tax calculated using statutory tax rate                                                                            |  |                        | 613   |   |      |  | 793   |      |  |  | 571   |  
|                                                                                                                   |  |                        |      
|Increase (decrease) in taxes resulting from permanent differences - the tax effect:                                |  |                        |       |   |      |  |       |      |  |  |       |  
|                                                                                                                   |  |                        |      
|Tax exempt income, income subject to special tax rates and non deductible expenses **)                             |  |                        | (110  | ) |      |  | (101  | )    |  |  | (311  | )
|Increase in taxes resulting from change in carry-forward tax losses for which no deferred taxes were provided, net |  |                        | 84    |   |      |  | 78    |      |  |  | 228   |  
|Taxes on non-controlling interest in a subsidiary qualifies as a REIT                                              |  |                        | (218  | ) |      |  | (13   | )    |  |  | (190  | )
|Taxes with respect to prior years                                                                                  |  |                        | 9     |   |      |  | 1     |      |  |  | 2     |  
|Deferred taxes due to changes in tax rates                                                                         |  |                        | (49   | ) |      |  | 33    |      |  |  | 90    |  
|Taxes with respect to Companys share of equity-accounted investees, net                                           |  |                        | (37   | ) |      |  | (75   | )    |  |  | (80   | )
|Difference in tax rate applicable to income of foreign companies and other differences                             |  |                        | (27   | ) |      |  | 42    |      |  |  | 42    |  
|                                                                                                                   |  |                        |       |   |      |  |       |      |  |  |       |  
|                                                                                                                   |  |                        |      
|Taxes on income                                                                                                    |  |                        | 265   |   |      |  | 758   |      |  |  | 352   |  
|                                                                                                                   |  |                        |       |   |      |  |       |      |  |  |       |  
|                                                                                                                   |  |                        |      
|Effective tax rate                                                                                                 |  |                        | 10.8  | % |      |  | 23.9  | %    |  |  | 14.8  | %
|                                                                                                                   |  |                        |       |   |      |  |       |      |  |  |       |  



|*) | Restated and retrospectively adjusted, refer to Notes 2a and 2ee.
|-- | -----------------------------------------------------------------

|**) | 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.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-96



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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 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%.

In
January, 2013, the Company waived, under certain conditions, its right of first offer from Aloney-Hetz.



| | 2. | Shareholders agreement between the Company and CPI in connection with ATR
| | -- | --------------------------------------------------------------------------

The
Company and CPI (the Investors) have entered into a number of agreements regulating their relationships with regard to their investment in ATR, which include the following principles:



| | a) | Appointment of directors to the ATR Board is proportional to their interest in ATR shares, as it stands from time to time, based on specified thresholds. Since the Investors jointly own over 80 million ATR shares,
they are entitled according to the agreements with ATR to appoint four directors in ATR. Based on their relative interests as of the approval date of these financial statements, each party may appoint two directors to the ATR Board. It was also
agreed that subject to a minimal holding threshold (which is met as of the reporting date) of each of the investors, a consent of both sides is required for nominating the Chairman of the Board and the majority of the nomination committees
members.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 26:- | CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
|--------- | ----------------------------------------------



| | b) | The Investors undertook to vote jointly with the share issued to them pursuant to the investment agreements in ATR at the general meetings of ATR shareholders, and in case of disagreement - to vote against the relevant
matter, for as long as each party owns at least 20 million ATR shares. Should one of the parties own less than 20 million ATR shares, and at the same time the other party owns more than 20 million ATR shares, the former would be
required (subject to any applicable law) to vote as directed by the latter.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c) | As part of the agreements with respect to ATR, the Investors were granted consent rights with regard to highly significant decisions pertaining to ATR, including the appointment of ATRs CEO (the consent
rights). Decisions subject to the consent rights are to be made jointly by the Investors, for as long as each party owns at least 20 million ATR shares. Should any of the parties own less than 20 million shares, that partys
consent rights would be terminated.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | d) | Provisions regarding a right of first offer between the investors in event of shares transfer of the shares issued to them as part of the investment agreements in ATR and investors consent while exceeding 50% interest
in ATR by one of the investors.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | 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.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | 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     |       
|                      |  | 2013            |       
|                      |  | NIS in millions |       
|                      | 
|Year 1                |  |                 | 2,750  | 
|Year 2                |  |                 | 2,411  | 
|Year 3                |  |                 | 2,095  | 
|Year 4                |  |                 | 1,790  | 
|Year 5                |  |                 | 1,490  | 
|Year 6 and thereafter |  |                 | 6,784  | 
|                      |  |                 |        | 
|                      | 
|Total                 |  |                 | 17,320 | 
|                      |  |                 |        | 



| | 5. | As for engagements with related parties, refer to Note 38.
| | -- | ----------------------------------------------------------



F-98



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 26:- | CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
|--------- | ----------------------------------------------



| | b. | Guarantees
| | -- | ----------



| | 1. | As of December 31, 2013, 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 784 million (December 31, 2012 - approximately NIS 774 million).
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | As of December 31, 2013 Dori Group and its subsidiaries provided guarantees as follows:
| | -- | ---------------------------------------------------------------------------------------



|                                                                              |  |                |       | 
|----------------------------------------------------------------------------- |  | -------------- | ----- | 
|                                                                              |  | NIS inmillions |      
|                                                                              | 
|Bank guarantees under the Apartments Sales Law in Israel                      |  |                | 380   | 
|Bank guarantees to secure performance and quality of other construction works |  |                | 441   | 
|Others                                                                        |  |                | 204   | 
|                                                                              |  |                |       | 
|                                                                              | 
|                                                                              |  |                | 1,025 | 
|                                                                              |  |                |       | 



| | 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, 2013 and 2012 amounted to
NIS 1,305 million and NIS 1,219 million, respectively. Total utilized guarantees (including debentures) as of December 31, 2013 and 2012 amounted to NIS 373 million and NIS 417 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, 2013, totaled approximately
NIS 1,444 million (December 31, 2012 - NIS 834 million).
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | As of the reporting date, CTY has a contingent liability to refund input VAT received of approximately NIS 383 million (December 31, 2012 - NIS 361 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.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-99



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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. | On June 19, 2011, the Company announced that a settlement agreement had been reached in all the legal proceedings involving the Company, ATR and Meinl Bank (as well as all the other related parties and former and
current officers of the parties). The principal legal proceedings referred to were a lawsuit in an amount of EUR 1.2 billion filed by Meinl Bank in 2010 against the Company and other parties in a Jersey Island court, which sought recognition as a
derivative action. The subject of the aforesaid lawsuit was the transactions which were executed between the Company and CPI and ATR during 2009, and which the plaintiffs claim were not in the best interests of ATR, had caused it damages, and had
resulted in unjust enrichment to the defendants. This action followed a claim filed by ATR in August 2010, in England, in an amount of over EUR 2 billion for losses caused to ATR at the time that ATR was under the management of Meinl Bank and its
controlling shareholder, prior to its acquisition by the Company. The settlement agreement did not prescribe any payment to any specific party or its deputy with regard to the alleged losses.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Despite the settlement agreement, the Company is unable to guarantee that the Company and ATR will not be sued in the future with regard to
the causes on which the derivative action described above was based. Nevertheless, ATRs independent Board Committee has conducted its own investigation into the events alleged to have occurred in the derivative action and have concluded that
the allegations made against the directors of ATR are without merit and that there would be no benefit to ATR in such a claim.



| | 3. | As ATR noted in its financial reports as of December 31, 2013, 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 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.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 26:- | CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
|--------- | ----------------------------------------------



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.



| | 4. | As for the Companys and subsidiaries disputed income tax and VAT assessments, refer to Note 25j and 25k above.
| | -- | ---------------------------------------------------------------------------------------------------------------



| | 5. | As for lawsuits that were filed to certify as class actions, against Dori Construction, Dori Group, their directors and officers and their auditors, as well as against Gazit Development and the Company in July and
August 2014, refer to Note 40m.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|NOTE 27:- | EQUITY
|--------- | ------



| | a. | Composition
| | -- | -----------



|                                        |  |                   |             |  |                       |  |                |                 |  |  |                       |  |  |            |                |  |                       |  |             |  |  |  |                | 
|--------------------------------------- |  | ----------------- | ----------- |  | --------------------- |  | -------------- | --------------- |  |  | --------------------- |  |  | ---------- | -------------- |  | --------------------- |  | ----------- |  |  |  | -------------- | 
|                                        |  | December 31, 2013 |             |  | December 31, 2012     |  |                | January 1, 2012 | 
|                                        |  | Authorized        |             |  | Issued andoutstanding |  |                | Authorized      |  |  | Issued andoutstanding |  |  | Authorized |                |  | Issued andoutstanding | 
|                                        |  | Number of shares  |            
|                                        |  |                   |             |  |                       | 
|Ordinary shares of NIS 1 par value each |  |                   | 500,000,000 |  |                       |  | *) 176,837,508 |                 |  |  | 500,000,000           |  |  |            | *) 166,294,246 |  |                       |  | 500,000,000 |  |  |  | *) 165,868,103 | 
|                                        |  |                   |             |  |                       |  |                |                 |  |  |                       |  |  |            |                |  |                       |  |             |  |  |  |                | 



| | b. | Movement in issued and outstanding share capital
| | -- | ------------------------------------------------



|                                                   |  |                  |             |  |      |  |             |      |  |  |             | 
|-------------------------------------------------- |  | ---------------- | ----------- |  | ---- |  | ----------- | ---- |  |  | ----------- | 
|                                                   |  | 2013             |             |  | 2012 |  |             | 2011 | 
|                                                   |  | Number of shares |            
|                                                   |  |                  |            
|Balance as of January 1 *)                         |  |                  | 166,294,246 |  |      |  | 165,868,103 |      |  |  | 155,413,817 | 
|                                                   |  |                  |            
|Exercise of share options (employees and officers) |  |                  | 104,242     |  |      |  | 426,143     |      |  |  | 104,286     | 
|Issue of shares                                    |  |                  | 10,439,020  |  |      |  |            |      |  |  | 10,350,000  | 
|                                                   |  |                  |             |  |      |  |             |      |  |  |             | 
|                                                   |  |                  |            
|Balance as of December 31 *)                       |  |                  | 176,837,508 |  |      |  | 166,294,246 |      |  |  | 165,868,103 | 
|                                                   |  |                  |             |  |      |  |             |      |  |  |             | 



|*) | of which NIS 1,046,993 par value shares are held in treasury by the Company.
|-- | ----------------------------------------------------------------------------



| | c. | The Ordinary shares of NIS 1 par value each confer upon the holders the right to receive dividends, the right to receive share distributions and the right to distributions of the Companys assets in the event
of liquidation, whether voluntary or in any other manner. Each share confers one voting right. The shares are traded on the Tel-Aviv Stock Exchange and on the New-York Stock Exchange (NYSE).
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | d. | On October 15, 2013 the Company completed the process of listing its Ordinary shares for trading on the Toronto Stock Exchange (TSX). The listing was not accompanied by an equity offering by the Company.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 27:- | EQUITY (Cont.)
|--------- | --------------



| | e. | 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).
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | f. | On December 19, 2011 the Company completed an initial public offering of 10,350,000 ordinary shares in the NYSE in consideration for U.S.$ 93.2 million (NIS 350 million). After deducting the underwriting
discounts and commissions and the offering expenses, the proceeds from the offering amounted to U.S.$ 81.6 million (NIS 313 million).
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Norstar Group purchased, as part of the offering 2.5 million ordinary shares of the Company, for a total consideration of U.S.$
22.5 million (NIS 86 million).



| | g. | Composition of other capital reserves:
| | -- | --------------------------------------



|                                            |  |                        |       |   |      |  |      |      |  |  |       |  
|------------------------------------------- |  | ---------------------- | ----- | - | ---- |  | ---- | ---- |  |  | ----- | -
|                                            |  | Year ended December 31 |      
|                                            |  | 2013                   |       |   | 2012 |  |      | 2011 | 
|                                            |  | NIS in millions        |      
|                                            |  |                        |      
|Available-for-sale financial assets         |  |                        | 15    |   |      |  | 19   |      |  |  | (20   | )
|Transactions with controlling shareholder   |  |                        | 147   |   |      |  | 147  |      |  |  | 147   |  
|Transactions with non-controlling interests |  |                        | *) 44 |   |      |  | 77   |      |  |  | *) 52 |  
|Share-based payment                         |  |                        | 16    |   |      |  | 11   |      |  |  | 23    |  
|Revaluation reserve of cash flow hedges     |  |                        | (76   | ) |      |  | (199 | )    |  |  | (151  | )
|Revaluation reserve of fixed assets         |  |                        |      |   |      |  | 5    |      |  |  | 98    |  
|                                            |  |                        |       |   |      |  |      |      |  |  |       |  
|                                            |  |                        |      
|                                            |  |                        | 146   |   |      |  | 60   |      |  |  | 149   |  
|                                            |  |                        |       |   |      |  |      |      |  |  |       |  



|*) | Restated and retrospectively adjusted, refer to Notes 2a and 2ee.
|-- | -----------------------------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 27:- | EQUITY (Cont.)
|--------- | --------------



| | h. | Supplementary information with regard to other comprehensive income (loss)
| | -- | --------------------------------------------------------------------------



|                                                                                  |  |                        |        |   |      |  |      |      |  |  |       |  
|--------------------------------------------------------------------------------- |  | ---------------------- | ------ | - | ---- |  | ---- | ---- |  |  | ----- | -
|                                                                                  |  | Year ended December 31 |       
|                                                                                  |  | 2013                   |        |   | 2012 |  |      | 2011 | 
|                                                                                  |  | NIS in millions        |       
|Exchange differences on translation of foreign operations **)                     |  |                        | (2,414 | ) |      |  | (425 | )    |  |  | 1,129 |  
|Transfer to profit or loss with respect to disposal of foreign operations         |  |                        |       |   |      |  | 3    |      |  |  | 12    |  
|Groups share in equity-accounted investees                                       |  |                        | (29    | ) |      |  | 9    |      |  |  | 2     |  
|                                                                                  |  |                        |        |   |      |  |      |      |  |  |       |  
|                                                                                  |  |                        |       
|                                                                                  |  |                        | (2,443 | ) |      |  | (413 | )    |  |  | 1,143 |  
|                                                                                  |  |                        |        |   |      |  |      |      |  |  |       |  
|                                                                                  |  |                        |       
|Gain (loss) with respect to cash flow hedges *)                                   |  |                        | 172    |   |      |  | (128 | )    |  |  | (183  | )
|Transfer to profit or loss with respect to exercise cash flow hedges transactions |  |                        | 130    |   |      |  | 8    |      |  |  | 7     |  
|Groups share in equity-accounted investees                                       |  |                        | 10     |   |      |  | (12  | )    |  |  | (11   | )
|Tax effect                                                                        |  |                        | (73    | ) |      |  | 32   |      |  |  | 48    |  
|                                                                                  |  |                        |        |   |      |  |      |      |  |  |       |  
|                                                                                  |  |                        |       
|                                                                                  |  |                        | 239    |   |      |  | (100 | )    |  |  | (139  | )
|                                                                                  |  |                        |        |   |      |  |      |      |  |  |       |  
|Income (loss) with respect to available-for-sale financial assets                 |  |                        | (7     | ) |      |  | 39   |      |  |  | (35   | )
|Transfer to income statement with respect to available-for-sale financial assets  |  |                        | 4      |   |      |  | (3   | )    |  |  | (7    | )
|Tax effect                                                                        |  |                        | (1     | ) |      |  | 1    |      |  |  | 3     |  
|                                                                                  |  |                        |        |   |      |  |      |      |  |  |       |  
|                                                                                  |  |                        |       
|                                                                                  |  |                        | (4     | ) |      |  | 37   |      |  |  | (39   | )
|                                                                                  |  |                        |        |   |      |  |      |      |  |  |       |  
|Revaluation gain (loss) on fixed assets in joint venture                          |  |                        | (6     | ) |      |  | 10   |      |  |  | 28    |  
|                                                                                  |  |                        |        |   |      |  |      |      |  |  |       |  
|                                                                                  |  |                        |       
|Total other comprehensive income (loss)                                           |  |                        | (2,214 | ) |      |  | (466 | )    |  |  | 993   |  
|                                                                                  |  |                        |        |   |      |  |      |      |  |  |       |  



|*) | In 2013, includes NIS 118 million due to unwinding of hedge transactions in CTY, refer to Note 20d.
|-- | ---------------------------------------------------------------------------------------------------

|**) | Retrospectively adjusted, refer to Note 2a.
|--- | -------------------------------------------



| | i. | Composition of non-controlling interests
| | -- | ----------------------------------------



|                                                                                     |  |                        |        |  |      |  |        |      |  |  |        | 
|------------------------------------------------------------------------------------ |  | ---------------------- | ------ |  | ---- |  | ------ | ---- |  |  | ------ | 
|                                                                                     |  | Year ended December 31 |       
|                                                                                     |  | 2013                   |        |  | 2012 |  |        | 2011 | 
|                                                                                     |  | NIS in millions        |       
|                                                                                     |  |                        |       
|Share in equity of subsidiaries *) **)                                               |  |                        | 14,381 |  |      |  | 14,406 |      |  |  | 11,987 | 
|Share options, warrants and capital reserve from share-based payment in subsidiaries |  |                        | 144    |  |      |  | 154    |      |  |  | 158    | 
|Conversion option proceeds in subsidiaries                                           |  |                        | 26     |  |      |  | 56     |      |  |  | 52     | 
|                                                                                     |  |                        |        |  |      |  |        |      |  |  |        | 
|                                                                                     |  |                        |       
|                                                                                     |  |                        | 14,551 |  |      |  | 14,616 |      |  |  | 12,197 | 
|                                                                                     |  |                        |        |  |      |  |        |      |  |  |        | 



|*) | Including capital reserves and acquisition-date fair value adjustments.
|-- | -----------------------------------------------------------------------

|**) | Restated and retrospectively adjusted, refer to Notes 2a and 2ee.
|--- | -----------------------------------------------------------------



F-103



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 27:- | EQUITY (Cont.)
|--------- | --------------



| | j. | 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 2013, the Company announced that the dividend to be declared in 2014
would not be less than NIS 0.45 per share per quarter (NIS 1.80 per share on an annualized basis), in place of the dividend policy announced in November 2012, pursuant to which the Company distributed NIS 0.43 per share per quarter
(NIS 1.72 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 2013, the Company declared and paid dividends in the total amount of approximately NIS 298 million (NIS 1.72 per share) (2012 - NIS 264 million (NIS 1.60 per share), 2011 - NIS
241 million (NIS 1.56 per share)).
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | On March 25, 2014, the Company declared a dividend in the amount of NIS 0.45 per share (a total of approximately NIS 79 million), payable on April 23, 2014 to the shareholders of the Company on
April 7, 2014.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | k. | 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 2013, the Group raised a total of approximately NIS 1,086 million, in 2012 - NIS 2,224 million and in 2011 - NIS 1,498 million.



F-104



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 27:- | EQUITY (Cont.)
|--------- | --------------



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 July 2005, the Company adopted a share-based compensation plan for employees and officers of the Company based on section 102 of the Income Tax Ordinance, based on the capital gain alternative with a trustee. In
addition, between the years 2002-2010, the Company had a share-based compensation plan for the Board of Directors.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | 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.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. | In February 2013, the Companys Compensation Committee and the Board of Directors approved a grant of non-listed share options, Restricted Share Units (RSUs) and Performance Share Units
(PSUs) to 6 officers of the Company and 24 employees (the grantees), according to the capital gain alternative with a trustee, pursuant to section 102 of the Israeli Income Tax Ordinance (as detailed in section b above). The
aggregated value of the equity instruments granted at the grant day totalled NIS 13.9 million.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In September 2013 the
Companys General Meeting approved (after the approval of the Board of Directors and the Compensation Committee) a grant of non-listed share options, RSUs and PSUs to Mr. Aharon Soffer, the Companys president and to Mr. Arie
Mientkavich, Deputy Chairmen of the Board. For additional information, refer to sections d and e below.

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.

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.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 28:- | SHARE-BASED COMPENSATION (Cont.)
|--------- | --------------------------------



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.



| | d. | The following table presents the movement in number of the Companys share options and their weighted average exercise price:
| | -- | -----------------------------------------------------------------------------------------------------------------------------



|                                         |  |                  |           |   |                              |  |       |                  |  |  |                              |   |  |  |       | 
|---------------------------------------- |  | ---------------- | --------- | - | ---------------------------- |  | ----- | ---------------- |  |  | ---------------------------- | - |  |  | ----- | 
|                                         |  | 2013             |           |   | 2012                         | 
|                                         |  | Number ofoptions |           |   | Weightedaverageexerciseprice |  |       | Number ofoptions |  |  | Weightedaverageexerciseprice |  
|                                         |  |                  |           |   | NIS                          |  |       |                  |  |  | NIS                          |  
|Share options at beginning of year       |  |                  | 818,900   |   |                              |  | 36.12 |                  |  |  | 2,207,402                    |   |  |  | 35.33 | 
|Share options granted *)                 |  |                  | 1,048,287 |   |                              |  | 47.85 |                  |  |  |                             |   |  |  |      | 
|Share options forfeited                  |  |                  | (12,871   | ) |                              |  | 46.59 |                  |  |  |                             |   |  |  |      | 
|Share options exercised                  |  |                  | (353,600  | ) |                              |  | 37.04 |                  |  |  | (1,326,902                   | ) |  |  | 34.45 | 
|Share options expired                    |  |                  |          |   |                              |  |      |                  |  |  | (61,600                      | ) |  |  | 48.76 | 
|                                         |  |                  |           |   |                              |  |       |                  |  |  |                              |   |  |  |       | 
|                                         |  |                  |           |  
|Share options at end of year             |  |                  | 1,500,716 |   |                              |  | 44.00 |                  |  |  | 818,900                      |   |  |  | 36.12 | 
|                                         |  |                  |           |   |                              |  |       |                  |  |  |                              |   |  |  |       | 
|                                         |  |                  |           |  
|Share options exercisable at end of year |  |                  | 311,425   |   |                              |  | 33.61 |                  |  |  | 220,400                      |   |  |  | 35.71 | 
|                                         |  |                  |           |   |                              |  |       |                  |  |  |                              |   |  |  |       | 



|*) | Options granted in 2013
|-- | -----------------------



|                                                |  |                        |         |   |     |  |         |                            |  |  |         |  
|----------------------------------------------- |  | ---------------------- | ------- | - | --- |  | ------- | -------------------------- |  |  | ------- | -
|                                                |  | Details of 2013 awards |        
|                                                |  | Employeesand officers  |         |   | CEO |  |         | DeputyChairman ofthe Board | 
|                                                |  |                        |        
|Number of options                               |  |                        | 522,303 |   |     |  | 382,306 |                            |  |  | 143,678 |  
|Exercise price NIS                              |  |                        | 48.6    |   |     |  | 47.1    |                            |  |  | 46.9    |  
|Fair value of options granted at the grant date |  |                        | 13.3    |   |     |  | 10.8    |                            |  |  | 9.5     |  
|Standard deviation                              |  |                        | 33.73   | % |     |  | 27.81   | %                          |  |  | 28.27   | %
|Risk-free interest rate                         |  |                        | 0.22    | % |     |  | 0.00    | %                          |  |  | 0.29    | %
|Share price                                     |  |                        | 47.6    |   |     |  | 48.3    |                            |  |  | 45.5    |  



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 28:- | SHARE-BASED COMPENSATION (Cont.)
|--------- | --------------------------------



| | e. | 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:
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                 |  |      |         |   |      |  |         | 
|-------------------------------- |  | ---- | ------- | - | ---- |  | ------- | 
|                                 |  | 2013 |        
|                                 |  | RSUs |         |   | PSUs | 
|                                 |  |     
|Units at beginning of the year   |  |      |        |   |      |  |        | 
|                                 |  |     
|Units granted *)                 |  |      | 153,920 |   |      |  | 244,761 | 
|Units forfeited                  |  |      | (2,829  | ) |      |  |        | 
|                                 |  |      |         |   |      |  |         | 
|                                 |  |     
|Units at end of year             |  |      | 151,091 |   |      |  | 244,761 | 
|                                 |  |      |         |   |      |  |         | 
|                                 |  |     
|Units exercisable at end of year |  |      |        |   |      |  |        | 
|                                 |  |      |         |   |      |  |         | 



|*) | RSUs and PSUs granted in 2013
|-- | -------------------------------



|                                          |  |                        |         |   |     |  |        |                            |  |  |        |  
|----------------------------------------- |  | ---------------------- | ------- | - | --- |  | ------ | -------------------------- |  |  | ------ | -
|                                          |  | Details of 2013 awards |        
|                                          |  | Employeesand officers  |         |   | CEO |  |        | DeputyChairman ofthe Board | 
|                                          |  |                        |        
|Number of RSU                             |  |                        | 95,393  |   |     |  | 42,711 |                            |  |  | 15,816 |  
|Fair value per RSU (share price)          |  |                        | 47.6    |   |     |  | 48.3   |                            |  |  | 45.5   |  
|                                          |  |                        |        
|Performance contingent restricted shares: |  |                        |         |   |     |  |        |                            |  |  |        |  
|                                          |  |                        |        
|Number of PSU                             |  |                        | 111,987 |   |     |  | 96,988 |                            |  |  | 35,786 |  
|PSU fair value at the grant date          |  |                        | 21.6    |   |     |  | 21.3   |                            |  |  | 20.1   |  
|Standard deviation                        |  |                        | 28.8    | % |     |  | 27.3   | %                          |  |  | 27.4   | %
|Risk-free interest                        |  |                        | 0.00    | % |     |  | 0.00   | %                          |  |  | 0.03   | %



| | f. | The expenses recognized in the income statement for share options, RSUs and PSUs in 2013, 2012 and 2011 amounted to NIS 9.7 million, NIS 3.9 million and NIS 7.2 million, respectively.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | g. | 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 (phantom options or units). The vesting period of the units is three or four years, as applicable, in equal installments, starting one year
from the units grant date. As of the reporting date there are 274 thousand units outstanding with weighted average exercise price of NIS 43.91, out of which 38 thousands are vested.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 28:- | SHARE-BASED COMPENSATION (Cont.)
|--------- | --------------------------------



In 2013 employees and officers of a wholly-owned subsidiary of the Company were granted
approximately 43 thousand restricted share units (RSUs) which are settled in cash according to the Companys stock price. The grant date fair value amounts to U.S. $ 13.7. The vesting period of each RSU was established in
three equal installments starting from the grant date. In the case of a dividend distribution each holder will be entitled to compensation funds reflecting the benefit in respect to the dividend distribution of the unvested RSUs on the date of the
dividend distribution.

The carrying amount of the liability relating to the aforementioned cash settled compensation plans as of
December 31, 2013 is NIS 1 million (2012 - NIS 1 million).

Expenses (income) recognized in the income statement for the
cash settled plans in 2013, 2012 and 2011 amounted to NIS 0.5 million, NIS (0.6) million and NIS (0.8) million, respectively.



|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     |       
|                                                       |  | 2013            |        |  | 2012 | 
|                                                       |  | NIS in millions |       
|                                                       |  |                
|Short-term loans and credit                            |  |                 | 175    |  |      |  | 293    | 
|Non-current liabilities (including current maturities) |  |                 | 9,555  |  |      |  | 13,128 | 
|Debentures (including current maturities)              |  |                 | 861    |  |      |  | 850    | 
|                                                       |  |                 |        |  |      |  |        | 
|                                                       |  |                
|                                                       |  |                 | 10,591 |  |      |  | 14,271 | 
|                                                       |  |                 |        |  |      |  |        | 



| | c. | 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 1,127 million.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-108



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 30:- | RENTAL INCOME
|--------- | -------------

During the years 2011-2013, 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.



|NOTE 31:- | PROPERTY OPERATING EXPENSES
|--------- | ---------------------------



|                              |  |                        |       |  |      |  |       |      |  |  |       | 
|----------------------------- |  | ---------------------- | ----- |  | ---- |  | ----- | ---- |  |  | ----- | 
|                              |  | Year ended December 31 |      
|                              |  | 2013                   |       |  | 2012 |  |       | 2011 | 
|                              |  | NIS in millions        |      
|                              |  |                        |      
|Salaries and related expenses |  |                        | 103   |  |      |  | 96    |      |  |  | 77    | 
|Property tax and other fees   |  |                        | 650   |  |      |  | 672   |      |  |  | 583   | 
|Maintenance and repairs       |  |                        | 413   |  |      |  | 421   |      |  |  | 387   | 
|Utilities                     |  |                        | 258   |  |      |  | 259   |      |  |  | 239   | 
|Insurance and security        |  |                        | 124   |  |      |  | 127   |      |  |  | 109   | 
|Others                        |  |                        | 141   |  |      |  | 130   |      |  |  | 127   | 
|                              |  |                        |       |  |      |  |       |      |  |  |       | 
|                              |  |                        |      
|                              |  |                        | 1,689 |  |      |  | 1,705 |      |  |  | 1,522 | 
|                              |  |                        |       |  |      |  |       |      |  |  |       | 



|NOTE 32:- | REVENUES AND COSTS FROM SALE OF BUILDINGS, LAND AND CONSTRUCTION WORK PERFORMED
|--------- | -------------------------------------------------------------------------------



|   |  |                                                     |  |                        |          |  |      |  |          |      |  |  |       | 
|-- |  | --------------------------------------------------- |  | ---------------------- | -------- |  | ---- |  | -------- | ---- |  |  | ----- | 
|   |  |                                                     |  | Year ended December 31 |         
|   |  |                                                     |  | 2013                   |          |  | 2012 |  |          | 2011 | 
|   |  |                                                     |  | NIS in millions        |         
|a. |  | Revenues                                            |  |                        |          |  |      |  |          |      |  |  |       | 
|   |  |                                                     |  |                       
|   |  | Revenues from sale of buildings and land            |  |                        | 328      |  |      |  | 200      |      |  |  | 14    | 
|   |  | Revenues from construction contracts                |  |                        | *) 1,344 |  |      |  | *) 1,560 |      |  |  | 987   | 
|   |  |                                                     |  |                        |          |  |      |  |          |      |  |  |       | 
|   |  |                                                     |  |                       
|   |  |                                                     |  |                        | 1,672    |  |      |  | 1,760    |      |  |  | 1,001 | 
|   |  |                                                     |  |                        |          |  |      |  |          |      |  |  |       | 
|b. |  | Cost of revenues by revenue sources                 |  |                        |          |  |      |  |          |      |  |  |       | 
|   |  |                                                     |  |                       
|   |  | Cost of sale of buildings and land                  |  |                        | 279      |  |      |  | 181      |      |  |  | 18    | 
|   |  | Cost of revenues from construction contracts        |  |                        | *) 1,409 |  |      |  | *) 1,539 |      |  |  | 949   | 
|   |  |                                                     |  |                        |          |  |      |  |          |      |  |  |       | 
|   |  |                                                     |  |                       
|   |  |                                                     |  |                        | 1,688    |  |      |  | 1,720    |      |  |  | 967   | 
|   |  |                                                     |  |                        |          |  |      |  |          |      |  |  |       | 
|c. |  | Cost of revenues by expense components *)           |  |                        |          |  |      |  |          |      |  |  |       | 
|   |  |                                                     |  |                       
|   |  | Land                                                |  |                        | 73       |  |      |  | 46       |      |  |  | 10    | 
|   |  | Materials                                           |  |                        | 427      |  |      |  | 464      |      |  |  | 220   | 
|   |  | Subcontractors                                      |  |                        | 959      |  |      |  | 953      |      |  |  | 628   | 
|   |  | Salaries and related expenses                       |  |                        | 116      |  |      |  | 119      |      |  |  | 69    | 
|   |  | Depreciation                                        |  |                        | 5        |  |      |  | 5        |      |  |  | 3     | 
|   |  | Fair value upon acquisition amortization and others |  |                        | 108      |  |      |  | 133      |      |  |  | 37    | 
|   |  |                                                     |  |                        |          |  |      |  |          |      |  |  |       | 
|   |  |                                                     |  |                       
|   |  |                                                     |  |                        | 1,688    |  |      |  | 1,720    |      |  |  | 967   | 
|   |  |                                                     |  |                        |          |  |      |  |          |      |  |  |       | 



|*) | Restated, refer to Note 2ee.
|-- | ----------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 33:- | GENERAL AND ADMINISTRATIVE EXPENSES
|--------- | -----------------------------------



|                                         |  |                        |     |  |      |  |     |      |  |  |     | 
|---------------------------------------- |  | ---------------------- | --- |  | ---- |  | --- | ---- |  |  | --- | 
|                                         |  | Year ended December 31 |    
|                                         |  | 2013                   |     |  | 2012 |  |     | 2011 | 
|                                         |  | NIS in millions        |    
|                                         |  |                        |    
|Salaries and management fees (1)         |  |                        | 350 |  |      |  | 397 |      |  |  | 469 | 
|Professional fees                        |  |                        | 77  |  |      |  | 86  |      |  |  | 85  | 
|Depreciation                             |  |                        | 29  |  |      |  | 29  |      |  |  | 25  | 
|Sales and marketing (including salary)*) |  |                        | 38  |  |      |  | 32  |      |  |  | 28  | 
|Other (including office maintenance) (2) |  |                        | 116 |  |      |  | 129 |      |  |  | 148 | 
|                                         |  |                        |     |  |      |  |     |      |  |  |     | 
|                                         |  |                        |    
|                                         |  |                        | 610 |  |      |  | 673 |      |  |  | 755 | 
|                                         |  |                        |     |  |      |  |     |      |  |  |     | 



|*) | Reclassified, refer to Note 2a.
|-- | -------------------------------

|(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 |    
|                                |  | 2013                   |     |  | 2012 |  |     | 2011 | 
|                                |  | NIS in millions        |    
|                                |  |                        |    
|Gain from disposal of investee  |  |                        |    |  |      |  | 4   |      |  |  |    | 
|Capital gain on assets disposal |  |                        | 5   |  |      |  | 21  |      |  |  |    | 
|Gain from bargain purchase *)   |  |                        | 198 |  |      |  | 134 |      |  |  | 102 | 
|Others                          |  |                        | 15  |  |      |  | 5   |      |  |  | 13  | 
|                                |  |                        |     |  |      |  |     |      |  |  |     | 
|                                |  |                        |    
|                                |  |                        | 218 |  |      |  | 164 |      |  |  | 115 | 
|                                |  |                        |     |  |      |  |     |      |  |  |     | 



|*) | In 2013 includes amount of NIS 173 million due to purchase of additional ATR shares which result in an increase of holding to 39.8% (refer to Note 9c) and an amount of NIS 25 million due to purchase of
additional indirect 7.7% of Ronson Europe N.V. shares by Dory Group in November 2013.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | Other expenses
| | -- | --------------



|                                            |  |                        |    |  |      |  |    |      |  |  |     | 
|------------------------------------------- |  | ---------------------- | -- |  | ---- |  | -- | ---- |  |  | --- | 
|                                            |  | Year ended December 31 |   
|                                            |  | 2013                   |    |  | 2012 |  |    | 2011 | 
|                                            |  | NIS in millions        |   
|                                            |  |                        |   
|Loss from decrease in holding interest, net |  |                        | 11 |  |      |  | 4  |      |  |  | 1   | 
|Capital loss on assets disposal             |  |                        | 58 |  |      |  | 26 |      |  |  | 64  | 
|Impairment of goodwill                      |  |                        |   |  |      |  |   |      |  |  | 38  | 
|Impairment of other assets                  |  |                        | 2  |  |      |  | 7  |      |  |  | 7   | 
|Other                                       |  |                        | 3  |  |      |  | 10 |      |  |  |    | 
|                                            |  |                        |    |  |      |  |    |      |  |  |     | 
|                                            |  |                        |   
|                                            |  |                        | 74 |  |      |  | 47 |      |  |  | 110 | 
|                                            |  |                        |    |  |      |  |    |      |  |  |     | 



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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 |      
|                                                                 |  | 2013                   |       |   | 2012 |  |       | 2011 | 
|                                                                 |  | NIS in millions        |      
|                                                                 |  |                        |      
|Finance expenses on debentures                                   |  |                        | 1,190 |   |      |  | 1,050 |      |  |  | 979   |  
|Finance expenses on convertible debentures                       |  |                        | 89    |   |      |  | 99    |      |  |  | 68    |  
|Finance expenses on loans from financial institutions and others |  |                        | 831   |   |      |  | 1,013 |      |  |  | 1,015 |  
|Revaluation of derivatives                                       |  |                        | 2     |   |      |  |      |      |  |  | 190   |  
|Loss from early redemption of liabilities and derivatives *)     |  |                        | 142   |   |      |  | 147   |      |  |  | 14    |  
|Exchange rate differences and other finance expenses             |  |                        | 44    |   |      |  | 37    |      |  |  | 36    |  
|Finance expenses capitalized to real estate under development    |  |                        | (113  | ) |      |  | (132  | )    |  |  | (105  | )
|                                                                 |  |                        |       |   |      |  |       |      |  |  |       |  
|                                                                 |  |                        |      
|                                                                 |  |                        | 2,185 |   |      |  | 2,214 |      |  |  | 2,197 |  
|                                                                 |  |                        |       |   |      |  |       |      |  |  |       |  



|*) | In 2013 includes NIS 118 million due to unwinding hedging transactions in a subsidiary, that was reclassified from other comprehensive income, also refer to note 20d.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | Finance income:
| | -- | ---------------



|                                         |  |                        |     |  |      |  |     |      |  |  |    | 
|---------------------------------------- |  | ---------------------- | --- |  | ---- |  | --- | ---- |  |  | -- | 
|                                         |  | Year ended December 31 |    
|                                         |  | 2013                   |     |  | 2012 |  |     | 2011 | 
|                                         |  | NIS in millions        |    
|                                         |  |                        |    
|Gain from investments in securities, net |  |                        | 7   |  |      |  | 28  |      |  |  | 11 | 
|Dividend income                          |  |                        | 4   |  |      |  | 6   |      |  |  | 8  | 
|Interest income from investees           |  |                        | 34  |  |      |  | 5   |      |  |  | 2  | 
|Interest income                          |  |                        | 73  |  |      |  | 63  |      |  |  | 51 | 
|Revaluation of derivatives *)            |  |                        | 431 |  |      |  | 13  |      |  |  |   | 
|Exchange rate differences                |  |                        |    |  |      |  | 5   |      |  |  |   | 
|                                         |  |                        |     |  |      |  |     |      |  |  |    | 
|                                         |  |                        |    
|                                         |  |                        | 549 |  |      |  | 120 |      |  |  | 72 | 
|                                         |  |                        |     |  |      |  |     |      |  |  |    | 



|*) | Primarily from swap hedging transactions.
|-- | -----------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|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, |        
|                                                      |  | 2013                    |         |  | 2012                                                  |  |     | 2011                    | 
|                                                      |  | Weightednumber ofshares |         |  | Net incomeattributableto equityholders oftheCompany*) |  |     | Weightednumber ofshares |  |  | Net incomeattributableto equityholders oftheCompany*) |  |  | Weightednumber ofshares |     |   | Net incomeattributableto equityholders oftheCompany*) | 
|                                                      |  | In thousands            |         |  | NIS inmillions                                        |  |     | In thousands            |  |  | NIS inmillions                                        |  |  | In thousands            |     |   | NIS inmillions                                        | 
|                                                      |  |                         |         |  |                                                       | 
|For the calculation of basic net earnings per share   |  |                         | 171,103 |  |                                                       |  | 926 |                         |  |  | 164,912                                               |  |  |                         | 901 |   |                                                       |  | 154,456 |  |  |  | 706 |  
|                                                      |  |                         |         |  |                                                       |  |     |                         |  |  |                                                       |  |  |                         |     |   |                                                       |  |         |  |  |  |     |  
|                                                      |  |                         |         |  |                                                       | 
|Effect of dilutive potential ordinary shares          |  |                         | 310     |  |                                                       |  | (10 | )                       |  |  | 104                                                   |  |  |                         | (34 | ) |                                                       |  | 327     |  |  |  | (52 | )
|                                                      |  |                         |         |  |                                                       |  |     |                         |  |  |                                                       |  |  |                         |     |   |                                                       |  |         |  |  |  |     |  
|                                                      |  |                         |         |  |                                                       | 
|For the calculation of diluted net earnings per share |  |                         | 171,413 |  |                                                       |  | 916 |                         |  |  | 165,016                                               |  |  |                         | 867 |   |                                                       |  | 154,783 |  |  |  | 654 |  
|                                                      |  |                         |         |  |                                                       |  |     |                         |  |  |                                                       |  |  |                         |     |   |                                                       |  |         |  |  |  |     |  



|*) | Restated and retrospectively adjusted, refer to Note 2a and 2ee.
|-- | ----------------------------------------------------------------

For details in respect of the
outstanding warrants and stock options of the Companys investees, refer to Note 9c(3), 9d(3), 9e(3) and 9f(3) and for convertible debentures issued by subsidiary, refer to Note 21.



|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.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 37:- | FINANCIAL INSTRUMENTS (Cont.)
|--------- | -----------------------------



| | 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, 90% of the Groups long-term liabilities (80% excluding interest rate swaps) bear fixed interest (as of December 31, 2012 - 87%, 73% 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, 2013 is NIS 220 million (December 31, 2012 -
NIS 101 million). This exposure is not hedged.



| | 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.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 37:- | FINANCIAL INSTRUMENTS (Cont.)
|--------- | -----------------------------



| | 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, 2013, the Group has a working capital deficiency of NIS 1.8 billion. The Group has unused approved credit facilities
in the amount of NIS 8.0 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, 2013 |          |   | December 31, 2012 | 
|                                                              |  |      |  | Carryingamount    |          |   | Fairvalue         |  |         | Carryingamount |  |  | Fairvalue |  
|                                                              |  | Note |  | NIS in millions   |         
|Financial assets                                              |  |      |  |                   |          |   |                   |  |         |                |  |  |           |   |  |  |         |  
|                                                              |  |      |  |                   |         
|Non-current investments and loans                             |  |      |  |                   | 659      |   |                   |  | 657     |                |  |  | 713       |   |  |  | 703     |  
|                                                              |  |      |  |                   |          |   |                   |  |         |                |  |  |           |   |  |  |         |  
|                                                              |  |      |  |                   |         
|Financial liabilities                                         |  |      |  |                   |          |   |                   |  |         |                |  |  |           |   |  |  |         |  
|                                                              |  |      |  |                   |         
|Debentures                                                    |  |      |  |                   | 23,070   |   |                   |  | 24,598  |                |  |  | 19,327    |   |  |  | 21,036  |  
|Convertible debentures                                        |  |      |  |                   | *) 1,221 |   |                   |  | 1,273   |                |  |  | *) 1,390  |   |  |  | 1,504   |  
|Interest-bearing loans from financial institutions and others |  |      |  |                   | 14,767   |   |                   |  | 15,090  |                |  |  | 20,795    |   |  |  | 21,324  |  
|                                                              |  |      |  |                   |          |   |                   |  |         |                |  |  |           |   |  |  |         |  
|                                                              |  |      |  |                   |         
|                                                              |  |      |  |                   | 39,058   |   |                   |  | 40,961  |                |  |  | 41,512    |   |  |  | 43,864  |  
|                                                              |  |      |  |                   |          |   |                   |  |         |                |  |  |           |   |  |  |         |  
|                                                              |  |      |  |                   |         
|Total financial liabilities, net                              |  |      |  |                   | (38,399  | ) |                   |  | (40,304 | )              |  |  | (40,799   | ) |  |  | (43,161 | )
|                                                              |  |      |  |                   |          |   |                   |  |         |                |  |  |           |   |  |  |         |  



|*) | Excluding the conversion component which is presented in non-controlling interests, for a total of NIS 26 million (2012 - NIS 56 million).
|-- | ------------------------------------------------------------------------------------------------------------------------------------------

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.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 37:- | FINANCIAL INSTRUMENTS (Cont.)
|--------- | -----------------------------



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, 2013 the interest rate range for unquoted debt instruments
(mortgages receivable) that were classified at level 3 in the fair value hierarchy is 4.25%-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, 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   |  |                   | 14,432 |  |         |  | 8,640  |         |  |  |    | 
|Convertible debentures                                        |  | 21   |  |                   | 1,221  |  |         |  |       |         |  |  |    | 
|Interest bearing loans from financial institutions and others |  | 22   |  |                   |       |  |         |  | 14,840 |         |  |  |     | 
|                                                              |  |      |  |                   |        |  |         |  |        |         |  |  |     | 
|                                                              |  |      |  |                  
|                                                              |  |      |  |                   | 15,653 |  |         |  | 23,480 |         |  |  |    | 
|                                                              |  |      |  |                   |        |  |         |  |        |         |  |  |     | 



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 37:- | FINANCIAL INSTRUMENTS (Cont.)
|--------- | -----------------------------



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 2n):



|                                                       |  |      |  |                   |     |  |         |  |     |         |  |  |     | 
|------------------------------------------------------ |  | ---- |  | ----------------- | --- |  | ------- |  | --- | ------- |  |  | --- | 
|                                                       |  |      |  | December 31, 2013 |    
|                                                       |  |      |  | Level 1           |     |  | Level 2 |  |     | Level 3 | 
|                                                       |  | Note |  | NIS in millions   |    
|Financial assets measured at fair value                |  |      |  |                   |     |  |         |  |     |         |  |  |     | 
|                                                       |  |      |  |                  
|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   |  |                   | 129 |  |         |  |    |         |  |  |    | 
|Participation certificates in equity funds *)          |  | 11   |  |                   |    |  |         |  |    |         |  |  | 315 | 
|                                                       |  |      |  |                   |     |  |         |  |     |         |  |  |     | 
|                                                       |  |      |  |                  
|                                                       |  |      |  |                   | 220 |  |         |  | 808 |         |  |  | 315 | 
|                                                       |  |      |  |                   |     |  |         |  |     |         |  |  |     | 



|                                                                    |  |      |  |                   |    |  |         |  |     |         |  |  |   | 
|------------------------------------------------------------------- |  | ---- |  | ----------------- | -- |  | ------- |  | --- | ------- |  |  | - | 
|                                                                    |  |      |  | December 31, 2013 |   
|                                                                    |  |      |  | Level 1           |    |  | Level 2 |  |     | Level 3 | 
|                                                                    |  | Note |  | NIS in millions   |   
|Financial liabilities measured at fair value through profit or loss |  |      |  |                   |    |  |         |  |     |         |  |  |   | 
|                                                                    |  |      |  |                  
|Hedging financial derivatives                                       |  | 37d  |  |                   |   |  |         |  | 201 |         |  |  |  | 
|Non-hedging financial derivatives                                   |  | 19   |  |                   | 26 |  |         |  |    |         |  |  |  | 
|Other liabilities **)                                               |  |      |  |                   |   |  |         |  |    |         |  |  | 4 | 
|                                                                    |  |      |  |                   |    |  |         |  |     |         |  |  |   | 
|                                                                    |  |      |  |                  
|                                                                    |  |      |  |                   | 26 |  |         |  | 201 |         |  |  | 4 | 
|                                                                    |  |      |  |                   |    |  |         |  |     |         |  |  |   | 



|*) | Below is the roll-forward of financial assets classified as level 3 under the fair value hierarchy:
|-- | ---------------------------------------------------------------------------------------------------



|                                                |  |                  |     |  
|----------------------------------------------- |  | ---------------- | --- | -
|                                                |  | December 31,2013 |    
|                                                |  | NIS in millions  |    
|                                                | 
|Balance at beginning of the year                |  |                  | 339 |  
|Additions                                       |  |                  | 4   |  
|Capital return                                  |  |                  | (8  | )
|Revaluation through capital reserve             |  |                  | 4   |  
|Translation adjustments from foreign operations |  |                  | (24 | )
|                                                |  |                  |     |  
|                                                | 
|Balance at end of the year                      |  |                  | 315 |  
|                                                |  |                  |     |  

The balance represent the participation certificates in private equity funds, for additional information refer
to Note 11.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 37:- | FINANCIAL INSTRUMENTS (Cont.)
|--------- | -----------------------------



|**) | The table below shows the roll-forward of financial liabilities classified as level 3 under the fair value hierarchy:
|--- | ---------------------------------------------------------------------------------------------------------------------



|                                                |  |                  |     |  
|----------------------------------------------- |  | ---------------- | --- | -
|                                                |  | December 31,2013 |    
|                                                |  | NIS in millions  |    
|                                                | 
|Balance at beginning of the year                |  |                  | 85  |  
|Distributions                                   |  |                  | (11 | )
|Exercise                                        |  |                  | (69 | )
|Revaluation through profit or loss              |  |                  | 2   |  
|Translation adjustments from foreign operations |  |                  | (3  | )
|                                                |  |                  |     |  
|                                                | 
|Balance at end of the year                      |  |                  | 4   |  
|                                                |  |                  |     |  

In 2013, 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.



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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 call options:



|                                   |  |                           |  |                                             |       |  |                                  |  |                                |  |                                   |                         |                             |                               |  |                   |  |  |          |   |  |  |      |  
|---------------------------------- |  | ------------------------- |  | ------------------------------------------- | ----- |  | -------------------------------- |  | ------------------------------ |  | --------------------------------- | ----------------------- | --------------------------- | ----------------------------- |  | ----------------- |  |  | -------- | - |  |  | ---- | -
|Transaction type                   |  | Denomination              |  | Outstanding notionalamount - NIS inmillions |       |  | Linkage basis/Interestreceivable |  | Linkage basis /Interestpayable |  | Remainingaverageeffectiveduration |                         | Fair value - NIS inmillions |                              
|                                   |  |                           |  | 31.12.13                                    |       |  | 31.12.12                         |  |                                |  |                                   |                         |                             |                               |  | 31.12.13          |  |  | 31.12.12 |  
|Cross currency swaps               |  |                           |  |                                             |       |  |                                  |  |                                |  |                                   |                         |                             |                               |  |                   |  |  |          |   |  |  |      |  
|                                   |  | Euro-NIS                  |  |                                             | 2,172 |  |                                  |  | 1,456                          |  |                                   | CPI linked, 1.10%-5.10% |                             | Fixed, 2.15%-6.36%            |  | 6.3               |  |  | 145      |   |  |  | 160  |  
|                                   |  |                           |  |                                             | 70    |  |                                  |  | 260                            |  |                                   | CPI linked, 4.95%       |                             | Variable L+1.35%              |  | 2.9               |  |  | 35       |   |  |  | 146  |  
|                                   |  |                           |  |                                             | 220   |  |                                  |  | 330                            |  |                                   | nominal, 6.0%-6.83%     |                             | Fixed, 3.98%-5.06%            |  | 2.4               |  |  | 40       |   |  |  | 45   |  
|                                   |  |                           |  |                                             | 151   |  |                                  |  |                               |  |                                   | Nominal, 2.63%          |                             | Variable, L                   |  | 5.5               |  |  | (2       | ) |  |  |     |  
|                                   |  |                           |  |                                             |       |  |                                  | 
|                                   |  | U.S.$-NIS                 |  |                                             | 272   |  |                                  |  | 50                             |  |                                   | CPI linked, 3.56%-4.57% |                             | Fixed 5.38-5.97%              |  | 6.4               |  |  | 33       |   |  |  | 20   |  
|                                   |  |                           |  |                                             |      |  |                                  |  | 475                            |  |                                   |                         |                             |                               |  |                  |  |  |         |   |  |  | 298  |  
|                                   |  |                           |  |                                             | 160   |  |                                  |  | 240                            |  |                                   | nominal, 6%-7.7%        |                             | Fixed, 4.59%-6.33%            |  | 2.4               |  |  | 26       |   |  |  | 19   |  
|                                   |  |                           |  |                                             | 150   |  |                                  |  | 150                            |  |                                   | Telbor + 0.7%           |                             | Fixed 3.53%                   |  | 3.7               |  |  | 20       |   |  |  | 8    |  
|                                   |  |                           |  |                                             | 243   |  |                                  |  |                               |  |                                   | Nominal, 2.67%          |                             | Variable, L                   |  | 5.5               |  |  | 1        |   |  |  |     |  
|                                   |  |                           |  |                                             |       |  |                                  | 
|                                   |  | C$-NIS                    |  |                                             | 773   |  |                                  |  | 374                            |  |                                   | CPI linked, 3.45%-4.95% |                             | Fixed, 5.43%-6.07%            |  | 6.6               |  |  | 115      |   |  |  | 111  |  
|                                   |  |                           |  |                                             | 305   |  |                                  |  | 320                            |  |                                   | CPI linked, 4.40%-4.95% |                             | Variable, L + 0.94%-1.35%     |  | 4.6               |  |  | 180      |   |  |  | 155  |  
|                                   |  |                           |  |                                             | 80    |  |                                  |  | 120                            |  |                                   | nominal, 6.4%           |                             | Variable, L + 1.08%           |  | 2.4               |  |  | 16       |   |  |  | 6    |  
|                                   |  |                           |  |                                             | 76    |  |                                  |  | 114                            |  |                                   | nominal, 6.0%           |                             | Fixed, 2.95%-3.15%            |  | 2.4               |  |  | 19       |   |  |  | 14   |  
|                                   |  |                           |  |                                             | 100   |  |                                  |  | 100                            |  |                                   | Telbor + 0.7%           |                             | Fixed 3.37%                   |  | 3.7               |  |  | 16       |   |  |  | 4    |  
|                                   |  |                           |  |                                             | 250   |  |                                  |  | 250                            |  |                                   | Telbor + 0.7%           |                             | Variable, L + 1.04%           |  | 3.7               |  |  | 46       |   |  |  | 19   |  
|                                   |  |                           |  |                                             |       |  |                                  | 
|                                   |  | BRL- NIS                  |  |                                             | 273   |  |                                  |  | 273                            |  |                                   | CPI Linked 2.60%        |                             | Brazil CPI linked 3.45%-3.79% |  | 4.0               |  |  | 80       |   |  |  | (3   | )
|Interest rate swaps fixed/variable |  |                           |  |                                             |       |  |                                  |  |                                |  |                                   |                         |                             |                               |  |                   |  |  |          |   |  |  |      |  
|                                   |  | U.S.$                     |  |                                             | 868   |  |                                  |  | 1,120                          |  |                                   | Variable                |                             | Fixed                         |  | 5.1               |  |  | 10       |   |  |  | (33  | )
|                                   |  | C$                        |  |                                             | 273   |  |                                  |  | 324                            |  |                                   | Variable                |                             | Fixed                         |  | 7.9               |  |  | 6        |   |  |  | (9   | )
|                                   |  |                          |  |                                             | 2,138 |  |                                  |  | 3,067                          |  |                                   | Variable                |                             | Fixed                         |  | 2.9               |  |  | (147     | ) |  |  | (287 | )
|                                   |  | Swedish Krona             |  |                                             | 1,125 |  |                                  |  | 2,500                          |  |                                   | Variable                |                             | Fixed                         |  | 2.6               |  |  | 34       |   |  |  | (152 | )
|Forward contracts                  |  |                           |  |                                             |       |  |                                  |  |                                |  |                                   |                         |                             |                               |  |                   |  |  |          |   |  |  |      |  
|                                   |  | Different currencies      |  |                                             | 3,946 |  |                                  |  | 3,870                          |  |                                   |                         |                             |                               |  | Less thanone year |  |  | 1        |   |  |  | 5    |  
|Purchase option                    |  |                           |  |                                             |       |  |                                  |  |                                |  |                                   |                         |                             |                               |  |                   |  |  |          |   |  |  |      |  
|                                   |  | Canadian government bonds |  |                                             | 294   |  |                                  |  |                               |  |                                   |                         |                             |                               |  |                   |  |  | 1        |   |  |  |     |  
|                                   |  |                           |  |                                             |       |  |                                  |  |                                |  |                                   |                         |                             |                               |  |                   |  |  |          |   |  |  |      |  
|                                   |  |                           |  |                                             |       |  |                                  | 
|                                   |  |                           |  |                                             |       |  |                                  |  |                                |  |                                   |                         |                             |                               |  |                   |  |  | 607      |   |  |  | 526  |  
|                                   |  |                           |  |                                             |       |  |                                  |  |                                |  |                                   |                         |                             |                               |  |                   |  |  |          |   |  |  |      |  



F-118



---

##### 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     |     
|                        |  | 2013            |      |   | 2012 | 
|                        |  | NIS in millions |     
|                        |  |                
|Current assets *)       |  |                 | 39   |   |      |  | 81   |  
|Non-current assets *)   |  |                 | 769  |   |      |  | 929  |  
|Current liabilities     |  |                 | (32  | ) |      |  | (12  | )
|Non-current liabilities |  |                 | (169 | ) |      |  | (472 | )
|                        |  |                 |      |   |      |  |      |  
|                        |  |                
|                        |  |                 | 607  |   |      |  | 526  |  
|                        |  |                 |      |   |      |  |      |  

In 2013, the Company unwound cash flow hedging interest-rate swap transactions (principal and interest swap)
totaling notional amount of NIS 1.3 billion in consideration for approximately NIS 598 million (the amount includes NIS 206 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     |     
|            |  | 2013            |      |   | 2012 | 
|            |  | NIS in millions |     
|            |  |                
|Assets      |  |                 | 38   |   |      |  | 11   |  
|Liabilities |  |                 | (138 | ) |      |  | (402 | )
|            |  |                 |      |   |      |  |      |  
|            |  |                
|            |  |                 | (100 | ) |      |  | (391 | )
|            |  |                 |      |   |      |  |      |  



| | 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, 2013



|                                                              |  |                 |       |  |             |  |        |             |  |  |             |   |  |       |        |   |  |  |        |  
|------------------------------------------------------------- |  | --------------- | ----- |  | ----------- |  | ------ | ----------- |  |  | ----------- | - |  | ----- | ------ | - |  |  | ------ | -
|                                                              |  | Up toone 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 |  
|                                                              |  |                 |       |  |             |  |        |             |  |  |             |   |  |       |        |   |  |  |        |  



|*) | Restated, refer to Note 2ee.
|-- | ----------------------------



F-119



---

##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 37:- | FINANCIAL INSTRUMENTS (Cont.)
|--------- | -----------------------------



December 31, 2012



|                                                              |  |                   |       |  |             |  |        |             |  |  |             |   |  |       |        |   |  |  |        |  
|------------------------------------------------------------- |  | ----------------- | ----- |  | ----------- |  | ------ | ----------- |  |  | ----------- | - |  | ----- | ------ | - |  |  | ------ | -
|                                                              |  | Less thanone year |       |  | 2 to 3years |  |        | 4 to 5years |  |  | Over 5years |   |  | Total |       
|                                                              |  | NIS in millions   |      
|                                                              |  |                   |       |  |            
|Credit from banks and others (excluding current maturities)   |  |                   | 351   |  |             |  |       |             |  |  |            |   |  |       |       |   |  |  | 351    |  
|Trade payables *)                                             |  |                   | 917   |  |             |  |       |             |  |  |            |   |  |       |       |   |  |  | 917    |  
|Other accounts payable *)                                     |  |                   | 1,093 |  |             |  |       |             |  |  |            |   |  |       |       |   |  |  | 1,093  |  
|Debentures                                                    |  |                   | 1,827 |  |             |  | 4,942  |             |  |  | 6,117       |   |  |       | 12,296 |   |  |  | 25,182 |  
|Convertible debentures                                        |  |                   | 271   |  |             |  | 132    |             |  |  | 576         |   |  |       | 868    |   |  |  | 1,847  |  
|Interest-bearing loans from financial institutions and others |  |                   | 2,452 |  |             |  | 8,662  |             |  |  | 6,356       |   |  |       | 6,959  |   |  |  | 24,429 |  
|Hedging financial derivatives, net                            |  |                   | 75    |  |             |  | 104    |             |  |  | (33         | ) |  |       | (514   | ) |  |  | (368   | )
|Other financial liabilities                                   |  |                   | 159   |  |             |  | 155    |             |  |  | 196         |   |  |       | 232    |   |  |  | 742    |  
|                                                              |  |                   |       |  |             |  |        |             |  |  |             |   |  |       |        |   |  |  |        |  
|                                                              |  |                   |       |  |            
|                                                              |  |                   | 7,145 |  |             |  | 13,995 |             |  |  | 13,212      |   |  |       | 19,841 |   |  |  | 54,193 |  
|                                                              |  |                   |       |  |             |  |        |             |  |  |             |   |  |       |        |   |  |  |        |  



|*) | Restated, refer to Note 2ee.
|-- | ----------------------------



| | f. | Linkage terms of monetary balances
| | -- | ----------------------------------



|                                                              |  |                             |         |   |                     |  |        |                  |  |  |                    |  |  |                    |        |  |       |  |       |          |  |  |       |  |  |  |        |   |  |  |        | 
|------------------------------------------------------------- |  | --------------------------- | ------- | - | ------------------- |  | ------ | ---------------- |  |  | ------------------ |  |  | ------------------ | ------ |  | ----- |  | ----- | -------- |  |  | ----- |  |  |  | ------ | - |  |  | ------ | 
|                                                              |  | December 31, 2013 *)        |        
|                                                              |  | NIS -Linkedto theIsraeliCPI |         |   | In orlinked toU.S.$ |  |        | In orlinked toC$ |  |  | In orlinked toEuro |  |  | In NIS -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 financial 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 the reporting date, the Company has NIS 4,067 million of cross-currency swaps from NIS
linked to Israeli CPI to foreign currency and NIS 1,430 million from non-linked NIS to foreign currency.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Mainly deferred taxes and advances from customers.
|--- | --------------------------------------------------

|*) | Restated and retrospectively adjusted, refer to Notes 2a and 2ee.
|-- | -----------------------------------------------------------------



F-120



---

##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 37:- | FINANCIAL INSTRUMENTS (Cont.)
|--------- | -----------------------------



|                                                              |  |                             |        |   |                     |  |        |                  |  |  |                    |  |  |                    |        |  |       |  |       |          |  |  |       |  |  |  |        |   |  |  |        | 
|------------------------------------------------------------- |  | --------------------------- | ------ | - | ------------------- |  | ------ | ---------------- |  |  | ------------------ |  |  | ------------------ | ------ |  | ----- |  | ----- | -------- |  |  | ----- |  |  |  | ------ | - |  |  | ------ | 
|                                                              |  | December 31, 2012 *)        |       
|                                                              |  | NIS -Linkedto theIsraeliCPI |        |   | In orlinked toU.S.$ |  |        | In orlinked toC$ |  |  | In orlinked toEuro |  |  | In NIS -non-linked |        |  | Other |  |       | Unlinked |  |  | Total | 
|                                                              |  | NIS in millions             |       
|Assets                                                        |  |                             |        |   |                     |  |        |                  |  |  |                    |  |  |                    |        |  |       |  |       |          |  |  |       |  |  |  |        |   |  |  |        | 
|                                                              |  |                             |        |   |                     |  |        |                 
|Cash and cash equivalents                                     |  |                             | 14     |   |                     |  | 296    |                  |  |  | 273                |  |  |                    | 703    |  |       |  | 328   |          |  |  | 69    |  |  |  |       |   |  |  | 1,683  | 
|Short-term investments and loans                              |  |                             | 89     |   |                     |  | 216    |                  |  |  | 230                |  |  |                    | 3      |  |       |  |      |          |  |  |      |  |  |  |       |   |  |  | 538    | 
|Trade and other accounts receivable                           |  |                             | 13     |   |                     |  | 72     |                  |  |  | 87                 |  |  |                    | 65     |  |       |  | 603   |          |  |  | 25    |  |  |  | 82     |   |  |  | 947    | 
|Long-term investments and loans                               |  |                             | 143    |   |                     |  | 551    |                  |  |  | 148                |  |  |                    | 2      |  |       |  | 10    |          |  |  | 2     |  |  |  |       |   |  |  | 856    | 
|                                                              |  |                             |        |   |                     |  |        |                  |  |  |                    |  |  |                    |        |  |       |  |       |          |  |  |       |  |  |  |        |   |  |  |        | 
|                                                              |  |                             |        |   |                     |  |        |                 
|Total monetary assets                                         |  |                             | 259    |   |                     |  | 1,135  |                  |  |  | 738                |  |  |                    | 773    |  |       |  | 941   |          |  |  | 96    |  |  |  | 82     |   |  |  | 4,024  | 
|Other financial assets (1)                                    |  |                             |       |   |                     |  |       |                  |  |  |                   |  |  |                    |       |  |       |  |      |          |  |  |      |  |  |  | 1,450  |   |  |  | 1,450  | 
|Other assets (2)                                              |  |                             |       |   |                     |  | 16,265 |                  |  |  | 26,483             |  |  |                    | 13,276 |  |       |  | 3,338 |          |  |  | 5,883 |  |  |  | 315    |   |  |  | 65,560 | 
|                                                              |  |                             |        |   |                     |  |        |                  |  |  |                    |  |  |                    |        |  |       |  |       |          |  |  |       |  |  |  |        |   |  |  |        | 
|                                                              |  |                             |        |   |                     |  |        |                 
|Total assets                                                  |  |                             | 259    |   |                     |  | 17,400 |                  |  |  | 27,221             |  |  |                    | 14,049 |  |       |  | 4,279 |          |  |  | 5,979 |  |  |  | 1,847  |   |  |  | 71,034 | 
|                                                              |  |                             |        |   |                     |  |        |                  |  |  |                    |  |  |                    |        |  |       |  |       |          |  |  |       |  |  |  |        |   |  |  |        | 
|                                                              |  |                             |        |   |                     |  |        |                 
|Liabilities:                                                  |  |                             |        |   |                     |  |        |                  |  |  |                    |  |  |                    |        |  |       |  |       |          |  |  |       |  |  |  |        |   |  |  |        | 
|                                                              |  |                             |        |   |                     |  |        |                 
|Short-term credit from banks and others                       |  |                             | 59     |   |                     |  | 28     |                  |  |  | 62                 |  |  |                    | 160    |  |       |  | 42    |          |  |  |      |  |  |  |       |   |  |  | 351    | 
|Trade payables and other accounts payable                     |  |                             | 165    |   |                     |  | 219    |                  |  |  | 650                |  |  |                    | 180    |  |       |  | 725   |          |  |  | 188   |  |  |  | 105    |   |  |  | 2,232  | 
|Liabilities attributable to assets held for sale              |  |                             |       |   |                     |  | 12     |                  |  |  | 156                |  |  |                    |       |  |       |  |      |          |  |  |      |  |  |  |       |   |  |  | 168    | 
|Debentures (3)                                                |  |                             | 8,325  |   |                     |  | 2,919  |                  |  |  | 5,508              |  |  |                    | 1,086  |  |       |  | 1,489 |          |  |  |      |  |  |  |       |   |  |  | 19,327 | 
|Convertible debentures                                        |  |                             |       |   |                     |  |       |                  |  |  | 1,197              |  |  |                    | 193    |  |       |  |      |          |  |  |      |  |  |  |       |   |  |  | 1,390  | 
|Interest-bearing loans from financial institutions and others |  |                             | 346    |   |                     |  | 5,485  |                  |  |  | 6,428              |  |  |                    | 5,419  |  |       |  | 222   |          |  |  | 2,895 |  |  |  |       |   |  |  | 20,795 | 
|Other financial liabilities                                   |  |                             | 2      |   |                     |  | 66     |                  |  |  | 158                |  |  |                    | 30     |  |       |  | 6     |          |  |  | 6     |  |  |  | 85     |   |  |  | 353    | 
|                                                              |  |                             |        |   |                     |  |        |                  |  |  |                    |  |  |                    |        |  |       |  |       |          |  |  |       |  |  |  |        |   |  |  |        | 
|                                                              |  |                             |        |   |                     |  |        |                 
|Total financial liabilities                                   |  |                             | 8,897  |   |                     |  | 8,729  |                  |  |  | 14,159             |  |  |                    | 7,068  |  |       |  | 2,484 |          |  |  | 3,089 |  |  |  | 190    |   |  |  | 44,616 | 
|Other liabilities (4)                                         |  |                             |       |   |                     |  |       |                  |  |  |                   |  |  |                    |       |  |       |  |      |          |  |  |      |  |  |  | 4,121  |   |  |  | 4,121  | 
|                                                              |  |                             |        |   |                     |  |        |                  |  |  |                    |  |  |                    |        |  |       |  |       |          |  |  |       |  |  |  |        |   |  |  |        | 
|                                                              |  |                             |        |   |                     |  |        |                 
|Total liabilities                                             |  |                             | 8,897  |   |                     |  | 8,729  |                  |  |  | 14,159             |  |  |                    | 7,068  |  |       |  | 2,484 |          |  |  | 3,089 |  |  |  | 4,311  |   |  |  | 48,737 | 
|                                                              |  |                             |        |   |                     |  |        |                  |  |  |                    |  |  |                    |        |  |       |  |       |          |  |  |       |  |  |  |        |   |  |  |        | 
|                                                              |  |                             |        |   |                     |  |        |                 
|Assets, net of liabilities                                    |  |                             | (8,638 | ) |                     |  | 8,671  |                  |  |  | 13,062             |  |  |                    | 6,981  |  |       |  | 1,795 |          |  |  | 2,890 |  |  |  | (2,464 | ) |  |  | 22,297 | 
|                                                              |  |                             |        |   |                     |  |        |                  |  |  |                    |  |  |                    |        |  |       |  |       |          |  |  |       |  |  |  |        |   |  |  |        | 



|(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, 2012, the Company has NIS 3,555 million of cross- currency swaps from
NIS linked to Israeli CPI to foreign currency and has NIS 1,304 million from non-linked NIS to foreign currency.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Mainly deferred taxes and advances from customers.
|--- | --------------------------------------------------

|*) | Restated and retrospectively adjusted, refer to Notes 2a and 2ee.
|-- | -----------------------------------------------------------------



| | 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                                                                 |    
|                                                                                |  |                                                                                 |     |  
|31.12.2013                                                                      |  |                                                                                 | (22 | ) |            |  | (7  | )         |  |  | (23         | ) |  |  | (3 | )
|31.12.2012                                                                      |  |                                                                                 | (21 | ) |            |  | (14 | )         |  |  | (32         | ) |  |  | (3 | )



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 37:- | FINANCIAL INSTRUMENTS (Cont.)
|--------- | -----------------------------

|
|



|                                          |  |                                                                                         |      |   |     |  |      |     |  |  |      |   |  |  |     |  
|----------------------------------------- |  | --------------------------------------------------------------------------------------- | ---- | - | --- |  | ---- | --- |  |  | ---- | - |  |  | --- | -
|                                          |  | Sensitivity analysis of financial balances ofabsolute changes in Consumer Price Index   |     
|Effect on pre-tax income (loss)           |  | +2%                                                                                     |      |   | +1% |  |      | -1% |  |  | -2%  |  
|                                          |  | NIS in millions                                                                         |     
|                                          |  |                                                                                         |      |  
|31.12.2013                                |  |                                                                                         | (205 | ) |     |  | (103 | )   |  |  | 103  |   |  |  | 205 |  
|31.12.2012                                |  |                                                                                         | (173 | ) |     |  | (86  | )   |  |  | 86   |   |  |  | 173 |  
|                                          | 
|                                          |  | Sensitivity analysis for financial derivatives-absolute changes in Consumer Price Index |     
|Effect on pre-tax income (loss)           |  | +2%                                                                                     |      |   | +1% |  |      | -1% |  |  | -2%  |  
|                                          |  | NIS in millions                                                                         |     
|                                          |  |                                                                                         |      |  
|31.12.2013                                |  |                                                                                         | 94   |   |     |  | 47   |     |  |  | (47  | ) |  |  | (95 | )
|31.12.2012                                |  |                                                                                         | 87   |   |     |  | 43   |     |  |  | (44  | ) |  |  | (88 | )
|                                          | 
|                                          |  | Sensitivity analysis for financial derivatives-relative changes in exchange rates       |     
|Effect on pre-tax income (loss)           |  | +10%                                                                                    |      |   | +5% |  |      | -5% |  |  | -10% |  
|                                          |  | NIS in millions                                                                         |     
|                                          |  |                                                                                         |      |  
|31.12.2013                                |  |                                                                                         |      |   |     |  |      |     |  |  |      |   |  |  |     |  
|                                          |  |                                                                                         |      |  
|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  |  
|                                          |  |                                                                                         |      |  
|31.12.2012                                |  |                                                                                         |      |   |     |  |      |     |  |  |      |   |  |  |     |  
|                                          |  |                                                                                         |      |  
|Change in exchange rate of               |  |                                                                                         | (234 | ) |     |  | (115 | )   |  |  | 114  |   |  |  | 227 |  
|Change in exchange rate of U.S.$          |  |                                                                                         | (85  | ) |     |  | (42  | )   |  |  | 42   |   |  |  | 85  |  
|Change in exchange rate of C$             |  |                                                                                         | (130 | ) |     |  | (65  | )   |  |  | 65   |   |  |  | 130 |  
|Change in exchange rate of Brazilian Real |  |                                                                                         | (1   | ) |     |  |     |     |  |  |     |   |  |  | 1   |  



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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                                                                   |     
|                                            |  |                                                                                   |      |  
|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 interest on 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  |  
|                                            |  |                                                                                   |      |  
|2012                                        |  |                                                                                   |      |   |     |  |      |     |  |  |      |   |  |  |      |  
|                                            |  |                                                                                   |      |  
|Change in interest on                      |  |                                                                                   | 248  |   |     |  | 129  |     |  |  | (119 | ) |  |  | (152 | )
|Change in interest on U.S.$                 |  |                                                                                   | 33   |   |     |  | 17   |     |  |  | (9   | ) |  |  | (9   | )
|Change in interest on C$                    |  |                                                                                   | 60   |   |     |  | 31   |     |  |  | (33  | ) |  |  | (58  | )
|Change in interest on Brazilian Real        |  |                                                                                   | (2   | ) |     |  | (1   | )   |  |  | 1    |   |  |  | 2    |  
|Change in nominal interest on NIS           |  |                                                                                   | (47  | ) |     |  | (24  | )   |  |  | 25   |   |  |  | 46   |  
|Change in real interest on NIS              |  |                                                                                   | (488 | ) |     |  | (252 | )   |  |  | 267  |   |  |  | 557  |  
|                                            | 
|                                            |  | Sensitivity analysis for financial derivatives-absolute changes in interest rates |     
|Effect on pre-tax equity (accounting hedge) |  | +2%                                                                               |      |   | +1% |  |      | -1% |  |  | -2%  |  
|                                            |  | NIS in millions                                                                   |     
|                                            |  |                                                                                   |      |  
|31.12.2013                                  |  |                                                                                   |      |   |     |  |      |     |  |  |      |   |  |  |      |  
|                                            |  |                                                                                   |      |  
|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  | )
|                                            |  |                                                                                   |      |  
|31.12.2012                                  |  |                                                                                   |      |   |     |  |      |     |  |  |      |   |  |  |      |  
|                                            |  |                                                                                   |      |  
|Change in interest on                      |  |                                                                                   | 184  |   |     |  | 95   |     |  |  | (54  | ) |  |  | (54  | )
|Change in interest on U.S.$                 |  |                                                                                   | 101  |   |     |  | 52   |     |  |  | (53  | ) |  |  | (55  | )
|Change in interest on C$                    |  |                                                                                   | 44   |   |     |  | 23   |     |  |  | (25  | ) |  |  | (52  | )
|Change in Swedish Krona                     |  |                                                                                   | 172  |   |     |  | 88   |     |  |  | (93  | ) |  |  | (121 | )



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 37:- | FINANCIAL INSTRUMENTS (Cont.)
|--------- | -----------------------------

|
|

|
|



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.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 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.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 38:- | TRANSACTIONS AND BALANCES WITH RELATED PARTIES
|--------- | ----------------------------------------------



| | a. | Income
| | -- | ------



|                                                       |  |                        |     |  |      |  |     |      |  |  |      | 
|------------------------------------------------------ |  | ---------------------- | --- |  | ---- |  | --- | ---- |  |  | ---- | 
|                                                       |  | Year ended December 31 |    
|                                                       |  | 2013                   |     |  | 2012 |  |     | 2011 | 
|                                                       |  | NIS in millions        |    
|                                                       |  |                        |    
|Finance income on a loan to related party of section f |  |                        |    |  |      |  |    |      |  |  | 0.01 | 
|                                                       |  |                        |     |  |      |  |     |      |  |  |      | 
|                                                       |  |                        |    
|Management fees from the parent company (section f)    |  |                        | 1.3 |  |      |  | 1.4 |      |  |  | 0.2  | 
|                                                       |  |                        |     |  |      |  |     |      |  |  |      | 
|                                                       |  |                        |    
|Interest income from investees                         |  |                        | 34  |  |      |  | 5   |      |  |  | 2    | 
|                                                       |  |                        |     |  |      |  |     |      |  |  |      | 
|                                                       |  |                        |    
|Management fees from jointly controlled entity (ATR)   |  |                        |    |  |      |  |    |      |  |  | 2    | 
|                                                       |  |                        |     |  |      |  |     |      |  |  |      | 



| | b. | Other expenses and payments
| | -- | ---------------------------



|                                                     |  |                        |   |  |                |  |         |                 |  |  |                |  |  |                 |      |  |                |  |   |  |  |  |      | 
|---------------------------------------------------- |  | ---------------------- | - |  | -------------- |  | ------- | --------------- |  |  | -------------- |  |  | --------------- | ---- |  | -------------- |  | - |  |  |  | ---- | 
|                                                     |  | Year ended December 31 |  
|                                                     |  | 2013                   |   |  | 2012           |  |         | 2011            | 
|                                                     |  | Numberof people        |   |  | NIS inmillions |  |         | Numberof people |  |  | NIS inmillions |  |  | Numberof people |      |  | NIS inmillions | 
|                                                     |  |                        |   |  |                | 
|Directors fees                                      |  |                        | 8 |  |                |  | 2.9     |                 |  |  | 7              |  |  |                 | 2.3  |  |                |  | 5 |  |  |  | 1.6  | 
|                                                     |  |                        |   |  |                |  |         |                 |  |  |                |  |  |                 |      |  |                |  |   |  |  |  |      | 
|                                                     |  |                        |   |  |                | 
|Salaries and related expenses, see (1) and (2) below |  |                        | 4 |  |                |  | *) 26.4 |                 |  |  | 4              |  |  |                 | 25.3 |  |                |  | 4 |  |  |  | 28.4 | 
|                                                     |  |                        |   |  |                |  |         |                 |  |  |                |  |  |                 |      |  |                |  |   |  |  |  |      | 



|*) | Includes compensation 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 e below.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | In 2011 the Chairman of the Board and the Executive Vice Chairman of the Board waived amounts of NIS 43.4 million and NIS 17.4 million, respectively, of the bonus to which they were entitled pursuant to their
respective employment agreements. The bonus waiver by the Chairman of the Board in the respective years, net of the respective tax, including the waiver of the compensation due to the expiry of the employment agreement as detailed in section e(1)a
below, was recognized as general and administrative expenses and as a contribution to equity under capital reserves. The 2011 amount in the table above excludes the salary waived by the Chairman of the Board.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 38:- | TRANSACTIONS AND BALANCES WITH RELATED PARTIES (Cont.)
|--------- | ------------------------------------------------------



| | c. | In September 2013, the Companys General Meeting approved adoption of a Compensation Policy for the officers of the Company, pursuant to the provisions of Amendment No. 20 to the Israeli Companies Law, 1999.
The Compensation Policy is applied to the Companys President, Executive Vice Presidents and Vice Presidents, as well as to directors of the Company, including those who hold an executive position (with the exception of the Companys
controlling shareholders).
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

At the same date, the Companys General Meeting approved (following the Board of Directors
and the Compensation Committee approval) the extension of Mr. Aharon Soffers appointment as the Companys President for an additional three-year period starting on November 1, 2013, and updated the terms of his employment in the
Company, and also approved the extension of Mr. Arie Mientkavich appointment as the Deputy Chairman of the Board and updated the terms of his employment in the Company, refer to sections e3 and e4 below.



| | d. | In 2008, the Board of Directors of Dori Group approved an agreement which Dori Construction Ltd., a subsidiary of Dori Group, in conjunction with a private company owned by Mr. Chaim Katzman, Mr. Dori Segal,
Ms. Erika Ottosson and Mr. Ronen Ashkenazi (a shareholder and the CEO of Gazit Development and of Dori Group) (collectively: the Customers) for the performance of building frame work for the construction of a residential
building. Pursuant to the understandings reached between the parties, it was agreed that the work would not be performed by Dori Construction acting as the main contractor, and that payment for additional work performed by Dori Construction, other
than that in accordance with the original plans that were attached to the agreement for the performance of the building frame work, was to be settled by the parties in the future. As of the financial statements approval date, the work on the project
had been completed and the Customers and Dori Construction had settled the related payment, whereby Dori Construction received NIS 2.5 million plus VAT, instead of NIS 5.7 million as had been recorded as income receivable in Dori
Constructions financial statements for 2012 and for the third quarter of 2013.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | e. | Employment agreements
| | -- | ---------------------



| | 1. | Chairman of the Board of Directors, Mr. Chaim Katzman
| | -- | -----------------------------------------------------



| | a) | On November 15, 2011, the employment agreement between the Company and Mr. Katzman, which was approved on February 2000, expired. The expiry of the agreement was due to provisions enacted as part of the
Companies Law (Amendment No. 16), 2011, relating to the required approval  once every three years  of engagements between a public company and its controlling shareholder, with respect to the terms of appointment and employment.
Pursuant to the terms of the employment agreement, upon termination of the agreement, Mr. Katzman was entitled to a one-time payment equivalent to the annual compensation (including the annual bonus) that was due to him in 2010 in the total
amount of approximately NIS 60 million. However, Mr. Katzman has notified the Company that he has waived his right to the aforesaid payment in full.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 38:- | TRANSACTIONS AND BALANCES WITH RELATED PARTIES (Cont.)
|--------- | ------------------------------------------------------



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 August 2010, EQY and Mr. Katzman entered into an agreement for the period commencing on January 1, 2011 and ending on December 31, 2014, 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.
Concurrently, the parties entered into an agreement according to which 380,000 restricted shares were granted to Mr. Katzman, at a share price of U.S.$ 16.72. These shares are vested over four years commencing on January 1, 2011 and
ending on December 31, 2014, in unequal installments in accordance with the terms of the agreement.

As for the renewal of the
agreement for additional period, refer to Note 40g.



| | 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.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | d) | According to the advisory agreement since 2008 with ATR, Mr. Katzman, ATRs Chairman of the Board is entitled to a monthly remuneration of  46 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.



| | e) | For 2013, Mr. Katzman is entitled for directors remuneration in the amount of  170 thousand for his services as CTYs chairman of the Board.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 38:- | TRANSACTIONS AND BALANCES WITH RELATED PARTIES (Cont.)
|--------- | ------------------------------------------------------



| | 2. | Vice Chairman of the Companys Board of Directors, Mr. Dori Segal
| | -- | -----------------------------------------------------------------



| | a) | On November 15, 2011, the employment agreement with Mr. Segal which was approved on 2004 expired. Pursuant to the terms of the employment agreement, upon termination of the agreement, Mr. Segal was
entitled to a one-time payment equivalent to the annual compensation (including the annual bonus) that was due to him in 2010 amounting to NIS 24.5 million. However, Mr. Segal has notified the Company that he had waived his right to the
aforesaid payment in full.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 serves as FCRs President and CEO, entered into an employment agreement with FCR, effective October 2001 (which was amended from time to time and recently in 2007), pursuant to which, he is
entitled to an annual compensation of C$ 715 thousand as well as to reimbursement of expenses with respect to his position. In respect of 2013, Mr. Segals total salary cost was C$ 750 thousand. The above employment agreement 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 2013, Mr. Segal is entitled to an annual bonus of
C$ 475 thousand. 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.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

According to his agreement, Mr. Segal was granted compensation of equity instruments by FCR. Approximately 36 thousand restricted
units convertible into 36 thousand FCR shares were issued to Mr. Segal for no consideration in March 2013, based on the price of C$ 19.04 per share at the grant date. In addition, in March 2014, Mr. Segal was granted 25 thousands
restricted units convertible into 25 thousands FCR shares for no consideration, based on the price of C$ 17.75 per share at the grant date.

On March 2013, Mr. Segal was granted 130 thousand share options convertible into 130 thousand FCR shares at an exercise price
of C$ 18.97 per share, which are exercisable through March 2023. The fair value of each share option on the grant date, based on the binomial model, is C$ 1.19.

In addition, On March 2014, Mr. Segal was granted 65 thousand share options convertible into 65 thousand FCR shares at an
exercise price of C$ 17.77 per share, which are exercisable through March 2024.



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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. With respect to 2013 Mr. Segal was granted 3,300 restricted shares at the average price per share at the grant date of
U.S.$ 20.98. In January 2014 Mr. Segal was granted 3,500 restricted shares at the average price per share of U.S.$ 22.53. With respect to 2014 Mr. Segal also received directors compensation of U.S.$ 59.5 thousand with
respect to 2013.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 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 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 provide 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 employment agreement, Mr. Mientkavich was granted equity instruments, 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 2013 (excluding bonus) totaled to NIS 2,445 thousand.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 38:- | TRANSACTIONS AND BALANCES WITH RELATED PARTIES (Cont.)
|--------- | ------------------------------------------------------

|
|



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.

As part of the renewal of the employment agreement, Mr. Soffer was granted equity instruments, refer to Note 28 for details.

For his services as a director in ATR, Mr. Soffer is entitled to director fees in the amount of  32 thousand for 2013. Such
fees are fully transferred to the Company.



| | e. | 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.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 38:- | TRANSACTIONS AND BALANCES WITH RELATED PARTIES (Cont.)
|--------- | ------------------------------------------------------



| | 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 Norstar approved the renewal
of the agreement without changing its terms, other than updating the monthly management fees to NIS 122 thousand.



| | f. | Balances with related parties
| | -- | -----------------------------



|                                                 |  |                 |     |  |      |  |     | 
|------------------------------------------------ |  | --------------- | --- |  | ---- |  | --- | 
|                                                 |  | December 31     |    
|                                                 |  | 2013            |     |  | 2012 | 
|                                                 |  | NIS in millions |    
|                                                 |  |                
|Interest receivable from joint ventures (Note 6) |  |                 | 30  |  |      |  |    | 
|                                                 |  |                 |     |  |      |  |     | 
|                                                 |  |                
|Loans to equity-accounted investees (Note 9a)    |  |                 | 743 |  |      |  | 143 | 
|                                                 |  |                 |     |  |      |  |     | 



|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.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 39:- | SEGMENT INFORMATION (Cont.)
|--------- | ---------------------------



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
| | -- | -------------------------------------------

Year ended December 31, 2013



|                                      |  |                           |        |  |                          |  |          |                                  |  |  |                                            |  |  |                                                 |        |  |               |  |       |                                   |  |  |              |   |  |  |         |   |  |  |        | 
|------------------------------------- |  | ------------------------- | ------ |  | ------------------------ |  | -------- | -------------------------------- |  |  | ------------------------------------------ |  |  | ----------------------------------------------- | ------ |  | ------------- |  | ----- | --------------------------------- |  |  | ------------ | - |  |  | ------- | - |  |  | ------ | 
|                                      |  | Shoppingcenters inU.S.(1) |        |  | Shoppingcenters inCanada |  |          | Shoppingcenters inNorthEurope(2) |  |  | Shoppingcenters inCentral-EasternEurope(2) |  |  | Developmentandperformanceofconstructionwork **) |        |  | 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 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 | 
|                                      |  |                           |        |  |                          |  |          |                                  |  |  |                                            |  |  |                                                 |        |  |               |  |       |                                   |  |  |              |   |  |  |         |   |  |  |        | 



|*) | Reclassified, refer to Note 2a.
|-- | -------------------------------

|**) | Restated, refer to Note 2ee.
|--- | ----------------------------



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 39:- | SEGMENT INFORMATION (Cont.)
|--------- | ---------------------------



| | b. | Financial information by operating segments
| | -- | -------------------------------------------

Year ended December 31, 2012



|                                      |  |                           |        |  |                          |  |          |                                  |  |  |                                            |  |  |                                                 |        |  |               |  |       |                                   |  |  |              |  |  |  |          |   |  |  |        | 
|------------------------------------- |  | ------------------------- | ------ |  | ------------------------ |  | -------- | -------------------------------- |  |  | ------------------------------------------ |  |  | ----------------------------------------------- | ------ |  | ------------- |  | ----- | --------------------------------- |  |  | ------------ |  |  |  | -------- | - |  |  | ------ | 
|                                      |  | Shoppingcenters inU.S.(1) |        |  | Shoppingcenters inCanada |  |          | Shoppingcenters inNorthEurope(2) |  |  | Shoppingcenters inCentral-EasternEurope(2) |  |  | Developmentandperformanceofconstructionwork **) |        |  | 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  | 
|                                      |  |                           |        |  |                          |  |          |                                 
|Segment assets:                       |  |                           |        |  |                          |  |          |                                  |  |  |                                            |  |  |                                                 |        |  |               |  |       |                                   |  |  |              |  |  |  |          |   |  |  |        | 
|                                      |  |                           |        |  |                          |  |          |                                 
|Operating assets (6)                  |  |                           | 11,555 |  |                          |  | 26,707   |                                  |  |  | 13,518                                     |  |  |                                                 | 13,831 |  |               |  | 1,329 |                                   |  |  | 6,393        |  |  |  | (7,012   | ) |  |  | 66,321 | 
|Investments in investees              |  |                           | 269    |  |                          |  | 142      |                                  |  |  | 4                                          |  |  |                                                 | 7      |  |               |  | 350   |                                   |  |  | 110          |  |  |  | 3,831    |   |  |  | 4,713  | 
|                                      |  |                           |        |  |                          |  |          |                                  |  |  |                                            |  |  |                                                 |        |  |               |  |       |                                   |  |  |              |  |  |  |          |   |  |  |        | 
|                                      |  |                           |        |  |                          |  |          |                                 
|Total assets                          |  |                           | 11,824 |  |                          |  | 26,849   |                                  |  |  | 13,522                                     |  |  |                                                 | 13,838 |  |               |  | 1,679 |                                   |  |  | 6,503        |  |  |  | (3,181   | ) |  |  | 71,034 | 
|                                      |  |                           |        |  |                          |  |          |                                  |  |  |                                            |  |  |                                                 |        |  |               |  |       |                                   |  |  |              |  |  |  |          |   |  |  |        | 
|                                      |  |                           |        |  |                          |  |          |                                 
|Investments in non-current assets (7) |  |                           | 1,489  |  |                          |  | 3,520    |                                  |  |  | 802                                        |  |  |                                                 | 308    |  |               |  | 10    |                                   |  |  | 145          |  |  |  | (308     | ) |  |  | 5,966  | 
|                                      |  |                           |        |  |                          |  |          |                                  |  |  |                                            |  |  |                                                 |        |  |               |  |       |                                   |  |  |              |  |  |  |          |   |  |  |        | 
|                                      |  |                           |        |  |                          |  |          |                                 
|Segment liabilities (8)               |  |                           | 237    |  |                          |  | 420      |                                  |  |  | 356                                        |  |  |                                                 | 628    |  |               |  | 894   |                                   |  |  | 110          |  |  |  | 46,092   |   |  |  | 48,737 | 
|                                      |  |                           |        |  |                          |  |          |                                  |  |  |                                            |  |  |                                                 |        |  |               |  |       |                                   |  |  |              |  |  |  |          |   |  |  |        | 



|*) | Reclassified, refer to Note 2a.
|-- | -------------------------------

|**) | Restated, refer to Note 2ee.
|--- | ----------------------------



| | b. | Financial information by operating segments
| | -- | -------------------------------------------

Year ended December 31, 2011



|                                  |  |                           |        |  |                          |  |          |                                  |  |  |                                            |  |  |                                             |       |  |               |  |       |                                   |  |  |              |  |  |  |          |   |  |  |       | 
|--------------------------------- |  | ------------------------- | ------ |  | ------------------------ |  | -------- | -------------------------------- |  |  | ------------------------------------------ |  |  | ------------------------------------------- | ----- |  | ------------- |  | ----- | --------------------------------- |  |  | ------------ |  |  |  | -------- | - |  |  | ----- | 
|                                  |  | Shoppingcenters inU.S.(1) |        |  | Shoppingcenters inCanada |  |          | Shoppingcenters inNorthEurope(2) |  |  | Shoppingcenters inCentral-EasternEurope(2) |  |  | Developmentandperformanceofconstructionwork |       |  | Othersegments |  |       | Adjustmentsforconsolidated(3)-(8) |  |  | Consolidated | 
|                                  |  | NIS in millions           |       
|Segment revenues                  |  |                           |        |  |                          |  |          |                                  |  |  |                                            |  |  |                                             |       |  |               |  |       |                                   |  |  |              |  |  |  |          |   |  |  |       | 
|                                  |  |                           |        |  |                          |  |          |                                 
|External revenues (3)             |  |                           | 1,045  |  |                          |  | 1,893    |                                  |  |  | 1,081                                      |  |  |                                             | 1,198 |  |               |  | 1,356 |                                   |  |  | 509          |  |  |  | (1,363   | ) |  |  | 5,719 | 
|                                  |  |                           |        |  |                          |  |          |                                  |  |  |                                            |  |  |                                             |       |  |               |  |       |                                   |  |  |              |  |  |  |          |   |  |  |       | 
|                                  |  |                           |        |  |                          |  |          |                                 
|Segment results:                  |  |                           |        |  |                          |  |          |                                  |  |  |                                            |  |  |                                             |       |  |               |  |       |                                   |  |  |              |  |  |  |          |   |  |  |       | 
|                                  |  |                           |        |  |                          |  |          |                                 
|Gross profit (4)                  |  |                           | 449    |  |                          |  | 1,223    |                                  |  |  | 720                                        |  |  |                                             | 771   |  |               |  | 59    |                                   |  |  | 371          |  |  |  | (363     | ) |  |  | 3,230 | 
|Depreciation and amortization (4) |  |                           | 301    |  |                          |  | 8        |                                  |  |  | 5                                          |  |  |                                             | 6     |  |               |  | 5     |                                   |  |  | 9            |  |  |  | (267     | ) |  |  | 67    | 
|Share in earnings of investees    |  |                           | 17     |  |                          |  | 14       |                                  |  |  | 1                                          |  |  |                                             |      |  |               |  | 66    |                                   |  |  | 10           |  |  |  | 226      |   |  |  | 334   | 
|Operating income (5)              |  |                           | *) 328 |  |                          |  | *) 1,136 |                                  |  |  | 584                                        |  |  |                                             | 711   |  |               |  | 137   |                                   |  |  | 142          |  |  |  | *) 1,468 |   |  |  | 4,506 | 



|*) | Reclassified, refer to Note 2a.
|-- | -------------------------------



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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 |         
|                            |  | 2013                   |          |   | 2012 |  |          | 2011 | 
|                            |  | NIS in millions        |         
|                            |  |                        |         
|U.S.                        |  |                        | 1,401    |   |      |  | 1,448    |      |  |  | 1,190  |  
|Canada                      |  |                        | 2,216    |   |      |  | 2,292    |      |  |  | 1,948  |  
|Northern and Western Europe |  |                        | 1,487    |   |      |  | 1,268    |      |  |  | 1,161  |  
|Central-Eastern Europe      |  |                        | 1,348    |   |      |  | 1,327    |      |  |  | 1,201  |  
|Israel                      |  |                        | *) 1,778 |   |      |  | *) 1,960 |      |  |  | 1,192  |  
|Other                       |  |                        | 34       |   |      |  | 31       |      |  |  | 34     |  
|Reconciliations (1) (3)     |  |                        | (1,446   | ) |      |  | (1,317   | )    |  |  | (1,007 | )
|                            |  |                        |          |   |      |  |          |      |  |  |        |  
|                            |  |                        |         
|Total                       |  |                        | 6,818    |   |      |  | 7,009    |      |  |  | 5,719  |  
|                            |  |                        |          |   |      |  |          |      |  |  |        |  



|*) | Restated, refer to Notes 2ee and 41.
|-- | ------------------------------------

Location of non-current operating assets (7)



|                            |  |                 |           |   |      |  |        |  
|--------------------------- |  | --------------- | --------- | - | ---- |  | ------ | -
|                            |  | December 31     |          
|                            |  | 2013            |           |   | 2012 | 
|                            |  | NIS in millions |          
|                            |  |                
|U.S.                        |  |                 | 12,223    |   |      |  | 13,232 |  
|Canada                      |  |                 | 23,544    |   |      |  | 25,301 |  
|Northern and Western Europe |  |                 | 16,543    |   |      |  | 14,304 |  
|Central-Eastern Europe      |  |                 | 14,433    |   |      |  | 13,932 |  
|Israel                      |  |                 | 2,748     |   |      |  | 2,683  |  
|Other                       |  |                 | 487       |   |      |  | 523    |  
|Reconciliations (1) (6)     |  |                 | *) (6,025 | ) |      |  | (4,485 | )
|                            |  |                 |           |   |      |  |        |  
|                            |  |                
|Total non- current assets   |  |                 | 63,953    |   |      |  | 65,490 |  
|                            |  |                 |           |   |      |  |        |  



|*) | Retrospectively adjusted, refer to Note 2a.
|-- | -------------------------------------------



| | 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.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 39:- | SEGMENT INFORMATION (Cont.)
|--------- | ---------------------------



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.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 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 962 million, NIS 1,938 million and NIS 1,692 for 2013, 2012 and 2011, respectively. Likewise, these reconciliations include unallocated general and administrative expenses of
approximately NIS 159 million, NIS 175 million and NIS 49 million and unallocated net other income (expense) of approximately NIS 162 million, NIS 132 million and NIS (177) million, for 2013, 2012 and 2011,
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.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 40:- | EVENTS AFTER THE REPORTING DATE
|--------- | -------------------------------



| | a. | On 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). Simultaneously, the Company entered into
an agreement with CPPIBEH, which provides arrangements for the appointment of directors for the board of directors of CTY, and the Company to grant CPPIBEH a tag-along right for the sale of CTY shares under certain conditions.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, on July 8, 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 in consideration for 
87.6 million (NIS 411 million). Following the closing of the Private Offering, the Companys interest in CTY decreased to 41.9%. Since the Company remained in effective control over CTY, the Company recognized an equity decrease in the
amount of NIS 12 million that was recognized in other reserves. After CTY has completed the Right Issuance, the Companys interest in CTY increased to 42.2%.



| | b. | In the first quarter of 2014, FCR issued to the public in Canada C$ 300 million par value (NIS 947 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 on August 30, 2024.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In June and July 2014, FCR issued
to the public in Canada C$ 210 million par value (NIS 676 million) unsecured debentures (series S). The debentures bear an annual interest rate of 4.32% and are payable in one installment on July 31, 2025. FCR used the net proceeds of the
offering, inter alia, to early redeem its C$ 100 million (NIS 322 million) debentures (series F) that bear an annual interest rate of 5.32% and were originally redeemable in October 2014.



| | c. | 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
interest rate of 3.45%.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The parent company purchased, as part of the issuance, NIS 27 million par value unsecured
debentures (series L) for consideration of NIS 29 million.



| | d. | In June, 2014 the Company and wholly owned subsidiaries entered into an agreement with an institutional investor, for a U.S.$ 100 million (NIS 344 million) unsecured term loan to the wholly-owned subsidiaries, in
which the Company is a guarantor, which matures in September 2027. The term loan bears fixed annual interest rate of 6%, payable semi annually in March and September. The term loan agreement includes financial and other customary covenants.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 40:- | EVENTS AFTER THE REPORTING DATE (Cont.)
|--------- | ---------------------------------------



| | e. | 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.



| | f. | 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.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------



| | g. | 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 addition, on January 1, 2015 255,000 restricted shares of EQY will be granted to Mr. Katzman, which
will vest monthly over 35 months commencing on February 28, 2015 and ending on December 31, 2017, in unequal instalments in accordance with the terms of the agreement.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | h. | Further to the description above regarding the deviations in the estimates of revenues and costs of the projects being performed by Dori Construction and the restatement of the financial statements of Dori Construction
and of the Company as of June 30, 2014, Dori Construction has a capital deficiency attributable to its equity holders of NIS 235.3 million. As of June 30, 2014 Dori Group and Dori Construction noted in their financial statements that they
are not in compliance with financial covenants relating to some of the debentures they have issued, and also that Dori Construction has not complied with various financial ratios to which it has given undertakings to financing bodies. At the same
time, Dori Group and Dori Construction have stated that, as of the date of approval of the financial statements, waivers from all financing bodies were obtained and that they are not in breach of their commitments to the aforementioned debentures
holders, due to the provisions of the trust deeds in relation to the examination and remedy periods in the event of non-compliance with the financial ratios.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | i. | In August 2014, the Companys Board of Directors approved a grant of loan at an amount of NIS 200 million to Gazit Development to be used for a scheme for investment in Doris Group equity by Gazit
Development, which includes the following elements:
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 1. | 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 will amount to 85% of Dori Groups share capital.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 40:- | EVENTS AFTER THE REPORTING DATE (Cont.)
|--------- | ---------------------------------------



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



| | 3. | Dori Group will undertake to offer Dori Construction that one half of the Assigned Credit Lines will be converted into shares of Dori Construction.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | 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.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. | Dori Group will undertake 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.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Closure of the
scheme is subject to obtaining the approval of the relevant organs of Dori Group and of Dori Construction, as required by law.



| | j. | On August 31, 2014, Gazit Development made an irrevocable commitment to Dori Group that, in the event that the aforementioned investment scheme is not approved by the competent organs of Dori Group and subject to
certain conditions, it would act to inject an amount of NIS 200 million for the purpose of strengthening the capital structure of Dori Group and Dori Construction, with NIS 130 million of the aforesaid amount to be transferred, in whatever
manner Gazit Development deems, including by means of a rights offering to be issued by Dori Group at market prices and subject to the commitment of Dori Group that the vast majority of the proceeds from the issuance would be used to strengthen the
capital structure and the cash flows of Dori Construction. Moreover, an amount of NIS 70 million of the aforesaid amount will be transferred to Dori Group subject to closing the repurchase of the debentures (Series A) of Dori Construction by
Dori Group. So long as the aforementioned amounts are provided by means of shareholders loans, they will not be due for repayment before June 30, 2016, and they will also be available to Dori Group, subject to the amounts being treated as
equity of Dori Group for the purposes of the financial covenants, compliance with which Dori Group has committed to vis-à-vis financing bodies. Furthermore, Gazit Development has committed to act to convert a loan of NIS 125 million into
equity of Dori Construction at the share price on July 24, 2014.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 40:- | EVENTS AFTER THE REPORTING DATE (Cont.)
|--------- | ---------------------------------------



| | k. | In accordance with the provisions of an agreement with a financing body, Gazit Development has committed to comply with a financial covenant of minimum equity in an amount of NIS 500 million (the
Covenant). As of June 30, 2014, the equity of Gazit Development amounted to NIS 465 million. In accordance with the provisions of the agreement, Gazit Development has a set time, during which it is required to remedy the breach
(the Remedial Period). Accordingly, Gazit Development had act to increase its equity and is in compliance with the above mentioned Covenant. Refer to section l below.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | l. | In August 2014, the board of directors of Gazit Development approved the issuance of 3.0 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 the board of directors approval, 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 granted to the Company in a total 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).
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | m. | 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 that are the subject of the aforesaid motions include grounds by virtue of the Securities Law, 1968,
including the inclusion of erroneous details in the financial statements and the making of reports containing omissions and errors, torts of negligence under the Torts Laws, breach of a statutory duty (in relation to the Securities Law and the
regulations promulgated thereunder and also the Companies Law) and deprivation, all with respect to the public 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).
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n. | On May 27, 2014 the Company declared a dividend in the amount of NIS 0.45 per share (a total of approximately NIS 79 million), that was paid on July 8, 2014 to the shareholders of the Company on
June 25, 2014.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On August 31, 2014 the Company declared a dividend in the amount of NIS 0.45 per share (a
total of approximately NIS 79 million), payable on October 1, 2014 to the shareholders of the Company on September 16, 2014.



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 40:- | EVENTS AFTER THE REPORTING DATE (Cont.)
|--------- | ---------------------------------------



| | o. | On September 3, 2014, FCR announced a public offering in Canada of 5.25 million shares (the Offering) for a total consideration of C$ 100 million (C$ 19.06 per share). The Company has
made a commitment to the Offerings underwriters to acquire 883 thousand shares of the shares to be offered as aforesaid. In addition, FCR has granted to the Offerings underwriters an option to acquire from it, at the Offering price,
an additional 787.5 thousand shares. This option is valid for a period of 30 days from the date of closing the Offering. The Offering is expected to be closed on September 12, 2014. As a result of the Offering, the Companys interest
in FCR is expected to be diluted to 44.2%, and the Company is expected to recognize an increase in its equity in an amount of NIS 15 million, which will be recognized in other reserves.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 41:- | THE EFFECT OF RESTATEMENT AND CLARIFICATION TO IAS 12 ON THE FINANCIAL STATEMENTS
|--------- | ---------------------------------------------------------------------------------

Below
is the impact of the restatement with respect to the correction to the estimates of revenues and costs of the projects undertaken by Dori Construction (refer to Note 2ee) and of the retrospective adjustment due to the clarification to IAS 12 (refer
to Note 2a).

In the consolidated statement of financial position as of December 31, 2013



|                                                           |  |                      |        |   |                                 |  |      |                      |  |  |                      |   |  |  |        |  
|---------------------------------------------------------- |  | -------------------- | ------ | - | ------------------------------- |  | ---- | -------------------- |  |  | -------------------- | - |  |  | ------ | -
|                                                           |  | Aspreviouslyreported |        |   | Impact ofClarificationto IAS 12 |  |      | Impact ofRestatement |  |  | Ascurrentlypresented |  
|                                                           |  | NIS in millions      |       
|ASSETS                                                     |  |                      |        |   |                                 |  |      |                      |  |  |                      |   |  |  |        |  
|                                                           |  |                      |        |  
|Trade receivables                                          |  |                      | 831    |   |                                 |  |     |                      |  |  | (142                 | ) |  |  | 689    |  
|                                                           |  |                      |        |   |                                 |  |      |                      |  |  |                      |   |  |  |        |  
|Other accounts receivable                                  |  |                      | 298    |   |                                 |  |     |                      |  |  | 4                    |   |  |  | 302    |  
|                                                           |  |                      |        |   |                                 |  |      |                      |  |  |                      |   |  |  |        |  
|Inventory of buildings and apartments for sale             |  |                      | 703    |   |                                 |  |     |                      |  |  | (11                  | ) |  |  | 692    |  
|                                                           |  |                      |        |   |                                 |  |      |                      |  |  |                      |   |  |  |        |  
|Equity-accounted investees                                 |  |                      | 5,919  |   |                                 |  | (12  | )                    |  |  |                     |   |  |  | 5,907  |  
|                                                           |  |                      |        |   |                                 |  |      |                      |  |  |                      |   |  |  |        |  
|Total assets                                               |  |                      | 68,088 |   |                                 |  | (12  | )                    |  |  | (149                 | ) |  |  | 67,927 |  
|                                                           |  |                      |        |   |                                 |  |      |                      |  |  |                      |   |  |  |        |  
|                                                           |  |                      |        |  
|LIABILITIES                                                |  |                      |        |   |                                 |  |      |                      |  |  |                      |   |  |  |        |  
|                                                           |  |                      |        |  
|Trade payables                                             |  |                      | 936    |   |                                 |  |     |                      |  |  | 4                    |   |  |  | 940    |  
|                                                           |  |                      |        |   |                                 |  |      |                      |  |  |                      |   |  |  |        |  
|Other accounts payable                                     |  |                      | 1,253  |   |                                 |  |     |                      |  |  | 19                   |   |  |  | 1,272  |  
|                                                           |  |                      |        |   |                                 |  |      |                      |  |  |                      |   |  |  |        |  
|Advances from customers and buyers of apartments           |  |                      | 259    |   |                                 |  |     |                      |  |  | 8                    |   |  |  | 267    |  
|                                                           |  |                      |        |   |                                 |  |      |                      |  |  |                      |   |  |  |        |  
|Income taxes payable                                       |  |                      | 34     |   |                                 |  |     |                      |  |  | (2                   | ) |  |  | 32     |  
|                                                           |  |                      |        |   |                                 |  |      |                      |  |  |                      |   |  |  |        |  
|Deferred taxes                                             |  |                      | 3,000  |   |                                 |  | 284  |                      |  |  | (8                   | ) |  |  | 3,276  |  
|                                                           |  |                      |        |   |                                 |  |      |                      |  |  |                      |   |  |  |        |  
|Total assets                                               |  |                      | 45,269 |   |                                 |  | 284  |                      |  |  | 21                   |   |  |  | 45,574 |  
|                                                           |  |                      |        |   |                                 |  |      |                      |  |  |                      |   |  |  |        |  
|                                                           |  |                      |        |  
|EQUITY                                                     |  |                      |        |   |                                 |  |      |                      |  |  |                      |   |  |  |        |  
|                                                           |  |                      |        |  
|Retained earnings                                          |  |                      | 5,378  |   |                                 |  | (150 | )                    |  |  | (68                  | ) |  |  | 5,160  |  
|                                                           |  |                      |        |   |                                 |  |      |                      |  |  |                      |   |  |  |        |  
|Reserves                                                   |  |                      | (1,865 | ) |                                 |  | 4    |                      |  |  | 7                    |   |  |  | (1,854 | )
|                                                           |  |                      |        |   |                                 |  |      |                      |  |  |                      |   |  |  |        |  
|Total equity attributable to equity holders of the Company |  |                      | 8,009  |   |                                 |  | (146 | )                    |  |  | (61                  | ) |  |  | 7,802  |  
|                                                           |  |                      |        |   |                                 |  |      |                      |  |  |                      |   |  |  |        |  
|Non-controlling interests                                  |  |                      | 14,810 |   |                                 |  | (150 | )                    |  |  | (109                 | ) |  |  | 14,551 |  
|                                                           |  |                      |        |   |                                 |  |      |                      |  |  |                      |   |  |  |        |  
|Total equity                                               |  |                      | 22,819 |   |                                 |  | (296 | )                    |  |  | (170                 | ) |  |  | 22,353 |  
|                                                           |  |                      |        |   |                                 |  |      |                      |  |  |                      |   |  |  |        |  



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 41:- | THE EFFECT OF RESTATEMENT AND CLARIFICATION TO IAS 12 ON THE FINANCIAL STATEMENTS (Cont.)
|--------- | -----------------------------------------------------------------------------------------



In the consolidated statement of income for the year ended December 31, 2013



|                                                                                 |  |                                             |         |   |                                 |  |      |                      |  |  |                      |   |  |  |       |  
|-------------------------------------------------------------------------------- |  | ------------------------------------------- | ------- | - | ------------------------------- |  | ---- | -------------------- |  |  | -------------------- | - |  |  | ----- | -
|                                                                                 |  | Aspreviouslyreported                        |         |   | Impact ofClarificationto IAS 12 |  |      | Impact ofRestatement |  |  | Ascurrentlypresented |  
|                                                                                 |  | NIS in millions (except for per share data) |        
|                                                                                 |  |                                             |         |  
|Revenues from sale of buildings, land and construction work performed            |  |                                             | 1,794   |   |                                 |  |     |                      |  |  | (122                 | ) |  |  | 1,672 |  
|                                                                                 |  |                                             |         |   |                                 |  |      |                      |  |  |                      |   |  |  |       |  
|Cost of buildings sold, land and construction work performed                     |  |                                             | 1,667   |   |                                 |  |     |                      |  |  | 21                   |   |  |  | 1,688 |  
|                                                                                 |  |                                             |         |   |                                 |  |      |                      |  |  |                      |   |  |  |       |  
|                                                                                 |  |                                             |         |  
|Gross profit (loss) from sale of buildings, land and construction work performed |  |                                             | 127     |   |                                 |  |     |                      |  |  | (143                 | ) |  |  | (16   | )
|                                                                                 |  |                                             |         |   |                                 |  |      |                      |  |  |                      |   |  |  |       |  
|                                                                                 |  |                                             |         |  
|General and administrative expenses                                              |  |                                             | *) (611 | ) |                                 |  |     |                      |  |  | 1                    |   |  |  | (610  | )
|                                                                                 |  |                                             |         |   |                                 |  |      |                      |  |  |                      |   |  |  |       |  
|                                                                                 |  |                                             |         |  
|Companys share in earnings of equity- accounted investees, net                  |  |                                             | 161     |   |                                 |  | (12  | )                    |  |  |                     |   |  |  | 149   |  
|                                                                                 |  |                                             |         |   |                                 |  |      |                      |  |  |                      |   |  |  |       |  
|                                                                                 |  |                                             |         |  
|Operating income                                                                 |  |                                             | 4,240   |   |                                 |  | (12  | )                    |  |  | (142                 | ) |  |  | 4,086 |  
|                                                                                 |  |                                             |         |   |                                 |  |      |                      |  |  |                      |   |  |  |       |  
|                                                                                 |  |                                             |         |  
|Taxes on income                                                                  |  |                                             | 294     |   |                                 |  | (22  | )                    |  |  | (7                   | ) |  |  | 265   |  
|                                                                                 |  |                                             |         |   |                                 |  |      |                      |  |  |                      |   |  |  |       |  
|                                                                                 |  |                                             |         |  
|Net income                                                                       |  |                                             | 2,310   |   |                                 |  | 10   |                      |  |  | (135                 | ) |  |  | 2,185 |  
|                                                                                 |  |                                             |         |   |                                 |  |      |                      |  |  |                      |   |  |  |       |  
|Attributable to:                                                                 |  |                                             |         |   |                                 |  |      |                      |  |  |                      |   |  |  |       |  
|Equity holders of the Company                                                    |  |                                             | 977     |   |                                 |  | 5    |                      |  |  | (55                  | ) |  |  | 927   |  
|Non-controlling interests                                                        |  |                                             | 1,333   |   |                                 |  | 5    |                      |  |  | (80                  | ) |  |  | 1,258 |  
|                                                                                 |  |                                             |         |   |                                 |  |      |                      |  |  |                      |   |  |  |       |  
|                                                                                 |  |                                             |         |  
|                                                                                 |  |                                             | 2,310   |   |                                 |  | 10   |                      |  |  | (135                 | ) |  |  | 2,185 |  
|                                                                                 |  |                                             |         |   |                                 |  |      |                      |  |  |                      |   |  |  |       |  
|                                                                                 |  |                                             |         |  
|Net earnings per share attributable to equity holders of the Company:            |  |                                             |         |   |                                 |  |      |                      |  |  |                      |   |  |  |       |  
|Basic net earnings                                                               |  |                                             | 5.70    |   |                                 |  | 0.03 |                      |  |  | (0.32                | ) |  |  | 5.41  |  
|                                                                                 |  |                                             |         |   |                                 |  |      |                      |  |  |                      |   |  |  |       |  
|Diluted net earnings                                                             |  |                                             | 5.64    |   |                                 |  | 0.03 |                      |  |  | (0.32                | ) |  |  | 5.35  |  
|                                                                                 |  |                                             |         |   |                                 |  |      |                      |  |  |                      |   |  |  |       |  



|*) | Reclassified, refer to Note 2d.
|-- | -------------------------------

|**) | Total impact of other comprehensive income due to IAS 12 is NIS 11 million (Companys share NIS 6 million) from foreign currency translation reserve.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------



F-142



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 41:- | THE EFFECT OF RESTATEMENT AND CLARIFICATION TO IAS 12 ON THE FINANCIAL STATEMENTS (Cont.)
|--------- | -----------------------------------------------------------------------------------------



In the consolidated statement of financial position as of December 31, 2012



|                                                           |  |                      |        |  |                                 |  |      |                      |  |  |                      |   |  |  |        | 
|---------------------------------------------------------- |  | -------------------- | ------ |  | ------------------------------- |  | ---- | -------------------- |  |  | -------------------- | - |  |  | ------ | 
|                                                           |  | Aspreviouslyreported |        |  | Impact ofClarificationto IAS 12 |  |      | Impact ofRestatement |  |  | Ascurrentlypresented |  
|                                                           |  | NIS in millions      |       
|                                                           |  |                      |        | 
|ASSETS                                                     |  |                      |        |  |                                 |  |      |                      |  |  |                      |   |  |  |        | 
|                                                           |  |                      |        | 
|Trade receivables                                          |  |                      | 744    |  |                                 |  |     |                      |  |  | (28                  | ) |  |  | 716    | 
|                                                           |  |                      |        |  |                                 |  |      |                      |  |  |                      |   |  |  |        | 
|Total assets                                               |  |                      | 71,062 |  |                                 |  |     |                      |  |  | (28                  | ) |  |  | 71,034 | 
|                                                           |  |                      |        |  |                                 |  |      |                      |  |  |                      |   |  |  |        | 
|                                                           |  |                      |        | 
|LIABILITIES                                                |  |                      |        |  |                                 |  |      |                      |  |  |                      |   |  |  |        | 
|                                                           |  |                      |        | 
|Trade payables                                             |  |                      | 914    |  |                                 |  |     |                      |  |  | 3                    |   |  |  | 917    | 
|                                                           |  |                      |        |  |                                 |  |      |                      |  |  |                      |   |  |  |        | 
|Other accounts payable                                     |  |                      | 1,256  |  |                                 |  |     |                      |  |  | 12                   |   |  |  | 1,268  | 
|                                                           |  |                      |        |  |                                 |  |      |                      |  |  |                      |   |  |  |        | 
|Income taxes payable                                       |  |                      | 52     |  |                                 |  |     |                      |  |  | (5                   | ) |  |  | 47     | 
|                                                           |  |                      |        |  |                                 |  |      |                      |  |  |                      |   |  |  |        | 
|Deferred taxes                                             |  |                      | 3,066  |  |                                 |  | 316  |                      |  |  | (2                   | ) |  |  | 3,380  | 
|                                                           |  |                      |        |  |                                 |  |      |                      |  |  |                      |   |  |  |        | 
|Total assets                                               |  |                      | 48,413 |  |                                 |  | 316  |                      |  |  | 8                    |   |  |  | 48,737 | 
|                                                           |  |                      |        |  |                                 |  |      |                      |  |  |                      |   |  |  |        | 
|                                                           |  |                      |        | 
|EQUITY                                                     |  |                      |        |  |                                 |  |      |                      |  |  |                      |   |  |  |        | 
|                                                           |  |                      |        | 
|Retained earnings                                          |  |                      | 4,699  |  |                                 |  | (153 | )                    |  |  | (15                  | ) |  |  | 4,531  | 
|                                                           |  |                      |        |  |                                 |  |      |                      |  |  |                      |   |  |  |        | 
|Total equity attributable to equity holders of the company |  |                      | 7,849  |  |                                 |  | (153 | )                    |  |  | (15                  | ) |  |  | 7,681  | 
|                                                           |  |                      |        |  |                                 |  |      |                      |  |  |                      |   |  |  |        | 
|Non-controlling interests                                  |  |                      | 14,800 |  |                                 |  | (163 | )                    |  |  | (21                  | ) |  |  | 14,616 | 
|                                                           |  |                      |        |  |                                 |  |      |                      |  |  |                      |   |  |  |        | 
|Total equity                                               |  |                      | 22,649 |  |                                 |  | (316 | )                    |  |  | (36                  | ) |  |  | 22,297 | 
|                                                           |  |                      |        |  |                                 |  |      |                      |  |  |                      |   |  |  |        | 



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 41:- | THE EFFECT OF RESTATEMENT AND CLARIFICATION TO IAS 12 ON THE FINANCIAL STATEMENTS (Cont.)
|--------- | -----------------------------------------------------------------------------------------



In the consolidated statement of income for the year ended December 31, 2012



|                                                                          |  |                                             |       |  |                                 |  |       |                      |  |  |                      |   |  |  |       | 
|------------------------------------------------------------------------- |  | ------------------------------------------- | ----- |  | ------------------------------- |  | ----- | -------------------- |  |  | -------------------- | - |  |  | ----- | 
|                                                                          |  | Aspreviouslyreported                        |       |  | Impact ofClarificationto IAS 12 |  |       | Impact ofRestatement |  |  | Ascurrentlypresented |  
|                                                                          |  | NIS in millions (except for per share data) |      
|                                                                          |  |                                             |       | 
|Revenues from sale of buildings, land and construction work performed     |  |                                             | 1,749 |  |                                 |  |      |                      |  |  | 11                   |   |  |  | 1,760 | 
|                                                                          |  |                                             |       |  |                                 |  |       |                      |  |  |                      |   |  |  |       | 
|Cost of buildings sold, land and construction work performed              |  |                                             | 1,665 |  |                                 |  |      |                      |  |  | 55                   |   |  |  | 1,720 | 
|                                                                          |  |                                             |       |  |                                 |  |       |                      |  |  |                      |   |  |  |       | 
|Gross profit from sale of buildings, land and construction work performed |  |                                             | 84    |  |                                 |  |      |                      |  |  | (44                  | ) |  |  | 40    | 
|                                                                          |  |                                             |       |  |                                 |  |       |                      |  |  |                      |   |  |  |       | 
|Operating income                                                          |  |                                             | 5,309 |  |                                 |  |      |                      |  |  | (44                  | ) |  |  | 5,265 | 
|                                                                          |  |                                             |       |  |                                 |  |       |                      |  |  |                      |   |  |  |       | 
|Taxes on income                                                           |  |                                             | 681   |  |                                 |  | 84    |                      |  |  | (7                   | ) |  |  | 758   | 
|                                                                          |  |                                             |       |  |                                 |  |       |                      |  |  |                      |   |  |  |       | 
|Net income                                                                |  |                                             | 2,534 |  |                                 |  | (84   | )                    |  |  | (37                  | ) |  |  | 2,413 | 
|                                                                          |  |                                             |       |  |                                 |  |       |                      |  |  |                      |   |  |  |       | 
|                                                                          |  |                                             |       | 
|Attributable to:                                                          |  |                                             |       |  |                                 |  |       |                      |  |  |                      |   |  |  |       | 
|Equity holders of the Company                                             |  |                                             | 957   |  |                                 |  | (41   | )                    |  |  | (15                  | ) |  |  | 901   | 
|Non-controlling interests                                                 |  |                                             | 1,577 |  |                                 |  | (43   | )                    |  |  | (22                  | ) |  |  | 1,512 | 
|                                                                          |  |                                             |       |  |                                 |  |       |                      |  |  |                      |   |  |  |       | 
|                                                                          |  |                                             |       | 
|                                                                          |  |                                             | 2,534 |  |                                 |  | (84   | )                    |  |  | (37                  | ) |  |  | 2,413 | 
|                                                                          |  |                                             |       |  |                                 |  |       |                      |  |  |                      |   |  |  |       | 
|Net earnings per share attributable to equity holders of the Company:     |  |                                             |       |  |                                 |  |       |                      |  |  |                      |   |  |  |       | 
|Basic net earnings                                                        |  |                                             | 5.80  |  |                                 |  | (0.25 | )                    |  |  | (0.09                | ) |  |  | 5.46  | 
|                                                                          |  |                                             |       |  |                                 |  |       |                      |  |  |                      |   |  |  |       | 
|Diluted net earnings                                                      |  |                                             | 5.59  |  |                                 |  | (0.25 | )                    |  |  | (0.09                | ) |  |  | 5.25  | 
|                                                                          |  |                                             |       |  |                                 |  |       |                      |  |  |                      |   |  |  |       | 



|*) | Total impact of other comprehensive income is not material.
|-- | -----------------------------------------------------------

In the consolidated statement
of income for the year ended December 31, 2011



|                                                                      |  |                                             |       |  |                                 |  |       |                      |  |  |                      |  |  |  |       | 
|--------------------------------------------------------------------- |  | ------------------------------------------- | ----- |  | ------------------------------- |  | ----- | -------------------- |  |  | -------------------- |  |  |  | ----- | 
|                                                                      |  | Aspreviouslyreported                        |       |  | Impact ofClarificationto IAS 12 |  |       | Impact ofRestatement |  |  | Ascurrentlypresented | 
|                                                                      |  | NIS in millions (except for per share data) |      
|                                                                      |  |                                             |       | 
|Taxes on income                                                       |  |                                             | 328   |  |                                 |  | 24    |                      |  |  |                     |  |  |  | 352   | 
|                                                                      |  |                                             |       |  |                                 |  |       |                      |  |  |                      |  |  |  |       | 
|Net income                                                            |  |                                             | 2,053 |  |                                 |  | (24   | )                    |  |  |                     |  |  |  | 2,029 | 
|                                                                      |  |                                             |       |  |                                 |  |       |                      |  |  |                      |  |  |  |       | 
|                                                                      |  |                                             |       | 
|Attributable to:                                                      |  |                                             |       |  |                                 |  |       |                      |  |  |                      |  |  |  |       | 
|Equity holders of the Company                                         |  |                                             | 719   |  |                                 |  | (11   | )                    |  |  |                     |  |  |  | 708   | 
|Non-controlling interests                                             |  |                                             | 1,334 |  |                                 |  | (13   | )                    |  |  |                     |  |  |  | 1,321 | 
|                                                                      |  |                                             |       |  |                                 |  |       |                      |  |  |                      |  |  |  |       | 
|                                                                      |  |                                             |       | 
|                                                                      |  |                                             | 2,053 |  |                                 |  | (24   | )                    |  |  |                     |  |  |  | 2,029 | 
|                                                                      |  |                                             |       |  |                                 |  |       |                      |  |  |                      |  |  |  |       | 
|                                                                      |  |                                             |       | 
|Net earnings per share attributable to equity holders of the Company: |  |                                             |       |  |                                 |  |       |                      |  |  |                      |  |  |  |       | 
|Basic net earnings                                                    |  |                                             | 4.65  |  |                                 |  | (0.08 | )                    |  |  |                     |  |  |  | 4.57  | 
|                                                                      |  |                                             |       |  |                                 |  |       |                      |  |  |                      |  |  |  |       | 
|                                                                      |  |                                             |       | 
|Diluted net earnings                                                  |  |                                             | 4.30  |  |                                 |  | (0.07 | )                    |  |  |                     |  |  |  | 4.23  | 
|                                                                      |  |                                             |       |  |                                 |  |       |                      |  |  |                      |  |  |  |       | 





|*) | Total impact of other comprehensive income is not material.
|-- | -----------------------------------------------------------



F-144



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 42:- | CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY
|--------- | -----------------------------------------------------

Condensed statements of
financial position



|                                                                           |  |                 |        |  |      |  |        | 
|-------------------------------------------------------------------------- |  | --------------- | ------ |  | ---- |  | ------ | 
|                                                                           |  | December 31     |       
|                                                                           |  | 2013            |        |  | 2012 | 
|                                                                           |  | NIS in millions |       
|ASSETS                                                                     |  |                 |        |  |      |  |        | 
|                                                                           |  |                
|CURRENT ASSETS                                                             |  |                 |        |  |      |  |        | 
|                                                                           |  |                
|Cash and cash equivalents                                                  |  |                 | 474    |  |      |  | 780    | 
|Short-term loans and current maturities of long-term loans to subsidiaries |  |                 | 363    |  |      |  | 217    | 
|Financial derivatives                                                      |  |                 | 17     |  |      |  | 81     | 
|Other accounts receivable                                                  |  |                 | 4      |  |      |  | 1      | 
|                                                                           |  |                 |        |  |      |  |        | 
|                                                                           |  |                
|Total current assets                                                       |  |                 | 858    |  |      |  | 1,079  | 
|                                                                           |  |                 |        |  |      |  |        | 
|                                                                           |  |                
|NON-CURRENT ASSETS                                                         |  |                 |        |  |      |  |        | 
|                                                                           |  |                
|Long-term loans                                                            |  |                 | *)    |  |      |  | *)    | 
|Available for sale marketable securities                                   |  |                 | 108    |  |      |  |       | 
|Financial derivatives                                                      |  |                 | 743    |  |      |  | 910    | 
|Loans to investees                                                         |  |                 | 6,267  |  |      |  | 6,790  | 
|Investments in subsidiaries                                                |  |                 | 6,145  |  |      |  | 5,176  | 
|Fixed assets, net                                                          |  |                 | 6      |  |      |  | 7      | 
|Deferred costs                                                             |  |                 |       |  |      |  | 1      | 
|                                                                           |  |                 |        |  |      |  |        | 
|                                                                           |  |                
|Total non-current assets                                                   |  |                 | 13,269 |  |      |  | 12,884 | 
|                                                                           |  |                 |        |  |      |  |        | 
|                                                                           |  |                
|Total assets                                                               |  |                 | 14,127 |  |      |  | 13,963 | 
|                                                                           |  |                 |        |  |      |  |        | 



|*) | Represents an amount lower than NIS 1 million.
|-- | ----------------------------------------------



F-145



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 42:- | CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (Cont.)
|--------- | -------------------------------------------------------------



Condensed statements of financial position (Cont.)





|                                                     |  |                 |        |   |      |  |        |  
|---------------------------------------------------- |  | --------------- | ------ | - | ---- |  | ------ | -
|                                                     |  | December 31     |       
|                                                     |  | 2013            |        |   | 2012 | 
|                                                     |  | NIS in millions |       
|LIABILITIES AND EQUITY                               |  |                 |        |   |      |  |        |  
|                                                     |  |                
|CURRENT LIABILITIES                                  |  |                 |        |   |      |  |        |  
|                                                     |  |                
|Current maturities of debentures                     |  |                 | 256    |   |      |  | 731    |  
|Trade payables                                       |  |                 | 4      |   |      |  | 1      |  
|Other accounts payable                               |  |                 | 181    |   |      |  | 162    |  
|Current tax payable                                  |  |                 | 8      |   |      |  | 1      |  
|                                                     |  |                 |        |   |      |  |        |  
|                                                     |  |                
|Total current liabilities                            |  |                 | 449    |   |      |  | 895    |  
|                                                     |  |                 |        |   |      |  |        |  
|                                                     |  |                
|NON-CURRENT LIABILITIES                              |  |                 |        |   |      |  |        |  
|                                                     |  |                
|Loans from banks                                     |  |                 | 1,154  |   |      |  | 2,118  |  
|Debentures                                           |  |                 | 10,464 |   |      |  | 9,098  |  
|Deferred taxes                                       |  |                 | 26     |   |      |  | 121    |  
|                                                     |  |                 |        |   |      |  |        |  
|                                                     |  |                
|Total non-current liabilities                        |  |                 | 11,644 |   |      |  | 11,337 |  
|                                                     |  |                 |        |   |      |  |        |  
|                                                     |  |                
|EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY |  |                 |        |   |      |  |        |  
|                                                     |  |                
|Share capital                                        |  |                 | 229    |   |      |  | 219    |  
|Share premium                                        |  |                 | 4,288  |   |      |  | 3,805  |  
|Reserves                                             |  |                 | (3     | ) |      |  | (8     | )
|Accumulated losses                                   |  |                 | (2,480 | ) |      |  | (2,285 | )
|                                                     |  |                 |        |   |      |  |        |  
|                                                     |  |                
|Total equity                                         |  |                 | 2,034  |   |      |  | 1,731  |  
|                                                     |  |                 |        |   |      |  |        |  
|                                                     |  |                
|Total liabilities and equity                         |  |                 | 14,127 |   |      |  | 13,963 |  
|                                                     |  |                 |        |   |      |  |        |  



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##### Table of Contents

GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 42:- | CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (Cont.)
|--------- | -------------------------------------------------------------



Condensed statements of income



|                                            |  |                        |     |   |      |    |      |      |  |  |       |  
|------------------------------------------- |  | ---------------------- | --- | - | ---- | -- | ---- | ---- |  |  | ----- | -
|                                            |  | Year ended December 31 |    
|                                            |  | 2013                   |     |   | 2012 |    |      | 2011 | 
|                                            |  | NIS in millions        |    
|                                            |  |                        |    
|Dividend income                             |  |                        | 113 |   |      |    | 99   |      |  |  | 80    |  
|Management fees from investees              |  |                        | 2   |   |      |    | 3    |      |  |  | 8     |  
|Finance income from subsidiaries            |  |                        | 340 |   |      |    | 413  |      |  |  | 658   |  
|Other finance income                        |  |                        | 540 |   |      |    | 25   |      |  |  | 9     |  
|                                            |  |                        |     |   |      |    |      |      |  |  |       |  
|                                            |  |                        |    
|Total income                                |  |                        | 995 |   |      |    | 540  |      |  |  | 755   |  
|                                            |  |                        |     |   |      |    |      |      |  |  |       |  
|                                            |  |                        |    
|General and administrative expenses         |  |                        | 79  |   |      |    | 68   |      |  |  | 66    |  
|Finance expenses                            |  |                        | 611 |   |      |    | 602  |      |  |  | 937   |  
|Exchange differences on loans to investees  |  |                        | 256 |   |      |    | 98   |      |  |  | 11    |  
|Other expenses                              |  | *)                     |    |   |      | *) |     |      |  |  | 6     |  
|                                            |  |                        |     |   |      |    |      |      |  |  |       |  
|                                            |  |                        |    
|Total expenses                              |  |                        | 946 |   |      |    | 768  |      |  |  | 1,020 |  
|                                            |  |                        |     |   |      |    |      |      |  |  |       |  
|                                            |  |                        |    
|Income (loss) before taxes on income        |  |                        | 49  |   |      |    | (228 | )    |  |  | (265  | )
|Taxes on income (tax benefit)               |  |                        | (54 | ) |      |    | (12  | )    |  |  | 4     |  
|                                            |  |                        |     |   |      |    |      |      |  |  |       |  
|                                            |  |                        |    
|Net income (loss) attributed to the Company |  |                        | 103 |   |      |    | (216 | )    |  |  | (269  | )
|                                            |  |                        |     |   |      |    |      |      |  |  |       |  



|*) | Represents an amount lower than NIS 1 million.
|-- | ----------------------------------------------



F-147



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##### Table of Contents

GAZIT-GLOBE LTD.

APPENDIX B TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 42:- | CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (Cont.)
|--------- | -------------------------------------------------------------



Condensed statements of cash flows



|                                                                                                    |  |                        |      |   |      |  |      |      |  |  |      |  
|--------------------------------------------------------------------------------------------------- |  | ---------------------- | ---- | - | ---- |  | ---- | ---- |  |  | ---- | -
|                                                                                                    |  | Year ended December 31 |     
|                                                                                                    |  | 2013                   |      |   | 2012 |  |      | 2011 | 
|                                                                                                    |  | NIS in millions        |     
|Cash flows from operating activities of the Company:                                                |  |                        |      |   |      |  |      |      |  |  |      |  
|                                                                                                    |  |                        |     
|Net income (loss) attributed to the Company                                                         |  |                        | 103  |   |      |  | (216 | )    |  |  | (269 | )
|                                                                                                    |  |                        |      |   |      |  |      |      |  |  |      |  
|                                                                                                    |  |                        |     
|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    |   |      |  | 1    |      |  |  | 1    |  
|Dividend income                                                                                     |  |                        | (113 | ) |      |  | (99  | )    |  |  | (80  | )
|Finance expenses (income), net                                                                      |  |                        | (13  | ) |      |  | 262  |      |  |  | 281  |  
|Cost of share-based payment                                                                         |  |                        | 10   |   |      |  | 4    |      |  |  | 7    |  
|Taxes on income (tax benefit)                                                                       |  |                        | (54  | ) |      |  | (12  | )    |  |  | 4    |  
|                                                                                                    |  |                        |      |   |      |  |      |      |  |  |      |  
|                                                                                                    |  |                        |     
|                                                                                                    |  |                        | (168 | ) |      |  | 156  |      |  |  | 213  |  
|                                                                                                    |  |                        |      |   |      |  |      |      |  |  |      |  
|Changes in assets and liabilities of the Company:                                                   |  |                        |      |   |      |  |      |      |  |  |      |  
|                                                                                                    |  |                        |     
|Decrease (increase) in other accounts receivable                                                    |  |                        | (4   | ) |      |  | (11  | )    |  |  | 28   |  
|Increase (decrease) in trade payables and other accounts payable                                    |  |                        |     |   |      |  | 6    |      |  |  | (55  | )
|                                                                                                    |  |                        |      |   |      |  |      |      |  |  |      |  
|                                                                                                    |  |                        |     
|                                                                                                    |  |                        | (4   | ) |      |  | (5   | )    |  |  | (27  | )
|                                                                                                    |  |                        |      |   |      |  |      |      |  |  |      |  
|Cash paid and received during the year by the Company for:                                          |  |                        |      |   |      |  |      |      |  |  |      |  
|                                                                                                    |  |                        |     
|Interest paid                                                                                       |  |                        | (491 | ) |      |  | (661 | )    |  |  | (261 | )
|Interest received (Note 37d)                                                                        |  |                        | 191  |   |      |  | 1    |      |  |  | 2    |  
|Interest received from subsidiaries                                                                 |  |                        | 233  |   |      |  | 303  |      |  |  | 280  |  
|Taxes paid                                                                                          |  |                        | (33  | ) |      |  | (2   | )    |  |  | (4   | )
|Dividends received from subsidiaries                                                                |  |                        | 113  |   |      |  | 99   |      |  |  | 80   |  
|                                                                                                    |  |                        |      |   |      |  |      |      |  |  |      |  
|                                                                                                    |  |                        |     
|                                                                                                    |  |                        | 13   |   |      |  | (260 | )    |  |  | 97   |  
|                                                                                                    |  |                        |      |   |      |  |      |      |  |  |      |  
|                                                                                                    |  |                        |     
|Net cash provided by (used in) operating activities of the Company                                  |  |                        | (56  | ) |      |  | (325 | )    |  |  | 14   |  
|                                                                                                    |  |                        |      |   |      |  |      |      |  |  |      |  



F-148



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 42:- | CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (Cont.)
|--------- | -------------------------------------------------------------



Condensed statements of cash flows (Cont.)



|                                                                    |  |                        |        |   |      |  |       |      |  |  |       |  
|------------------------------------------------------------------- |  | ---------------------- | ------ | - | ---- |  | ----- | ---- |  |  | ----- | -
|                                                                    |  | Year ended December 31 |       
|                                                                    |  | 2013                   |        |   | 2012 |  |       | 2011 | 
|                                                                    |  | NIS in millions        |       
|Cash flows from investing activities of the Company:                |  |                        |        |   |      |  |       |      |  |  |       |  
|                                                                    |  |                        |       
|Acquisition of fixed assets                                         |  |                        | (2     | ) |      |  | (1    | )    |  |  | (2    | )
|Investments in subsidiaries                                         |  |                        | (1,200 | ) |      |  | (248  | )    |  |  | (303  | )
|Redemption of preferred shares of subsidiary                        |  |                        | 231    |   |      |  |      |      |  |  |      |  
|Loans repaid by (granted to) subsidiaries, net                      |  |                        | 212    |   |      |  | 150   |      |  |  | (227  | )
|Proceeds from sale of convertible debenture of subsidiary           |  |                        |       |   |      |  | 208   |      |  |  |      |  
|Investment in available for sale marketable securities              |  |                        | (105   | ) |      |  |      |      |  |  |      |  
|Repayment of loan granted                                           |  |                        |       |   |      |  |      |      |  |  | 5     |  
|Repayment of deposit                                                |  |                        |       |   |      |  |      |      |  |  | 4     |  
|                                                                    |  |                        |        |   |      |  |       |      |  |  |       |  
|                                                                    |  |                        |       
|Net cash provided by (used in) investing activities of the Company  |  |                        | (864   | ) |      |  | 109   |      |  |  | (523  | )
|                                                                    |  |                        |        |   |      |  |       |      |  |  |       |  
|                                                                    |  |                        |       
|Cash flows from financing activities of the Company:                |  |                        |        |   |      |  |       |      |  |  |       |  
|                                                                    |  |                        |       
|Issue of shares (less issue expenses)                               |  |                        | 489    |   |      |  |      |      |  |  | 313   |  
|Exercise of stock options into shares                               |  |                        | *)    |   |      |  | 3     |      |  |  | 2     |  
|Repayment of loans for purchase of company shares                   |  |                        | *)    |   |      |  | *)   |      |  |  | 4     |  
|Dividends paid to equity holders of the Company                     |  |                        | (298   | ) |      |  | (264  | )    |  |  | (241  | )
|Issue of debentures (less issue expenses)                           |  |                        | 1,670  |   |      |  | 1,676 |      |  |  | 446   |  
|Repayment and early redemption of debentures                        |  |                        | (885   | ) |      |  | (786  | )    |  |  | (233  | )
|Receipt (repayment) of long-term credit facilities from banks, net  |  |                        | (753   | ) |      |  | (314  | )    |  |  | 897   |  
|Unwinding of hedging transactions (Note 37d)                        |  |                        | 392    |   |      |  |      |      |  |  |      |  
|                                                                    |  |                        |        |   |      |  |       |      |  |  |       |  
|                                                                    |  |                        |       
|Net cash provided by financing activities of the Company            |  |                        | 615    |   |      |  | 315   |      |  |  | 1,188 |  
|                                                                    |  |                        |        |   |      |  |       |      |  |  |       |  
|                                                                    |  |                        |       
|Exchange differences on balance of cash and cash equivalents        |  |                        | (1     | ) |      |  | (11   | )    |  |  | (22   | )
|                                                                    |  |                        |        |   |      |  |       |      |  |  |       |  
|                                                                    |  |                        |       
|Increase (decrease) in cash and cash equivalents                    |  |                        | (306   | ) |      |  | 88    |      |  |  | 657   |  
|Cash and cash equivalents at the beginning of year                  |  |                        | 780    |   |      |  | 692   |      |  |  | 35    |  
|                                                                    |  |                        |        |   |      |  |       |      |  |  |       |  
|                                                                    |  |                        |       
|Cash and cash equivalents at the end of year                        |  |                        | 474    |   |      |  | 780   |      |  |  | 692   |  
|                                                                    |  |                        |        |   |      |  |       |      |  |  |       |  
|                                                                    |  |                        |       
|Significant non-cash activities of the Company:                     |  |                        |        |   |      |  |       |      |  |  |       |  
|                                                                    |  |                        |       
|Exchange of loan granted to subsidiaries for capital issuance       |  |                        | 214    |   |      |  | 373   |      |  |  | 347   |  
|                                                                    |  |                        |        |   |      |  |       |      |  |  |       |  
|Redemption of capital note of an subsidiary                         |  |                        |       |   |      |  | 180   |      |  |  |      |  
|                                                                    |  |                        |        |   |      |  |       |      |  |  |       |  
|Redemption of preferred shares of subsidiary against loan repayment |  |                        |       |   |      |  |      |      |  |  | 50    |  
|                                                                    |  |                        |        |   |      |  |       |      |  |  |       |  



|*) | Represents an amount lower than NIS 1 million.
|-- | ----------------------------------------------



F-149



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 42:- | 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     |       
|                                    |  | 2013            |        |  | 2012 | 
|                                    |  | NIS in millions |       
|                                    |  |                
|Loans from banks and others (1) (3) |  |                 | 1,154  |  |      |  | 2,118  | 
|Debentures (2) (3)                  |  |                 | 10,464 |  |      |  | 9,098  | 
|                                    |  |                 |        |  |      |  |        | 
|                                    |  |                
|                                    |  |                 | 11,618 |  |      |  | 11,216 | 
|                                    |  |                 |        |  |      |  |        | 



| | (1) | Composition of banks credit
| | --- | ---------------------------



|                              |  |           |      |   |                 |  |       |      |  |  |       |  
|----------------------------- |  | --------- | ---- | - | --------------- |  | ----- | ---- |  |  | ----- | -
|                              |  | Effective |      |   | December 31     | 
|                              |  | interest  |      |   | 2013            |  |       | 2012 | 
|Denomination                  |  | %         |      |   | NIS in millions | 
|                              |  |           |     
|In NIS - unlinked             |  |           |     |   |                 |  |      |      |  |  | 200   |  
|In U.S.$                      |  |           |     |   |                 |  |      |      |  |  | 125   |  
|In U.S.$                      |  |           | 5.52 | % |                 |  | 266   |      |  |  | 286   |  
|In C$                         |  |           | 2.40 | % |                 |  | 1     |      |  |  |      |  
|In                           |  |           | 2.72 | % |                 |  | 908   |      |  |  | 1,520 |  
|                              |  |           |      |   |                 |  |       |      |  |  |       |  
|                              |  |           |     
|                              |  |           |      |   |                 |  | 1,175 |      |  |  | 2,131 |  
|Less - deferred finance costs |  |           |      |   |                 |  | (21   | )    |  |  | (13   | )
|                              |  |           |      |   |                 |  |       |      |  |  |       |  
|                              |  |           |     
|                              |  |           |      |   |                 |  | 1,154 |      |  |  | 2,118 |  
|                              |  |           |      |   |                 |  |       |      |  |  |       |  

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).



F-150



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 42:- | CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (Cont.)
|--------- | -------------------------------------------------------------



Note B - Non-current liabilities (Cont.) -





| | (2) | Composition of debentures
| | --- | -------------------------



|                                        |  |              |  |           |      |  |        |  |      |                 |  |  |        |  |  |  |       | 
|--------------------------------------- |  | ------------ |  | --------- | ---- |  | ------ |  | ---- | --------------- |  |  | ------ |  |  |  | ----- | 
|                                        |  |              |  | Effective |      |  |        |  |      | Carrying amount | 
|                                        |  |              |  | interest  |      |  | Coupon |  |      | December 31     | 
|                                        |  | Denomination |  | rate      |      |  | rate   |  |      | 2013            |  |  | 2012   | 
|                                        |  |              |  | %         |      |  | %      |  |      | NIS in millions | 
|                                        |  |              |  |           |     
|Debentures (series A)                   |  | U.S.$        |  |           | 6.18 |  |        |  | 6.50 |                 |  |  | 158    |  |  |  | 212   | 
|Debentures (series B) **)               |  |             |  |           | 2.50 |  |        |  | 2.39 |                 |  |  | 149    |  |  |  | 307   | 
|Debentures (series C)                   |  | CPI          |  |           | 4.88 |  |        |  | 4.95 |                 |  |  | 1,125  |  |  |  | 1,265 | 
|Debentures (series D)                   |  | CPI          |  |           | 5.02 |  |        |  | 5.10 |                 |  |  | 2,466  |  |  |  | 2,421 | 
|Debentures (series E) **)               |  | NIS          |  |           | 2.08 |  |        |  | 1.58 |                 |  |  | 545    |  |  |  | 543   | 
|Debentures (series F)                   |  | NIS          |  |           | 6.73 |  |        |  | 6.40 |                 |  |  | 565    |  |  |  | 847   | 
|Debentures (series I)                   |  | CPI          |  |           | 5.58 |  |        |  | 5.30 |                 |  |  | 1,444  |  |  |  | 1,668 | 
|Debentures (series J) *)                |  | CPI          |  |           | 5.76 |  |        |  | 6.50 |                 |  |  | 861    |  |  |  | 850   | 
|Debentures (series K)                   |  | CPI          |  |           | 4.35 |  |        |  | 5.35 |                 |  |  | 2,961  |  |  |  | 1,716 | 
|Debenture (series L)                    |  | CPI          |  |           | 4.14 |  |        |  | 4.00 |                 |  |  | 446    |  |  |  |      | 
|                                        |  |              |  |           |      |  |        |  |      |                 |  |  |        |  |  |  |       | 
|                                        |  |              |  |           |     
|                                        |  |              |  |           |      |  |        |  |      |                 |  |  | 10,720 |  |  |  | 9,829 | 
|Less - current maturities of debentures |  |              |  |           |      |  |        |  |      |                 |  |  | 256    |  |  |  | 731   | 
|                                        |  |              |  |           |      |  |        |  |      |                 |  |  |        |  |  |  |       | 
|                                        |  |              |  |           |     
|                                        |  |              |  |           |      |  |        |  |      |                 |  |  | 10,464 |  |  |  | 9,098 | 
|                                        |  |              |  |           |      |  |        |  |      |                 |  |  |        |  |  |  |       | 



|*) | 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 1,127 million.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|**) | Floating interest rate.
|--- | -----------------------



| | (3) | Maturities
| | --- | ----------



|                            |  |                           |       |  |            |  |        | 
|--------------------------- |  | ------------------------- | ----- |  | ---------- |  | ------ | 
|                            |  | Loansfrom banksand others |       |  | Debentures | 
|                            |  | NIS in millions           |      
|                            |  |                          
|Year 1 - current maturities |  |                           |      |  |            |  | 256    | 
|                            |  |                          
|Year 2                      |  |                           |      |  |            |  | 975    | 
|Year 3                      |  |                           | 11    |  |            |  | 974    | 
|Year 4                      |  |                           | 11    |  |            |  | 761    | 
|Year 5                      |  |                           | 452   |  |            |  | 1,388  | 
|Year 6 and thereafter       |  |                           | 680   |  |            |  | 6,366  | 
|                            |  |                           |       |  |            |  |        | 
|                            |  |                          
|                            |  |                           | 1,154 |  |            |  | 10,720 | 
|                            |  |                           |       |  |            |  |        | 



F-151



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GAZIT-GLOBE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|NOTE 42:- | CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (Cont.)
|--------- | -------------------------------------------------------------



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 1,305 million.

As of the reporting date, total debt of the
wholly-owned subsidiaries which is guaranteed by the Company amounts to NIS 373 million.

As for legal claims, refer to Note 26d
above. As for disputed VAT assessments, refer to Note 25k above.

Note D - Dividends from subsidiaries -

Dividends declared and received from subsidiary:



|            |  |                        |     |  |      |  |    |      |  |  |    | 
|----------- |  | ---------------------- | --- |  | ---- |  | -- | ---- |  |  | -- | 
|            |  | Year ended December 31 |    
|            |  | 2013                   |     |  | 2012 |  |    | 2011 | 
|            |  | NIS in millions        |    
|            |  |                        |    
|Citycon OYJ |  |                        | 113 |  |      |  | 99 |      |  |  | 80 | 
|            |  |                        |     |  |      |  |    |      |  |  |    | 



F-152



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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, 2013 (1)



|                                          |  |                                    |         |  |      |  |                 |      |                       |     |         |                |  |   
|----------------------------------------- |  | ---------------------------------- | ------- |  | ---- |  | --------------- | ---- | --------------------- | --- | ------- | -------------- |  | --
|                                          |  | Holding interest asof December 31, |         |  |      |  | Incorporated in |      | Additionalinformation
|                                          |  | 2013                               |         |  | 2012 |  |                 | Note |                       |     | in Note
|                                          |  | %                                  |         |  |      |  |                 |      |                      
|                                          |  |                                    |         |  |     
|Equity One Inc. *)                        |  |                                    | *) 45.2 |  |      |  | *) 45.5         |      |                       | (3) |         | USA            |  | 9d
|First Capital Realty Inc.                 |  |                                    | 45.2    |  |      |  | 45.6            |      |                       | (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            |  | 9i
|Gazit Senior Care 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         |  |   
|Golden Oak Inc.                           |  |                                    | 100     |  |      |  | 100             |      |                       | (2) |         | Cayman Islands |  |   
|Hollywood Properties Ltd.                 |  |                                    | 100     |  |      |  | 100             |      |                       | (2) |         | Cayman Islands |  |   
|Citycon Oyj                               |  |                                    | 49.3    |  |      |  | 48.8            |      |                       | (2) |         | Finland        |  |   
|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        |  | 9i
|Gazit Brazil Ltda.                        |  |                                    | 100     |  |      |  | 100             |      |                       | (3) |         | Brazil         |  | 9i
|Gazit Gaia Limited                        |  |                                    | 100     |  |      |  | 100             |      |                       | (2) |         | Jersey         |  |   
|Gazit Midas Limited                       |  |                                    | 100     |  |      |  | 100             |      |                       | (2) |         | Jersey         |  |   
|Atrium European Real Estate Limited       |  |                                    | 39.8    |  |      |  | 34.5            |      |                       | (3) |         | Jersey         |  | 9l
|Gazit Globe Israel (Development) Ltd.     |  |                                    | 82.5    |  |      |  | 75              |      |                       | (2) |         | Israel         |  | 9i
|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.                        |  |                                    | 73.9    |  |      |  | 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, ProMed Properties Inc. and Gazit Senior Care 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, 2013 and 2012 is 45.1%.
|-- | ------------------------------------------------------------------------



F-153



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GAZIT-GLOBE LTD.

APPENDIX B TO CONSOLIDATED FINANCIAL STATEMENTS







SCHEDULE III

OF RULE 5-04 OF REGULATION S-X

AS OF DECEMBER 31, 2013

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                              |  |                     | 42  |  |                            |  | 3,607  |                                               |  |  | 369                                    |  |                                       | 1982 |  | 2002
|North Florida                              |  |                     | 27  |  |                            |  | 1,358  |                                               |  |  | 78                                     |  |                                       | 1987 |  | 2002
|Southeast U.S. (excluding Florida)         |  |                     | 28  |  |                            |  | 1,206  |                                               |  |  | 48                                     |  |                                       | 1986 |  | 2004
|Northeast U.S.                             |  |                     | 25  |  |                            |  | 3,878  |                                               |  |  | 441                                    |  |                                       | 1987 |  | 2010
|West Coast                                 |  |                     | 12  |  |                            |  | 3,107  |                                               |  |  | 572                                    |  |                                       | 1979 |  | 2011
|                                           |  |                     |     |  |                            |  |        |                                               |  |  |                                        |  |                                       |      |  |     
|Subtotal Equity One                        |  |                     | 134 |  |                            |  | 13,156 |                                               |  |  | 1,508                                  |  |                                       |      |  |     
|                                           |  |                     |     |  |                            |  |        |                                               |  |  |                                        |  |                                       |      |  |     
|                                           |  |                     |     |  |                           
|First Capital                              |  |                     |     |  |                            |  |        |                                               |  |  |                                        |  |                                       |      |  |     
|Central (Ontario)                          |  |                     | 60  |  |                            |  | 9,371  |                                               |  |  | 1,757                                  |  |                                       | 2008 |  | 2007
|East (mainly Quebec)                       |  |                     | 53  |  |                            |  | 4,770  |                                               |  |  | 766                                    |  |                                       | 2006 |  | 2007
|West (mainly British Columbia and Alberta) |  |                     | 47  |  |                            |  | 8,074  |                                               |  |  | 1,751                                  |  |                                       | 2007 |  | 2006
|                                           |  |                     |     |  |                            |  |        |                                               |  |  |                                        |  |                                       |      |  |     
|Subtotal First Capital                     |  |                     | 160 |  |                            |  | 22,215 |                                               |  |  | 4,274                                  |  |                                       |      |  |     
|                                           |  |                     |     |  |                            |  |        |                                               |  |  |                                        |  |                                       |      |  |     
|                                           |  |                     |     |  |                           
|Citycon                                    |  |                     |     |  |                            |  |        |                                               |  |  |                                        |  |                                       |      |  |     
|Finland                                    |  |                     | 54  |  |                            |  | 7,873  |                                               |  |  |                                       |  |                                       | 1988 |  | 2003
|Sweden                                     |  |                     | 11  |  |                            |  | 3,444  |                                               |  |  | 49                                     |  |                                       | 1967 |  | 2006
|Other (Baltic countries/Denmark)           |  |                     | 5   |  |                            |  | 1,636  |                                               |  |  |                                       |  |                                       | 1997 |  | 2008
|                                           |  |                     |     |  |                            |  |        |                                               |  |  |                                        |  |                                       |      |  |     
|Subtotal Citycon                           |  |                     | 70  |  |                            |  | 12,953 |                                               |  |  | 49                                     |  |                                       |      |  |     
|                                           |  |                     |     |  |                            |  |        |                                               |  |  |                                        |  |                                       |      |  |     
|                                           |  |                     |     |  |                           
|ProMed Properties - U.S. (4)               |  |                     | 16  |  |                            |  | 1,935  |                                               |  |  | 1,012                                  |  |                                       | 1967 |  | 2009
|Gazit Israel                               |  |                     | 11  |  |                            |  | 2,387  |                                               |  |  | 1,186                                  |  |                                       | 2003 |  | 2006
|Gazit Germany                              |  |                     | 7   |  |                            |  | 865    |                                               |  |  | 509                                    |  |                                       | 1996 |  | 2007
|Gazit Brazil                               |  |                     | 4   |  |                            |  | 334    |                                               |  |  |                                       |  |                                       | 2001 |  | 2010
|Other                                      |  |                     | 1   |  |                            |  | 13     |                                               |  |  | 5                                      |  |                                       | 1998 |  | 1998
|                                           |  |                     |     |  |                            |  |        |                                               |  |  |                                        |  |                                       |      |  |     
|Subtotal - operating investment property   |  |                     | 403 |  |                            |  | 53,858 |                                               |  |  | 8,543                                  |  |                                       |      |  |     
|                                           |  |                     |     |  |                            |  |        |                                               |  |  |                                        |  |                                       |      |  |     
|                                           |  |                     |     |  |                           
|Investment property under development      |  |                     | 9   |  |                            |  | 1,511  |                                               |  |  | 160                                    |  |                                       |      |  |     
|                                           |  |                     |     |  |                           
|Land for future development (5)            |  |                     |    |  |                            |  | 1,030  |                                               |  |  | 38                                     |  |                                       |      |  |     
|                                           |  |                     |     |  |                            |  |        |                                               |  |  |                                        |  |                                       |      |  |     
|Grand total                                |  |                     | 412 |  |                            |  | 56,399 |                                               |  |  | 8,741                                  |  |                                       |      |  |     
|                                           |  |                     |     |  |                            |  |        |                                               |  |  |                                        |  |                                       |      |  |     



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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 62 million of land) |  |                 | 611    | 
|Investment property                                                       |  |                 | 53,309 | 
|Investment property under development and Land                            |  |                 | 2,479  | 
|                                                                          |  |                 |        | 
|                                                                          | 
|                                                                          |  |                 | 56,399 | 
|                                                                          |  |                 |        | 



|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. With respect to First Capitals properties that were redeveloped, renovated or expanded, the construction date used is the year in which the applicable construction,
renovation or expansion was completed.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|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. With respect to First Capitals properties that were purchased in assemblies, the acquisition date used is the most recent year of acquisition.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3 | Excludes properties owned by equity-accounted joint ventures.
|- | -------------------------------------------------------------

|4 | Medical offices buildings.
|- | --------------------------

|5 | Includes NIS 62 million of land presented under assets held for sale.
|- | ---------------------------------------------------------------------

- - - - - - - - - -
- - -



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LOGO

Atrium European Real Estate Limited

Consolidated Financial Statements 2013



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ATRIUM EUROPEAN REAL ESTATE LIMITED

Contents



|   |  |                                   |  |  |       | 
|-- |  | --------------------------------- |  |  | ----- | 
|1. |  | Consolidated Financial Statements |  |  | F-158 | 
|   |  |                                  
|   |  | Notes to the Financial Statements |  |  | F-163 | 
|   |  |                                  
|2. |  | Independent Auditors Report      |  |  | F-230 | 



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ATRIUM EUROPEAN REAL ESTATE LIMITED

1. Consolidated Financial Statements

Consolidated
Statement of Financial Positionas at 31 December 2013



|                                          |  |      |      |  |       |  |           |       |  |  |           |  |  |       |           |   |  |  |           | 
|----------------------------------------- |  | ---- | ---- |  | ----- |  | --------- | ----- |  |  | --------- |  |  | ----- | --------- | - |  |  | --------- | 
|                                          |  |      |      |  | 2013  |  |           | 2012  | 
|                                          |  | Note |      |  | 000 |  |           | 000 |  |  | 000     |  |  | 000 |          
|Assets                                    |  |      |      |  |       |  |           |       |  |  |           |  |  |       |           |   |  |  |           | 
|Non-current assets                        |  |      |      |  |       |  |           |       |  |  |           |  |  |       |           |   |  |  |           | 
|Standing investments                      |  |      | 1.4  |  |       |  | 2,356,164 |       |  |  |           |  |  |       | 2,185,336 |   |  |  |           | 
|Developments and land                     |  |      | 1.5  |  |       |  | 583,637   |       |  |  |           |  |  |       | 538,395   |   |  |  |           | 
|Property, plant and equipment             |  |      | 1.6  |  |       |  | 3,402     |       |  |  |           |  |  |       | 3,111     |   |  |  |           | 
|                                          |  |      |      |  |       |  |           |       |  |  | 2,943,203 |  |  |       |           |   |  |  | 2,726,842 | 
|Intangible assets and goodwill            |  |      | 1.7  |  |       |  | 14,737    |       |  |  |           |  |  |       | 16,483    |   |  |  |           | 
|Equity-accounted investees                |  |      | 1.8  |  |       |  |          |       |  |  |           |  |  |       | 1,455     |   |  |  |           | 
|Deferred tax assets                       |  |      | 1.9  |  |       |  | 9,067     |       |  |  |           |  |  |       | 8,742     |   |  |  |           | 
|Long term loans                           |  |      | 1.10 |  |       |  | 8,114     |       |  |  |           |  |  |       | 36,592    |   |  |  |           | 
|Other assets                              |  |      | 1.11 |  |       |  | 19,986    |       |  |  |           |  |  |       | 27,003    |   |  |  |           | 
|                                          |  |      |      |  |       |  |           |       |  |  | 51,904    |  |  |       |           |   |  |  | 90,275    | 
|Current assets                            |  |      |      |  |       |  |           |       |  |  |           |  |  |       |           |   |  |  |           | 
|Inventory                                 |  |      |      |  |       |  |          |       |  |  |           |  |  |       | 2,214     |   |  |  |           | 
|Receivables from tenants*                 |  |      | 1.12 |  |       |  | 13,773    |       |  |  |           |  |  |       | 15,018    |   |  |  |           | 
|Prepayments                               |  |      | 1.13 |  |       |  | 12,097    |       |  |  |           |  |  |       | 12,504    |   |  |  |           | 
|Other receivables                         |  |      | 1.14 |  |       |  | 14,584    |       |  |  |           |  |  |       | 8,658     |   |  |  |           | 
|Income tax receivable                     |  |      |      |  |       |  | 3,068     |       |  |  |           |  |  |       | 2,168     |   |  |  |           | 
|Cash and cash equivalents                 |  |      | 1.15 |  |       |  | 305,577   |       |  |  |           |  |  |       | 207,843   |   |  |  |           | 
|                                          |  |      |      |  |       |  |           |       |  |  | 349,099   |  |  |       |           |   |  |  | 248,405   | 
|Total assets                              |  |      |      |  |       |  |           |       |  |  | 3,344,206 |  |  |       |           |   |  |  | 3,065,522 | 
|Equity and liabilities                    |  |      |      |  |       |  |           |       |  |  |           |  |  |       |           |   |  |  |           | 
|Equity                                    |  |      |      |  |       |  |           |       |  |  |           |  |  |       |           |   |  |  |           | 
|Stated capital                            |  |      | 1.16 |  |       |  | 2,760,335 |       |  |  |           |  |  |       | 2,836,658 |   |  |  |           | 
|Other reserves                            |  |      | 1.17 |  |       |  | (5,176    | )     |  |  |           |  |  |       | (9,562    | ) |  |  |           | 
|Retained earnings                         |  |      |      |  |       |  | (389,542  | )     |  |  |           |  |  |       | (457,158  | ) |  |  |           | 
|Currency translation reserve              |  |      |      |  |       |  | (97,588   | )     |  |  |           |  |  |       | (85,505   | ) |  |  |           | 
|Non-controlling interest                  |  |      |      |  |       |  | (740      | )     |  |  |           |  |  |       | (3,061    | ) |  |  |           | 
|                                          |  |      |      |  |       |  |           |       |  |  | 2,267,289 |  |  |       |           |   |  |  | 2,281,372 | 
|Non-current liabilities                   |  |      |      |  |       |  |           |       |  |  |           |  |  |       |           |   |  |  |           | 
|Long term borrowings                      |  |      | 1.18 |  |       |  | 798,044   |       |  |  |           |  |  |       | 462,075   |   |  |  |           | 
|Derivatives                               |  |      | 1.19 |  |       |  | 11,756    |       |  |  |           |  |  |       | 17,828    |   |  |  |           | 
|Provisions                                |  |      |      |  |       |  | 2,569     |       |  |  |           |  |  |       | 1,000     |   |  |  |           | 
|Deferred tax liabilities                  |  |      | 1.20 |  |       |  | 111,562   |       |  |  |           |  |  |       | 98,775    |   |  |  |           | 
|Long term liabilities from finance leases |  |      | 1.21 |  |       |  | 46,040    |       |  |  |           |  |  |       | 47,320    |   |  |  |           | 
|Other long term liabilities               |  |      | 1.22 |  |       |  | 21,537    |       |  |  |           |  |  |       | 19,730    |   |  |  |           | 
|                                          |  |      |      |  |       |  |           |       |  |  | 991,508   |  |  |       |           |   |  |  | 646,728   | 
|Current liabilities                       |  |      |      |  |       |  |           |       |  |  |           |  |  |       |           |   |  |  |           | 
|Trade and other payables*                 |  |      | 1.23 |  |       |  | 37,139    |       |  |  |           |  |  |       | 35,359    |   |  |  |           | 
|Accrued expenditure                       |  |      | 1.24 |  |       |  | 42,291    |       |  |  |           |  |  |       | 26,131    |   |  |  |           | 
|Short term borrowings                     |  |      | 1.18 |  |       |  | 5,511     |       |  |  |           |  |  |       | 74,986    |   |  |  |           | 
|Income tax payable                        |  |      |      |  |       |  | 468       |       |  |  |           |  |  |       | 946       |   |  |  |           | 
|                                          |  |      |      |  |       |  |           |       |  |  | 85,409    |  |  |       |           |   |  |  | 137,422   | 
|Total equity and liabilities              |  |      |      |  |       |  |           |       |  |  | 3,344,206 |  |  |       |           |   |  |  | 3,065,522 | 

The financial statements were approved and authorised for issue by the Board of Directors on 11 March 2014 and were duly
signed on the Boards behalf by Rachel Lavine, Chief Executive Officer and Chaim Katzman, Chairman.

* 31/12/2012 balances have been reclassified, see
note 1.3



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ATRIUM EUROPEAN REAL ESTATE LIMITED

Consolidated Income Statement for the year ended 31 December 2013



|                                                                             |  |      |          |  |       |  |         |       |  |  |         |  |  |       |         |   |  |  |         | 
|---------------------------------------------------------------------------- |  | ---- | -------- |  | ----- |  | ------- | ----- |  |  | ------- |  |  | ----- | ------- | - |  |  | ------- | 
|                                                                             |  |      |          |  | 2013  |  |         | 2012  | 
|                                                                             |  | Note |          |  | 000 |  |         | 000 |  |  | 000   |  |  | 000 |        
|Gross rental income                                                          |  |      | 1.25     |  |       |  | 203,455 |       |  |  |         |  |  |       | 193,475 |   |  |  |         | 
|Service charge income                                                        |  |      | 1.26     |  |       |  | 77,031  |       |  |  |         |  |  |       | 73,762  |   |  |  |         | 
|Net property expenses                                                        |  |      | 1.27     |  |       |  | (89,653 | )     |  |  |         |  |  |       | (85,958 | ) |  |  |         | 
|Net rental income                                                            |  |      |          |  |       |  |         |       |  |  | 190,833 |  |  |       |         |   |  |  | 181,279 | 
|Net result on disposals                                                      |  |      |          |  |       |  | 1,376   |       |  |  |         |  |  |       | 793     |   |  |  |         | 
|Costs connected with developments                                            |  |      |          |  |       |  | (5,146  | )     |  |  |         |  |  |       | (6,161  | ) |  |  |         | 
|Revaluation of investment properties                                         |  |      | 1.4, 1.5 |  |       |  | (21,286 | )     |  |  |         |  |  |       | (4,961  | ) |  |  |         | 
|Other depreciation, amortisation and impairments                             |  |      | 1.28     |  |       |  | (6,966  | )     |  |  |         |  |  |       | (1,835  | ) |  |  |         | 
|Administrative expenses                                                      |  |      | 1.29     |  |       |  | (25,286 | )     |  |  |         |  |  |       | (29,125 | ) |  |  |         | 
|Net operating profit                                                         |  |      |          |  |       |  |         |       |  |  | 133,525 |  |  |       |         |   |  |  | 139,990 | 
|Interest income                                                              |  |      | 1.30     |  |       |  | 2,505   |       |  |  |         |  |  |       | 3,883   |   |  |  |         | 
|Interest expense                                                             |  |      | 1.30     |  |       |  | (31,576 | )     |  |  |         |  |  |       | (23,103 | ) |  |  |         | 
|Other financial income/(expenses)                                            |  |      | 1.31     |  |       |  | (13,854 | )     |  |  |         |  |  |       | (4,697  | ) |  |  |         | 
|Profit before taxation                                                       |  |      |          |  |       |  |         |       |  |  | 90,600  |  |  |       |         |   |  |  | 116,073 | 
|Taxation charge for the year                                                 |  |      | 1.32     |  |       |  | (14,722 | )     |  |  |         |  |  |       | (19,898 | ) |  |  |         | 
|Profit after taxation for the year                                           |  |      |          |  |       |  |         |       |  |  | 75,878  |  |  |       |         |   |  |  | 96,175  | 
|Attributable to:                                                             |  |      |          |  |       |  |         |       |  |  |         |  |  |       |         |   |  |  |         | 
|Owners of the parent                                                         |  |      |          |  |       |  | 75,936  |       |  |  |         |  |  |       | 98,712  |   |  |  |         | 
|Non-controlling interest                                                     |  |      |          |  |       |  | (58     | )     |  |  |         |  |  |       | (2,537  | ) |  |  |         | 
|                                                                             |  |      |          |  |       |  |         |       |  |  | 75,878  |  |  |       |         |   |  |  | 96,175  | 
|Basic and diluted earnings per share in cents, attributable to shareholders |  |      | 1.33     |  |       |  |         |       |  |  | 20.3    |  |  |       |         |   |  |  | 26.4    | 



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ATRIUM EUROPEAN REAL ESTATE LIMITED

Consolidated Statement of Comprehensive Incomefor the year ended 31 December 2013



|                                                                                        |  |       |         |   |       |  |        |       |  |  |        |   |  |  |        | 
|--------------------------------------------------------------------------------------- |  | ----- | ------- | - | ----- |  | ------ | ----- |  |  | ------ | - |  |  | ------ | 
|                                                                                        |  | 2013  |         |   | 2012  | 
|                                                                                        |  | 000 |         |   | 000 |  |        | 000 |  |  | 000  |  
|Profit for the year                                                                     |  |       | 75,878  |   |       |  |        |       |  |  | 96,175 |   |  |  |        | 
|Items that may be reclassified subsequently to income statement:                        |  |       |         |   |       |  |        |       |  |  |        |   |  |  |        | 
|Exchange differences arising on translation of foreign operations (net of deferred tax) |  |       | (12,083 | ) |       |  |        |       |  |  | (1,108 | ) |  |  |        | 
|Movements in hedging reserves (net of deferred tax)                                     |  |       | 4,919   |   |       |  |        |       |  |  | (7,102 | ) |  |  |        | 
|Total comprehensive income for the year                                                 |  |       |         |   |       |  | 68,714 |       |  |  |        |   |  |  | 87,965 | 
|Attributable to:                                                                        |  |       |         |   |       |  |        |       |  |  |        |   |  |  |        | 
|Owners of the parent                                                                    |  |       | 68,772  |   |       |  |        |       |  |  | 90,498 |   |  |  |        | 
|Non-controlling interest                                                                |  |       | (58     | ) |       |  | 68,714 |       |  |  | (2,533 | ) |  |  | 87,965 | 



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ATRIUM EUROPEAN REAL ESTATE LIMITED

Consolidated Cash Flow Statementfor the year ended 31 December 2013



|                                                                 |  |      |      |  |       |  |          |       |  |  |          |  
|---------------------------------------------------------------- |  | ---- | ---- |  | ----- |  | -------- | ----- |  |  | -------- | -
|                                                                 |  |      |      |  | 2013  |  |          | 2012  | 
|                                                                 |  | Note |      |  | 000 |  |          | 000 | 
|Cash flows from operating activities                             |  |      |      |  |       |  |          |       |  |  |          |  
|Profit before taxation                                           |  |      |      |  |       |  | 90,600   |       |  |  | 116,073  |  
|Adjustments for:                                                 |  |      |      |  |       |  |          |       |  |  |          |  
|Other depreciation, amortisation and impairments                 |  |      |      |  |       |  | 6,966    |       |  |  | 1,835    |  
|Revaluation of investment properties                             |  |      |      |  |       |  | 21,286   |       |  |  | 4,961    |  
|Foreign exchange loss/(gain)                                     |  |      |      |  |       |  | 5,810    |       |  |  | (7,860   | )
|Change in provisions and share based payments                    |  |      |      |  |       |  | 1,114    |       |  |  | 1,718    |  
|Profit from disposal of investment properties and inventory      |  |      |      |  |       |  | (1,376   | )     |  |  | (793     | )
|Impairment loss on financial assets and other financial expenses |  |      |      |  |       |  | 7,787    |       |  |  | 16,013   |  
|Profit on purchase of financial liabilities                      |  |      |      |  |       |  |         |       |  |  | (4,477   | )
|Interest expense                                                 |  |      |      |  |       |  | 31,576   |       |  |  | 23,103   |  
|Interest income                                                  |  |      |      |  |       |  | (2,505   | )     |  |  | (3,883   | )
|Operating cash flows before working capital changes              |  |      |      |  |       |  | 161,258  |       |  |  | 146,690  |  
|Decrease in trade and other receivables                          |  |      |      |  |       |  | 1,646    |       |  |  | 1,290    |  
|Decrease in prepayments                                          |  |      |      |  |       |  | 463      |       |  |  | 2,273    |  
|Decrease in inventory                                            |  |      |      |  |       |  | 1,136    |       |  |  |         |  
|Decrease in trade and other payables                             |  |      |      |  |       |  | (7,764   | )     |  |  | (4,215   | )
|Increase in accrued expenditure                                  |  |      |      |  |       |  | 8,603    |       |  |  | 5,318    |  
|Cash generated from operations                                   |  |      |      |  |       |  | 165,342  |       |  |  | 151,356  |  
|Interest paid                                                    |  |      |      |  |       |  | (21,581  | )     |  |  | (23,876  | )
|Interest received                                                |  |      |      |  |       |  | 500      |       |  |  | 547      |  
|Corporation taxes paid                                           |  |      |      |  |       |  | (3,663   | )     |  |  | (1,534   | )
|Net cash generated from operating activities                     |  |      |      |  |       |  | 140,598  |       |  |  | 126,493  |  
|Cash flows from investing activities                             |  |      |      |  |       |  |          |       |  |  |          |  
|Payments related to investment properties and other assets       |  |      |      |  |       |  | (226,777 | )     |  |  | (47,872  | )
|Proceeds from the disposal of investment properties              |  |      |      |  |       |  | 9,617    |       |  |  | 1,006    |  
|Deconsolidation of subsidiary                                    |  |      | 1.15 |  |       |  |         |       |  |  | (417     | )
|Payment related to other financial assets                        |  |      |      |  |       |  |         |       |  |  | (273     | )
|Acquisition of subsidiaries net of cash acquired                 |  |      | 1.15 |  |       |  | (211     | )     |  |  |         |  
|Net cash used in investing activities                            |  |      |      |  |       |  | (217,371 | )     |  |  | (47,556  | )
|Net cash flow before financing activities                        |  |      |      |  |       |  | (76,773  | )     |  |  | 78,937   |  
|Cash flows from financing activities                             |  |      |      |  |       |  |          |       |  |  |          |  
|Proceeds from issuance of share capital                          |  |      |      |  |       |  | 908      |       |  |  | 814      |  
|Repayments of long term loans                                    |  |      |      |  |       |  | (78,655  | )     |  |  | (74,304  | )
|Receipt of long term loans                                       |  |      |      |  |       |  | 345,776  |       |  |  | 48,784   |  
|Payments for land leases                                         |  |      |      |  |       |  | (7,560   | )     |  |  | (8,103   | )
|Purchase of non-controlling interest                             |  |      |      |  |       |  | (5,941   | )     |  |  | (9,409   | )
|Dividends paid                                                   |  |      |      |  |       |  | (78,624  | )     |  |  | (63,431  | )
|Net cash generated/(used) in financing activities                |  |      |      |  |       |  | 175,904  |       |  |  | (105,649 | )
|Net increase (decrease) in cash and cash equivalents             |  |      |      |  |       |  | 99,131   |       |  |  | (26,712  | )
|Cash and cash equivalents at the beginning of year               |  |      |      |  |       |  | 207,843  |       |  |  | 234,924  |  
|Effect of exchange rate fluctuations on cash held                |  |      |      |  |       |  | (1,397   | )     |  |  | (369     | )
|Cash and cash equivalents at the end of year                     |  |      | 1.15 |  |       |  | 305,577  |       |  |  | 207,843  |  



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Consolidated Statement of Changes in Equityfor the year ended 31 December 2013



|                                        |  |      |      |  |               |  |           |               |  |  |                 |   |  |                  |         |   |                             |  |          |                                              |  |  |                          |   |  |             |           |   |  |  |         |   |  |  |           |  
|--------------------------------------- |  | ---- | ---- |  | ------------- |  | --------- | ------------- |  |  | --------------- | - |  | ---------------- | ------- | - | --------------------------- |  | -------- | -------------------------------------------- |  |  | ------------------------ | - |  | ----------- | --------- | - |  |  | ------- | - |  |  | --------- | -
|                                        |  |      |      |  | Statedcapital |  |           | Otherreserves |  |  | Hedgingreserves |   |  | Retainedearnings |         |   | Currencytranslation
reserve |  |          | Equityattributable tocontrollingshareholders |  |  | Non-
controllinginterest |   |  | Totalequity |          
|                                        |  | Note |      |  | 000         |  |           | 000         |  |  | 000           |   |  | 000            |         |   | 000                       |  |          | 000                                        |  |  | 000                    |   |  | 000       |          
|Balance as at 1 January 2013            |  |      |      |  |               |  | 2,836,658 |               |  |  | 4,879           |   |  |                  | (14,441 | ) |                             |  | (457,158 | )                                            |  |  | (85,505                  | ) |  |             | 2,284,433 |   |  |  | (3,061  | ) |  |  | 2,281,372 |  
|Total comprehensive income              |  |      |      |  |               |  |          |               |  |  |                |   |  |                  | 4,919   |   |                             |  | 75,936   |                                              |  |  | (12,083                  | ) |  |             | 68,772    |   |  |  | (58     | ) |  |  | 68,714    |  
|Transactions with owners                |  |      |      |  |               |  |           |               |  |  |                 |   |  |                  |         |   |                             |  |          |                                              |  |  |                          |   |  |             |           |   |  |  |         |   |  |  |           |  
|Share based payment                     |  |      | 1.17 |  |               |  |          |               |  |  | 690             |   |  |                  |        |   |                             |  |         |                                              |  |  |                         |   |  |             | 690       |   |  |  |        |   |  |  | 690       |  
|Issuance of no par value shares         |  |      | 1.17 |  |               |  | 2,301     |               |  |  | (1,223          | ) |  |                  |        |   |                             |  |         |                                              |  |  |                         |   |  |             | 1,078     |   |  |  |        |   |  |  | 1,078     |  
|Dividends                               |  |      | 1.16 |  |               |  | (78,624   | )             |  |  |                |   |  |                  |        |   |                             |  |         |                                              |  |  |                         |   |  |             | (78,624   | ) |  |  |        |   |  |  | (78,624   | )
|Acquisition of non-controlling interest |  |      |      |  |               |  |          |               |  |  |                |   |  |                  |        |   |                             |  | (8,320   | )                                            |  |  |                         |   |  |             | (8,320    | ) |  |  | 2,379   |   |  |  | (5,941    | )
|Balance as at 31 December 2013          |  |      |      |  |               |  | 2,760,335 |               |  |  | 4,346           |   |  |                  | (9,522  | ) |                             |  | (389,542 | )                                            |  |  | (97,588                  | ) |  |             | 2,268,029 |   |  |  | (740    | ) |  |  | 2,267,289 |  
|                                        |  |      |      |  |               |  |           |               | 
|                                        |  |      |      |  | Statedcapital |  |           | Otherreserves |  |  | Hedgingreserves |   |  | Retainedearnings |         |   | Currencytranslation
reserve |  |          | Equityattributable tocontrollingshareholders |  |  | Non-controllinginterest  |   |  | Totalequity |          
|                                        |  |      |      |  | 000         |  |           | 000         |  |  | 000           |   |  | 000            |         |   | 000                       |  |          | 000                                        |  |  | 000                    |   |  | 000       |          
|                                        |  |      |      |  |               |  |           |               |  |  |                 |   |  |                  |         |   |                             |  |          |                                              |  |  |                          |   |  |             |           |   |  |  |         |   |  |  |           |  
|Balance as at 1 January 2012            |  |      |      |  |               |  | 2,899,118 |               |  |  | 3,571           |   |  |                  | (7,339  | ) |                             |  | (531,131 | )                                            |  |  | (84,393                  | ) |  |             | 2,279,826 |   |  |  | (15,283 | ) |  |  | 2,264,543 |  
|Total comprehensive income              |  |      |      |  |               |  |          |               |  |  |                |   |  |                  | (7,102  | ) |                             |  | 98,712   |                                              |  |  | (1,112                   | ) |  |             | 90,498    |   |  |  | (2,533  | ) |  |  | 87,965    |  
|Transactions with owners                |  |      |      |  |               |  |           |               |  |  |                 |   |  |                  |         |   |                             |  |          |                                              |  |  |                          |   |  |             |           |   |  |  |         |   |  |  |           |  
|Share based payment                     |  |      | 1.17 |  |               |  |          |               |  |  | 1,465           |   |  |                  |        |   |                             |  |         |                                              |  |  |                         |   |  |             | 1,465     |   |  |  |        |   |  |  | 1,465     |  
|Issuance of no par value shares         |  |      | 1.17 |  |               |  | 971       |               |  |  | (157            | ) |  |                  |        |   |                             |  |         |                                              |  |  |                         |   |  |             | 814       |   |  |  |        |   |  |  | 814       |  
|Dividends                               |  |      | 1.16 |  |               |  | (63,431   | )             |  |  |                |   |  |                  |        |   |                             |  |         |                                              |  |  |                         |   |  |             | (63,431   | ) |  |  |        |   |  |  | (63,431   | )
|Deconsolidated non-controlling interest |  |      |      |  |               |  |          |               |  |  |                |   |  |                  |        |   |                             |  |         |                                              |  |  |                         |   |  |             |          |   |  |  | (540    | ) |  |  | (540      | )
|Acquisition of non-controlling interest |  |      |      |  |               |  |          |               |  |  |                |   |  |                  |        |   |                             |  | (24,739  | )                                            |  |  |                         |   |  |             | (24,739   | ) |  |  | 15,295  |   |  |  | (9,444    | )
|Balance as at 31 December 2012          |  |      |      |  |               |  | 2,836,658 |               |  |  | 4,879           |   |  |                  | (14,441 | ) |                             |  | (457,158 | )                                            |  |  | (85,505                  | ) |  |             | 2,284,433 |   |  |  | (3,061  | ) |  |  | 2,281,372 |  



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Notes to the Financial Statements



|1.1 | Reporting entity
|--- | ----------------

Atrium European Real Estate Limited (Atrium or the Company) is
a company incorporated and domiciled in Jersey. Its registered office is 11-15 Seaton Place, St. Helier, Jersey, Channel Islands and its business address in Jersey is Lister House Chambers, 35 The Parade, St Helier, Jersey, Channel Islands.

The consolidated financial statements of Atrium as at and for the year ended 31 December 2013 comprise Atrium and its subsidiaries (the
Group) and its interest in associates.

The principal activity of the Group is the ownership, management and development of commercial real
estate in the retail sector.

The Group primarily operates in Poland, the Czech Republic, Slovakia, Russia, Hungary and Romania.



|1.2 | Basis of preparation
|--- | --------------------

Statement of compliance

The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRSs) as issued by
the International Accounting Standards Board (IASB).

Basis of measurement

The consolidated financial statements are prepared on the historical cost basis, except for the following material items in the statement of financial
position:



| |  | Standing investments and developments and land (investment property) are measured at fair value; and
|- |  | ------------------------------------------------------------------------------------------------------



| |  | Derivative financial instruments are measured at fair value.
|- |  | ------------------------------------------------------------

Functional and presentation currency

These financial statements are presented in euros (), which is considered by the Board of Directors to be the appropriate presentation
currency due to the fact that the majority of the transactions of the Group are denominated in or based on this currency. All financial information presented in euros has been rounded to the nearest thousand, unless stated otherwise.

The individual financial statements of each of the Group entities use the currency of the primary economic environment in which the entity operates as its
functional currency. The currency in which the entity generates rental income is the primary driver determining the functional currency of that entity, but other cash flows are also taken into account.

The euro has been determined to be the functional currency for the Group companies, except for certain subsidiaries in the Czech Republic, which use the Czech
Koruna (CZK) as their functional currency and for certain subsidiaries in Cyprus, which use the US dollars (USD) as their functional currency.



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New standards, amendments to and interpretations of existing standards effective in the current period

The Group has adopted the following amended IFRSs as at 1 January 2013:



| |  | IFRS 10 Consolidated Financial Statementswhich replaces SIC-12 Consolidation - Special Purpose Entities and the consolidation elements of the existing IAS 27 Consolidated and Separate Financial
Statements.The new standard adopts a single definition of control: a reporting entity controls another entity when the reporting entity has the power to direct the activities of that other entity to generate returns for the reporting entity.
The new standard does not include a change in the consolidation procedures. The standard did not have a material impact on the Groups financial statements.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | IFRS 11 Joint Arrangements which supersedes IAS 31 Interests in Joint Ventures(2011). IFRS 11 distinguishes between joint operations and joint ventures. A joint operation is a joint arrangement whereby
the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. An entity holding a joint operation will recognise its share in the assets, the liabilities, revenues
and costs. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. An entity holding a joint venture will represent its investment in it using the equity
method in accordance with IAS 28 Investments in Associates and Joint Ventures(2011). The standard did not have an impact on the Groups financial statements.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | IFRS 12 Disclosure of Interests in Other Entities covers disclosures for entities reporting under IFRS 10 Consolidated Financial Statements and IFRS 11 Joint Arrangements replacing those in IAS 28
Investments in Associates and Joint Ventures(2011) and IAS 27 Separate Financial Statements(2011). Entities are required to disclose information that helps financial statement readers evaluate the nature, risks and financial
effects associated with an entitys interests in subsidiaries, associates and joint arrangements and in unconsolidated structured entities. The standard did not have a material impact on the Groups financial statements.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | IFRS 13 Fair Value Measurement which sets out a single IFRS framework for defining and measuring fair value and requiring disclosures about fair value measurements. IFRS 13 defines fair value as 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. IFRS 13 determines that an entity shall use valuation techniques that are appropriate in the
circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. It does not require fair value measurements in addition to those already
required or permitted by other IFRSs and is not intended to establish valuation standards or affect valuation practices outside financial reporting. The standard did not have a material impact on the measurement of fair value; however additional
disclosures have been presented in the notes to the financial statements.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | IAS 28 Investments in Associates and Joint Ventures covers joint ventures as well as associates; both must be accounted for using the equity method. The mechanics of the equity method are unchanged. The standard
did not have a material impact on the Groups financial statements.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | IFRS 7 Financial Instruments: Disclosures-Offsetting Financial Assets and Financial Liabilities (Amendments, December 2011) amends the required disclosures to include information that will enable users of an
entitys financial statements to evaluate the effect or potential effect of netting arrangements, including rights of set-off associated with the entitys recognised financial assets and recognised financial liabilities, on the
entitys financial position. The standard did not have a material impact on the Groups financial statements.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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New standards, amendments to and interpretations of existing standards that are not yet effective and have
not been adopted by the Group early



| |  | IFRS 9Financial Instruments. In November 2009, the IASB issued IFRS 9, as a first step in its project to replace IAS 39 Financial Instruments: Recognition and Measurement (the standard will not be
effective before 1 January 2017 with the final effective date being determined by the IASB when other parts of IFRS 9 are finalised but may be applied earlier). IFRS 9 (2009) retains but simplifies the mixed measurement model and
establishes two primary measurement categories for financial assets: amortised cost and fair value. The basis of classification depends on the entitys business model and the contractual cash flow characteristics of the financial asset. The
guidance in IAS 39 on impairment of financial assets and hedge accounting continues to apply. The Group is currently reviewing the standard to determine its effect on the Groups financial statements.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | IFRS 9 Financial Instruments (Amendments, October 2010) adds the requirements related to classification and measurement of financial liabilities, and derecognition of financial assets and liabilities to the
version issued in November 2009. It also includes those paragraphs of IAS 39 dealing with how to measure fair value and accounting for derivatives embedded in a contract that contains a host that is not a financial asset, as well as the requirements
of IFRIC 9 Reassessment of Embedded Derivatives. The standard will not be effective before 1 January 2017 with the final effective date being determined by the IASB when other parts of IFRS 9 are finalised but may be applied earlier. The
Group is currently reviewing the standard to determine its effect on the Groups financial statements.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | IAS 32 Financial Instruments: Presentation-Offsetting Financial Assets and Financial Liabilities(Amendments, December 2011). The amendments stipulate the specific conditions which allow a net presentation of
financial assets and liabilities. The amendments should be applied retrospecively commencing from the financial statements for periods beginning on or after 1 January 2014. The Group is currently reviewing the standard to determine its effect
on the Groups financial statements.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | IFRIC Interpretation 21 Levies clarifies that an entity recognises a liability for a levy when the activity that triggers payment, as identified by the relevant legislation, occurs. For a levy that is
triggered on reaching a minimum threshold, the interpretation clarifies that no liability should be anticipated before the specified minimum threshold is reached. The IFRIC does not apply to accounting for income taxes, fines and penalties or the
acquisition of assets from governments. IFRIC 21 is effective for annual periods beginning on or after January 1 2014. The Group is currently reviewing the standard to determine its effect on the Groups financial statements.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Use of judgements and estimates

The
preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses in the
reporting period. The estimates and associated assumptions are based on historical experience and other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying
values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.



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The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates
are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Critical judgements in applying accounting policies

The following are critical judgements that management have made in the process of applying the Groups accounting policies and that have the most
significant effect on the amounts recognised in the consolidated financial statements:



| |  |  | Acquisition of subsidiaries that are not business combinations -When acquiring a subsidiary, management considers whether the acquisition represents a business combination pursuant to IFRS 3. The following
criteria which indicate an acquisition of a business are considered: the number of properties acquired, the extent to which strategic management processes and operational processes are acquired and the complexity of the processes acquired.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Income tax -In determining the amount of current and deferred tax, the Group takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. This assessment relies
on estimates and assumptions and may involve a series of judgements about future events. New information may become available that causes Atrium to change its judgement regarding the adequacy of existing tax liabilities; such changes to tax
liabilities will impact tax expense in the period that such a determination is made.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Key sources of estimation uncertainty

The following are the key assumptions and key sources of estimation uncertainty at the end of the reporting period, that have a significant effect
on the amounts recognised in the financial statements:



| |  |  | Fair value measurements and valuation processes - Standing investments, developments and land and derivatives are presented at fair value in the statement of financial position. Management determines the
appropriate valuation techniques and inputs for the fair value measurements. Information about the valuation techniques and inputs used in determining the fair values are disclosed in note 1.36.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Deferred tax assets -Deferred tax assets are recognised for unused carry-forward tax losses and deductible temporary differences to the extent that it is probable that taxable profit will be available against
losses which can be utilised. Significant estimates are required to determine the amount of deferred tax assets that can be recognised, on the basis of the likely timing and level of future taxable profits together with future tax planning
strategies. Further information is provided in Note 1.9.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Legal proceedings  The Group regularly monitors developments in on-going legal proceedings, to which it is a party, when developments in legal proceedings are noted and at each reporting date in order to
assess and determine the need for possible provisions and disclosures in its financial statements. When assessing whether a specific case requires a provision (including the amount), the main factors considered by the Group are: the Groups
potential financial exposure, the assessments and recommendations of the Groups external legal advisers regarding the Groups position, the stage of the proceedings and the anticipated amount of time it will take before a final and
binding decision is delivered, as well as the Groups past experience of similar cases.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|1.3 | Significant accounting policies
|--- | -------------------------------

The accounting policies set out below have been applied consistently
for all periods presented in these consolidated financial statements, except for newly effective standards as described above and have been applied consistently by entities within the Group.

Certain comparative amounts in the consolidated statement of financial position have been reclassified from those initially reported in order to conform to
the current year presentation, for further details see notes 1.12 and 1.23.

Basis of consolidation

Subsidiaries

The consolidated financial statements
include the financial statements of the Company as well as the entities that are controlled, directly or indirectly, by the Company (subsidiaries). The Group controls an entity when the Group is exposed to, or has the rights to, variable returns
from the involvement with the entity and has the ability to affect those returns through its power over the entity. When assessing control, the Group considers its potential voting rights as well as the potential voting rights held by other parties,
to determine whether it has power. Those potential voting rights are considered only if the rights are substantive. The Company must have the practical ability to exercise those rights. The consolidation of the financial statements commences on the
date on which control is obtained and ends on the date such control ceases. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with those used by the Group.

For the purposes of the consolidation, all inter-company transactions, balances, income and expenses are eliminated.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement and the consolidated statement of
comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Non-controlling interest

Non-controlling interests of subsidiaries represent the non-controlling shareholders proportion of the net assets or the net identifiable assets on the
acquisition of the subsidiaries, adjusted subsequently for their proportionate interest in the comprehensive income or loss of the subsidiaries and dividends distributed. The non-controlling interests are presented as equity separately from the
equity attributable to the shareholders of the Company.



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The acquisition of non-controlling interests by the Group is recorded against a decrease or an increase in
equity. On disposal of rights in a subsidiary that does not result in a loss of control, an increase or a decrease in equity is recognised as the amount of the difference between the consideration received by the Group and the carrying amount of the
non-controlling interests in the subsidiary which has been added to the Groups equity, also taking into account the disposal of goodwill in a subsidiary, if any, and amounts which have been recognised in other comprehensive income, if any,
based on the decrease in the interests in the subsidiary. Transaction costs in respect of transactions with non-controlling interests are also recorded in equity.

Loss of control

On the loss of control, the Group
derecognises the assets and liabilities of the subsidiary, any non-controlling interests and other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in the consolidated income
statement. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value as at the date the control is lost. Subsequently, that retained interest is accounted for using the equity method if significant
influence is retained.

Acquisitions of subsidiaries that are not business combinations

On the acquisition of subsidiaries and operations that do not constitute a business, the acquisition consideration is 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. Non-controlling interests, if any, participate at their relative share of the fair value
of the net identifiable assets on the acquisition date. Directly attributable costs are recognised as part of the acquisition cost.

Associates

Associates are all entities over which the Group has significant influence but not control, generally through a shareholding of between 20% and 50% of
the voting rights. Investments in associates are accounted for using the equity method and are initially recognised at cost. The cost of the investment includes transaction costs. The Groups share of its associates post-acquisition
profits or losses is recognised in the consolidated income statement. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Groups share of losses in an associate equals or exceeds its
interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations to or made payments on behalf of the associate.

Consolidation group

The Group consists of Atrium and the
following entities at 31 December 2013:



|                                |  |         |          |  |           |  |     |  
|------------------------------- |  | ------- | -------- |  | --------- |  | --- | -
|Company name                    |  | Country |          |  | Ownership | 
|SOFIA PARK EAD                  |  |         | Bulgaria |  |           |  | 100 | %
|ABERGAVENNY INVESTMENTS LIMITED |  |         | Cyprus   |  |           |  | 70  | %
|ATTILO HOLDINGS LIMITED         |  |         | Cyprus   |  |           |  | 100 | %
|BROADVALE HOLDINGS LIMITED      |  |         | Cyprus   |  |           |  | 100 | %
|DALSEN SERVICES LIMITED         |  |         | Cyprus   |  |           |  | 90  | %
|DANELDEN ENTERPRISES LIMITED    |  |         | Cyprus   |  |           |  | 100 | %



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|                                        |  |  |                |  |  |  |     |  
|--------------------------------------- |  |  | -------------- |  |  |  | --- | -
|ETHERLAND INVESTMENTS LIMITED           |  |  | Cyprus         |  |  |  | 100 | %
|MALL GALLERY 1 LIMITED*                 |  |  | Cyprus         |  |  |  | 63  | %
|MALL GALLERY 2 LIMITED                  |  |  | Cyprus         |  |  |  | 100 | %
|MD CE HOLDING LIMITED                   |  |  | Cyprus         |  |  |  | 100 | %
|MD REAL ESTATE MANAGEMENT LTD           |  |  | Cyprus         |  |  |  | 100 | %
|MD RUSSIA HOLDING LIMITED               |  |  | Cyprus         |  |  |  | 100 | %
|MD TIME HOLDING LIMITED                 |  |  | Cyprus         |  |  |  | 100 | %
|NOKITON INVESTMENTS LIMITED             |  |  | Cyprus         |  |  |  | 100 | %
|PATTONGATE TRADING LIMITED              |  |  | Cyprus         |  |  |  | 100 | %
|ATRIUM ALFA CZECH REPUBLIC S.R.O.       |  |  | Czech Republic |  |  |  | 100 | %
|ATRIUM BETA CZECH REPUBLIC S.R.O.       |  |  | Czech Republic |  |  |  | 100 | %
|ATRIUM DELTA CZECH REPUBLIC S.R.O.      |  |  | Czech Republic |  |  |  | 100 | %
|ATRIUM FLÓRA A.S                        |  |  | Czech Republic |  |  |  | 100 | %
|ATRIUM GAMMA CZECH REPUBLIC S.R.O.      |  |  | Czech Republic |  |  |  | 100 | %
|ATRIUM KAPPA CZECH REPUBLIC S.R.O.      |  |  | Czech Republic |  |  |  | 100 | %
|ATRIUM LAMBDA CZECH REPUBLIC S.R.O.     |  |  | Czech Republic |  |  |  | 100 | %
|ATRIUM OSTRAVA CZECH REPUBLIC S.R.O.    |  |  | Czech Republic |  |  |  | 100 | %
|ATRIUM PARDUBICE CZECH REPUBLIC S.R.O.  |  |  | Czech Republic |  |  |  | 100 | %
|ATRIUM SIGMA CZECH REPUBLIC S.R.O.      |  |  | Czech Republic |  |  |  | 100 | %
|ATRIUM ZLÍN CZECH REPUBLIC S.R.O.       |  |  | Czech Republic |  |  |  | 100 | %
|EURO MALL BRNO REAL ESTATE S.R.O.       |  |  | Czech Republic |  |  |  | 100 | %
|FLÓRA-SEN S.R.O.                        |  |  | Czech Republic |  |  |  | 100 | %
|MANHATTAN DEVELOPMENT S.R.O.            |  |  | Czech Republic |  |  |  | 100 | %
|MANHATTAN REAL ESTATE MANAGEMENT S.R.O. |  |  | Czech Republic |  |  |  | 100 | %
|VEVEŘÍ CENTRE S.R.O.                    |  |  | Czech Republic |  |  |  | 100 | %
|FORAS HOLDING A/S                       |  |  | Denmark        |  |  |  | 100 | %
|POLONIACO APS                           |  |  | Denmark        |  |  |  | 100 | %
|EUROPE & CO LLC                         |  |  | Georgia        |  |  |  | 100 | %
|ATRIUM ALPHA LLC                        |  |  | Georgia        |  |  |  | 100 | %
|ALFA - PIAC KFT.                        |  |  | Hungary        |  |  |  | 100 | %
|ATRIUM ALFA HU KFT.                     |  |  | Hungary        |  |  |  | 100 | %
|ATRIUM BETA HU KFT.                     |  |  | Hungary        |  |  |  | 100 | %
|MAGNUM HUNGARIA INVEST KFT.             |  |  | Hungary        |  |  |  | 100 | %
|MANHATTAN DEVELOPMENT ALFA KFT.         |  |  | Hungary        |  |  |  | 100 | %
|MANHATTAN DEVELOPMENT GLOBAL KFT.       |  |  | Hungary        |  |  |  | 100 | %
|MANHATTAN DEVELOPMENT INVEST KFT.       |  |  | Hungary        |  |  |  | 100 | %
|MANHATTAN DEVELOPMENT KFT.              |  |  | Hungary        |  |  |  | 100 | %
|MANHATTAN DEVELOPMENT PROJEKT KFT.      |  |  | Hungary        |  |  |  | 100 | %
|MANHATTAN DEVELOPMENT PROPERTY KFT.     |  |  | Hungary        |  |  |  | 100 | %
|MANHATTAN DEVELOPMENT TANNE KFT.        |  |  | Hungary        |  |  |  | 100 | %
|MANHATTAN REAL ESTATE MANAGEMENT KFT.   |  |  | Hungary        |  |  |  | 100 | %



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|                                             |  |  |             |  |  |  |     |  
|-------------------------------------------- |  |  | ----------- |  |  |  | --- | -
|THESIS SRL                                   |  |  | Italy       |  |  |  | 100 | %
|ATRIUM EUROPEAN REAL ESTATE NOMINEES LIMITED |  |  | Jersey      |  |  |  | 100 | %
|ATRIUM TREASURY SERVICES LIMITED             |  |  | Jersey      |  |  |  | 100 | %
|SIA MANHATTAN REAL ESTATE MANAGEMENT         |  |  | Latvia      |  |  |  | 100 | %
|SIA MD GALERIJA AZUR                         |  |  | Latvia      |  |  |  | 100 | %
|HEDAN S.A.                                   |  |  | Luxemburg   |  |  |  | 100 | %
|ATRIUM EUROPE B.V.                           |  |  | Netherlands |  |  |  | 100 | %
|ATRIUM EUROPEAN COÖPERATIEF U.A.             |  |  | Netherlands |  |  |  | 100 | %
|ATRIUM EUROPEAN MANAGEMENT N.V.              |  |  | Netherlands |  |  |  | 100 | %
|ATRIUM HUNGARIAN HOLDING 1 B.V.              |  |  | Netherlands |  |  |  | 100 | %
|ATRIUM HUNGARIAN HOLDING 2 B.V.              |  |  | Netherlands |  |  |  | 100 | %
|ATRIUM HUNGARIAN HOLDING 3 B.V.              |  |  | Netherlands |  |  |  | 100 | %
|ATRIUM HUNGARIAN HOLDING 4 B.V.              |  |  | Netherlands |  |  |  | 100 | %
|ATRIUM HUNGARIAN HOLDING 5 B.V.              |  |  | Netherlands |  |  |  | 100 | %
|ATRIUM HUNGARIAN HOLDING 6 B.V.              |  |  | Netherlands |  |  |  | 100 | %
|ATRIUM HUNGARIAN HOLDING 7 B.V.              |  |  | Netherlands |  |  |  | 100 | %
|ATRIUM HUNGARIAN HOLDING 8 B.V.              |  |  | Netherlands |  |  |  | 100 | %
|ATRIUM RUSSIAN HOLDING 1 B.V.                |  |  | Netherlands |  |  |  | 100 | %
|ATRIUM RUSSIAN HOLDING 2 B.V.                |  |  | Netherlands |  |  |  | 100 | %
|ATRIUM TURKEY ADANA BOSSA B.V.               |  |  | Netherlands |  |  |  | 100 | %
|ATRIUM TURKEY B.V.                           |  |  | Netherlands |  |  |  | 100 | %
|ATRIUM TURKEY GOETZTEPE B.V.                 |  |  | Netherlands |  |  |  | 100 | %
|ATRIUM TURKEY KAHRAMANMARAS B.V.             |  |  | Netherlands |  |  |  | 100 | %
|ATRIUM TURKEY SAMSUN B.V.                    |  |  | Netherlands |  |  |  | 100 | %
|ATRIUM TURKEY URFA B.V.                      |  |  | Netherlands |  |  |  | 100 | %
|MORNING RISE B.V.                            |  |  | Netherlands |  |  |  | 100 | %
|A1 ALLANITE COMPANY SP. Z O.O. S.K.A.        |  |  | Poland      |  |  |  | 100 | %
|A4 ALLANITE COMPANY SP. Z O.O. S.K.A.        |  |  | Poland      |  |  |  | 100 | %
|A5 ALLANITE COMPANY SP. Z O.O. S.K.A.        |  |  | Poland      |  |  |  | 100 | %
|A6 ALLANITE COMPANY SP. Z O.O. S.K.A.        |  |  | Poland      |  |  |  | 100 | %
|A7 ALLANITE COMPANY SP. Z O.O. S.K.A.        |  |  | Poland      |  |  |  | 100 | %
|A8 ALLANITE COMPANY SP. Z O.O. S.K.A.        |  |  | Poland      |  |  |  | 100 | %
|A9 ALLANITE COMPANY SP. Z O.O. S.K.A.        |  |  | Poland      |  |  |  | 100 | %
|A16 ALLANITE COMPANY SP. Z O.O. S.K.A.       |  |  | Poland      |  |  |  | 100 | %
|A17 ALLANITE COMPANY SP. Z O.O. S.K.A.       |  |  | Poland      |  |  |  | 100 | %
|A18 ALLANITE COMPANY SP. Z O.O. S.K.A.       |  |  | Poland      |  |  |  | 100 | %
|A19 ALLANITE COMPANY SP. Z O.O. S.K.A.       |  |  | Poland      |  |  |  | 100 | %
|A20 ALLANITE COMPANY SP. Z O.O. S.K.A.       |  |  | Poland      |  |  |  | 100 | %
|AGROMEX DEVELOPMENT SP. Z O.O.               |  |  | Poland      |  |  |  | 100 | %
|ALLEGRA INVESTMENTS SP. Z O.O.               |  |  | Poland      |  |  |  | 100 | %
|ATRIUM BIAŁA SP. Z O.O.                      |  |  | Poland      |  |  |  | 100 | %



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|                                                                |  |  |         |  |  |  |     |  
|--------------------------------------------------------------- |  |  | ------- |  |  |  | --- | -
|ATRIUM COPERNICUS SP. Z O.O.**                                  |  |  | Poland  |  |  |  | 100 | %
|ATRIUM COPERNICUS 2 SP. Z O.O.**                                |  |  | Poland  |  |  |  | 100 | %
|ATRIUM DOMINIKANSKA SP. Z O.O.**,***                            |  |  | Poland  |  |  |  | 100 | %
|ATRIUM FELICITY SP. Z O.O.                                      |  |  | Poland  |  |  |  | 100 | %
|ATRIUM GDAŃSK 3 SP. Z O.O.**                                    |  |  | Poland  |  |  |  | 100 | %
|ATRIUM KALISZ 2 SP. Z O.O.**                                    |  |  | Poland  |  |  |  | 100 | %
|ATRIUM KOSZALIN SP. Z O.O.                                      |  |  | Poland  |  |  |  | 100 | %
|ATRIUM PLEJADA SP. Z O.O.                                       |  |  | Poland  |  |  |  | 100 | %
|ATRIUM POLAND 1 SP. Z O.O.                                      |  |  | Poland  |  |  |  | 100 | %
|ATRIUM POLAND 2 SP. Z O.O.                                      |  |  | Poland  |  |  |  | 100 | %
|ATRIUM POLAND REAL ESTATE MANAGEMENT SP. Z O.O                  |  |  | Poland  |  |  |  | 100 | %
|ATRIUM PROMENADA SP. Z O.O.**                                   |  |  | Poland  |  |  |  | 100 | %
|ATRIUM TARGÓWEK SP. Z O.O.                                      |  |  | Poland  |  |  |  | 100 | %
|ATRIUM REDUTA SP. Z O.O.                                        |  |  | Poland  |  |  |  | 100 | %
|CENTRUM HANDLOWE NEPTUNCITY SP. Z O.O.                          |  |  | Poland  |  |  |  | 100 | %
|EURO MALL POLSKA XVI SP. Z O.O.                                 |  |  | Poland  |  |  |  | 100 | %
|EURO MALL POLSKA XIX SP. Z O.O.                                 |  |  | Poland  |  |  |  | 100 | %
|FORAS TARGÓWEK SP. Z O.O.                                       |  |  | Poland  |  |  |  | 100 | %
|GALERIA NA WYSPIE SP. Z O.O.                                    |  |  | Poland  |  |  |  | 100 | %
|INVESTIM SP. Z O.O.                                             |  |  | Poland  |  |  |  | 100 | %
|IPOPEMA 77 FIZ                                                  |  |  | Poland  |  |  |  | 100 | %
|L.P.H. SP. Z O.O.                                               |  |  | Poland  |  |  |  | 100 | %
|MANHATTAN DEVELOPMENT SP. Z O.O.                                |  |  | Poland  |  |  |  | 100 | %
|MD JASTRZEBIE ZDROJ SP. Z O.O.                                  |  |  | Poland  |  |  |  | 100 | %
|MD POLAND II SP. Z O.O.                                         |  |  | Poland  |  |  |  | 100 | %
|MD POLAND III SP. Z O.O.                                        |  |  | Poland  |  |  |  | 100 | %
|PROJEKT ECHO-35 SP. Z O.O.                                      |  |  | Poland  |  |  |  | 100 | %
|WIOSENNY ATRIUM POLAND REAL ESTATE MANAGEMENT SP. Z O.O. S.K.A. |  |  | Poland  |  |  |  | 100 | %
|ZIELONY ATRIUM POLAND REAL ESTATE MANAGEMENT SP. Z O.O. S.K.A.  |  |  | Poland  |  |  |  | 100 | %
|ATRIUM ROMANIA REAL ESTATE MANAGEMENT SRL                       |  |  | Romania |  |  |  | 100 | %
|LAND DEVELOPMENT PROIECT SRL                                    |  |  | Romania |  |  |  | 100 | %
|PROPERTY DEVELOPMENT ONE SRL                                    |  |  | Romania |  |  |  | 100 | %
|PROPERTY DEVELOPMENT TWO SRL                                    |  |  | Romania |  |  |  | 100 | %
|OOO BUGRY                                                       |  |  | Russia  |  |  |  | 100 | %
|OOO DELTA                                                       |  |  | Russia  |  |  |  | 100 | %
|OOO ENGINEERICS*                                                |  |  | Russia  |  |  |  | 63  | %
|OOO EVEREST                                                     |  |  | Russia  |  |  |  | 100 | %
|OOO MALL MANAGEMENT                                             |  |  | Russia  |  |  |  | 100 | %
|OOO MANHATTAN BRATEEVO                                          |  |  | Russia  |  |  |  | 100 | %
|OOO MANHATTAN DEVELOPMENT                                       |  |  | Russia  |  |  |  | 100 | %
|OOO MANHATTAN REAL ESTATE MANAGEMENT                            |  |  | Russia  |  |  |  | 100 | %



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|                                                            |  |  |          |  |  |  |      |  
|----------------------------------------------------------- |  |  | -------- |  |  |  | ---- | -
|OOO MANHATTAN SIGNALNY                                      |  |  | Russia   |  |  |  | 100  | %
|OOO MANHATTAN YEKATERINBURG                                 |  |  | Russia   |  |  |  | 100  | %
|OOO MD TOGLIATTI                                            |  |  | Russia   |  |  |  | 100  | %
|OOO RETAIL TOGLIATTI                                        |  |  | Russia   |  |  |  | 100  | %
|OOO SODRUZHESTVO                                            |  |  | Russia   |  |  |  | 100  | %
|OOO ZVEZDNYI GOROD                                          |  |  | Russia   |  |  |  | 100  | %
|OOO DIALOG                                                  |  |  | Russia   |  |  |  | 100  | %
|ZAO MEGAPOLIS                                               |  |  | Russia   |  |  |  | 100  | %
|ZAO NAUTILUS                                                |  |  | Russia   |  |  |  | 100  | %
|ZAO PATERA                                                  |  |  | Russia   |  |  |  | 100  | %
|ZAO UNIVERSAL-URAL                                          |  |  | Russia   |  |  |  | 51   | %
|MANHATTAN DEVELOPMENT SK A.S.                               |  |  | Slovakia |  |  |  | 100  | %
|MANHATTAN REAL ESTATE MANAGEMENT SK S.R.O.                  |  |  | Slovakia |  |  |  | 100  | %
|PALM CORP S.R.O.                                            |  |  | Slovakia |  |  |  | 100  | %
|SLOVAK INVESTMENT GROUP A.S.                                |  |  | Slovakia |  |  |  | 100  | %
|ATRIUM EUROPEAN REAL ESTATE SPAIN S.L.U.                    |  |  | Spain    |  |  |  | 100  | %
|TRETTIOENCORP AB                                            |  |  | Sweden   |  |  |  | 100  | %
|BALCOVA GAYRIMENKUL YATIRIM INSAAT VE TICARET A.S.          |  |  | Turkey   |  |  |  | 100  | %
|ISTMAR TEM GAYRIMENKUL YATIRIM INSAAT VE TICARET A.S.       |  |  | Turkey   |  |  |  | 100  | %
|MANHATTAN GAYRIMENKUL YÖNETIMI LIMITED SIRKETI              |  |  | Turkey   |  |  |  | 100  | %
|MEL 1 GAYRIMENKUL GELISTIRME YATIRIM INSAAT VE TICARET A.S. |  |  | Turkey   |  |  |  | 100  | %
|MEL 6 GAYRIMENKUL GELISTIRME YATIRIM INSAAT VE TICARET A.S. |  |  | Turkey   |  |  |  | 100  | %
|A.KHARKIV 1 LLC                                             |  |  | Ukraine  |  |  |  | 99.9 | %
|A.KHARKIV 2 LLC                                             |  |  | Ukraine  |  |  |  | 99.9 | %
|A.KHARKIV 3 LLC                                             |  |  | Ukraine  |  |  |  | 99.9 | %
|A.KYIV LLC                                                  |  |  | Ukraine  |  |  |  | 100  | %
|ENGINEERICS UKRAINE LLC*                                    |  |  | Ukraine  |  |  |  | 100  | %
|OJSC IPODROM                                                |  |  | Ukraine  |  |  |  | 100  | %
|VORONTSOVSKI VEZHI LLC                                      |  |  | Ukraine  |  |  |  | 70   | %



|* | These entities are equity accounted for as at 31 December 2013. OOO Engineerics and Engineerics Ukraine llc are held by Mall Gallery 1Llimited
|- | ----------------------------------------------------------------------------------------------------------------------------------------------

|** | Companies renamed during 2013:
|-- | ------------------------------



| |  | Atrium Copernicus Sp. z o.o. previously Galeria Copernicus Toruń Sp. z o.o.
| | - | ---------------------------------------------------------------------------



| |  | Atrium Copernicus 2 Sp. z o.o. previously Galeria Copernicus Toruń 2 Sp. z o.o.
| | - | -------------------------------------------------------------------------------



| |  | Atrium Dominikanska Sp. z o.o. previously Atrium Poland 3 Sp. z o.o.
| | - | --------------------------------------------------------------------



| |  | Atrium Gdańsk 3 Sp. z o.o. previously Euro Mall Polska XX Sp. z o.o.
| | - | --------------------------------------------------------------------



| |  | Atrium Kalisz 2 Sp. z o.o. previously Progres 77 Sp. z o.o.
| | - | -----------------------------------------------------------



| |  | Atrium Promenada Sp. z o.o. previously MD Poland I Sp. z o.o.
| | - | -------------------------------------------------------------



|*** | IlwroJoint Venture Sp. z o.o was mergen into Atrium Dominikanska Sp. z o.o .in December 2013
|--- | --------------------------------------------------------------------------------------------



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Foreign currency

Foreign currency transactions

Transactions in
foreign currencies are translated to the respective functional currency of Group entities at the foreign exchange rate prevailing as at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies as at the
reporting date are translated into the functional currency at the foreign exchange rate prevailing as at that date. Non monetary assets and liabilities denominated in foreign currencies that are measured in terms of historical cost in a foreign
currency are translated using the exchange rate as at the date of the transaction. Non monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated into the functional currency at the foreign
exchange rates prevailing as at the dates the fair values are determined.

Foreign currency exchange gains and losses resulting from the settlement of
foreign currency transactions and balances and from the translation at year-end exchange rates are recognised in the consolidated income statement.

Foreign operations

On consolidation, the assets
and liabilities of the Groups foreign entities with a functional currency that differ from the presentation currency are translated into euros at exchange rates prevailing on the reporting date. Income and expense items are translated at the
average exchange rates for the period.

The exchange differences that arise from the translation of the statement of financial position and the
consolidated income statement from the functional to the presentation currency are recognised in other comprehensive income and presented as a separate component of equity until the disposal of the foreign entity, when the cumulative amount in
equity is reclassified to the consolidated income statement as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant
proportion of the cumulative amount is attributed to non-controlling interest. When the Group disposes of only part of its investment in an associate that includes a foreign operation while retaining significant influence, the relevant proportion of
the cumulative amount is reclassified to the consolidated income statement. If the foreign operation is a non-wholly owned subsidiary then the relevant proportion of the translation difference is allocated to non-controlling interests. Exchange
differences arising on items, which in substance form part of the net investment in a foreign entity, are also presented in the statement of comprehensive income and as a separate component of equity until the disposal of the net investment.

Standing investments

Standing investments comprise
properties held to earn rental income and land related to those properties. Standing investments are initially measured at cost, including costs directly attributable to the acquisition and, after initial recognition, they are measured at fair
value. The fair values of all standing investments were determined based on the valuations received from Cushman & Wakefield and Jones Lang LaSalle. Both are external, independent, international valuation companies and real estate
consultants, having an appropriately recognised professional qualification and recent experience in the respective locations and categories of properties being valued. The valuations were prepared in accordance with the Royal Institution of
Chartered Surveyors Valuation Standards published by the Royal Institution of Chartered Surveyors (the Red Book). For further details see notes 1.4 and 1.36.



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When technical improvements or extensions are constructed or added to an existing standing investment, the
property will continue to be classified as a standing investment, which is measured at fair value.

Subsequent expenditures are capitalised to the
property only if it is probable that the cash outflow will produce future economic benefits and the cost can be measured reliably. The day to day maintenance costs are expensed to the consolidated income statement.

Any gain or loss arising from a change in the fair value of standing investments is recognised in the consolidated income statement under the caption
Revaluation of investment properties. In the case of entities whose functional currency is the local currency (i.e. not the euro) the revaluation gain/loss in the local currency is converted into euros using the average foreign exchange
rate for the period. The remaining foreign exchange difference (being the difference arising from the conversion of the standing investments in the statement of financial position at the period end rates and the conversion of the revaluation
gain/loss using the average period rate) is recognised in the statement of comprehensive income and in equity as a foreign exchange difference.

Developments and land

Developments and land comprise
capitalised development costs and land, except for the land on which standing investments are situated. Developments and land are initially recognised at cost which includes directly attributable expenditures and subsequently at fair value with any
change therein recognised in the consolidated income statement.

All costs directly associated with the purchase and development of a property and all
subsequent capital expenditure that adds to, replaces part of or services the property are capitalised. The Group capitalises borrowing costs if they are directly attributable to the acquisition or construction of a qualifying asset. Capitalisation
of borrowing costs commences when the activities to prepare the asset for its intended use have started and expenditure and borrowing costs are incurred. Capitalisation of borrowing costs may continue until the assets are substantially ready for
their intended use. Capitalisation ceases when the project has been stopped. The capitalisation rate is determined by reference to the actual rate payable on borrowings for the respective development or by the Groups average rate.

The commencement of development with a plan or a prior agreement to sell represents a change in use and accordingly the project is transferred from
developments to inventories. The developments deemed cost shall be its fair value at the date of change in use.

The fair value of most of the
developments and land as at 31 December 2013 was determined based on valuations received from Cushman & Wakefield, an external, independent, international valuation company. Approximately 32% (2012: 11%) was valued internally. For
further details see note 1.5 and 1.36.



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Any gain or loss arising from a change in fair value of development and land is recognised in the
consolidated income statement under the caption Revaluation of investment properties. In the case of entities whose functional currency is the local currency (i.e. not the euro) the revaluation gain/loss in the local currency is
converted into euros using the average foreign exchange rate for the period. The remaining foreign exchange difference (being the difference arising from the conversion of the development and land in the statement of financial position at the period
end rates and the conversion of the revaluation gain/loss using the average period rate) is recognised in the statement of comprehensive income and in equity as a foreign exchange difference.

Inventory

Inventory developed for sale is recorded at
the lower of cost and estimated net realisable value. The inventory is reviewed for impairment on each reporting date. An impairment loss is recognised in net income when the carrying value of the property exceeds its net realisable value. Net
realisable value is based on projections of future cash flows. The inventory is presented separately on the consolidated statement of financial position as current assets.

Property, plant and equipment

Property, plant and
equipment are measured at cost less accumulated depreciation and accumulated impairment losses, if any.

Depreciation is calculated on a straight-line
basis over the expected useful life of the assets, which is usually between five and ten years, taking into account the expected residual value at the end of the useful life.

Depreciation is charged on the asset from the date that it is available for use, for the entire useful life of the asset or until the date of its disposal.

Goodwill

Goodwill initially represents the excess
of the aggregate of the cost of the acquisition and any non-controlling interests over the fair value of the Groups share of the identifiable net assets acquired.

Goodwill is subsequently measured at cost less accumulated impairment losses. Goodwill is tested for impairment annually or whenever there is an indication
that assets may be impaired.

Determining whether goodwill is impaired requires an estimation of the recoverable amount of the cash-generating units to
which goodwill has been allocated. The Groups cash-generating units are determined on the basis of the countries in which the Group operates. The recoverable amount is the higher amount of the fair value less the cost to sell or the value in
use of the cash generating unit. Determination of the value in use requires the Group to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value.

Future cash flows of real estate companies are mainly derived from the cash flows of the standing investment properties and future standing investment
properties and are therefore reflected in the fair values of investment properties. Goodwill itself mainly arises due to the recognition of deferred tax liabilities in the course of the purchase price allocation. Therefore, goodwill impairment
testing is carried out by comparing the goodwill recognised to the carrying value of deferred tax liabilities per country. Any excess of goodwill over deferred tax liabilities is considered a goodwill impairment loss.



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Impairment losses are recognised immediately in the consolidated income statement. Impairment losses in
respect of goodwill are not reversed.

Intangible assets

Intangible assets are defined as identifiable, non-monetary assets without physical substance, which are expected to generate future economic benefits.
Intangible assets include assets with an estimated useful life greater than one year and, for the Group, primarily comprise software.

Intangible assets
that are acquired by the Group are measured at cost less accumulated amortisation and accumulated impairment losses.

Amortisation of intangible assets is
recorded on a straight line basis over their estimated useful lives. The useful lives of the assets are usually between four and ten years.

Amortisation
is charged on an asset from the date it is available for use to the date of its disposal.

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 must be 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 on the 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 is presented separately in the statement of financial position as assets classified as held for sale.

Financial instruments

Financial assets are
recognised in the statement of financial position when the group becomes a party to the contractual conditions of the instrument. All financial assets are recognised initially at fair value plus transaction costs, with the exception of financial
assets classified at fair value through profit or loss presented at fair value.

The Groups financial assets are classified as loans and receivables
and consist of cash and cash equivalents, loans, receivables from tenants and other receivables with fixed or determinable payments that are not quoted in an active market.

Subsequent to initial recognition, loans and receivables are measured at amortised cost, using the effective interest method, less impairment.

Financial liabilitiesare classified as financial liabilities at fair value through profit or loss or as other financial liabilities.



| |  |  | Financial liabilities at fair value through profit or loss include derivatives as detailed below. Financial liabilities at fair value through profit or loss are presented at fair value. Any profit or loss deriving from
changes in fair value is recognised in the consolidated income statement. For further details see note 1.19
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Other financial liabilities in the Group include borrowings, financial leases, other long term liabilities, trade and other payables, payables related in acquisitions and accrued expenditures.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Other financial liabilities are initially recognised at fair value after the deduction of transactions costs. Subsequent to initial
recognition, other financial liabilities are measured on the basis of amortised cost, with financing costs recorded in the consolidated income statement on the basis of the effective interest method.

Other than as described in note 1.36, the Group believes that the carrying amounts of financial assets and liabilities which are carried at amortised cost in
the financial statements are deemed not to be significantly different from their fair value. Loans to third parties with a book value of 8.1 million (31 December 2012: 8.1 million) were impaired to reflect the recoverable amounts.

Cash and cash equivalents

Cash and cash equivalents
comprise cash in hand, deposits on demand, and other short term highly liquid assets that are readily convertible to a known amount of cash and are subject to an insignificant risk of change in value.

Financial Derivatives and hedge accounting

The
Group holds derivative financial instruments to hedge its interest rate risk exposure.

On initial designation of the derivative as the hedging
instrument, the Group formally documents the relationship between the hedging instrument and the hedged item, including the risk management objectives and strategy in undertaking the hedge transaction and the hedged risk, together with the methods
that will be used to assess the effectiveness of the hedging relationship. The Group makes an assessment, both at the inception of the hedge relationship as well as on an on-going basis, of whether the hedging instruments are expected to be
highly effective in offsetting the changes in the fair value or cash flows of the respective hedged items attributable to the hedged risk, and whether the actual results of each hedge are within a range of 80%  125%.

Derivatives are recognised initially at fair value; any attributable transaction costs are recognised in the consolidated income statement as incurred.
Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.

Cash flow
hedges

When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk
associated with a recognised asset or liability or a highly probable forecast transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognised in other comprehensive income and
presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in the consolidated income statement. If the hedging instrument no longer meets the criteria for hedge
accounting, expires or is sold, terminated or exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. If the forecast transaction is no longer expected to occur, then the balance in equity is reclassified to
the consolidated income statement.



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Impairment

At each reporting date, Group executive management reviews the carrying amount of the Groups assets, other than investment properties measured at fair
value, goodwill and deferred tax assets, to determine whether there is any objective evidence that it is impaired. An asset is impaired if there is objective evidence of impairment as a result of one or more events that occurred after the initial
recognition of the asset, and that loss event(s) had an impact on the estimated future cash flows of that asset that can be estimated reliably.

Objective
evidence that assets are impaired includes default or delinquency by a debtor, indications that a debtor will enter bankruptcy, adverse changes in the payment status of borrowers or economic conditions that correlate with defaults. An impairment
loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the consolidated income statement immediately.

In respect of other assets, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.

An impairment loss is reversed only to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined,
net of depreciation or amortisation, if no impairment loss had been recognised.

Stated capital

The stated capital account consists of the proceeds received and receivable by Atrium from the issue of its ordinary shares, net of direct issue costs.

Dividends

Dividends on ordinary shares are
recognised as a liability in the period in which they are declared. Dividends declared during the period have been presented as a reduction in the stated capital of Atrium.

Share based payments

Atrium operates Employee
Share Option Plans (ESOP) under which the Group receives services from key employees selected by the Board in consideration for equity instruments settled in shares. The cost of the ESOP is measured at the fair value of the options
granted at the grant date.

The cost of the ESOP is recognised in the consolidated income statement, together with a corresponding increase in equity,
over the period in which the service conditions are satisfied, ending on the date on which the relevant employees become fully entitled to the award (the vesting period). The cumulative expense, recognised for the ESOP at each reporting
date until the vesting date, reflects the extent to which the vesting period has expired and the Groups best estimate of the number of equity instruments that will ultimately be vested.



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Borrowings

Borrowings are recorded as the proceeds received, net of direct issuance costs, and are amortised to the settlement amount using the effective interest method.
Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accrual basis in the consolidated income statement using the effective interest method.

Short term borrowings represent borrowings that are due within 12 months. Long term borrowings represent borrowings due after more than 12 months.

When an element of bonds issued by the Group is repurchased before maturity, the carrying amount of the bond is allocated between the element that continues
to be recognised and the element that is derecognised based on the relative fair values of such element on the date of repurchase. The difference between (a) the carrying amount allocated to the element derecognised and (b) the
consideration paid is recognised as profit or loss on repurchase of bonds in the consolidated income statement.

Provisions

A provision is recognised when the Group has a legal or constructive obligation as a result of a past event and it is probable (i.e. more likely than not) 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.

Liabilities from leases

A lease is classified as a
finance lease if it transfers substantially all the risks and rewards incidental to ownership. All other leases are classified as operating leases.

At
the commencement of the lease term, the leased assets held are measured at their fair value or, if lower, at the present value of the minimum lease payments. Subsequently such assets are measured in analogy to other assets held under the relevant
caption (e.g. standing investments and developments and land  at fair value; property, plant and equipment  costs less accumulated depreciation and accumulated impairment losses). The corresponding liability is included in the statement
of financial position as a finance lease obligation. The lease payments are apportioned between finance charges and the reduction of the outstanding lease liability. The finance charge is allocated to each period during the lease term so as to
produce a constant periodic rate of interest on the remaining balance of the liability.

Revenue recognition

Revenues are recognised in the consolidated 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 from operating leases is recognised on a straight line basis over the lease term.



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Net result on disposals of properties

The net result on disposal of properties is determined as the difference between the sale proceeds and the carrying value of the property and is recognised in
the income statement when the significant risks and rewards of ownership have been transferred to the buyer.

Interest income, interest expense and
other financial income and expenses

Interest income and expenses are accounted for using the effective interest method.

Other financial income and expenses comprise mainly foreign currency gains and losses, net profit or loss from bond buybacks and the impairment of financial
instruments.

Taxation

General

Expenses in respect of taxes on income include all current taxes, as well as the total change in deferred tax balances, except for deferred taxes arising from
transactions or events which are applied directly to equity or to comprehensive income. The tax results deriving from a transaction or event recognised directly in equity or in other comprehensive income are also charged directly to equity or to
other comprehensive income.

Current tax

Current tax expenses (benefits) are the expected tax payable or receivable on the taxable income or loss for the year using tax rates enacted or substantively
enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Current tax is recognised in the consolidated income statement.

The taxable profit differs from the net loss or profit as reported in the consolidated income statement due to the inclusion or exclusion of income or expense
items that are taxable or deductible in different reporting periods or which are not taxable or deductible.

Deferred tax

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets or liabilities in the financial statements and their tax
base. Deferred tax assets and liabilities are measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted on the reporting date. Deferred tax is computed on
the total amount of the revaluation adjustment for investment properties.

Deferred tax is recognised in the consolidated income statement except to the
extent that it relates to items recognised directly in equity or in other comprehensive income, in which case it is recognised in equity or in other comprehensive income.

A deferred tax asset is recognised on unused tax losses carried forward and unused tax credits to the extent that it is probable that future taxable profit
will be available against which the unused tax losses and unused tax credits can be utilised.



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Deferred tax assets are offset against deferred tax liabilities within one entity only if the entity has a
legally enforceable right to set off current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on the same taxable entity.

Earnings per share

The basic earnings per share is
calculated by dividing the earnings attributed to regular company shareholders by a weighted average of the number of regular shares in circulation throughout the reported period.

In order to calculate diluted earnings per share, the earnings attributed to the regular Company shareholders, and the weighted average of the number of
shares in circulation, are adjusted on the basis of the influence of all potential regular shares originating from employees options, so long as they lead to dilution relative to the basic profit per share.

Segment reporting

An operating segment is a component of
the Group that is engaged in business activities from which it may earn revenues and incur expenses, and whose operating results are regularly reviewed in order to allocate resources to the segment and assess its performance, and for which discrete
financial information is available.

The Group has two reportable segments:



| |  | The standing investment segment includes all commercial real estate held to generate rental income of the Group;
|- |  | ----------------------------------------------------------------------------------------------------------------



| |  | The development segment includes all development activities and activities related with land plots.
|- |  | ---------------------------------------------------------------------------------------------------

The
reconciling items mainly include holding activities and other items that relate to activities other than the standing investment segment and the development segment.

The Groups reportable segments are strategic business sectors which carry out different business activities and are managed separately.

The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies. Segment results, assets
and liabilities include items directly attributable to a segment as well as those that can be allocated on a reliable basis. The Group evaluates performance of the standing investment segment on the basis of profit or loss from operations before tax
excluding foreign exchange gains and losses. The performance of the development segment is evaluated on the basis of expected yield on cost.

Geographical
information is based on the geographical locations of the investment properties. The Group operates in the following countries: Poland, the Czech Republic, Slovakia, Russia, Hungary, Romania, Latvia, Turkey, Georgia and Bulgaria. In addition, the
Group has its holding, management or other companies in Cyprus, Denmark, Italy, Luxembourg, the Netherlands, Spain, Sweden, Ukraine and the parent company in Jersey.



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|1.4 | Standing investments
|--- | --------------------

The current portfolio of standing investments consists of 153 properties (2012:
156); which comprise 22 properties in Poland (2012: 21), 95 properties in the Czech Republic (2012: 98), 3 properties in Slovakia (2012: 3), 7 properties in Russia (2012: 7), 24 properties in Hungary (2012: 25), 1 property in Romania (2012: 1) and 1
property in Latvia (2012: 1).

A roll forward of the total standing investments portfolio is provided in the table below:



|                                               |  |       |           |   |       |  |           | 
|---------------------------------------------- |  | ----- | --------- | - | ----- |  | --------- | 
|Standing investments                           |  | 2013  |           |   | 2012  | 
|                                               |  | 000 |           |   | 000 | 
|Balance as at 1 January                        |  |       | 2,185,336 |   |       |  | 2,077,246 | 
|Additions - new properties                     |  |       | 146,012   |   |       |  |          | 
|Additions - technical improvements, extensions |  |       | 30,811    |   |       |  | 33,629    | 
|Movements - financial leases                   |  |       | 4,755     |   |       |  | 3,861     | 
|Transfers from developments and land           |  |       | 877       |   |       |  | 6,750     | 
|Currency translation difference                |  |       | (18,660   | ) |       |  | 5,317     | 
|Revaluation of standing investments            |  |       | 14,712    |   |       |  | 58,533    | 
|Disposals                                      |  |       | (7,679    | ) |       |  |          | 
|Balance as at 31 December                      |  |       | 2,356,164 |   |       |  | 2,185,336 | 

In August 2013, the Group completed the acquisition of Galeria Dominikańska shopping centre in Wroclaw, Poland for an
agreed asset value of 151.7 million which was revised for accounting purposes to 146.0 million due to IFRS requirements in respect of deferred taxes at initial recognition and transaction costs. The transaction was accounted
for as an asset acquisition rather than a business combination as the shopping centre is located in one of our core markets and therefore Atrium has the ability to manage it, even though an external party will continue the day to day management of
the centre, working closely alongside Atriums in-house team of retail experts. Furthermore, Atrium has the right to make all strategic decisions and all the incumbent directors are now Atriums nominees.

In October 2013, the Group completed the acquisition of an additional 1,966 sqm of gross lettable area in Park House Togliatti, in Russia for a consideration
of 3.6 million. Pursuant to the acquisition, Atrium increased its ownership of the building by 4.8% to 78%.

During the year, in the Czech Republic
the Group completed the sale of two assets and returned one asset (by electing not to exercise a purchase right at expiry of a finance lease) to its lessor. In addition, during 2013, the group sold a warehouse in Hungary. The net gain resulting from
these transactions amounted to 0.4 million.

In 2012, the Group completed the acquisition from cinema operator RCH of its holdings in three of our
shopping centres in the Russian towns of Volgograd, Togliatti and Yekaterinburg for a total consideration of 9.3 million. RCH also signed new lease agreements whereby it remained a tenant of the Group at these locations.



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During the second half of 2012 Atrium finalised two development projects and transferred them from
developments and land to standing investments at fair value of 6.8 million. The two projects include a stand-alone retail box in Gdynia, Poland, handed over to the tenant Media Markt and Phase II of Atrium Galeria Mosty in Plock, Poland.

The total value of land leases was 35.8 million as at 31 December 2013 (2012: 31.8 million).

The yield diversification across the Groups income producing portfolio is stated in the table below:



|                     |  |                              |      |   |      |  |      |  
|-------------------- |  | ---------------------------- | ---- | - | ---- |  | ---- | -
|Standing investments |  | EPRA Net initial yield (NIY) |     
|                     |  | 2013                         |      |   | 2012 | 
|Poland               |  |                              | 6.7  | % |      |  | 7.0  | %
|Czech Republic       |  |                              | 7.6  | % |      |  | 7.8  | %
|Slovakia             |  |                              | 7.4  | % |      |  | 7.5  | %
|Russia               |  |                              | 12.3 | % |      |  | 12.6 | %
|Hungary              |  |                              | 9.1  | % |      |  | 8.8  | %
|Romania              |  |                              | 8.9  | % |      |  | 8.8  | %
|Latvia               |  |                              | 5.5  | % |      |  | 2.4  | %
|Average              |  |                              | 8.1  | % |      |  | 8.3  | %

For information about the fair value of standing investments, see note 1.36.

Fair value of collateral

As at 31 December 2013,
the Group had pledged a total of 19 standing investments (2012: 77) with a fair value of 1,208.3 million (2012: 1,365.9 million) and one development and land plot with a fair value of 1.5 million in favour of bondholders
and various commercial banks.

Certain assets have been provided as collateral against bonds 2003, bonds 2005 and bank loans held by the Group. The
analysis of assets charged as collateral is as follows:



|                     |  |                   |    |  |                              |  |           |                                     |  |  |         |   
|-------------------- |  | ----------------- | -- |  | ---------------------------- |  | --------- | ----------------------------------- |  |  | ------- | --
|Standing investments |  |                   |    |  |                              |  |           |                                     | 
|2013
Country         |  | No. of collateral |    |  | Fair value ofcollateral000 |  |           | Collateralised bonds and loans000 | 
|Poland               |  |                   | 15 |  |                              |  | 872,466   |                                     |  |  | 306,954 |   
|Czech Republic       |  |                   | 2  |  |                              |  | 198,077   |                                     |  |  | 113,563 |   
|Others*              |  |                   | 2  |  |                              |  | 137,730   |                                     |  |  | 41,744  |   
|Total                |  |                   | 19 |  |                              |  | 1,208,273 |                                     |  |  | 462,261 |   
|                     |  |                   |   
|2012
Country         |  | No. ofcollateral  |    |  | Fair value ofcollateral000 |  |           | Collateralised bonds and loans000 | 
|Poland               |  |                   | 15 |  |                              |  | 852,576   |                                     |  |  | 341,572 |   
|Czech Republic       |  |                   | 38 |  |                              |  | 301,021   |                                     |  |  | 155,974 | **
|Hungary              |  |                   | 20 |  |                              |  | 46,310    |                                     |  |  |        |   
|Others*              |  |                   | 4  |  |                              |  | 165,990   |                                     |  |  | 46,074  |   
|Total                |  |                   | 77 |  |                              |  | 1,365,897 |                                     |  |  | 543,620 |   



|* | In 2013 this represents properties in Slovakia, in 2012 this represents properties in Slovakia and Romania
|- | ----------------------------------------------------------------------------------------------------------

|** | Although the collateral for the 2003 Bond is identified as relating only to the Czech Republic in fact some of the assets pledged are in the Hungary and Others fair value collateral balances. We have
presented the total value of the bond against the Czech balance as it represents the majority of the collateral value.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|1.5 | Developments and land
|--- | ---------------------

The current portfolio of developments and land of the Group consists of 36
projects (31 December 2012: 36).



|                                          |  |       |         |   |       |  |         |  
|----------------------------------------- |  | ----- | ------- | - | ----- |  | ------- | -
|Developments and land                     |  | 2013  |         |   | 2012  | 
|                                          |  | 000 |         |   | 000 | 
|Balance as at 1 January                   |  |       | 538,395 |   |       |  | 587,351 |  
|Additions - cost of land and construction |  |       | 54,737  |   |       |  | 26,161  |  
|Additions - new properties                |  |       | 28,862  |   |       |  |        |  
|Movements - financial leases              |  |       | 2,910   |   |       |  | (1,139  | )
|Transfer to inventory                     |  |       |        |   |       |  | (1,744  | )
|Transfer to standing investments          |  |       | (877    | ) |       |  | (6,750  | )
|Disposals                                 |  |       | (4,817  | ) |       |  | (3,310  | )
|Interest capitalised                      |  |       | 799     |   |       |  | 1,320   |  
|Currency translation difference           |  |       | (374    | ) |       |  |        |  
|Revaluation of developments and land      |  |       | (35,998 | ) |       |  | (63,494 | )
|Balance as at 31 December                 |  |       | 583,637 |   |       |  | 538,395 |  

In July 2012, the Group signed definitive contracts with a general contractor for the construction of Atrium Felicity Shopping
Centre; our development project in Lublin, Poland. The centre is on target to open on 20 March 2014. The total net incremental costs to complete the project are approximately 24.6 million. In October 2013, the hypermarket component of the
project, which was held as an inventory, was sold to a major international food retailer in line with a forward sale agreement concluded in June 2012.

In
July 2013, the Group signed agreements with the general contractor for the second phase of the redevelopment of our Atrium Copernicus centre in Torun, Poland. Together with the first phase multi-level car park expansion, the total extension will add
an additional 17,300 sqm of GLA and a further 640 parking spaces to the centre upon completion. The total net incremental costs to complete the project are approximately 26.5 million.

In June 2013, the Group acquired the remaining 76% of the shares it did not already hold in three companies, which jointly own a land site in Gdansk, Poland.
The initial land acquisition had been previously financed by Atrium and was presented as a long term loan to an associate. Post the share acquisitions and the assumption of control, the land including its associated finance lease is now presented at
its fair value. Please also refer to note 1.35.

In November 2013, the Group completed a sale of a 5 hectares land plot which was
part of its 40 hectares land plot adjacent to Severniy shopping mall in St Petersburg, Russia, for 5.2 million. The land plot was sold to a major international DIY operator. The transaction resulted in a net gain of 0.5 million.

During the second half of 2012, Atrium finalised two developments projects (Gdynia and Phase II of Atrium Galeria Mosty) and transferred them from
developments and land to standing investments at fair value of 6.8 million (Please also refer to note 1.4).

For information about the fair
value of developments and land, see note 1.36.

The average capitalisation rate used for capitalisation of borrowing costs was 4.0% for the year 2013
(2012: 4.4%).

The total value of land leases was 17.1 million (2012: 15.5 million) as at 31 December 2013.



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|1.6 | Property, plant and equipment
|--- | -----------------------------



|                                    |  |       |       |  |       |  |       | 
|----------------------------------- |  | ----- | ----- |  | ----- |  | ----- | 
|Property, plant and equipment       |  | 2013  |       |  | 2012  | 
|                                    |  | 000 |       |  | 000 | 
|Cars and motor vehicles             |  |       | 88    |  |       |  | 114   | 
|Office equipment                    |  |       | 1,118 |  |       |  | 899   | 
|Other property, plant and equipment |  |       | 2,196 |  |       |  | 2,098 | 
|Total                               |  |       | 3,402 |  |       |  | 3,111 | 



|1.7 | Intangible assets and goodwill
|--- | ------------------------------



|                               |  |       |        |  |       |  |        | 
|------------------------------ |  | ----- | ------ |  | ----- |  | ------ | 
|Intangible assets and goodwill |  | 2013  |        |  | 2012  | 
|                               |  | 000 |        |  | 000 | 
|Intangible assets              |  |       | 7,120  |  |       |  | 5,458  | 
|Goodwill                       |  |       | 7,617  |  |       |  | 11,025 | 
|Total                          |  |       | 14,737 |  |       |  | 16,483 | 

Intangible assets relate mainly to software.



|                                        |  |                  |        |   |          |  |         |  
|--------------------------------------- |  | ---------------- | ------ | - | -------- |  | ------- | -
|                                        |  | Intangibleassets |        |   | Goodwill | 
|                                        |  | 000            |        |   | 000    | 
|Cost                                    |  |                  |        |   |          |  |         |  
|Balance at 1 January 2012               |  |                  | 4,574  |   |          |  | 42,561  |  
|Additions                               |  |                  | 2,699  |   |          |  |        |  
|Disposals                               |  |                  | (300   | ) |          |  |        |  
|Balance at 31 December 2012             |  |                  | 6,973  |   |          |  | 42,561  |  
|Additions                               |  |                  | 2,758  |   |          |  |        |  
|Disposals                               |  |                  | (87    | ) |          |  |        |  
|Foreign exchange differences            |  |                  | (21    | ) |          |  |        |  
|Balance at 31 December 2013             |  |                  | 9,623  |   |          |  | 42,561  |  
|Accumulated depreciation and impairment |  |                  |        |   |          |  |         |  
|Balance at 1 January 2012               |  |                  | (1,238 | ) |          |  | (31,086 | )
|Amortisation                            |  |                  | (546   | ) |          |  |        |  
|Impairment loss                         |  |                  |       |   |          |  | (450    | )
|Disposals                               |  |                  | 268    |   |          |  |        |  
|Balance at 31 December 2012             |  |                  | (1,516 | ) |          |  | (31,536 | )
|Amortisation                            |  |                  | (1,058 | ) |          |  |        |  
|Impairment loss                         |  |                  |       |   |          |  | (3,408  | )
|Disposals                               |  |                  | 48     |   |          |  |        |  
|Foreign exchange differences            |  |                  | 23     |   |          |  |        |  
|Balance at 31 December 2013             |  |                  | (2,503 | ) |          |  | (34,944 | )
|Carrying amount                         |  |                  | 7,120  |   |          |  | 7,617   |  



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Goodwill arose in respect of the following cash generating units:



|                      |  |       |       |  |       |  |        | 
|--------------------- |  | ----- | ----- |  | ----- |  | ------ | 
|Cash generating units |  | 2013  |       |  | 2012  | 
|                      |  | 000 |       |  | 000 | 
|Hungary               |  |       |      |  |       |  | 3,408  | 
|Poland                |  |       | 3,263 |  |       |  | 3,263  | 
|Russia                |  |       | 2,323 |  |       |  | 2,323  | 
|Slovakia              |  |       | 2,031 |  |       |  | 2,031  | 
|Total                 |  |       | 7,617 |  |       |  | 11,025 | 

The Goodwill in Hungary was impaired to reflect its recoverable amount.



|1.8 | Equity-accounted investee
|--- | -------------------------

As at 31 December 2013 the Company owns 63% interest in Mall Gallery 1
Limited (Mall Gallery) and measures its investment in Mall Gallery according to the equity method as the Company has no controlling influence. In 2013 the investment was fully impaired to reflect managements best estimate of its
recoverable amount.



|1.9 | Deferred tax assets
|--- | -------------------



|                                                                    |  |                |       |   |                                                   |  |        |                                                   |  |  |                |  |  |  |        |  
|------------------------------------------------------------------- |  | -------------- | ----- | - | ------------------------------------------------- |  | ------ | ------------------------------------------------- |  |  | -------------- |  |  |  | ------ | -
|Deferred tax assets 2013                                            |  | Openingbalance |       |   | Deferred taxcredit/(charge) tothe incomestatement |  |        | Deferred taxrecognised inothercomprehensiveincome |  |  | Closingbalance | 
|                                                                    |  | 000          |       |   | 000                                             |  |        | 000                                             |  |  | 000          | 
|Deferred tax assets arise from the following temporary differences: |  |                |       |   |                                                   |  |        |                                                   |  |  |                |  |  |  |        |  
|Investment properties                                               |  |                | 2,863 |   |                                                   |  | (5,564 | )                                                 |  |  |               |  |  |  | (2,701 | )
|Other assets                                                        |  |                | (88   | ) |                                                   |  | (96    | )                                                 |  |  |               |  |  |  | (184   | )
|Liabilities and provisions                                          |  |                | 4,055 |   |                                                   |  | 1,432  |                                                   |  |  | 1,147          |  |  |  | 6,634  |  
|Tax losses carried forward                                          |  |                | 2,149 |   |                                                   |  | 2,174  |                                                   |  |  |               |  |  |  | 4,323  |  
|Other                                                               |  |                | (237  | ) |                                                   |  | 1,232  |                                                   |  |  |               |  |  |  | 995    |  
|Total deferred tax assets                                           |  |                | 8,742 |   |                                                   |  | (822   | )                                                 |  |  | 1,147          |  |  |  | 9,067  |  

The amount of 1.1 million recognised in other comprehensive income relates to the deferred tax on foreign exchange
gains of 1.8 million offset by a deferred tax loss on the hedging instrument of 0.6 million.



|                                                                    |  |                |        |   |                                                   |  |        |                |  |  |       |  
|------------------------------------------------------------------- |  | -------------- | ------ | - | ------------------------------------------------- |  | ------ | -------------- |  |  | ----- | -
|Deferred tax assets 2012                                            |  | Openingbalance |        |   | Deferred taxcredit/(charge) tothe incomestatement |  |        | Closingbalance | 
|                                                                    |  | 000          |        |   | 000                                             |  |        | 000          | 
|Deferred tax assets arise from the following temporary differences: |  |                |        |   |                                                   |  |        |                |  |  |       |  
|Investment properties                                               |  |                | (4,269 | ) |                                                   |  | 7,132  |                |  |  | 2,863 |  
|Other assets                                                        |  |                | 257    |   |                                                   |  | (345   | )              |  |  | (88   | )
|Liabilities and provisions                                          |  |                | 5,339  |   |                                                   |  | (1,284 | )              |  |  | 4,055 |  
|Tax losses carried forward                                          |  |                | 387    |   |                                                   |  | 1,762  |                |  |  | 2,149 |  
|Other                                                               |  |                | 616    |   |                                                   |  | (853   | )              |  |  | (237  | )
|Total deferred tax assets                                           |  |                | 2,330  |   |                                                   |  | 6,412  |                |  |  | 8,742 |  



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|1.10 | Loans
|---- | -----



|                                                            |  |       |        |   |       |  |         |  
|----------------------------------------------------------- |  | ----- | ------ | - | ----- |  | ------- | -
|Loans                                                       |  | 2013  |        |   | 2012  | 
|                                                            |  | 000 |        |   | 000 | 
|Loans to associates                                         |  |       |       |   |       |  | 42,519  |  
|Impairment of loans to associates                           |  |       |       |   |       |  | (14,016 | )
|Loans to third parties                                      |  |       | 16,751 |   |       |  | 16,403  |  
|Impairment of loans to third parties                        |  |       | (8,594 | ) |       |  | (8,255  | )
|Total                                                       |  |       | 8,157  |   |       |  | 36,651  |  
|Amount due within 12 months (included under current assets) |  |       | 43     |   |       |  | 59      |  
|Amount due after more than 12 months                        |  |       | 8,114  |   |       |  | 36,592  |  

As at 31 December 2012, the loans to associates with a book value of 42.5 million had a fixed interest rate of
6.7% and were impaired to reflect the fair value of the underlying securities. In June 2013, the Group acquired the remaining 76% of the shares it did not already hold in these associates; please also refer to note 1.35.

An unsecured loan to a third party which has a book value of 8.0 million (2012: 8.0 million) as at 31 December 2013, and a variable
interest of 3 month EURIBOR plus 150 basis points per annum was impaired to reflect the recoverable amount.

The carrying amount of the loans is
approximately equal to their fair value.



|1.11 | Other assets
|---- | ------------



|                |  |       |        |  |       |  |        | 
|--------------- |  | ----- | ------ |  | ----- |  | ------ | 
|Other assets    |  | 2013  |        |  | 2012  | 
|                |  | 000 |        |  | 000 | 
|VAT receivables |  |       | 19,907 |  |       |  | 26,965 | 
|Other           |  |       | 79     |  |       |  | 38     | 
|Total           |  |       | 19,986 |  |       |  | 27,003 | 

Long term VAT receivables arise primarily from the development of investment properties in Russia and Turkey. VAT receivables
will either be netted off against any VAT payables once payables arise or will be repaid by the relevant tax authority.



|1.12 | Receivables from tenants
|---- | ------------------------



|                                                 |  |            |        |  |                                     |  |         |          |  |  |        | 
|------------------------------------------------ |  | ---------- | ------ |  | ----------------------------------- |  | ------- | -------- |  |  | ------ | 
|Receivables from tenants 2013
Receivables aging: |  | Gross000 |        |  | Allowancesfor impairedbalances000 |  |         | Net000 | 
|Due within term                                  |  |            | 7,783  |  |                                     |  | (43     | )        |  |  | 7,740  | 
|Overdue 0-30 days                                |  |            | 5,212  |  |                                     |  | (1,144  | )        |  |  | 4,068  | 
|Overdue 31-90 days                               |  |            | 2,915  |  |                                     |  | (1,432  | )        |  |  | 1,483  | 
|Overdue 91-180 days                              |  |            | 2,342  |  |                                     |  | (2,095  | )        |  |  | 247    | 
|Overdue 181-360 days                             |  |            | 1,022  |  |                                     |  | (931    | )        |  |  | 91     | 
|Overdue 361 days and more                        |  |            | 7,001  |  |                                     |  | (6,857  | )        |  |  | 144    | 
|Total                                            |  |            | 26,275 |  |                                     |  | (12,502 | )        |  |  | 13,773 | 



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|                                                 |  |            |        |  |                                     |  |         |          |  |  |        | 
|------------------------------------------------ |  | ---------- | ------ |  | ----------------------------------- |  | ------- | -------- |  |  | ------ | 
|Receivables from tenants 2012
Receivables aging: |  | Gross000 |        |  | Allowancesfor impairedbalances000 |  |         | Net000 | 
|Due within term*                                 |  |            | 7,496  |  |                                     |  | (183    | )        |  |  | 7,313  | 
|Overdue 0-30 days                                |  |            | 5,738  |  |                                     |  | (685    | )        |  |  | 5,053  | 
|Overdue 31-90 days                               |  |            | 2,709  |  |                                     |  | (1,114  | )        |  |  | 1,595  | 
|Overdue 91-180 days                              |  |            | 1,472  |  |                                     |  | (1,138  | )        |  |  | 334    | 
|Overdue 181-360 days                             |  |            | 1,702  |  |                                     |  | (1,409  | )        |  |  | 293    | 
|Overdue 361 days and more                        |  |            | 6,460  |  |                                     |  | (6,030  | )        |  |  | 430    | 
|Total                                            |  |            | 25,577 |  |                                     |  | (10,559 | )        |  |  | 15,018 | 



|* | 3.0 million of receivables from tenants as at 31 December 2012 have been reclassified to trade and other payables as this resulted in a more relevant presentation of the nature of these balances.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The description of collateral held as security in relation to tenants is provided in note 1.39 under credit risk.

Allowances for bad debts are calculated on the basis of managements knowledge of the tenants, business and the market.

The table below provides a reconciliation of changes in allowances during the year:



|                         |  |       |         |   |       |  |         |  
|------------------------ |  | ----- | ------- | - | ----- |  | ------- | -
|Allowances for bad debts |  | 2013  |         |   | 2012  | 
|                         |  | 000 |         |   | 000 | 
|At 1 January             |  |       | (10,559 | ) |       |  | (12,870 | )
|Release                  |  |       | 1,528   |   |       |  | 5,394   |  
|Addition                 |  |       | (3,471  | ) |       |  | (3,083  | )
|At 31 December           |  |       | (12,502 | ) |       |  | (10,559 | )



|1.13 | Prepayments
|---- | -----------



|                                   |  |       |        |   |       |  |        |  
|---------------------------------- |  | ----- | ------ | - | ----- |  | ------ | -
|Prepayments                        |  | 2013  |        |   | 2012  | 
|                                   |  | 000 |        |   | 000 | 
|Prepaid utilities                  |  |       | 1,150  |   |       |  | 1,328  |  
|Prepayments for land               |  |       | 14,317 |   |       |  | 14,317 |  
|Other                              |  |       | 2,682  |   |       |  | 2,911  |  
|Gross total                        |  |       | 18,149 |   |       |  | 18,556 |  
|Impairment of prepayments for land |  |       | (6,052 | ) |       |  | (6,052 | )
|Total                              |  |       | 12,097 |   |       |  | 12,504 |  



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|1.14 | Other receivables
|---- | -----------------



|                                                          |  |       |        |  |       |  |       | 
|--------------------------------------------------------- |  | ----- | ------ |  | ----- |  | ----- | 
|Other receivables                                         |  | 2013  |        |  | 2012  | 
|                                                          |  | 000 |        |  | 000 | 
|Receivables for sale of standing investment and inventory |  |       | 3,181  |  |       |  |      | 
|Other financial receivables                               |  |       | 5,115  |  |       |  | 2,643 | 
|Total financial receivables                               |  |       | 8,296  |  |       |  | 2,643 | 
|Other taxes and fees receivable                           |  |       | 130    |  |       |  | 132   | 
|VAT receivable                                            |  |       | 6,158  |  |       |  | 5,883 | 
|Total other non-financial receivables                     |  |       | 6,288  |  |       |  | 6,015 | 
|Total                                                     |  |       | 14,584 |  |       |  | 8,658 | 



|1.15 | Cash and cash equivalents
|---- | -------------------------

At the year end, the Group held cash and cash equivalents to a total amount
of 305.6 million (2012: 207.8 million). The Group held cash of 6.3 million (2012: 18.7 million) as backing for guarantees and/or other restricted cash held by various banks on the Groups behalf.

Additional information to the Consolidated cash flow statement:

Acquisition of subsidiaries during 2013



|                            |  |       |        |  
|--------------------------- |  | ----- | ------ | -
|Acquisition of subsidiaries |  | 2013  |       
|                            |  | 000 |       
|Development and land        |  |       | 28,863 |  
|Prepayments                 |  |       | 6      |  
|Other receivables           |  |       | 10     |  
|Long term lease liabilities |  |       | (335   | )
|Accrued expenditure         |  |       | (19    | )
|Other payables              |  |       | (32    | )
|Cash of subsidiary          |  |       | 51     |  

For further information about these subsidiaries see note 1.35.

Acquisition of subsidiaries net of cash acquired includes also 0.3 million of cash paid for the acquisition of the working capital of Galeria
Dominikańska.

Deconsolidated subsidiary as at 31 December 2012:



|                              |  |       |       |  
|----------------------------- |  | ----- | ----- | -
|Deconsolidating of subsidiary |  | 2012  |      
|                              |  | 000 |      
|Property, plant and equipment |  |       | 231   |  
|Other assets                  |  |       | 668   |  
|Other receivables             |  |       | 1,274 |  
|Trade and other payables      |  |       | (590  | )
|Cash of subsidiary            |  |       | 417   |  

For further information about the subsidiary see note 1.8.



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|1.16 | Stated capital
|---- | --------------

As at 31 December 2013, Atriums authorised and issued ordinary shares were
unlimited with no par value.

As at 31 December 2013, the total number of ordinary shares issued was 374,899,934 (2012: 373,388,756 shares), of which
374,888,858 ordinary shares were registered in the name of Nederlands Centraal Instituut voor Giraal Effectenverkeer B.V. (trading as Euroclear), 11,075 ordinary shares were registered in the name of an individual shareholder and one
ordinary share in the name of Aztec Financial Services (Jersey) Limited.

Changes in the stated capital account during the year 2013 were as follows:



| |  | Issue of shares to satisfy the exercise of options of 2.1 million (2012: 0.7 million);
|- |  | ----------------------------------------------------------------------------------------



| |  | Issue of shares in lieu of a directors and a CEOs remuneration 0.2 million (2012: 0.3 million);
|- |  | ---------------------------------------------------------------------------------------------------



| |  | Dividend payments of 78.6 million (2012: 63.4 million).
|- |  | ---------------------------------------------------------

For the year 2013,
the Board of Directors approved a dividend of at least 0.20 per share, payable in quarterly instalments of at least 0.05 per share at the end of each calendar quarter.

In November 2013, the Board of Directors approved a dividend distribution for the fourth quarter of 2013 amounting to 0.06 per
share. Additionally, for 2014, the dividend will increase to at least 0.24 per share and will be paid in quarterly instalments of 0.06 per share at the end of each calendar quarter, commencing at the end of the first quarter of
2014 (subject to any legal and regulatory requirements and restrictions of commercial viability).

Following the approval of the shareholders on
18 May 2010 to authorise the directors to issue ordinary shares in lieu of directors remuneration by agreement with the relevant directors, the Board adopted a Restricted Share Plan on 16 May 2011 (the Plan), which
confers on eligible directors of Atrium the right to opt (on a semi-annual basis) to receive ordinary shares in Atrium in lieu of their annual directors fees. The Plan further gives directors the ability to opt (on a semi-annual basis) to
subscribe for ordinary shares, up to the value of their annual directors fees. Directors will be given the opportunity to opt as referred to above in semi-annual option periods, being the four week free-dealing periods following the
announcement of each of the Companys half year and full year results. The strike price for the ordinary shares to be issued pursuant to any option notice (being the average market price over the 30 preceding dealing days) will be notified to
directors at the start of each option period. Atrium retains the discretion (subject to the approval of the Board) to refuse to satisfy an option notice in certain circumstances.



|1.17 | Other reserves
|---- | --------------

Other reserves of 5.2 million (2012: 9.6 million) comprise equity
settled share based payment transactions and hedging reserves.



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Share based payments

Details of the employee share option plans of the company



| |  | In 2009, Atrium established and its shareholders approved an Employee Share Option Plan (ESOP 2009), under which the Board of Directors can grant share options to key employees. The total number of options
which the Board can grant under the ESOP 2009 is 8,500,000. Each option shall be exercised by the issue of a new ordinary share in Atrium to the option holder. The exercise price shall be determined by the Board, and shall be not less than
Atriums share price on the dealing day immediately preceding the date of grant, or averaged over the 30 dealing days immediately preceding the date of grant. Options will be generally exercisable in three equal and annual tranches from the
date of grant and lapse on the fifth anniversary of the date of grant. In the event that the Company distributes a cash dividend, the exercise price of the options shall be decreased by the amount of the dividend per share. Unexercised options carry
no voting rights. No more grants have been approved under the ESOP 2009 as from 23 May 2013.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | On 23 May 2013, Atrium established and its shareholders approved a new Employee Share Option Plan (ESOP 2013), under which the Board of Directors or Compensation and Nominating Committee can grant share
options to key employees, executive directors or consultants. The initial number of securities that can be issued on the exercise of options under the ESOP 2013 is limited to options representing 5,000,000 shares. Options must be granted within 10
years of ESOP 2013s adoption. The exercise price on grant of options shall be the average market value over the 30 dealing days immediately preceding the date of grant unless otherwise determined by the Board of Directors. Options will
generally be exercisable in four equal and annual tranches from the date of grant and lapse on the tenth anniversary of the date of grant. Unexercised options carry neither rights to dividends nor voting rights.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table shows the movement in ESOP 2009 during the year:



|                  |  |                                 |      |  |                        |  |            |  
|----------------- |  | ------------------------------- | ---- |  | ---------------------- |  | ---------- | -
|2013              |  | Weighted averageexercise price |      |  | Number of shareoptions | 
|As at 1 January   |  |                                 | 2.98 |  |                        |  | 5,130,959  |  
|Granted           |  |                                 | 4.32 |  |                        |  | 210,000    |  
|Exercised (1)     |  |                                 | 1.58 |  |                        |  | (1,941,667 | )
|Forfeited         |  |                                 | 1.13 |  |                        |  | (259,998   | )
|As at 31 December |  |                                 | 3.65 |  |                        |  | 3,139,294  |  



|(1) | In respect of options exercised in 2013, the weighted average of the share price was 4.55 as at date of exercising the options.
|--- | --------------------------------------------------------------------------------------------------------------------------------

The following table shows the movement in ESOP 2013 during the year:



|                  |  |                                 |      |  |                        |  |           | 
|----------------- |  | ------------------------------- | ---- |  | ---------------------- |  | --------- | 
|2013              |  | Weighted averageexercise price |      |  | Number of shareoptions | 
|As at 1 January   |  |                                 |     |  |                        |  |          | 
|Granted           |  |                                 | 4.36 |  |                        |  | 3,629,838 | 
|As at 31 December |  |                                 | 4.36 |  |                        |  | 3,629,838 | 



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The following table shows the movement in ESOP 2009 during 2012:



|                  |  |                                                 |      |  |                        |  |           |  
|----------------- |  | ----------------------------------------------- | ---- |  | ---------------------- |  | --------- | -
|2012              |  | Weighted averageexercise price ofshare options |      |  | Number of shareoptions | 
|As at 1 January   |  |                                                 | 2.99 |  |                        |  | 5,372,171 |  
|Granted           |  |                                                 | 3.63 |  |                        |  | 227,119   |  
|Exercised (1)     |  |                                                 | 1.21 |  |                        |  | (408,333  | )
|Forfeited         |  |                                                 | 0.97 |  |                        |  | (59,998   | )
|As at 31 December |  |                                                 | 2.98 |  |                        |  | 5,130,959 |  



|(1) | In respect of options exercised in 2012, the weighted average of the share price was 4.05 as at date of exercising the options.
|--- | --------------------------------------------------------------------------------------------------------------------------------

The following table shows the vesting years and weighted average exercise prices of the outstanding options under ESOP 2009 as of 31 December 2013:



|             |  |                                                 |      |  |                        |  |           | 
|------------ |  | ----------------------------------------------- | ---- |  | ---------------------- |  | --------- | 
|Vesting year |  | Weighted averageexercise price ofshare options |      |  | Number of shareoptions | 
|2011         |  |                                                 | 3.55 |  |                        |  | 376,841   | 
|2012         |  |                                                 | 3.77 |  |                        |  | 926,833   | 
|2013         |  |                                                 | 3.71 |  |                        |  | 1,056,834 | 
|2014         |  |                                                 | 3.34 |  |                        |  | 378,333   | 
|2015         |  |                                                 | 3.47 |  |                        |  | 330,453   | 
|2016         |  |                                                 | 4.32 |  |                        |  | 70,000    | 
|Total        |  |                                                 | 3.65 |  |                        |  | 3,139,294 | 

The following table shows the vesting years and weighted average exercise prices of the outstanding options under ESOP 2009
as of 31 December 2013:



|             |  |                                                 |      |  |                        |  |           | 
|------------ |  | ----------------------------------------------- | ---- |  | ---------------------- |  | --------- | 
|Vesting year |  | Weighted averageexercise price ofshare options |      |  | Number of shareoptions | 
|2014         |  |                                                 | 4.36 |  |                        |  | 907,463   | 
|2015         |  |                                                 | 4.36 |  |                        |  | 907,460   | 
|2016         |  |                                                 | 4.36 |  |                        |  | 907,459   | 
|2017         |  |                                                 | 4.36 |  |                        |  | 907,456   | 
|Total        |  |                                                 | 4.36 |  |                        |  | 3,629,838 | 

The fair value of options granted during the year:

The fair value of options granted has been estimated using Black-Scholes options valuation model. The weighted average fair values of the options granted in
2013 under the ESOP 2009 and ESOP 2013 were 0.55 and 0.42 per option respectively.



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Significant inputs into the model:



|                                          |  |           |      |   |           |  |      |  
|----------------------------------------- |  | --------- | ---- | - | --------- |  | ---- | -
|                                          |  | ESOP 2009 |      |   | ESOP 2013 | 
|Weighted average share price at grant () |  |           | 4.26 |   |           |  | 4.35 |  
|Weighted average exercise price ()       |  |           | 4.46 |   |           |  | 4.36 |  
|Expected weighted average volatility      |  |           | 24.2 | % |           |  | 21.1 | %
|Expected life of the option (in years)    |  |           | 1.9  |   |           |  | 6.17 |  
|Risk free interest rate                   |  |           | 0.91 | % |           |  | 1.25 | %
|Expected dividend rate                    |  |           |     |   |           |  | 4.78 | %

The expected volatility is based on the historical share price volatility over the past year. The expected life used in the
model is based on managements best estimate regarding the duration of the holding period of the options and the Companys past experience regarding employee turnover.

Hedging reserves

The hedging reserve comprises the
effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred. See also note 1.19.



|1.18 | Borrowings
|---- | ----------



|           |  |       |         |  |       |  |         | 
|---------- |  | ----- | ------- |  | ----- |  | ------- | 
|Borrowings |  | 2013  |         |  | 2012  | 
|           |  | 000 |         |  | 000 | 
|Bonds      |  |       | 499,066 |  |       |  | 193,958 | 
|Bank loans |  |       | 304,489 |  |       |  | 343,103 | 
|Total      |  |       | 803,555 |  |       |  | 537,061 | 

The borrowings are repayable as follows:



|                                 |  |       |         |  |       |  |         | 
|-------------------------------- |  | ----- | ------- |  | ----- |  | ------- | 
|Borrowings total                 |  | 2013  |         |  | 2012  | 
|                                 |  | 000 |         |  | 000 | 
|Due within one year              |  |       | 5,511   |  |       |  | 74,986  | 
|In second year                   |  |       | 75,544  |  |       |  | 6,557   | 
|In third to fifth year inclusive |  |       | 270,290 |  |       |  | 347,089 | 
|After five years                 |  |       | 452,210 |  |       |  | 108,429 | 
|Total                            |  |       | 803,555 |  |       |  | 537,061 | 

Bonds

In April 2013,
Atrium issued a 350 million unsecured seven year Eurobond (2013 Bonds), carrying a 4.0% coupon. The bond was rated BBB- by both S&P and Fitch, in line with Atriums own corporate rating. The Eurobond will mature on
20 April 2020 and the issue price was 99.57%.

The 2013 bonds issued are subject to the following financial covenants: the solvency ratio will not
exceed 60%, the secured solvency ratio will not exceed 40%, the consolidated coverage ratio shall not be less than 1.5 and the ratio of unsecured consolidated assets to unsecured consolidated debt shall not be less than 150%; all of which were met
throughout the year.

In July 2013, Atrium repaid on maturity 39.2 million bonds issued in 2003.

In 2012, Atrium completed a 50.6 million 2003 bond buy back which resulted in a net loss of 1.5 million.



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|                                             |  |          |     |  |              |  |     |                 |  |  |          |  |  |                 |         |  |                 |         |         |  |  |         |  |  |        | 
|-------------------------------------------- |  | -------- | --- |  | ------------ |  | --- | --------------- |  |  | -------- |  |  | --------------- | ------- |  | --------------- | ------- | ------- |  |  | ------- |  |  | ------ | 
|2013
Bond/Issue year                         |  | Currency |     |  | Interestrate |  |     | Averagematurity |  |  | Maturity |  |  | Book value000 |         |  | Fair value000 |        
|Atrium European Real Estate Limited 2005 (2) |  |          | EUR |  |              |  | 4.4 | %**             |  |  | 1.6      |  |  |                 | 2015    |  |                 |         | 40,329  |  |  | 42,194  | 
|Atrium European Real Estate Limited 2005 (3) |  |          | EUR |  |              |  | 4.0 | %*              |  |  | 3.6      |  |  |                 | 2017    |  |                 |         | 83,280  |  |  | 87,570  | 
|Atrium European Real Estate Limited 2005 (4) |  |          | CZK |  |              |  | 1.8 | %*              |  |  | 1.6      |  |  |                 | 2015    |  |                 |         | 29,264  |  |  | 29,125  | 
|Atrium European Real Estate Limited 2013 (5) |  |          | EUR |  |              |  | 4.0 | %               |  |  | 6.4      |  |  |                 | 2020    |  |                 |         | 346,193 |  |  | 347,194 | 
|Total/Average                                |  |          |     |  |              |  | 3.9 | %               |  |  | 5.3      |  |  |                 | 499,066 |  |                 | 506,083 |        
|                                             |  |          |     |  |              | 
|2012
Bond/Issue year                         |  | Currency |     |  | Interestrate |  |     | Averagematurity |  |  | Maturity |  |  | Book value000 |         |  | Fair value000 |        
|Atrium European Real Estate Limited 2003 (1) |  |          | EUR |  |              |  | 6.0 | %               |  |  | 0.6      |  |  |                 | 2013    |  |                 |         | 11,975  |  |  |         |  |  | 12,277 | 
|Atrium European Real Estate Limited 2003 (1) |  |          | EUR |  |              |  | 5.5 | %               |  |  | 0.6      |  |  |                 | 2013    |  |                 |         | 27,181  |  |  |         |  |  | 27,883 | 
|Atrium European Real Estate Limited 2005 (2) |  |          | EUR |  |              |  | 4.4 | %               |  |  | 2.6      |  |  |                 | 2015    |  |                 |         | 40,003  |  |  |         |  |  | 42,825 | 
|Atrium European Real Estate Limited 2005 (3) |  |          | EUR |  |              |  | 4.0 | %               |  |  | 4.7      |  |  |                 | 2017    |  |                 |         | 82,990  |  |  |         |  |  | 87,855 | 
|Atrium European Real Estate Limited 2005 (4) |  |          | CZK |  |              |  | 2.4 | %               |  |  | 2.6      |  |  |                 | 2015    |  |                 |         | 31,809  |  |  |         |  |  | 31,665 | 
|Total/Average                                |  |          |     |  |              |  | 4.1 | %               |  |  | 3.5      |  |  |                 |         |  |                 |         | 193,958 |  |  | 202,505 | 



|(1) | EUR bonds issued in 2003 and matured in 2013, interest rate of 6% for tranche A and SWAP 10Y EURO (30/360) for tranche B payable annually in July, minimum of 5.5% p.a. These bonds were fully repaid together with
the final payment of interest in July 2013.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | EUR bonds issued in 2005 and due in 2015, interest rate of 4.35% payable annually in August.
|--- | --------------------------------------------------------------------------------------------

|(3) | EUR bonds issued in 2005 and due in 2017, interest rate of SWAP 10Y EURO (30/360), minimum 4.0% p.a. payable annually in August.
|--- | --------------------------------------------------------------------------------------------------------------------------------

|(4) | CZK bonds issued in 2005 and due in 2015, interest rate of 6M Pribor + 120 basis points payable semi-annually in February and in August.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------

|(5) | EUR bonds issued in 2013 and due in 2020, interest rate of 4.0% payable annually in April.
|--- | ------------------------------------------------------------------------------------------



|           |  |                                                |         |  |                                                 |  |         | 
|---------- |  | ---------------------------------------------- | ------- |  | ----------------------------------------------- |  | ------- | 
|Collateral |  | Fair value of pledgedinvestment properties2013 |         |  | Fair value of pledged
investment properties2012 | 
|           |  | 000                                          |         |  | 000                                           | 
|Bond 2003  |  |                                                |        |  |                                                 |  | 153,460 | 
|Bond 2005  |  |                                                | 440,993 |  |                                                 |  | 447,223 | 
|Total      |  |                                                | 440,993 |  |                                                 |  | 600,683 | 

Loans

In September 2013,
the Group has completed early repayments of two loans totalling 3.1 million and in November 2013 the Group repaid on maturity a 30 million loan.

In December 2012, an Atrium subsidiary entered into a new loan agreement of 50 million with Berlin-Hannoversche Hypothekenbank AG. During the year
ended 31 December 2012, Atrium also completed early repayments of four loans totalling 16.4 million and settled a third party loan of 9.2 million with Bulwer International Inc.

Most of the loans are subject to normal course of business Loan To Value (LTV) and Debt Service Coverage Ratio (DSCR) covenant tests,
all of which were met throughout the year.



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|                                                              |  |          |     |  |               |  |              |                 |  |  |          |  |  |                 |      |  |                 |  |         |  |  |  |         | 
|------------------------------------------------------------- |  | -------- | --- |  | ------------- |  | ------------ | --------------- |  |  | -------- |  |  | --------------- | ---- |  | --------------- |  | ------- |  |  |  | ------- | 
|2013
Lender                                                   |  | Currency |     |  | Interest rate |  |              | Averagematurity |  |  | Maturity |  |  | Book value000 |      |  | Fair value000 | 
|Berlin-Hannoversche Hypothekenbank AG                         |  |          | EUR |  |               |  | 4.7          | %*              |  |  | 2.4      |  |  |                 | 2016 |  |                 |  | 101,649 |  |  |  | 101,179 | 
|Berlin-Hannoversche Hypothekenbank AG                         |  |          | EUR |  |               |  | 3.1          | %               |  |  | 4.0      |  |  |                 | 2017 |  |                 |  | 48,579  |  |  |  | 49,687  | 
|Berlin-Hannoversche Hypothekenbank AG                         |  |          | EUR |  |               |  | 4.1          | %*              |  |  | 7.9      |  |  |                 | 2021 |  |                 |  | 112,517 |  |  |  | 112,166 | 
|UniCredit Bank Slovakia, a.s.                                 |  |          | EUR |  |               |  | Euribor+2.5  | %               |  |  | 3.3      |  |  |                 | 2017 |  |                 |  | 28,543  |  |  |  | 28,869  | 
|UniCredit Bank Slovakia, a.s.                                 |  |          | EUR |  |               |  | Euribor+2.5  | %               |  |  | 3.3      |  |  |                 | 2017 |  |                 |  | 13,201  |  |  |  | 13,352  | 
|Total/Average                                                 |  |          |     |  |               |  | 4.0          | %               |  |  | 4.8      |  |  |                 |      |  |                 |  | 304,489 |  |  |  | 305,253 | 
|                                                              |  |          |     |  |               | 
|2012
Lender                                                   |  | Currency |     |  | Interest rate |  |              | Averagematurity |  |  | Maturity |  |  | Book value000 |      |  | Fair value000 | 
|Berlin-Hannoversche Hypothekenbank AG                         |  |          | EUR |  |               |  | 4.7          | %*              |  |  | 3.4      |  |  |                 | 2016 |  |                 |  | 102,831 |  |  |  | 102,421 | 
|Rel Ibis Sp. z.o.o.                                           |  |          | EUR |  |               |  | 4.0          | %               |  |  | 0.9      |  |  |                 | 2013 |  |                 |  | 29,938  |  |  |  | 30,404  | 
|Berlin-Hannoversche Hypothekenbank AG                         |  |          | EUR |  |               |  | 3.1          | %               |  |  | 5.0      |  |  |                 | 2017 |  |                 |  | 48,793  |  |  |  | 50,792  | 
|Berlin-Hannoversche Hypothekenbank AG
and Erste Group Bank AG |  |          | EUR |  |               |  | 4.1          | %*              |  |  | 8.9      |  |  |                 | 2021 |  |                 |  | 113,105 |  |  |  | 112,700 | 
|Erste bank AG                                                 |  |          | EUR |  |               |  | Euribor+2.75 | %               |  |  | 2.8      |  |  |                 | 2015 |  |                 |  | 2,360   |  |  |  | 2,394   | 
|UniCredit Bank Slovakia, a.s.                                 |  |          | EUR |  |               |  | Euribor+2.5  | %               |  |  | 4.3      |  |  |                 | 2017 |  |                 |  | 30,484  |  |  |  | 30,921  | 
|UniCredit Bank Slovakia, a.s.                                 |  |          | EUR |  |               |  | Euribor+2.5  | %               |  |  | 4.3      |  |  |                 | 2017 |  |                 |  | 14,092  |  |  |  | 14,294  | 
|Ceskoslovenska obchodna banka a.s.                            |  |          | EUR |  |               |  | Euribor+1.35 | %               |  |  | 8.9      |  |  |                 | 2021 |  |                 |  | 1,500   |  |  |  | 1,452   | 
|Total/Average                                                 |  |          |     |  |               |  | 3.9          | %               |  |  | 5.3      |  |  |                 |      |  |                 |  | 343,103 |  |  |  | 345,378 | 



|* | Hedged interest rates.
|- | ----------------------



|                                                      |  |                                                 |         |  |                                                |  |         | 
|----------------------------------------------------- |  | ----------------------------------------------- | ------- |  | ---------------------------------------------- |  | ------- | 
|Collateral                                            |  | Fair value of pledged
investment properties2013 |         |  | Fair value of pledgedinvestment properties2012 | 
|                                                      |  | 000                                           |         |  | 000                                          | 
|Berlin-Hannoversche Hypothekenbank AG                 |  |                                                 | 574,072 |  |                                                |  | 549,762 | 
|Ceska sporitelna a.s. (mortgaged under finance lease) |  |                                                 | 277     |  |                                                |  | 302     | 
|Ceskoslovenska obchodna banka a.s.                    |  |                                                 |        |  |                                                |  | 9,110   | 
|Erste Bank AG                                         |  |                                                 |        |  |                                                |  | 15,069  | 
|Rel Ibis Sp. z o.o.                                   |  |                                                 | 56,720  |  |                                                |  | 55,610  | 
|UniCredit Bank Slovakia, a.s.                         |  |                                                 | 137,730 |  |                                                |  | 136,880 | 
|Total                                                 |  |                                                 | 768,799 |  |                                                |  | 766,733 | 

For information about the fair value of loans and bonds, see note 1.36.



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|1.19 | Derivatives
|---- | -----------

The Group entered into two interest rate swap contracts (IRSs) during 2011.
These swaps exchange floating interest rates to fixed interest rates. The swaps are cash flow hedges designed to reduce the Groups cash flow exposure to variable interest rates on certain borrowings.

The IRSs are in a liability position as at 31 December 2013, and have a fair value of approximately 11.8 million (2012: 17.8 million).

The interest rate swaps have quarterly coupons. The floating rate on the IRSs is the 3 month Euribor and the fixed rates are 2.17% and 2.89%.

The payments and receipts for the IRSs occur simultaneously with the interest payments on the loans. The Group settles the difference between the fixed and
floating interest amounts for the IRSs on a net basis with the respective counter party. The two swaps mature in 2016 and 2018.

For information about the
fair value of the derivatives, see note 1.36.



|1.20 | Deferred tax liabilities
|---- | ------------------------



|                                                                         |  |                |          |   |                                                    |  |         |                                                   |  |  |                |   |  |  |          |  
|------------------------------------------------------------------------ |  | -------------- | -------- | - | -------------------------------------------------- |  | ------- | ------------------------------------------------- |  |  | -------------- | - |  |  | -------- | -
|Deferred tax liabilities 2013                                            |  | Openingbalance |          |   | Deferred tax
credit/(charge)to the incomestatement |  |         | Deferred taxrecognised inothercomprehensiveincome |  |  | Closingbalance |  
|                                                                         |  | 000          |          |   | 000                                              |  |         | 000                                             |  |  | 000          |  
|Deferred tax liabilities arise from the following temporary differences: |  |                |          |   |                                                    |  |         |                                                   |  |  |                |   |  |  |          |  
|Investment properties                                                    |  |                | (134,721 | ) |                                                    |  | (20,332 | )                                                 |  |  | (168           | ) |  |  | (155,221 | )
|Other assets                                                             |  |                | (70      | ) |                                                    |  | 813     |                                                   |  |  |               |   |  |  | 743      |  
|Liabilities and provisions                                               |  |                | 12,445   |   |                                                    |  | (4,376  | )                                                 |  |  | (542           | ) |  |  | 7,527    |  
|Tax losses carried forward                                               |  |                | 21,642   |   |                                                    |  | 12,019  |                                                   |  |  |               |   |  |  | 33,661   |  
|Other                                                                    |  |                | 1,929    |   |                                                    |  | (201    | )                                                 |  |  |               |   |  |  | 1,728    |  
|Total deferred tax liabilities                                           |  |                | (98,775  | ) |                                                    |  | (12,077 | )                                                 |  |  | (710           | ) |  |  | (111,562 | )

The amount of 0.7 million recognised in other comprehensive income relates to the deferred tax charge on the
hedging instrument of 0.5 million and the deferred tax charge on foreign exchange differences which relate to the investment properties of 0.2 million.



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|                                                                         |  |                |          |   |                                                    |  |         |                                                   |  |  |                |  |  |  |          |  
|------------------------------------------------------------------------ |  | -------------- | -------- | - | -------------------------------------------------- |  | ------- | ------------------------------------------------- |  |  | -------------- |  |  |  | -------- | -
|Deferred tax liabilities 2012                                            |  | Openingbalance |          |   | Deferred taxcredit/ (charge)to the incomestatement |  |         | Deferred taxrecognised inothercomprehensiveincome |  |  | Closingbalance | 
|                                                                         |  | 000          |          |   | 000                                              |  |         | 000                                             |  |  | 000          | 
|Deferred tax liabilities arise from the following temporary differences: |  |                |          |   |                                                    |  |         |                                                   |  |  |                |  |  |  |          |  
|Investment properties                                                    |  |                | (109,064 | ) |                                                    |  | (25,775 | )                                                 |  |  | 118            |  |  |  | (134,721 | )
|Other assets                                                             |  |                | 391      |   |                                                    |  | (461    | )                                                 |  |  |               |  |  |  | (70      | )
|Liabilities and provisions                                               |  |                | 11,749   |   |                                                    |  | (557    | )                                                 |  |  | 1,253          |  |  |  | 12,445   |  
|Tax losses carried forward                                               |  |                | 18,717   |   |                                                    |  | 2,925   |                                                   |  |  |               |  |  |  | 21,642   |  
|Other                                                                    |  |                | 1,449    |   |                                                    |  | 480     |                                                   |  |  |               |  |  |  | 1,929    |  
|Total deferred tax liabilities                                           |  |                | (76,758  | ) |                                                    |  | (23,388 | )                                                 |  |  | 1,371          |  |  |  | (98,775  | )

The amounts recognised in other comprehensive income relate to the deferred tax credit on the hedging instrument of
1.3 million and the deferred tax credit on foreign exchange differences which relate to the investment properties of 0.1 million.



|1.21 | Liabilities from financial leases
|---- | ---------------------------------

The liabilities from financial leases as at 31 December 2013
consist of liabilities related to long term land leases in Poland, the Czech Republic, Slovakia, Russia, and Latvia. Lease payments are due as follows:



|                                     |  |                      |        |  |                               |  |         |                      |  |  |                                |  |  |  |         | 
|------------------------------------ |  | -------------------- | ------ |  | ----------------------------- |  | ------- | -------------------- |  |  | ------------------------------ |  |  |  | ------- | 
|Liabilities from financial leases    |  | 2013Net presentvalue |        |  | 2013Undiscountedleasepayments |  |         | 2012Net presentvalue |  |  | 2012Undiscounted leasepayments | 
|                                     |  | 000                |        |  | 000                         |  |         | 000                |  |  | 000                          | 
|Due within one year                  |  |                      | 7,802  |  |                               |  | 8,237   |                      |  |  | 5,998                          |  |  |  | 6,767   | 
|Due within two to five years         |  |                      | 17,256 |  |                               |  | 24,494  |                      |  |  | 18,830                         |  |  |  | 26,203  | 
|Due after five years                 |  |                      | 28,784 |  |                               |  | 268,573 |                      |  |  | 28,490                         |  |  |  | 244,138 | 
|Total                                |  |                      | 53,842 |  |                               |  | 301,304 |                      |  |  | 53,318                         |  |  |  | 277,108 | 
|Amount due within 12 months          |  |                      | 7,802  |  |                               |  | 8,237   |                      |  |  | 5,998                          |  |  |  | 6,767   | 
|Amount due after more than 12 months |  |                      | 46,040 |  |                               |  | 293,067 |                      |  |  | 47,320                         |  |  |  | 270,341 | 

The lease obligations are mainly denominated in the local currencies of the respective countries. The Group has two material
lease arrangements; Atrium Promenada, in Poland, with a net present value (NPV) of 14.5 million (2012: 14.7 million) and Kazan Park House, in Russia, with a NPV of 11.5 million (2012: 10.7 million).
Three of the properties in the Czech Republic have been financed on the basis of finance lease contracts (2012: 4) with a fair value of 5.8 million (2012: 9.4 million).



|1.22 | Other long term liabilities
|---- | ---------------------------

Other long term liabilities of 21.5 million (2012: 19.7
million) principally comprise long term deposits from tenants amounting to 21.4 million (2012: 18.9 million), and long term retentions from construction companies.



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|1.23 | Trade and other payables
|---- | ------------------------



|                                                 |  |       |        |  |       |  |        | 
|------------------------------------------------ |  | ----- | ------ |  | ----- |  | ------ | 
|Trade and other payables                         |  | 2013  |        |  | 2012  | 
|                                                 |  | 000 |        |  | 000 | 
|Payables for utilities                           |  |       | 1,885  |  |       |  | 2,251  | 
|Payables for consultancy and audit services      |  |       | 292    |  |       |  | 788    | 
|Payables for repairs and maintenance             |  |       | 1,098  |  |       |  | 907    | 
|Payables connected with development/construction |  |       | 3,696  |  |       |  | 3,201  | 
|Short term liabilities from leasing              |  |       | 7,802  |  |       |  | 5,998  | 
|Short term deposits from tenants*                |  |       | 2,539  |  |       |  | 2,414  | 
|Payables for other services                      |  |       | 1,037  |  |       |  | 1,383  | 
|Payable related to acquisitions                  |  |       |       |  |       |  | 389    | 
|Other                                            |  |       | 2,181  |  |       |  | 332    | 
|Total other financial payables                   |  |       | 20,530 |  |       |  | 17,663 | 
|VAT payables                                     |  |       | 3,133  |  |       |  | 2,507  | 
|Other taxes and fees payables                    |  |       | 2,273  |  |       |  | 2,905  | 
|Deferred revenue                                 |  |       | 5,922  |  |       |  | 5,678  | 
|Other advance payments from tenants              |  |       | 5,281  |  |       |  | 6,606  | 
|Total other non-financial payables               |  |       | 16,609 |  |       |  | 17,696 | 
|Total                                            |  |       | 37,139 |  |       |  | 35,359 | 



|* | 3.0 million of receivables from tenants as at 31 December 2012 have been reclassified to trade and other payables as this resulted in a more relevant presentation of the nature of these balances.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|1.24 | Accrued expenditure
|---- | -------------------



|                                            |  |       |        |  |       |  |        | 
|------------------------------------------- |  | ----- | ------ |  | ----- |  | ------ | 
|Accrued expenditure                         |  | 2013  |        |  | 2012  | 
|                                            |  | 000 |        |  | 000 | 
|Accruals for utilities                      |  |       | 1,870  |  |       |  | 1,272  | 
|Accruals for consultancy and audit services |  |       | 2,423  |  |       |  | 2,869  | 
|Accruals for construction services          |  |       | 12,542 |  |       |  | 6,292  | 
|Accruals for interest                       |  |       | 12,166 |  |       |  | 3,673  | 
|Accruals for employee compensation          |  |       | 3,780  |  |       |  | 3,434  | 
|Accruals for taxes                          |  |       | 4,200  |  |       |  | 2,981  | 
|Other                                       |  |       | 5,310  |  |       |  | 5,610  | 
|Total                                       |  |       | 42,291 |  |       |  | 26,131 | 



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|1.25 | Gross rental income
|---- | -------------------

Gross rental income (GRI) includes rental income from the lease of
investment properties, rent from advertising areas, communication equipment and other sources.

GRI by country is as follows:



|               |  |       |         |  |                |  |      |       |  |  |                |  |  |  |       |  
|-------------- |  | ----- | ------- |  | -------------- |  | ---- | ----- |  |  | -------------- |  |  |  | ----- | -
|Country        |  | 2013  |         |  | 2013           |  |      | 2012  |  |  | 2012           | 
|               |  | 000 |         |  | % of total GRI |  |      | 000 |  |  | % of total GRI | 
|Poland         |  |       | 78,858  |  |                |  | 38.8 | %     |  |  | 73,851         |  |  |  | 38.2  | %
|Czech Republic |  |       | 37,641  |  |                |  | 18.5 | %     |  |  | 38,629         |  |  |  | 20.0  | %
|Slovakia       |  |       | 11,258  |  |                |  | 5.5  | %     |  |  | 11,248         |  |  |  | 5.8   | %
|Russia         |  |       | 59,297  |  |                |  | 29.1 | %     |  |  | 52,940         |  |  |  | 27.4  | %
|Hungary        |  |       | 7,752   |  |                |  | 3.8  | %     |  |  | 8,567          |  |  |  | 4.4   | %
|Romania        |  |       | 7,248   |  |                |  | 3.6  | %     |  |  | 7,172          |  |  |  | 3.7   | %
|Latvia         |  |       | 1,401   |  |                |  | 0.7  | %     |  |  | 1,068          |  |  |  | 0.5   | %
|Total          |  |       | 203,455 |  |                |  | 100  | %     |  |  | 193,475        |  |  |  | 100.0 | %



|1.26 | Service charge income
|---- | ---------------------

Service charge income of 77.0 million (2012: 73.8 million)
represents income from services reinvoiced to tenants and results mainly from reinvoiced utilities, marketing, repairs and maintenance and is recorded on a gross basis. Expenses to be reinvoiced to tenants are presented under net property expenses
together with other operating costs that are not reinvoiced to tenants.



|1.27 | Net property expenses
|---- | ---------------------



|                                                               |  |       |         |   |       |  |         |  
|-------------------------------------------------------------- |  | ----- | ------- | - | ----- |  | ------- | -
|Net property expenses                                          |  | 2013  |         |   | 2012  | 
|                                                               |  | 000 |         |   | 000 | 
|Utilities                                                      |  |       | (30,313 | ) |       |  | (29,559 | )
|Security, cleaning & other facility related costs              |  |       | (11,350 | ) |       |  | (11,121 | )
|Real estate tax                                                |  |       | (12,775 | ) |       |  | (12,492 | )
|Repairs, maintenance and facility management fees              |  |       | (10,545 | ) |       |  | (10,857 | )
|Direct employment costs                                        |  |       | (12,072 | ) |       |  | (10,724 | )
|Marketing and other consulting                                 |  |       | (6,936  | ) |       |  | (6,940  | )
|Office related expenses                                        |  |       | (639    | ) |       |  | (734    | )
|Travel and transport cost                                      |  |       | (681    | ) |       |  | (646    | )
|Creation of allowance and written off receivables from tenants |  |       | (3,427  | ) |       |  | (1,559  | )
|Other                                                          |  |       | (915    | ) |       |  | (1,326  | )
|Total                                                          |  |       | (89,653 | ) |       |  | (85,958 | )



|1.28 | Other depreciation, amortisation and impairments
|---- | ------------------------------------------------



|                                                 |  |       |        |   |       |  |        |  
|------------------------------------------------ |  | ----- | ------ | - | ----- |  | ------ | -
|Other depreciation, amortisation and impairments |  | 2013  |        |   | 2012  | 
|                                                 |  | 000 |        |   | 000 | 
|Impairments                                      |  |       | (4,891 | ) |       |  | (450   | )
|Other depreciation and amortisation              |  |       | (2,075 | ) |       |  | (1,385 | )
|Total                                            |  |       | (6,966 | ) |       |  | (1,835 | )



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|1.29 | Administrative expenses
|---- | -----------------------



|                                     |  |       |         |   |       |  |         |  
|------------------------------------ |  | ----- | ------- | - | ----- |  | ------- | -
|Administrative expenses              |  | 2013  |         |   | 2012  | 
|                                     |  | 000 |         |   | 000 | 
|Legal fees                           |  |       | (2,665  | ) |       |  | (3,585  | )
|Legacy legal matters                 |  |       | (3,274  | ) |       |  | (3,255  | )
|Employee costs                       |  |       | (8,884  | ) |       |  | (9,299  | )
|Consultancy and other advisory fees  |  |       | (3,863  | ) |       |  | (4,450  | )
|Audit, audit related and review fees |  |       | (1,241  | ) |       |  | (1,683  | )
|Expenses related to directors        |  |       | (631    | ) |       |  | (816    | )
|Share based payments                 |  |       | (638    | ) |       |  | (1,447  | )
|Other                                |  |       | (4,090  | ) |       |  | (4,590  | )
|Total                                |  |       | (25,286 | ) |       |  | (29,125 | )

The Group does not have significant defined benefit pension plans.



|1.30 | Interest income and interest expenses
|---- | -------------------------------------

Interest income of 2.5 million (2012: 3.9
million) derived mainly from bank deposits and interest on the loans provided to third parties, which was subsequently impaired.

The Groups
interest expense of 31.6 million (2012: 23.1 million) consists of finance expense on bank loans 14.4 million (2012: 13.8 million) and on bonds 18.0 million (2012: 10.6 million). Finance expenses in
the amount of 0.8 million (2012: 1.3 million) were capitalised to the development projects, see note 1.5.



|1.31 | Other financial income and expenses
|---- | -----------------------------------



|                                    |  |       |         |   |       |  |         |  
|----------------------------------- |  | ----- | ------- | - | ----- |  | ------- | -
|Other financial income and expenses |  | 2013  |         |   | 2012  | 
|                                    |  | 000 |         |   | 000 | 
|Foreign currency differences        |  |       | (5,810  | ) |       |  | 7,860   |  
|Net loss from bond buy backs        |  |       |        |   |       |  | (1,519  | )
|Impairment of financial instruments |  |       | (1,782  | ) |       |  | (11,184 | )
|Other financial income/(expenses)   |  |       | (6,262  | ) |       |  | 146     |  
|Total                               |  |       | (13,854 | ) |       |  | (4,697  | )



|1.32 | Taxation charge for the year
|---- | ----------------------------



|                                                                                      |  |       |         |   |       |  |         |  
|------------------------------------------------------------------------------------- |  | ----- | ------- | - | ----- |  | ------- | -
|Taxation charge for the year                                                          |  | 2013  |         |   | 2012  | 
|                                                                                      |  | 000 |         |   | 000 | 
|Corporate income tax current year charge                                              |  |       | (1,554  | ) |       |  | (2,846  | )
|Deferred tax charge                                                                   |  |       | (12,899 | ) |       |  | (16,976 | )
|Adjustments to corporate income tax previous years                                    |  |       | (269    | ) |       |  | (76     | )
|Income tax charged to the income statement                                            |  |       | (14,722 | ) |       |  | (19,898 | )
|Income tax on foreign exchange differences credited/(charged) to comprehensive income |  |       | 1,591   |   |       |  | (301    | )
|Income tax on hedging instrument credited/(charged) to comprehensive income           |  |       | (1,154  | ) |       |  | 1,672   |  



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The subsidiary companies are subject to taxes for their respective businesses in the countries of their
registration at the rates prevailing in those jurisdictions.

Effective tax rate

A reconciliation between the current year income tax charge and the accounting profit before tax is shown below:



|                                                                           |  |       |         |    |      |  |     |       |  |  |         |    |  |  |     |  
|-------------------------------------------------------------------------- |  | ----- | ------- | -- | ---- |  | --- | ----- |  |  | ------- | -- |  |  | --- | -
|                                                                           |  | 2013  |         |    | 2013 |  |     | 2012  |  |  | 2012    |   
|                                                                           |  | 000 |         |    | %    |  |     | 000 |  |  | %       |   
|Profit before taxation                                                     |  |       | 90,600  |    |      |  |     |       |  |  | 116,073 |    |  |  |     |  
|Income tax credit/(charge) using the weighted average applicable tax rates |  |       | (3,150  | )  |      |  | 3.5 | %     |  |  | 2,237   |    |  |  | 1.9 | %
|Tax effect of non-taxable income/(non-deductible expenses)                 |  |       | (15,890 | )  |      |  |     |       |  |  | 5,008   |    |  |  |     |  
|Tax effect of losses previously not recognised                             |  |       | 11,996  |    |      |  |     |       |  |  | 7,015   |    |  |  |     |  
|Deferred tax asset not recognised                                          |  |       | (8,924  | )  |      |  |     |       |  |  | (33,957 | )  |  |  |     |  
|Tax adjustment of previous years                                           |  |       | (269    | )  |      |  |     |       |  |  | (76     | )  |  |  |     |  
|Other                                                                      |  |       | 1,515   |    |      |  |     |       |  |  | (125    | )  |  |  |     |  
|Tax charge                                                                 |  |       | (14,722 | )  |      |  |     |       |  |  | (19,898 | )  |  |  |     |  
|Effective tax rate                                                         |  |       | (16.2   | %) |      |  |     |       |  |  | (17.1   | %) |  |  |     |  

The Group has not recognised deferred tax assets of 143.3 million (2012: 147.5 million) as it is not probable
that future taxable profit will be available against which the Group can utilise these benefits. These unrecognised deferred tax assets arose primarily from the negative revaluation of investment properties and, in accordance with local tax
legislation, will expire over a number of years, commencing in 2014.



|                                         |  |           |         |  |           |  |         | 
|---------------------------------------- |  | --------- | ------- |  | --------- |  | ------- | 
|Unrecognised deferred tax assets
Country |  | 2013000 |         |  | 2012000 | 
|Poland                                   |  |           | 25,416  |  |           |  | 14,626  | 
|Czech Republic                           |  |           | 1,516   |  |           |  | 1,080   | 
|Russia                                   |  |           | 80,541  |  |           |  | 84,934  | 
|Slovakia                                 |  |           |        |  |           |  | 33      | 
|Hungary                                  |  |           | 2,241   |  |           |  | 2,043   | 
|Romania                                  |  |           | 6,336   |  |           |  | 6,193   | 
|Latvia                                   |  |           | 431     |  |           |  | 16      | 
|Turkey                                   |  |           | 14,523  |  |           |  | 11,481  | 
|Netherlands                              |  |           |        |  |           |  | 6,370   | 
|Georgia                                  |  |           |        |  |           |  | 6,963   | 
|Ukraine                                  |  |           | 6,639   |  |           |  | 6,686   | 
|Cyprus                                   |  |           | 6,746   |  |           |  | 6,950   | 
|Bulgaria                                 |  |           | 48      |  |           |  | 133     | 
|Total                                    |  |           | 144,437 |  |           |  | 147,508 | 



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The Group is liable for taxation on taxable profits in the following jurisdictions at the rates below:



|                           |  |      |      |    |      |  |      |   
|-------------------------- |  | ---- | ---- | -- | ---- |  | ---- | --
|Corporate income tax rates |  | 2013 |      |    | 2012 | 
|Poland                     |  |      | 19.0 | %  |      |  | 19.0 | % 
|Czech Republic             |  |      | 19.0 | %  |      |  | 19.0 | % 
|Slovakia                   |  |      | 23.0 | %  |      |  | 19.0 | % 
|Russia                     |  |      | 20.0 | %  |      |  | 20.0 | % 
|Hungary                    |  |      | 10.0 | %1 |      |  | 10.0 | %1
|Romania                    |  |      | 16.0 | %  |      |  | 16.0 | % 
|Latvia                     |  |      | 15.0 | %  |      |  | 15.0 | % 
|Turkey                     |  |      | 20.0 | %  |      |  | 20.0 | % 
|Bulgaria                   |  |      | 10.0 | %  |      |  | 10.0 | % 
|Cyprus                     |  |      | 10.0 | %  |      |  | 10.0 | % 
|Denmark                    |  |      | 25.0 | %  |      |  | 25.0 | % 
|Georgia                    |  |      | 15.0 | %  |      |  | 15.0 | % 
|Italy                      |  |      | 27.5 | %2 |      |  | 27.5 | %2
|Jersey                     |  |      | 0.0  | %  |      |  | 0.0  | % 
|Netherlands                |  |      | 25.0 | %3 |      |  | 25.0 | %3
|Sweden                     |  |      | 22.0 | %  |      |  | 26.3 | % 
|Spain                      |  |      | 30.0 | %4 |      |  | 30.0 | %4
|Ukraine                    |  |      | 19.0 | %  |      |  | 21.0 | % 



|1. | Effective from 1 July 2010, a 10% tax rate applies to a tax base up to HUF 500 million, with a 19% rate applying to a tax base exceeding this amount.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------

|2. | The corporate income tax rate is 27.5% plus local tax due (generally 3.9%).
|-- | ---------------------------------------------------------------------------

|3. | As at 1 January 2011, the rate applying to taxable profits exceeding 0.2 million is 25%. Below this amount a 20% tax rate is applicable to taxable
profit.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

|4. | The regular corporate income tax rate is 30 %, however a 25% rate is imposed on profits up to 0.3 million and if the annual turnover is less than 10 million.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



|1.33 | Earnings per share
|---- | ------------------

The following table sets forth the computation of earnings per share:



|                                                                                                                  |  |      |             |  |      |  |             | 
|----------------------------------------------------------------------------------------------------------------- |  | ---- | ----------- |  | ---- |  | ----------- | 
|                                                                                                                  |  | 2013 |             |  | 2012 | 
|Profit for the year attributable to the owners of the Company for basic and diluted earnings per share in (000) |  |      | 75,936      |  |      |  | 98,712      | 
|Weighted average number of ordinary shares used in the calculation of basic earnings per share                    |  |      | 374,288,340 |  |      |  | 373,075,076 | 
|Adjustments                                                                                                       |  |      |             |  |      |  |             | 
|Options                                                                                                           |  |      | 384,888     |  |      |  |            | 
|Weighted average number of ordinary shares used in the calculation of diluted earnings per share                  |  |      | 374,673,228 |  |      |  | 373,075,076 | 
|Basic earnings per share in cents                                                                                |  |      | 20.3        |  |      |  | 26.4        | 
|Diluted earnings per share in cents                                                                              |  |      | 20.3        |  |      |  | 26.4        | 

The following securities were not included in the diluted earnings per share calculation as the effect would have been
anti-dilutive:



|                              |  |      |           |  |      |  |           | 
|----------------------------- |  | ---- | --------- |  | ---- |  | --------- | 
|Number of shares if exercised |  | 2013 |           |  | 2012 | 
|Options                       |  |      | 3,629,838 |  |      |  | 5,130,959 | 



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|1.34 | Segment reporting
|---- | -----------------



|                                                                |  |                                |           |   |                         |  |         |                       |  |  |            |   |  |  |           |  
|--------------------------------------------------------------- |  | ------------------------------ | --------- | - | ----------------------- |  | ------- | --------------------- |  |  | ---------- | - |  |  | --------- | -
|Reportable segments in 2013
For the year ended 31 December 2013 |  | Standinginvestmentsegment000 |           |   | Developmentsegment000 |  |         | Reconciling item000 |  |  | Total000 |  
|Gross rental income                                             |  |                                | 203,455   |   |                         |  |        |                       |  |  |           |   |  |  | 203,455   |  
|Service charge income                                           |  |                                | 77,031    |   |                         |  |        |                       |  |  |           |   |  |  | 77,031    |  
|Net property expenses                                           |  |                                | (89,653   | ) |                         |  |        |                       |  |  |           |   |  |  | (89,653   | )
|Net rental income                                               |  |                                | 190,833   |   |                         |  |        |                       |  |  |           |   |  |  | 190,833   |  
|Net result on disposals                                         |  |                                | 432       |   |                         |  | 944     |                       |  |  |           |   |  |  | 1,376     |  
|Cost connected with developments                                |  |                                |          |   |                         |  | (5,146  | )                     |  |  |           |   |  |  | (5,146    | )
|Revaluation of investment properties                            |  |                                | 14,712    |   |                         |  | (35,998 | )                     |  |  |           |   |  |  | (21,286   | )
|Other depreciation, amortisation and impairments                |  |                                | (5,027    | ) |                         |  |        |                       |  |  | (1,939     | ) |  |  | (6,966    | )
|Administrative expenses                                         |  |                                | (11,341   | ) |                         |  | (1,226  | )                     |  |  | (12,719    | ) |  |  | (25,286   | )
|Net operating profit/(loss)                                     |  |                                | 189,609   |   |                         |  | (41,426 | )                     |  |  | (14,658    | ) |  |  | 133,525   |  
|Interest income                                                 |  |                                | 210       |   |                         |  | 120     |                       |  |  | 2,175      |   |  |  | 2,505     |  
|Interest expense                                                |  |                                | (29,975   | ) |                         |  | (1,599  | )                     |  |  | (2         | ) |  |  | (31,576   | )
|Other financial income/(expenses)                               |  |                                | (15,134   | ) |                         |  | 3,179   |                       |  |  | (1,899     | ) |  |  | (13,854   | )
|Profit/loss before taxation for the year                        |  |                                | 144,710   |   |                         |  | (39,726 | )                     |  |  | (14,384    | ) |  |  | 90,600    |  
|Taxation credit/(charge) for the year                           |  |                                | (13,177   | ) |                         |  | (1,424  | )                     |  |  | (121       | ) |  |  | (14,722   | )
|Profit/(loss) after taxation for the year                       |  |                                | 131,533   |   |                         |  | (41,150 | )                     |  |  | (14,505    | ) |  |  | 75,878    |  
|Investment properties                                           |  |                                | 2,356,164 |   |                         |  | 583,637 |                       |  |  |           |   |  |  | 2,939,801 |  
|Additions to investment properties                              |  |                                | 176,823   |   |                         |  | 84,398  |                       |  |  |           |   |  |  | 261,221   |  
|Segment assets                                                  |  |                                | 2,427,303 |   |                         |  | 623,985 |                       |  |  | 292,918    | * |  |  | 3,344,206 |  
|Segment liabilities                                             |  |                                | 783,019   |   |                         |  | 82,202  |                       |  |  | 211,696    |   |  |  | 1,076,917 |  



|* | The amount mainly relates to cash and cash equivalents.
|- | -------------------------------------------------------



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|                                                                |  |                                |           |   |                         |  |         |                       |  |  |            |   |  |  |           |  
|--------------------------------------------------------------- |  | ------------------------------ | --------- | - | ----------------------- |  | ------- | --------------------- |  |  | ---------- | - |  |  | --------- | -
|Reportable segments in 2012
For the year ended 31 December 2012 |  | Standinginvestmentsegment000 |           |   | Developmentsegment000 |  |         | Reconciling item000 |  |  | Total000 |  
|Gross rental income                                             |  |                                | 193,475   |   |                         |  |        |                       |  |  |           |   |  |  | 193,475   |  
|Service charge income                                           |  |                                | 73,762    |   |                         |  |        |                       |  |  |           |   |  |  | 73,762    |  
|Net properties expenses                                         |  |                                | (85,958   | ) |                         |  |        |                       |  |  |           |   |  |  | (85,958   | )
|Net rental income                                               |  |                                | 181,279   |   |                         |  |        |                       |  |  |           |   |  |  | 181,279   |  
|Net result on disposals                                         |  |                                | 427       |   |                         |  | 366     |                       |  |  |           |   |  |  | 793       |  
|Cost connected with developments                                |  |                                |          |   |                         |  | (6,161  | )                     |  |  |           |   |  |  | (6,161    | )
|Revaluation of investment properties                            |  |                                | 58,533    |   |                         |  | (63,494 | )                     |  |  |           |   |  |  | (4,961    | )
|Other depreciation, amortisation and impairments                |  |                                | (1,430    | ) |                         |  |        |                       |  |  | (405       | ) |  |  | (1,835    | )
|Administrative expenses                                         |  |                                | (11,278   | ) |                         |  | (1,081  | )                     |  |  | (16,766    | ) |  |  | (29,125   | )
|Net operating profit/(loss)                                     |  |                                | 227,531   |   |                         |  | (70,370 | )                     |  |  | (17,171    | ) |  |  | 139,990   |  
|Interest income                                                 |  |                                | 219       |   |                         |  | 19      |                       |  |  | 3,645      |   |  |  | 3,883     |  
|Interest expense                                                |  |                                | (22,363   | ) |                         |  | (735    | )                     |  |  | (5         | ) |  |  | (23,103   | )
|Other financial income/(expenses)                               |  |                                | (6,899    | ) |                         |  | 8,732   |                       |  |  | (6,530     | ) |  |  | (4,697    | )
|Profit/ (loss) before taxation of the year                      |  |                                | 198,488   |   |                         |  | (62,354 | )                     |  |  | (20,061    | ) |  |  | 116,073   |  
|Taxation credit/(charge) for the year                           |  |                                | (19,272   | ) |                         |  | 562     |                       |  |  | (1,188     | ) |  |  | (19,898   | )
|Profit/(loss) after taxation for the year                       |  |                                | 179,216   |   |                         |  | (61,792 | )                     |  |  | (21,249    | ) |  |  | 96,175    |  
|Investment properties                                           |  |                                | 2,185,336 |   |                         |  | 538,395 |                       |  |  |           |   |  |  | 2,723,731 |  
|Additions to investment properties                              |  |                                | 40,379    |   |                         |  | 27,481  |                       |  |  |           |   |  |  | 67,860    |  
|Segment assets                                                  |  |                                | 2,259,685 |   |                         |  | 586,947 |                       |  |  | 218,890    | * |  |  | 3,065,522 |  
|Segment liabilities                                             |  |                                | 692,445   |   |                         |  | 83,150  |                       |  |  | 8,555      |   |  |  | 784,150   |  



|* | The amount mainly relates to cash and cash equivalents.
|- | -------------------------------------------------------



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Geographical segments by business sector in 2013



|                                                 |  |                           |           |   |                    |  |         |                 |  |  |       |   |  |                           |           |   |                    |  |         |                 |  |  |       |   |  |  |      |   |  |  |         |  
|------------------------------------------------ |  | ------------------------- | --------- | - | ------------------ |  | ------- | --------------- |  |  | ----- | - |  | ------------------------- | --------- | - | ------------------ |  | ------- | --------------- |  |  | ----- | - |  |  | ---- | - |  |  | ------- | -
|                                                 |  | Poland                    |           |   | Czech Republic     | 
|For the year ended
31 December 2013              |  | Standinginvestmentsegment |           |   | Developmentsegment |  |         | Reconcilingitem |  |  | Total |   |  | Standinginvestmentsegment |           |   | Developmentsegment |  |         | Reconcilingitem |  |  | Total |  
|                                                 |  | 000                     |           |   | 000              |  |         | 000           |  |  | 000 |   |  | 000                     |           |   | 000              |  |         | 000           |  |  | 000 |  
|Gross rental income                              |  |                           | 78,858    |   |                    |  |        |                 |  |  |      |   |  |                           | 78,858    |   |                    |  | 37,641  |                 |  |  |      |   |  |  |     |   |  |  | 37,641  |  
|Service charge income                            |  |                           | 31,152    |   |                    |  |        |                 |  |  |      |   |  |                           | 31,152    |   |                    |  | 10,976  |                 |  |  |      |   |  |  |     |   |  |  | 10,976  |  
|Net property expenses                            |  |                           | (30,857   | ) |                    |  |        |                 |  |  |      |   |  |                           | (30,857   | ) |                    |  | (14,481 | )               |  |  |      |   |  |  |     |   |  |  | (14,481 | )
|Net rental income                                |  |                           | 79,153    |   |                    |  |        |                 |  |  |      |   |  |                           | 79,153    |   |                    |  | 34,136  |                 |  |  |      |   |  |  |     |   |  |  | 34,136  |  
|Net result on disposals                          |  |                           | 88        |   |                    |  | 349     |                 |  |  |      |   |  |                           | 437       |   |                    |  | 401     |                 |  |  | 65    |   |  |  |     |   |  |  | 466     |  
|Cost connected with developments                 |  |                           |          |   |                    |  | (158    | )               |  |  |      |   |  |                           | (158      | ) |                    |  |        |                 |  |  |      |   |  |  |     |   |  |  |        |  
|Revaluation of investment properties             |  |                           | 16,253    |   |                    |  | (6,331  | )               |  |  |      |   |  |                           | 9,922     |   |                    |  | (14,394 | )               |  |  | (163  | ) |  |  |     |   |  |  | (14,557 | )
|Other depreciation, amortisation and impairments |  |                           | (814      | ) |                    |  |        |                 |  |  |      |   |  |                           | (814      | ) |                    |  | (357    | )               |  |  |      |   |  |  |     |   |  |  | (357    | )
|Administrative expenses                          |  |                           | (5,225    | ) |                    |  | (1,112  | )               |  |  | 938   |   |  |                           | (5,399    | ) |                    |  | (2,562  | )               |  |  | (6    | ) |  |  | (225 | ) |  |  | (2,793  | )
|Net operating profit/(loss)                      |  |                           | 89,455    |   |                    |  | (7,252  | )               |  |  | 938   |   |  |                           | 83,141    |   |                    |  | 17,224  |                 |  |  | (104  | ) |  |  | (225 | ) |  |  | 16,895  |  
|Interest income                                  |  |                           | 134       |   |                    |  | 76      |                 |  |  | 3     |   |  |                           | 213       |   |                    |  | 20      |                 |  |  | 0     |   |  |  |     |   |  |  | 20      |  
|Interest expense                                 |  |                           | (15,124   | ) |                    |  | (230    | )               |  |  | (2    | ) |  |                           | (15,356   | ) |                    |  | (6,322  | )               |  |  | (7    | ) |  |  |     |   |  |  | (6,329  | )
|Other financial income/(expenses)                |  |                           | (2,209    | ) |                    |  | (57     | )               |  |  | (9    | ) |  |                           | (2,275    | ) |                    |  | (12,677 | )               |  |  |      |   |  |  | (118 | ) |  |  | (12,795 | )
|Profit/(loss) before taxation                    |  |                           | 72,256    |   |                    |  | (7,463  | )               |  |  | 930   |   |  |                           | 65,723    |   |                    |  | (1,755  | )               |  |  | (111  | ) |  |  | (343 | ) |  |  | (2,209  | )
|Taxation credit/(charge) for the year            |  |                           | (7,427    | ) |                    |  | (447    | )               |  |  | (15   | ) |  |                           | (7,889    | ) |                    |  | 1,267   |                 |  |  |      |   |  |  | (109 | ) |  |  | 1,158   |  
|Profit/(loss) after taxation for the year        |  |                           | 64,829    |   |                    |  | (7,910  | )               |  |  | 915   |   |  |                           | 57,834    |   |                    |  | (488    | )               |  |  | (111  | ) |  |  | (452 | ) |  |  | (1,051  | )
|Investment properties                            |  |                           | 1,206,716 |   |                    |  | 218,127 |                 |  |  |      |   |  |                           | 1,424,843 |   |                    |  | 411,484 |                 |  |  | 4,005 |   |  |  |     |   |  |  | 415,489 |  
|Additions to investment properties               |  |                           | 159,500   |   |                    |  | 80,770  |                 |  |  |      |   |  |                           | 240,270   |   |                    |  | 4,601   |                 |  |  | 816   |   |  |  |     |   |  |  | 5,417   |  
|Segment assets                                   |  |                           | 1,236,335 |   |                    |  | 226,465 |                 |  |  | 4,462 |   |  |                           | 1,467,262 |   |                    |  | 430,459 |                 |  |  | 4,007 |   |  |  | 827  |   |  |  | 435,293 |  
|Segment liabilities                              |  |                           | 464,640   |   |                    |  | 26,848  |                 |  |  | 17    |   |  |                           | 491,505   |   |                    |  | 153,482 |                 |  |  | 193   |   |  |  |     |   |  |  | 153,675 |  



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|                                                 |  |                           |         |   |                    |  |    |                 |  |  |       |   |  |                           |         |   |                    |  |         |                 |  |  |         |   |  |  |       |  |  |  |         |  
|------------------------------------------------ |  | ------------------------- | ------- | - | ------------------ |  | -- | --------------- |  |  | ----- | - |  | ------------------------- | ------- | - | ------------------ |  | ------- | --------------- |  |  | ------- | - |  |  | ----- |  |  |  | ------- | -
|                                                 |  | Slovakia                  |         |   | Russia             | 
|For the year ended
31 December 2013              |  | Standinginvestmentsegment |         |   | Developmentsegment |  |    | Reconcilingitem |  |  | Total |   |  | Standinginvestmentsegment |         |   | Developmentsegment |  |         | Reconcilingitem |  |  | Total   |  
|                                                 |  | 000                     |         |   | 000              |  |    | 000           |  |  | 000 |   |  | 000                     |         |   | 000              |  |         | 000           |  |  | 000   |  
|Gross rental income                              |  |                           | 11,258  |   |                    |  |   |                 |  |  |      |   |  |                           | 11,258  |   |                    |  | 59,297  |                 |  |  |        |   |  |  |      |  |  |  | 59,297  |  
|Service charge income                            |  |                           | 5,718   |   |                    |  |   |                 |  |  |      |   |  |                           | 5,718   |   |                    |  | 22,789  |                 |  |  |        |   |  |  |      |  |  |  | 22,789  |  
|Net property expenses                            |  |                           | (5,889  | ) |                    |  |   |                 |  |  |      |   |  |                           | (5,889  | ) |                    |  | (29,108 | )               |  |  |        |   |  |  |      |  |  |  | (29,108 | )
|Net rental income                                |  |                           | 11,087  |   |                    |  |   |                 |  |  |      |   |  |                           | 11,087  |   |                    |  | 52,978  |                 |  |  |        |   |  |  |      |  |  |  | 52,978  |  
|Net result disposals                             |  |                           |        |   |                    |  |   |                 |  |  |      |   |  |                           |        |   |                    |  |        |                 |  |  | 530     |   |  |  |      |  |  |  | 530     |  
|Cost connected with developments                 |  |                           |        |   |                    |  |   |                 |  |  |      |   |  |                           |        |   |                    |  |        |                 |  |  | (2,574  | ) |  |  |      |  |  |  | (2,574  | )
|Revaluation of investment properties             |  |                           | (1,071  | ) |                    |  |   |                 |  |  |      |   |  |                           | (1,071  | ) |                    |  | 37,190  |                 |  |  | (17,157 | ) |  |  |      |  |  |  | 20,033  |  
|Other depreciation, amortisation and impairments |  |                           | (189    | ) |                    |  |   |                 |  |  |      |   |  |                           | (189    | ) |                    |  | (98     | )               |  |  |        |   |  |  |      |  |  |  | (98     | )
|Administrative expenses                          |  |                           | (862    | ) |                    |  |   |                 |  |  | 50    |   |  |                           | (812    | ) |                    |  | (1,643  | )               |  |  | 52      |   |  |  | 455   |  |  |  | (1,136  | )
|Net operating profit/(loss)                      |  |                           | 8,965   |   |                    |  |   |                 |  |  | 50    |   |  |                           | 9,015   |   |                    |  | 88,427  |                 |  |  | (19,149 | ) |  |  | 455   |  |  |  | 69,733  |  
|Interest income                                  |  |                           |         |   |                    |  |    |                 |  |  |       |   |  |                           |         |   |                    |  | 24      |                 |  |  | 3       |   |  |  |      |  |  |  | 27      |  
|Interest expense                                 |  |                           | (2,280  | ) |                    |  |   |                 |  |  |      |   |  |                           | (2,280  | ) |                    |  | (4,661  | )               |  |  | (401    | ) |  |  |      |  |  |  | (5,062  | )
|Other financial income /(expenses)               |  |                           | (37     | ) |                    |  |   |                 |  |  | (2    | ) |  |                           | (39     | ) |                    |  | (618    | )               |  |  | 8,384   |   |  |  | 61    |  |  |  | 7,827   |  
|Profit/(loss) before taxation                    |  |                           | 6,648   |   |                    |  |   |                 |  |  | 48    |   |  |                           | 6,696   |   |                    |  | 83,172  |                 |  |  | (11,163 | ) |  |  | 516   |  |  |  | 72,525  |  
|Taxation credit/(charge) for the year            |  |                           | (577    | ) |                    |  |   |                 |  |  | (20   | ) |  |                           | (597    | ) |                    |  | (8,463  | )               |  |  | (3      | ) |  |  | 150   |  |  |  | (8,316  | )
|Profit/(loss) after taxation for the year        |  |                           | 6,071   |   |                    |  |   |                 |  |  | 28    |   |  |                           | 6,099   |   |                    |  | 74,709  |                 |  |  | (11,166 | ) |  |  | 666   |  |  |  | 64,209  |  
|Investment properties                            |  |                           | 147,260 |   |                    |  | 55 |                 |  |  |      |   |  |                           | 147,315 |   |                    |  | 443,424 |                 |  |  | 128,373 |   |  |  |      |  |  |  | 571,797 |  
|Additions to investment properties               |  |                           | 2,341   |   |                    |  |   |                 |  |  |      |   |  |                           | 2,341   |   |                    |  | 8,368   |                 |  |  | 2,594   |   |  |  |      |  |  |  | 10,962  |  
|Segment assets                                   |  |                           | 151,604 |   |                    |  | 57 |                 |  |  | 756   |   |  |                           | 152,417 |   |                    |  | 455,862 |                 |  |  | 132,509 |   |  |  | 3,250 |  |  |  | 591,621 |  
|Segment liabilities                              |  |                           | 64,994  |   |                    |  | 86 |                 |  |  |      |   |  |                           | 65,080  |   |                    |  | 83,923  |                 |  |  | 27,416  |   |  |  | 302   |  |  |  | 111,641 |  



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|                                                 |  |                           |         |   |                    |  |   |                 |  |  |       |   |  |                           |         |   |                    |  |        |                 |  |  |        |   |  |  |     |   |  |  |        |  
|------------------------------------------------ |  | ------------------------- | ------- | - | ------------------ |  | - | --------------- |  |  | ----- | - |  | ------------------------- | ------- | - | ------------------ |  | ------ | --------------- |  |  | ------ | - |  |  | --- | - |  |  | ------ | -
|                                                 |  | Hungary                   |         |   | Romania            | 
|For the year ended
31 December 2013              |  | Standinginvestmentsegment |         |   | Developmentsegment |  |   | Reconcilingitem |  |  | Total |   |  | Standinginvestmentsegment |         |   | Developmentsegment |  |        | Reconcilingitem |  |  | Total  |  
|                                                 |  | 000                     |         |   | 000              |  |   | 000           |  |  | 000 |   |  | 000                     |         |   | 000              |  |        | 000           |  |  | 000  |  
|Gross rental income                              |  |                           | 7,752   |   |                    |  |  |                 |  |  |      |   |  |                           | 7,752   |   |                    |  | 7,248  |                 |  |  |       |   |  |  |    |   |  |  | 7,248  |  
|Service charge income                            |  |                           | 3,200   |   |                    |  |  |                 |  |  |      |   |  |                           | 3,200   |   |                    |  | 2,204  |                 |  |  |       |   |  |  |    |   |  |  | 2,204  |  
|Net property expenses                            |  |                           | (4,546  | ) |                    |  |  |                 |  |  |      |   |  |                           | (4,546  | ) |                    |  | (3,021 | )               |  |  |       |   |  |  |    |   |  |  | (3,021 | )
|Net rental income                                |  |                           | 6,406   |   |                    |  |  |                 |  |  |      |   |  |                           | 6,406   |   |                    |  | 6,431  |                 |  |  |       |   |  |  |    |   |  |  | 6,431  |  
|Net result on disposals                          |  |                           | (57     | ) |                    |  |  |                 |  |  |      |   |  |                           | (57     | ) |                    |  |       |                 |  |  |       |   |  |  |    |   |  |  |       |  
|Cost connected with developments                 |  |                           |        |   |                    |  |  |                 |  |  |      |   |  |                           |        |   |                    |  |       |                 |  |  | (86    | ) |  |  |    |   |  |  | (86    | )
|Revaluation of investment properties             |  |                           | (13,239 | ) |                    |  |  |                 |  |  |      |   |  |                           | (13,239 | ) |                    |  | (6,167 | )               |  |  | (1,773 | ) |  |  |    |   |  |  | (7,940 | )
|Other depreciation, amortisation and impairments |  |                           | (3,520  | ) |                    |  |  |                 |  |  |      |   |  |                           | (3,520  | ) |                    |  | (49    | )               |  |  |       |   |  |  |    |   |  |  | (49    | )
|Administrative expenses                          |  |                           | (442    | ) |                    |  |  |                 |  |  | (81   | ) |  |                           | (523    | ) |                    |  | (545   | )               |  |  | (3     | ) |  |  | 3   |   |  |  | (545   | )
|Net operating profit/(loss)                      |  |                           | (10,852 | ) |                    |  |  |                 |  |  | (81   | ) |  |                           | (10,933 | ) |                    |  | (330   | )               |  |  | (1,862 | ) |  |  | 3   |   |  |  | (2,189 | )
|Interest income                                  |  |                           | 23      |   |                    |  |  |                 |  |  | (8    | ) |  |                           | 15      |   |                    |  | 9      |                 |  |  |       |   |  |  |    |   |  |  | 9      |  
|Interest expense                                 |  |                           | (405    | ) |                    |  |  |                 |  |  |      |   |  |                           | (405    | ) |                    |  | (823   | )               |  |  | (120   | ) |  |  |    |   |  |  | (943   | )
|Other financial income /(expenses)               |  |                           | 308     |   |                    |  |  |                 |  |  | (5    | ) |  |                           | 303     |   |                    |  | 78     |                 |  |  | 36     |   |  |  | (14 | ) |  |  | 100    |  
|Profit/(loss) before taxation                    |  |                           | (10,926 | ) |                    |  |  |                 |  |  | (94   | ) |  |                           | (11,020 | ) |                    |  | (1,066 | )               |  |  | (1,946 | ) |  |  | (11 | ) |  |  | (3,023 | )
|Taxation credit/(charge) for the year            |  |                           | 745     |   |                    |  |  |                 |  |  | (3    | ) |  |                           | 742     |   |                    |  | 671    |                 |  |  |       |   |  |  | (8  | ) |  |  | 663    |  
|Profit/(loss) after taxation for the year        |  |                           | (10,181 | ) |                    |  |  |                 |  |  | (97   | ) |  |                           | (10,278 | ) |                    |  | (395   | )               |  |  | (1,946 | ) |  |  | (19 | ) |  |  | (2,360 | )
|Investment properties                            |  |                           | 70,670  |   |                    |  |  |                 |  |  |      |   |  |                           | 70,670  |   |                    |  | 65,220 |                 |  |  | 10,400 |   |  |  |    |   |  |  | 75,620 |  
|Additions to investment properties               |  |                           | 1,225   |   |                    |  |  |                 |  |  |      |   |  |                           | 1,225   |   |                    |  | 687    |                 |  |  |       |   |  |  |    |   |  |  | 687    |  
|Segment assets                                   |  |                           | 73,893  |   |                    |  |  |                 |  |  | 636   |   |  |                           | 74,529  |   |                    |  | 67,265 |                 |  |  | 10,690 |   |  |  | 243 |   |  |  | 78,198 |  
|Segment liabilities                              |  |                           | 7,224   |   |                    |  |  |                 |  |  |      |   |  |                           | 7,224   |   |                    |  | 5,758  |                 |  |  | 3,013  |   |  |  | 95  |   |  |  | 8,866  |  



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|                                                 |  |                           |        |   |                                    |  |   |                 |  |  |       |  |  |                           |        |   |                    |  |   |                 |  |  |         |   |  |  |      |   |  |  |         |  
|------------------------------------------------ |  | ------------------------- | ------ | - | ---------------------------------- |  | - | --------------- |  |  | ----- |  |  | ------------------------- | ------ | - | ------------------ |  | - | --------------- |  |  | ------- | - |  |  | ---- | - |  |  | ------- | -
|                                                 |  | Latvia                    |        |   | Turkey, Bulgaria, Ukraine, Georgia | 
|For the year ended
31 December 2013              |  | Standinginvestmentsegment |        |   | Developmentsegment                 |  |   | Reconcilingitem |  |  | Total |  |  | Standinginvestmentsegment |        |   | Developmentsegment |  |   | Reconcilingitem |  |  | Total   |  
|                                                 |  | 000                     |        |   | 000                              |  |   | 000           |  |  | 000 |  |  | 000                     |        |   | 000              |  |   | 000           |  |  | 000   |  
|Gross rental income                              |  |                           | 1,401  |   |                                    |  |  |                 |  |  |      |  |  |                           | 1,401  |   |                    |  |  |                 |  |  |        |   |  |  |     |   |  |  |        |  
|Service charge income                            |  |                           | 992    |   |                                    |  |  |                 |  |  |      |  |  |                           | 992    |   |                    |  |  |                 |  |  |        |   |  |  |     |   |  |  |        |  
|Net property expenses                            |  |                           | (1,751 | ) |                                    |  |  |                 |  |  |      |  |  |                           | (1,751 | ) |                    |  |  |                 |  |  |        |   |  |  |     |   |  |  |        |  
|Net rental income                                |  |                           | 642    |   |                                    |  |  |                 |  |  |      |  |  |                           | 642    |   |                    |  |  |                 |  |  |        |   |  |  |     |   |  |  |        |  
|Net result on disposals                          |  |                           |       |   |                                    |  |  |                 |  |  |      |  |  |                           |       |   |                    |  |  |                 |  |  |        |   |  |  |     |   |  |  |        |  
|Cost connected with developments                 |  |                           |       |   |                                    |  |  |                 |  |  |      |  |  |                           |       |   |                    |  |  |                 |  |  | (1,271  | ) |  |  |     |   |  |  | (1,271  | )
|Revaluation of investment properties             |  |                           | (3,860 | ) |                                    |  |  |                 |  |  |      |  |  |                           | (3,860 | ) |                    |  |  |                 |  |  | (10,574 | ) |  |  |     |   |  |  | (10,574 | )
|Other depreciation, amortisation and impairments |  |                           |       |   |                                    |  |  |                 |  |  |      |  |  |                           |       |   |                    |  |  |                 |  |  |        |   |  |  | (43  | ) |  |  | (43     | )
|Administrative expenses                          |  |                           | (62    | ) |                                    |  |  |                 |  |  | 7     |  |  |                           | (55    | ) |                    |  |  |                 |  |  | (157    | ) |  |  | (70  | ) |  |  | (227    | )
|Net operating profit/(loss)                      |  |                           | (3,280 | ) |                                    |  |  |                 |  |  | 7     |  |  |                           | (3,273 | ) |                    |  |  |                 |  |  | (12,002 | ) |  |  | (113 | ) |  |  | (12,115 | )
|Interest income                                  |  |                           |       |   |                                    |  |  |                 |  |  |      |  |  |                           |       |   |                    |  |  |                 |  |  | 41      |   |  |  |     |   |  |  | 41      |  
|Interest expense                                 |  |                           | (360   | ) |                                    |  |  |                 |  |  |      |  |  |                           | (360   | ) |                    |  |  |                 |  |  | (841    | ) |  |  |     |   |  |  | (841    | )
|Other financial income /(expenses)               |  |                           | 21     |   |                                    |  |  |                 |  |  |      |  |  |                           | 21     |   |                    |  |  |                 |  |  | (5,184  | ) |  |  | 23   |   |  |  | (5,161  | )
|Profit/(loss) before taxation                    |  |                           | (3,619 | ) |                                    |  |  |                 |  |  | 7     |  |  |                           | (3,612 | ) |                    |  |  |                 |  |  | (17,986 | ) |  |  | (90  | ) |  |  | (18,076 | )
|Taxation credit/(charge) for the year            |  |                           | 607    |   |                                    |  |  |                 |  |  |      |  |  |                           | 607    |   |                    |  |  |                 |  |  | (974    | ) |  |  |     |   |  |  | (974    | )
|Profit/(loss) after taxation for the year        |  |                           | (3,012 | ) |                                    |  |  |                 |  |  | 7     |  |  |                           | (3,005 | ) |                    |  |  |                 |  |  | (18,960 | ) |  |  | (90  | ) |  |  | (19,050 | )
|Investment properties                            |  |                           | 11,390 |   |                                    |  |  |                 |  |  |      |  |  |                           | 11,390 |   |                    |  |  |                 |  |  | 222,677 |   |  |  |     |   |  |  | 222,677 |  
|Additions to investment properties               |  |                           | 101    |   |                                    |  |  |                 |  |  |      |  |  |                           | 101    |   |                    |  |  |                 |  |  | 218     |   |  |  |     |   |  |  | 218     |  
|Segment assets                                   |  |                           | 11,885 |   |                                    |  |  |                 |  |  | 11    |  |  |                           | 11,896 |   |                    |  |  |                 |  |  | 250,257 |   |  |  | 70   |   |  |  | 250,328 |  
|Segment liabilities                              |  |                           | 2,998  |   |                                    |  |  |                 |  |  | 34    |  |  |                           | 3,032  |   |                    |  |  |                 |  |  | 24,646  |   |  |  |     |   |  |  | 24,646  |  



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|                                                 |  |                           |   |  |                    |  |        |                 |  |  |         |   |  |  |         |  
|------------------------------------------------ |  | ------------------------- | - |  | ------------------ |  | ------ | --------------- |  |  | ------- | - |  |  | ------- | -
|                                                 |  | Reconciling               |  
|For the year ended
31 December 2013              |  | Standinginvestmentsegment |   |  | Developmentsegment |  |        | Reconcilingitem |  |  | Total   |  
|                                                 |  | 000                     |   |  | 000              |  |        | 000           |  |  | 000   |  
|Gross rental income                              |  |                           |  |  |                    |  |       |                 |  |  |        |   |  |  |        |  
|Service charge income                            |  |                           |  |  |                    |  |       |                 |  |  |        |   |  |  |        |  
|Net property expenses                            |  |                           |  |  |                    |  |       |                 |  |  |        |   |  |  |        |  
|Net rental income                                |  |                           |  |  |                    |  |       |                 |  |  |        |   |  |  |        |  
|Net result on disposals                          |  |                           |  |  |                    |  |       |                 |  |  |        |   |  |  |        |  
|Cost connected with developments                 |  |                           |  |  |                    |  | (1,057 | )               |  |  |        |   |  |  | (1,057  | )
|Revaluation of investment properties             |  |                           |   |  |                    |  |        |                 |  |  |         |   |  |  |         |  
|Other depreciation, amortisation and impairments |  |                           |  |  |                    |  |       |                 |  |  | (1,896  | ) |  |  | (1,896  | )
|Administrative expenses                          |  |                           |  |  |                    |  |       |                 |  |  | (13,796 | ) |  |  | (13,796 | )
|Net operating profit/(loss)                      |  |                           |  |  |                    |  | (1,057 | )               |  |  | (15,692 | ) |  |  | (16,749 | )
|Interest income                                  |  |                           |  |  |                    |  |       |                 |  |  | 2,180   |   |  |  | 2,180   |  
|Interest expense                                 |  |                           |  |  |                    |  |       |                 |  |  |        |   |  |  |        |  
|Other financial income/(expenses)                |  |                           |  |  |                    |  |       |                 |  |  | (1,835  | ) |  |  | (1,835  | )
|Profit/(loss) before taxation                    |  |                           |  |  |                    |  | (1,057 | )               |  |  | (15,347 | ) |  |  | (16,404 | )
|Taxation credit/(charge) for the year            |  |                           |  |  |                    |  |       |                 |  |  | (116    | ) |  |  | (116    | )
|Profit/(loss) after taxation for the year        |  |                           |  |  |                    |  | (1,057 | )               |  |  | (15,463 | ) |  |  | (16,520 | )
|Investment properties                            |  |                           |  |  |                    |  |       |                 |  |  |        |   |  |  |        |  
|Additions to investment properties               |  |                           |  |  |                    |  |       |                 |  |  |        |   |  |  |        |  
|Segment assets                                   |  |                           |  |  |                    |  |       |                 |  |  | 282,663 |   |  |  | 282,662 |  
|Segment liabilities                              |  |                           |  |  |                    |  |       |                 |  |  | 211,248 |   |  |  | 211,248 |  



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Geographical segments by business sector in 2012



|                                                 |  |                           |           |   |                    |  |         |                 |  |  |       |   |  |                           |           |   |                    |  |         |                 |  |  |       |   |  |  |       |   |  |  |         |  
|------------------------------------------------ |  | ------------------------- | --------- | - | ------------------ |  | ------- | --------------- |  |  | ----- | - |  | ------------------------- | --------- | - | ------------------ |  | ------- | --------------- |  |  | ----- | - |  |  | ----- | - |  |  | ------- | -
|                                                 |  | Poland                    |           |   | Czech Republic     | 
|For the year ended 31
December 2012              |  | Standinginvestmentsegment |           |   | Developmentsegment |  |         | Reconcilingitem |  |  | Total |   |  | Standinginvestmentsegment |           |   | Developmentsegment |  |         | Reconcilingitem |  |  | Total |  
|                                                 |  | 000                     |           |   | 000              |  |         | 000           |  |  | 000 |   |  | 000                     |           |   | 000              |  |         | 000           |  |  | 000 |  
|Gross rental income                              |  |                           | 73,851    |   |                    |  |        |                 |  |  |      |   |  |                           | 73,851    |   |                    |  | 38,629  |                 |  |  |      |   |  |  |      |   |  |  | 38,629  |  
|Service charge income                            |  |                           | 27,949    |   |                    |  |        |                 |  |  |      |   |  |                           | 27,949    |   |                    |  | 11,424  |                 |  |  |      |   |  |  |      |   |  |  | 11,424  |  
|Net property expenses                            |  |                           | (28,223   | ) |                    |  |        |                 |  |  |      |   |  |                           | (28,223   | ) |                    |  | (15,036 | )               |  |  |      |   |  |  |      |   |  |  | (15,036 | )
|Net rental income                                |  |                           | 73,577    |   |                    |  |        |                 |  |  |      |   |  |                           | 73,577    |   |                    |  | 35,017  |                 |  |  |      |   |  |  |      |   |  |  | 35,017  |  
|Net result on disposals                          |  |                           | 427       |   |                    |  | (24     | )               |  |  |      |   |  |                           | 403       |   |                    |  |        |                 |  |  |      |   |  |  |      |   |  |  |        |  
|Cost connected with developments                 |  |                           |          |   |                    |  | 109     |                 |  |  |      |   |  |                           | 109       |   |                    |  |        |                 |  |  |      |   |  |  |      |   |  |  |        |  
|Revaluation of investment properties             |  |                           | 25,681    |   |                    |  | (11,677 | )               |  |  |      |   |  |                           | 14,004    |   |                    |  | 59      |                 |  |  | 2,433 |   |  |  |      |   |  |  | 2,492   |  
|Other depreciation, amortisation and impairments |  |                           | (222      | ) |                    |  |        |                 |  |  |      |   |  |                           | (222      | ) |                    |  | (263    | )               |  |  |      |   |  |  |      |   |  |  | (263    | )
|Administrative expenses                          |  |                           | (4,939    | ) |                    |  | (226    | )               |  |  | 513   |   |  |                           | (4,652    | ) |                    |  | (3,086  | )               |  |  | (11   | ) |  |  | 146   |   |  |  | (2,951  | )
|Net operating profit/( loss)                     |  |                           | 94,524    |   |                    |  | (11,818 | )               |  |  | 513   |   |  |                           | 83,219    |   |                    |  | 31,727  |                 |  |  | 2,422 |   |  |  | 146   |   |  |  | 34,295  |  
|Interest income                                  |  |                           | 108       |   |                    |  | 9       |                 |  |  | 9     |   |  |                           | 126       |   |                    |  | 58      |                 |  |  |      |   |  |  |      |   |  |  | 58      |  
|Interest expense                                 |  |                           | (10,016   | ) |                    |  | (186    | )               |  |  |      |   |  |                           | (10,202   | ) |                    |  | (6,441  | )               |  |  | (5    | ) |  |  |      |   |  |  | (6,446  | )
|Other financial income /(expenses)               |  |                           | (4,489    | ) |                    |  | (235    | )               |  |  | (100  | ) |  |                           | (4,824    | ) |                    |  | (1,097  | )               |  |  | (3    | ) |  |  | (5    | ) |  |  | (1,105  | )
|Profit/(loss) before taxation                    |  |                           | 80,127    |   |                    |  | (12,230 | )               |  |  | 422   |   |  |                           | 68,319    |   |                    |  | 24,247  |                 |  |  | 2,414 |   |  |  | 141   |   |  |  | 26,802  |  
|Taxation credit/(charge) for the year            |  |                           | (7,084    | ) |                    |  | 174     |                 |  |  | (135  | ) |  |                           | (7,045    | ) |                    |  | (3,873  | )               |  |  | (12   | ) |  |  | (376  | ) |  |  | (4,261  | )
|Profit/(loss) after taxation for the year        |  |                           | 73,043    |   |                    |  | (12,056 | )               |  |  | 287   |   |  |                           | 61,274    |   |                    |  | 20,374  |                 |  |  | 2,402 |   |  |  | (235  | ) |  |  | 22,541  |  
|Investment properties                            |  |                           | 1,030,350 |   |                    |  | 143,125 |                 |  |  |      |   |  |                           | 1,173,475 |   |                    |  | 445,901 |                 |  |  | 4,776 |   |  |  |      |   |  |  | 450,677 |  
|Additions to investment properties               |  |                           | 14,785    |   |                    |  | 23,018  |                 |  |  |      |   |  |                           | 37,803    |   |                    |  | 5,164   |                 |  |  | 425   |   |  |  |      |   |  |  | 5,589   |  
|Segment assets                                   |  |                           | 1,059,616 |   |                    |  | 153,154 |                 |  |  | 2,657 |   |  |                           | 1,215,427 |   |                    |  | 458,890 |                 |  |  | 4,783 |   |  |  | 1,071 |   |  |  | 464,744 |  
|Segment liabilities                              |  |                           | 343,680   |   |                    |  | 23,249  |                 |  |  | 27    |   |  |                           | 366,956   |   |                    |  | 173,808 |                 |  |  | 251   |   |  |  |      |   |  |  | 174,059 |  



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ATRIUM EUROPEAN REAL ESTATE LIMITED



|                                                 |  |                           |         |   |                    |  |     |                 |  |  |       |   |  |                           |         |   |                    |  |         |                 |  |  |         |   |  |  |       |   |  |  |         |  
|------------------------------------------------ |  | ------------------------- | ------- | - | ------------------ |  | --- | --------------- |  |  | ----- | - |  | ------------------------- | ------- | - | ------------------ |  | ------- | --------------- |  |  | ------- | - |  |  | ----- | - |  |  | ------- | -
|                                                 |  | Slovakia                  |         |   | Russia             | 
|For the year ended 31
December 2012              |  | Standinginvestmentsegment |         |   | Developmentsegment |  |     | Reconcilingitem |  |  | Total |   |  | Standinginvestmentsegment |         |   | Developmentsegment |  |         | Reconcilingitem |  |  | Total   |  
|                                                 |  | 000                     |         |   | 000              |  |     | 000           |  |  | 000 |   |  | 000                     |         |   | 000              |  |         | 000           |  |  | 000   |  
|Gross rental income                              |  |                           | 11,248  |   |                    |  |    |                 |  |  |      |   |  |                           | 11,248  |   |                    |  | 52,940  |                 |  |  |        |   |  |  |      |   |  |  | 52,940  |  
|Service charge income                            |  |                           | 5,703   |   |                    |  |    |                 |  |  |      |   |  |                           | 5,703   |   |                    |  | 22,157  |                 |  |  |        |   |  |  |      |   |  |  | 22,157  |  
|Net property expenses                            |  |                           | (5,803  | ) |                    |  |    |                 |  |  |      |   |  |                           | (5,803  | ) |                    |  | (27,408 | )               |  |  |        |   |  |  |      |   |  |  | (27,408 | )
|Net rental income                                |  |                           | 11,148  |   |                    |  |    |                 |  |  |      |   |  |                           | 11,148  |   |                    |  | 47,689  |                 |  |  |        |   |  |  |      |   |  |  | 47,689  |  
|Net result on disposals                          |  |                           |        |   |                    |  |    |                 |  |  |      |   |  |                           |        |   |                    |  |        |                 |  |  | 377     |   |  |  |      |   |  |  | 377     |  
|Cost connected with developments                 |  |                           |        |   |                    |  |    |                 |  |  |      |   |  |                           |        |   |                    |  |        |                 |  |  | (3,307  | ) |  |  |      |   |  |  | (3,307  | )
|Revaluation of investment properties             |  |                           | 6,593   |   |                    |  | (13 | )               |  |  |      |   |  |                           | 6,580   |   |                    |  | 37,523  |                 |  |  | (38,028 | ) |  |  |      |   |  |  | (505    | )
|Other depreciation, amortisation and impairments |  |                           | (214    | ) |                    |  |    |                 |  |  |      |   |  |                           | (214    | ) |                    |  | (88     | )               |  |  |        |   |  |  |      |   |  |  | (88     | )
|Administrative expenses                          |  |                           | (754    | ) |                    |  | (1  | )               |  |  | 50    |   |  |                           | (705    | ) |                    |  | (1,450  | )               |  |  | (618    | ) |  |  | (101  | ) |  |  | (2,169  | )
|Net operating profit/(loss)                      |  |                           | 16,773  |   |                    |  | (14 | )               |  |  | 50    |   |  |                           | 16,809  |   |                    |  | 83,674  |                 |  |  | (41,576 | ) |  |  | (101  | ) |  |  | 41,997  |  
|Interest income                                  |  |                           | 1       |   |                    |  |    |                 |  |  |      |   |  |                           | 1       |   |                    |  | 27      |                 |  |  | 3       |   |  |  |      |   |  |  | 30      |  
|Interest expense                                 |  |                           | (1,727  | ) |                    |  |    |                 |  |  |      |   |  |                           | (1,727  | ) |                    |  | (3,104  | )               |  |  | (151    | ) |  |  |      |   |  |  | (3,255  | )
|Other financial income /(expenses)               |  |                           | (34     | ) |                    |  |    |                 |  |  | (3    | ) |  |                           | (37     | ) |                    |  | (889    | )               |  |  | 1,371   |   |  |  | (63   | ) |  |  | 419     |  
|Profit/(loss) before taxation                    |  |                           | 15,013  |   |                    |  | (14 | )               |  |  | 47    |   |  |                           | 15,046  |   |                    |  | 79,708  |                 |  |  | (40,353 | ) |  |  | (164  | ) |  |  | 39,191  |  
|Taxation credit/(charge) for the year            |  |                           | (3,274  | ) |                    |  | (2  | )               |  |  | (70   | ) |  |                           | (3,346  | ) |                    |  | (5,155  | )               |  |  | 42      |   |  |  | (301  | ) |  |  | (5,414  | )
|Profit/(loss) after taxation for the year        |  |                           | 11,739  |   |                    |  | (16 | )               |  |  | (23   | ) |  |                           | 11,700  |   |                    |  | 74,553  |                 |  |  | (40,311 | ) |  |  | (465  | ) |  |  | 33,777  |  
|Investment properties                            |  |                           | 145,990 |   |                    |  | 54  |                 |  |  |      |   |  |                           | 146,044 |   |                    |  | 394,375 |                 |  |  | 145,230 |   |  |  |      |   |  |  | 539,605 |  
|Additions to investment properties               |  |                           | 1,320   |   |                    |  | 13  |                 |  |  |      |   |  |                           | 1,333   |   |                    |  | 16,962  |                 |  |  | 3,884   |   |  |  |      |   |  |  | 20,846  |  
|Segment assets                                   |  |                           | 151,421 |   |                    |  | 56  |                 |  |  | 653   |   |  |                           | 152,130 |   |                    |  | 412,614 |                 |  |  | 149,953 |   |  |  | 3,085 |   |  |  | 565,652 |  
|Segment liabilities                              |  |                           | 64,964  |   |                    |  | 51  |                 |  |  |      |   |  |                           | 65,015  |   |                    |  | 87,779  |                 |  |  | 24,113  |   |  |  | 506   |   |  |  | 112,398 |  



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ATRIUM EUROPEAN REAL ESTATE LIMITED



|                                                 |  |                           |        |   |                    |  |   |                 |  |  |       |   |  |                           |        |   |                    |  |        |                 |  |  |        |   |  |  |     |   |  |  |         |  
|------------------------------------------------ |  | ------------------------- | ------ | - | ------------------ |  | - | --------------- |  |  | ----- | - |  | ------------------------- | ------ | - | ------------------ |  | ------ | --------------- |  |  | ------ | - |  |  | --- | - |  |  | ------- | -
|                                                 |  | Hungary                   |        |   | Romania            | 
|For the year ended 31
December 2012              |  | Standinginvestmentsegment |        |   | Developmentsegment |  |   | Reconcilingitem |  |  | Total |   |  | Standinginvestmentsegment |        |   | Developmentsegment |  |        | Reconcilingitem |  |  | Total  |  
|                                                 |  | 000                     |        |   | 000              |  |   | 000           |  |  | 000 |   |  | 000                     |        |   | 000              |  |        | 000           |  |  | 000  |  
|Gross rental income                              |  |                           | 8,567  |   |                    |  |  |                 |  |  |      |   |  |                           | 8,567  |   |                    |  | 7,172  |                 |  |  |       |   |  |  |    |   |  |  | 7,172   |  
|Service charge income                            |  |                           | 3,383  |   |                    |  |  |                 |  |  |      |   |  |                           | 3,383  |   |                    |  | 2,151  |                 |  |  |       |   |  |  |    |   |  |  | 2,151   |  
|Net property expenses                            |  |                           | (4,900 | ) |                    |  |  |                 |  |  |      |   |  |                           | (4,900 | ) |                    |  | (2,894 | )               |  |  |       |   |  |  |    |   |  |  | (2,894  | )
|Net rental income                                |  |                           | 7,050  |   |                    |  |  |                 |  |  |      |   |  |                           | 7,050  |   |                    |  | 6,429  |                 |  |  |       |   |  |  |    |   |  |  | 6,429   |  
|Net result on disposals                          |  |                           |       |   |                    |  |  |                 |  |  |      |   |  |                           |       |   |                    |  |       |                 |  |  |       |   |  |  |    |   |  |  |        |  
|Cost connected with developments                 |  |                           |       |   |                    |  |  |                 |  |  |      |   |  |                           |       |   |                    |  |       |                 |  |  | (54    | ) |  |  |    |   |  |  | (54     | )
|Revaluation of investment properties             |  |                           | (9,644 | ) |                    |  |  |                 |  |  |      |   |  |                           | (9,644 | ) |                    |  | (1,068 | )               |  |  | (9,365 | ) |  |  |    |   |  |  | (10,433 | )
|Other depreciation, amortisation and impairments |  |                           | (559   | ) |                    |  |  |                 |  |  |      |   |  |                           | (559   | ) |                    |  | (58    | )               |  |  |       |   |  |  |    |   |  |  | (58     | )
|Administrative expenses                          |  |                           | (517   | ) |                    |  |  |                 |  |  | (54   | ) |  |                           | (571   | ) |                    |  | (486   | )               |  |  | (5     | ) |  |  | (73 | ) |  |  | (564    | )
|Net operating profit/(loss)                      |  |                           | (3,670 | ) |                    |  |  |                 |  |  | (54   | ) |  |                           | (3,724 | ) |                    |  | 4,817  |                 |  |  | (9,424 | ) |  |  | (73 | ) |  |  | (4,680  | )
|Interest income                                  |  |                           | 15     |   |                    |  |  |                 |  |  | 1     |   |  |                           | 16     |   |                    |  | 10     |                 |  |  |       |   |  |  |    |   |  |  | 10      |  
|Interest expense                                 |  |                           | (425   | ) |                    |  |  |                 |  |  |      |   |  |                           | (425   | ) |                    |  | (446   | )               |  |  | (47    | ) |  |  |    |   |  |  | (493    | )
|Other financial income /(expenses)               |  |                           | (363   | ) |                    |  |  |                 |  |  | 1     |   |  |                           | (362   | ) |                    |  | (5     | )               |  |  | (3     | ) |  |  | (2  | ) |  |  | (10     | )
|Profit/(loss) before taxation                    |  |                           | (4,443 | ) |                    |  |  |                 |  |  | (52   | ) |  |                           | (4,495 | ) |                    |  | 4,376  |                 |  |  | (9,474 | ) |  |  | (75 | ) |  |  | (5,173  | )
|Taxation credit for the year                     |  |                           | 724    |   |                    |  |  |                 |  |  |      |   |  |                           | 724    |   |                    |  |       |                 |  |  |       |   |  |  | 8   |   |  |  | 8       |  
|Profit/(loss) after taxation for the year        |  |                           | (3,719 | ) |                    |  |  |                 |  |  | (52   | ) |  |                           | (3,771 | ) |                    |  | 4,376  |                 |  |  | (9,474 | ) |  |  | (67 | ) |  |  | (5,165  | )
|Investment properties                            |  |                           | 82,870 |   |                    |  |  |                 |  |  |      |   |  |                           | 82,870 |   |                    |  | 70,700 |                 |  |  | 12,173 |   |  |  |    |   |  |  | 82,873  |  
|Additions to investment properties               |  |                           | 1,529  |   |                    |  |  |                 |  |  |      |   |  |                           | 1,529  |   |                    |  | 468    |                 |  |  |       |   |  |  |    |   |  |  | 468     |  
|Segment assets                                   |  |                           | 90,006 |   |                    |  |  |                 |  |  | 478   |   |  |                           | 90,484 |   |                    |  | 71,435 |                 |  |  | 12,464 |   |  |  | 294 |   |  |  | 84,193  |  
|Segment liabilities                              |  |                           | 11,011 |   |                    |  |  |                 |  |  |      |   |  |                           | 11,011 |   |                    |  | 7,154  |                 |  |  | 4,801  |   |  |  | 55  |   |  |  | 12,010  |  



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##### Table of Contents

ATRIUM EUROPEAN REAL ESTATE LIMITED



|                                                 |  |                           |        |   |                                    |  |   |                 |  |  |       |   |  |                           |        |   |                    |  |   |                 |  |  |         |   |  |  |      |   |  |  |         |  
|------------------------------------------------ |  | ------------------------- | ------ | - | ---------------------------------- |  | - | --------------- |  |  | ----- | - |  | ------------------------- | ------ | - | ------------------ |  | - | --------------- |  |  | ------- | - |  |  | ---- | - |  |  | ------- | -
|                                                 |  | Latvia                    |        |   | Turkey, Bulgaria, Ukraine, Georgia | 
|For the year ended 31
December 2012              |  | Standinginvestmentsegment |        |   | Developmentsegment                 |  |   | Reconcilingitem |  |  | Total |   |  | Standinginvestmentsegment |        |   | Developmentsegment |  |   | Reconcilingitem |  |  | Total   |  
|                                                 |  | 000                     |        |   | 000                              |  |   | 000           |  |  | 000 |   |  | 000                     |        |   | 000              |  |   | 000           |  |  | 000   |  
|Gross rental income                              |  |                           | 1,068  |   |                                    |  |  |                 |  |  |      |   |  |                           | 1,068  |   |                    |  |  |                 |  |  |        |   |  |  |     |   |  |  |        |  
|Service charge income                            |  |                           | 995    |   |                                    |  |  |                 |  |  |      |   |  |                           | 995    |   |                    |  |  |                 |  |  |        |   |  |  |     |   |  |  |        |  
|Net property expenses                            |  |                           | (1,694 | ) |                                    |  |  |                 |  |  |      |   |  |                           | (1,694 | ) |                    |  |  |                 |  |  |        |   |  |  |     |   |  |  |        |  
|Net rental income                                |  |                           | 369    |   |                                    |  |  |                 |  |  |      |   |  |                           | 369    |   |                    |  |  |                 |  |  |        |   |  |  |     |   |  |  |        |  
|Net result on disposals                          |  |                           |       |   |                                    |  |  |                 |  |  |      |   |  |                           |       |   |                    |  |  |                 |  |  | 13      |   |  |  |     |   |  |  | 13      |  
|Cost connected with developments                 |  |                           |       |   |                                    |  |  |                 |  |  |      |   |  |                           |       |   |                    |  |  |                 |  |  | (2,003  | ) |  |  |     |   |  |  | (2,003  | )
|Revaluation of investment properties             |  |                           | (611   | ) |                                    |  |  |                 |  |  |      |   |  |                           | (611   | ) |                    |  |  |                 |  |  | (6,844  | ) |  |  |     |   |  |  | (6,844  | )
|Other depreciation, amortisation and impairments |  |                           | (26    | ) |                                    |  |  |                 |  |  |      |   |  |                           | (26    | ) |                    |  |  |                 |  |  |        |   |  |  | (29  | ) |  |  | (29     | )
|Administrative expenses                          |  |                           | (46    | ) |                                    |  |  |                 |  |  | (3    | ) |  |                           | (49    | ) |                    |  |  |                 |  |  | (220    | ) |  |  | (386 | ) |  |  | (606    | )
|Net operating loss                               |  |                           | (314   | ) |                                    |  |  |                 |  |  | (3    | ) |  |                           | (317   | ) |                    |  |  |                 |  |  | (9,054  | ) |  |  | (415 | ) |  |  | (9,469  | )
|Interest income                                  |  |                           |       |   |                                    |  |  |                 |  |  |      |   |  |                           |       |   |                    |  |  |                 |  |  | 7       |   |  |  |     |   |  |  | 7       |  
|Interest expense                                 |  |                           | (204   | ) |                                    |  |  |                 |  |  |      |   |  |                           | (204   | ) |                    |  |  |                 |  |  | (346    | ) |  |  |     |   |  |  | (346    | )
|Other financial income /(expenses)               |  |                           | (22    | ) |                                    |  |  |                 |  |  | (1    | ) |  |                           | (23    | ) |                    |  |  |                 |  |  | 7,602   |   |  |  | 2    |   |  |  | 7,604   |  
|Loss before taxation                             |  |                           | (540   | ) |                                    |  |  |                 |  |  | (4    | ) |  |                           | (544   | ) |                    |  |  |                 |  |  | (1,791  | ) |  |  | (413 | ) |  |  | (2,204  | )
|Taxation credit/(charge) for the year            |  |                           | (610   | ) |                                    |  |  |                 |  |  |      |   |  |                           | (610   | ) |                    |  |  |                 |  |  | 360     |   |  |  |     |   |  |  | 360     |  
|Loss after taxation for the year                 |  |                           | (1,150 | ) |                                    |  |  |                 |  |  | (4    | ) |  |                           | (1,154 | ) |                    |  |  |                 |  |  | (1,431  | ) |  |  | (413 | ) |  |  | (1,844  | )
|Investment properties                            |  |                           | 15,150 |   |                                    |  |  |                 |  |  |      |   |  |                           | 15,150 |   |                    |  |  |                 |  |  | 233,037 |   |  |  |     |   |  |  | 233,037 |  
|Additions to investment properties               |  |                           | 151    |   |                                    |  |  |                 |  |  |      |   |  |                           | 151    |   |                    |  |  |                 |  |  | 141     |   |  |  |     |   |  |  | 141     |  
|Segment assets                                   |  |                           | 15,689 |   |                                    |  |  |                 |  |  | 54    |   |  |                           | 15,743 |   |                    |  |  |                 |  |  | 266,551 |   |  |  | 102  |   |  |  | 266,653 |  
|Segment liabilities                              |  |                           | 4,049  |   |                                    |  |  |                 |  |  |      |   |  |                           | 4,049  |   |                    |  |  |                 |  |  | 30,685  |   |  |  |     |   |  |  | 30,685  |  



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|                                                 |  |                           |   |  |                    |  |      |                 |  |  |         |   |  |  |         |  
|------------------------------------------------ |  | ------------------------- | - |  | ------------------ |  | ---- | --------------- |  |  | ------- | - |  |  | ------- | -
|                                                 |  | Reconciling               |  
|For the year ended 31
December 2012              |  | Standinginvestmentsegment |   |  | Developmentsegment |  |      | Reconcilingitem |  |  | Total   |  
|                                                 |  | 000                     |   |  | 000              |  |      | 000           |  |  | 000   |  
|Gross rental income                              |  |                           |  |  |                    |  |     |                 |  |  |        |   |  |  |        |  
|Service charge income                            |  |                           |  |  |                    |  |     |                 |  |  |        |   |  |  |        |  
|Net property expenses                            |  |                           |  |  |                    |  |     |                 |  |  |        |   |  |  |        |  
|Net rental income                                |  |                           |  |  |                    |  |     |                 |  |  |        |   |  |  |        |  
|Net result on disposals                          |  |                           |  |  |                    |  |     |                 |  |  |        |   |  |  |        |  
|Cost connected with developments                 |  |                           |  |  |                    |  | (906 | )               |  |  |        |   |  |  | (906    | )
|Revaluation of investment properties             |  |                           |  |  |                    |  |     |                 |  |  |        |   |  |  |        |  
|Other depreciation, amortisation and impairments |  |                           |  |  |                    |  |     |                 |  |  | (376    | ) |  |  | (376    | )
|Administrative expenses                          |  |                           |  |  |                    |  |     |                 |  |  | (16,858 | ) |  |  | (16,858 | )
|Net operating loss                               |  |                           |  |  |                    |  | (906 | )               |  |  | (17,234 | ) |  |  | (18,140 | )
|Interest income                                  |  |                           |  |  |                    |  |     |                 |  |  | 3,635   |   |  |  | 3,635   |  
|Interest expense                                 |  |                           |  |  |                    |  |     |                 |  |  | (5      | ) |  |  | (5      | )
|Other financial expenses                         |  |                           |  |  |                    |  |     |                 |  |  | (6,359  | ) |  |  | (6,359  | )
|Loss before taxation                             |  |                           |  |  |                    |  | (906 | )               |  |  | (19,963 | ) |  |  | (20,869 | )
|Taxation charge for the year                     |  |                           |  |  |                    |  |     |                 |  |  | (314    | ) |  |  | (314    | )
|Loss after taxation for the year                 |  |                           |  |  |                    |  | (906 | )               |  |  | (20,277 | ) |  |  | (21,183 | )
|Investment properties                            |  |                           |  |  |                    |  |     |                 |  |  |        |   |  |  |        |  
|Additions to investment properties               |  |                           |  |  |                    |  |     |                 |  |  |        |   |  |  |        |  
|Segment assets                                   |  |                           |  |  |                    |  |     |                 |  |  | 210,496 |   |  |  | 210,496 |  
|Segment liabilities                              |  |                           |  |  |                    |  |     |                 |  |  | 7,967   |   |  |  | 7, 967  |  



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|1.35 | Investment in Group undertakings
|---- | --------------------------------

During the year ended 31 December 2013:



| |  | In January 2013, MD CE Holding Limited, a 100% owned subsidiary of Atrium, acquired the remaining 49% of the shares in Nokiton Investment Limited which it did not already hold and now owns 100% of this entity and its
subsidiaries. The transaction did not result in a change of control. The total consideration paid and transaction costs amounted to 3.4 million.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | In June 2013, through a two stage agreement, MD CE Holding Limited acquired the remaining 76% of the shares it did not already hold in Euro Mall Polska XVI Sp. z o.o., Euro Mall Polska XIX Sp. z o.o. and Euro Mall
Polska XX Sp. z o.o.; consequently it now owns 100% of these entities. The total consideration paid amounted to 2.5 million.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|1.36 | Fair value
|---- | ----------

Fair value measurements recognised in the consolidated statement of finance position are
categorised using the fair value hierarchy that reflects the significance of the inputs used in determining the fair values:



| |  | Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Level 3 inputs are unobservable inputs for the asset or liability
|- |  | -----------------------------------------------------------------

The following table shows the assets and
liabilities of the group which are presented at fair value in the statement of financial position as at 31 December 2013, including their levels in the fair value hierarchy:



|                                             |  |      |      |  |         |  |        |         |  |  |                          |  |  |  |           | 
|-------------------------------------------- |  | ---- | ---- |  | ------- |  | ------ | ------- |  |  | ------------------------ |  |  |  | --------- | 
|                                             |  | Note |      |  | Level 2 |  |        | Level 3 |  |  | Fair value as at31/12/13 | 
|                                             |  |      |      |  | 000   |  |        | 000   |  |  | 000                    | 
|Standing investments                         |  |      | 1.4  |  |         |  |        |         |  |  |                          |  |  |  |           | 
|Poland                                       |  |      |      |  |         |  |        |         |  |  | 1,206,716                |  |  |  | 1,206,716 | 
|Czech Republic                               |  |      |      |  |         |  |        |         |  |  | 411,484                  |  |  |  | 411,484   | 
|Slovakia                                     |  |      |      |  |         |  |        |         |  |  | 147,260                  |  |  |  | 147,260   | 
|Russia                                       |  |      |      |  |         |  |        |         |  |  | 443,424                  |  |  |  | 443,424   | 
|Hungary                                      |  |      |      |  |         |  |        |         |  |  | 70,670                   |  |  |  | 70,670    | 
|Romania                                      |  |      |      |  |         |  |        |         |  |  | 65,220                   |  |  |  | 65,220    | 
|Latvia                                       |  |      |      |  |         |  |        |         |  |  | 11,390                   |  |  |  | 11,390    | 
|Total standing investments                   |  |      |      |  |         |  |        |         |  |  | 2,356,164                |  |  |  | 2,356,164 | 
|Developments and land                        |  |      | 1.5  |  |         |  |        |         |  |  |                          |  |  |  |           | 
|Poland                                       |  |      |      |  |         |  |        |         |  |  | 218,127                  |  |  |  | 218,127   | 
|Russia                                       |  |      |      |  |         |  |        |         |  |  | 128,373                  |  |  |  | 128,373   | 
|Turkey                                       |  |      |      |  |         |  |        |         |  |  | 198,461                  |  |  |  | 198,461   | 
|Others                                       |  |      |      |  |         |  |        |         |  |  | 38,676                   |  |  |  | 37,676    | 
|Total developments and land                  |  |      |      |  |         |  |        |         |  |  | 583,637                  |  |  |  | 583,637   | 
|Financial liabilities measured at fair value |  |      |      |  |         |  |        |         |  |  |                          |  |  |  |           | 
|Interest rate swaps used for hedging         |  |      | 1.19 |  |         |  | 11,756 |         |  |  |                          |  |  |  | 11,756    | 



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Investment properties measured at level 3 fair value:



|                                                            |  |                     |           |   |                      |  |         |  
|----------------------------------------------------------- |  | ------------------- | --------- | - | -------------------- |  | ------- | -
|                                                            |  | Standinginvestments |           |   | Developmentsand land | 
|                                                            |  | 000               |           |   | 000                | 
|Balance as at 1 January 2013                                |  |                     | 2,185,336 |   |                      |  | 538,395 |  
|Gains (losses) included in the Income statement             |  |                     |           |   |                      |  |         |  
|Revaluation of investment properties (Unrealised)           |  |                     | 14,712    |   |                      |  | (35,998 | )
|Additions and Disposals                                     |  |                     |           |   |                      |  |         |  
|New Properties                                              |  |                     | 146,012   |   |                      |  | 28,862  |  
|Construction, technical improvements and extensions         |  |                     | 30,811    |   |                      |  | 54,737  |  
|Disposals                                                   |  |                     | (7,679    | ) |                      |  | (4,817  | )
|Other movements                                             |  |                     |           |   |                      |  |         |  
|Movements in financial leases                               |  |                     | 4,755     |   |                      |  | 2,910   |  
|Interest Capitalised                                        |  |                     |          |   |                      |  | 799     |  
|Currency translation difference                             |  |                     | (18,660   | ) |                      |  | (374    | )
|Transfers from Development and land to Standing Investments |  |                     | 877       |   |                      |  | (877    | )
|Balance as at 31 December 2013                              |  |                     | 2,356,164 |   |                      |  | 583,637 |  

A description of the Investment Properties valuation processes:

The policies and procedures for standing investments and developments and land valuations, and appointment of external independent valuation companies, are
made with the annual approval of the audit committee.

The criteria for selecting the valuation companies include recognised professional qualifications,
reputation and recent experience in the respective locations and categories of the properties being valued. A rotation of the different locations among the valuation companies is performed on a periodic basis.

External valuations of standing investment properties are performed on a quarterly basis at each interim reporting date using the desk top approach. A full
update of the valuation is performed only if material changes in net annual rental income occurred during the period or when deemed necessary by management. The valuations of developments and land properties, for interim reporting purposes, are
performed internally by the Companys internal valuation department using the internal methods which are aligned with those used by the external valuation companies. When considered necessary, external valuations are obtained to validate and
support the internal valuations of developments and land. At the year-end, all standing investments properties and the majority of developments and land are valued by external valuation companies.

The majority of the significant unobservable inputs are provided by the companys external, independent, international valuers and reflect the current
market assessments, while taking into account each propertys unique characteristics.



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The values of the investment properties are determined based on the valuations received from the external
valuation companies and the internal valuations.

Valuation results of the investment properties are presented to the audit committee. This includes a
discussion of the changes in the major assumptions used in the valuations, major changes, lack of changes if such are expected and the current economic situation of the market where the properties are located.

The valuation techniques used in measuring the fair value of assets and liabilities of the group which are presented at fair values in the statement of
financial position as at 31 December 2013:

Standing investments:

The fair value of standing investments is determined using a Discounted Cash Flow. The Discounted Cash Flow model considers the present value of the net cash
flow to be generated from the properties, taking into account the aggregate of the net annual rental income. The expected net cash flows are capitalised using a net yield which reflects the risks inherent in the net cash flows. The yield estimation
is derived from the market and considers, among other factors, the country in which the property is located and the risk assessment of the asset. The Group categorise standing investments fair value as level 3 within the fair value hierarchy.

The following table shows the significant unobservable inputs used in the fair value measurement of standing investments for the Discounted Cash Flow method:



|                                |  |                           |  |                       
|------------------------------- |  | ------------------------- |  | ----------------------
|Significant unobservable inputs |  | Range                     |  | Weighted average      
|Estimated rental value1 (ERV) |  | 1-233 per sqm per month |  | 12 per sqm, per month
|Equivalent yield                |  | 6.0%-15.1%                |  | 8.2%                  

Inter relationship between key unobservable inputs and fair value measurements:



|                                         |  |                  |       |   |                                                |  |         | 
|---------------------------------------- |  | ---------------- | ----- | - | ---------------------------------------------- |  | ------- | 
|                                         |  | Estimated change |       |   | Estimated total fair valuefollowing the change | 
|                                         |  |  in millions    |       |   |  in millions                                  | 
|Increase of 5% in ERV (1)                |  |                  | 116   |   |                                                |  | 2,472.2 | 
|Decrease of 5% in ERV (1)                |  |                  | (116  | ) |                                                |  | 2,240.2 | 
|Increase of 25bp in equivalent yield (2) |  |                  | (72.3 | ) |                                                |  | 2,283.8 | 
|Decrease of 25bp in equivalent yield (3) |  |                  | 77.3  |   |                                                |  | 2,433.4 | 



|(1) | The effect of the increase (decrease) in ERV on the estimated fair value of each country is approximately pro rata their fair value
|--- | -----------------------------------------------------------------------------------------------------------------------------------

|(2) | The distribution of the estimated decrease (in  millions): Poland-42.4, Czech Republic-12.5, Slovakia-4.7, Russia-8.8, Hungary-1.8, Romania-1.8 and Latvia-0.3
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | The distribution of the estimated increase (in  millions): Poland-45.8, Czech Republic-13.3, Slovakia-5.0, Russia-9.2, Hungary-1.8, Romania-1.9 and Latvia-0.3
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



|1 | The amount at which a property could be leased on the valuation date by a willing lessor to a willing lessee on appropriate lease terms in an arms length transaction.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Development and land:

The fair value of 21% of developments and land was determined using the Comparable method. The Comparable valuation method is based on the sales (offering and
listing) prices of similar properties that have recently been transacted in the open market. Sales prices are analysed by applying appropriate units of comparison and are adjusted for differences with the valued property on the basis of elements of
comparison, such as location, size of the plot and zoning etc.

The following table shows the significant unobservable input used in the fair value
measurement of developments and land for the Comparable method:



|                               |  |                  |  |                 
|------------------------------ |  | ---------------- |  | ----------------
|Significant unobservable input |  | Range            |  | Weighted average
|Price (1)                      |  | 38-107 per sqm |  | 74 per sqm     



|(1) | An outlier price of 586 per sqm of GLA is excluded from the range.
|--- | -------------------------------------------------------------------

Inter relationship between key
unobservable inputs and fair value measurements:



|                            |  |                  |      |   |                                                |  |       | 
|--------------------------- |  | ---------------- | ---- | - | ---------------------------------------------- |  | ----- | 
|                            |  | Estimated change |      |   | Estimated total fair valuefollowing the change | 
|                            |  |  in millions    |      |   |  in millions                                  | 
|Increase of 5% in price (1) |  |                  | 5.2  |   |                                                |  | 129.3 | 
|Decrease of 5% in price (1) |  |                  | (5.2 | ) |                                                |  | 118.9 | 



|(1) | The effect of the increase (decrease) in price on the estimated fair value of each country is approximately pro rata their fair value
|--- | -------------------------------------------------------------------------------------------------------------------------------------

The fair value of the remaining 79% of developments and land was determined using the Residual value method. The residual value method uses the present value
of the market value expected to be achieved in the future from the standing investment once it is developed less estimated cost to completion. The rental levels are set at the current market levels capitalised at the net yield which reflects the
risks inherent in the net cash flows.

The following table shows the significant unobservable inputs used in the fair value measurement of developments
and land for the Residual valuation method:



|                                |  |                           |  |                       
|------------------------------- |  | ------------------------- |  | ----------------------
|Significant unobservable inputs |  | Range                     |  | Weighted average      
|ERV                             |  | 4-24 per sqm, per month |  | 17 per sqm, per month
|Equivalent yield                |  | 6%-12%                    |  | 9.7%                  
|Construction costs              |  | 475-3,083 per sqm GLA   |  | 1,581 per sqm GLA    

Inter relationship between key unobservable inputs and fair value measurements:



|                                                  |  |                  |       |   |                                                |  |       | 
|------------------------------------------------- |  | ---------------- | ----- | - | ---------------------------------------------- |  | ----- | 
|                                                  |  | Estimated change |       |   | Estimated total fair valuefollowing the change | 
|                                                  |  |  in millions    |       |   |  in millions                                  | 
|Increase of 5% in ERV (1)                         |  |                  | 79.3  |   |                                                |  | 538.8 | 
|Decrease of 5% in ERV (1)                         |  |                  | (79.3 | ) |                                                |  | 380.2 | 
|Increase of 25bp in equivalent yield (2)          |  |                  | (41.6 | ) |                                                |  | 417.9 | 
|Decrease of 25bp in equivalent yield (3)          |  |                  | 43.9  |   |                                                |  | 503.4 | 
|Increase of 5% in expected construction costs (4) |  |                  | (57.7 | ) |                                                |  | 401.8 | 
|Decrease of 5% in expected construction costs (4) |  |                  | 57.7  |   |                                                |  | 517.2 | 



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|(1) | The effect of the increase (decrease) in ERV on the estimated fair value of each country is approximately pro rata their fair value
|--- | -----------------------------------------------------------------------------------------------------------------------------------

|(2) | The distribution of the estimated decrease (in  million): Poland-16.0, Russia-9.1, Turkey-14.3, Others-2.2
|--- | -----------------------------------------------------------------------------------------------------------

|(3) | The distribution of the estimated increase (in  million): Poland-17.1, Russia-9.5, Turkey-15, Others-2.3
|--- | ---------------------------------------------------------------------------------------------------------

|(4) | The distribution of the estimated increase (decrease) (in  million): Poland-16.0, Russia-17.6, Turkey-20.2, Others-3.9
|--- | -----------------------------------------------------------------------------------------------------------------------

Interest rate swaps used for hedging

The swaps are cash
flow hedges designed to reduce the Groups cash flow exposure to variable interest rates on certain borrowings. The swaps are presented at fair value. The Group categorise fair value swaps as level 2 within the fair value hierarchy. The inputs
used to determine the future cash flows are the 3 month Euribor Forward curve and an appropriate discount rate. The inputs used are derived either directly (i.e. as prices) or indirectly (i.e. from prices).

The following table shows the assets and liabilities of the group which are not presented at fair value in the statement of financial position as at
31 December 2013, including their levels in the fair value hierarchy:



|                      |  |       |   |  |                |  |         |            |  |  |                |  |  |            |         |  |  |  |         | 
|--------------------- |  | ----- | - |  | -------------- |  | ------- | ---------- |  |  | -------------- |  |  | ---------- | ------- |  |  |  | ------- | 
|                      |  | Level |   |  | 31/12/2013     |  |         | 31/12/2013 |  |  | 31/12/2012     |  |  | 31/12/2012 |        
|                      |  |       |   |  | Net book value |  |         | Fair value |  |  | Net book value |  |  | Fair value |        
|                      |  |       |   |  | 000          |  |         | 000      |  |  | 000          |  |  | 000      |        
|Financial liabilities |  |       |   |  |                |  |         |            |  |  |                |  |  |            |         |  |  |  |         | 
|Bonds                 |  |       | 2 |  |                |  | 499,066 |            |  |  | 506,083        |  |  |            | 193,958 |  |  |  | 202,505 | 
|Bank loans            |  |       | 2 |  |                |  | 304,489 |            |  |  | 305,253        |  |  |            | 343,103 |  |  |  | 345,378 | 
|Total                 |  |       |   |  |                |  | 803,555 |            |  |  | 811,336        |  |  |            | 537,061 |  |  |  | 547,883 | 

The fair values of loans and bonds were determined by an external appraiser using discounted cash flow models, zero-cost
derivative strategies for fixing the future values of market variables and option pricing models of the Black-Scholes type.

Fair values have been
determined with reference to market inputs, the most significant of which are:



| |  |  | Quoted EUR yield curve;
| | - |  | -----------------------



| |  |  | Quoted CZK yield curve;
| | - |  | -----------------------



| |  |  | Volatility of EUR swap rates;
| | - |  | -----------------------------



| |  |  | Spot exchange rates CZK/EUR; and
| | - |  | --------------------------------



| |  |  | Fair values of effected market transactions.
| | - |  | --------------------------------------------

Fair value measurements used for bonds and loans are categorised
within Level 2 of the fair value hierarchy.



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|1.37 | Categories of financial instruments
|---- | -----------------------------------

The Group distinguishes the following categories of financial
instruments:



|                                  |  |                |         |  |                      |  |         |                                         |  |  |                                     |  |  |  |        | 
|--------------------------------- |  | -------------- | ------- |  | -------------------- |  | ------- | --------------------------------------- |  |  | ----------------------------------- |  |  |  | ------ | 
|2013                              |  | Carryingamount |         |  | Loans andreceivables |  |         | Financial liabilities
at amortised cost |  |  | Financial liabilities
at fair value | 
|                                  |  | 000          |         |  | 000                |  |         | 000                                   |  |  | 000                               | 
|Financial assets                  |  |                |         |  |                      |  |         |                                         |  |  |                                     |  |  |  |        | 
|Long term loans                   |  |                | 8,114   |  |                      |  | 8,114   |                                         |  |  |                                    |  |  |  |       | 
|Receivables from tenants          |  |                | 13,773  |  |                      |  | 13,773  |                                         |  |  |                                    |  |  |  |       | 
|Other receivables                 |  |                | 8,296   |  |                      |  | 8,296   |                                         |  |  |                                    |  |  |  |       | 
|Cash and cash equivalents         |  |                | 305,577 |  |                      |  | 305,577 |                                         |  |  |                                    |  |  |  |       | 
|Total financial assets            |  |                | 335,760 |  |                      |  | 335,760 |                                         |  |  |                                    |  |  |  |       | 
|Financial liabilities             |  |                |         |  |                      |  |         |                                         |  |  |                                     |  |  |  |        | 
|Long term borrowings              |  |                | 798,044 |  |                      |  |        |                                         |  |  | 798,044                             |  |  |  |       | 
|Derivatives                       |  |                | 11,756  |  |                      |  |        |                                         |  |  |                                    |  |  |  | 11,756 | 
|Long term liabilities from leases |  |                | 46,040  |  |                      |  |        |                                         |  |  | 46,040                              |  |  |  |       | 
|Other long term liabilities       |  |                | 21,537  |  |                      |  |        |                                         |  |  | 21,537                              |  |  |  |       | 
|Trade and other payables          |  |                | 20,530  |  |                      |  |        |                                         |  |  | 20,530                              |  |  |  |       | 
|Accrued expenditure               |  |                | 42,291  |  |                      |  |        |                                         |  |  | 42,291                              |  |  |  |       | 
|Short term borrowings             |  |                | 5,511   |  |                      |  |        |                                         |  |  | 5,511                               |  |  |  |       | 
|Total financial liabilities       |  |                | 945,709 |  |                      |  |        |                                         |  |  | 933,953                             |  |  |  | 11,756 | 
|                                  |  |                |         | 
|2012                              |  | Carryingamount |         |  | Loans andreceivables |  |         | Financial liabilities atamortised cost  |  |  | Financial liabilities atfair value  | 
|                                  |  | 000          |         |  | 000                |  |         | 000                                   |  |  | 000                               | 
|Financial assets                  |  |                |         |  |                      |  |         |                                         |  |  |                                     |  |  |  |        | 
|Long term loans                   |  |                | 36,592  |  |                      |  | 36,592  |                                         |  |  |                                    |  |  |  |       | 
|Receivables from tenants          |  |                | 15,018  |  |                      |  | 15,018  |                                         |  |  |                                    |  |  |  |       | 
|Other receivables                 |  |                | 2,643   |  |                      |  | 2,643   |                                         |  |  |                                    |  |  |  |       | 
|Cash and cash equivalents         |  |                | 207,843 |  |                      |  | 207,843 |                                         |  |  |                                    |  |  |  |       | 
|Total financial assets            |  |                | 262,096 |  |                      |  | 262,096 |                                         |  |  |                                    |  |  |  |       | 
|Financial liabilities             |  |                |         |  |                      |  |         |                                         |  |  |                                     |  |  |  |        | 
|Long term borrowings              |  |                | 462,075 |  |                      |  |        |                                         |  |  | 462,075                             |  |  |  |       | 
|Derivatives                       |  |                | 17,828  |  |                      |  |        |                                         |  |  |                                    |  |  |  | 17,828 | 
|Long term liabilities from leases |  |                | 47,320  |  |                      |  |        |                                         |  |  | 47,320                              |  |  |  |       | 
|Other long term liabilities       |  |                | 19,730  |  |                      |  |        |                                         |  |  | 19,730                              |  |  |  |       | 
|Trade and other payables          |  |                | 17,663  |  |                      |  |        |                                         |  |  | 17,663                              |  |  |  |       | 
|Accrued expenditure               |  |                | 26,131  |  |                      |  |        |                                         |  |  | 26,131                              |  |  |  |       | 
|Short term borrowings             |  |                | 74,986  |  |                      |  |        |                                         |  |  | 74,986                              |  |  |  |       | 
|Total financial liabilities       |  |                | 665,733 |  |                      |  |        |                                         |  |  | 647,905                             |  |  |  | 17,828 | 

The fair values of bonds and loans presented under long term financial liabilities are disclosed in note 1.18 and 1.36. The
remaining financial liabilities are stated at amortised cost which is deemed not to be significantly different from fair value. The fair values of the financial assets are deemed to equal their book values. The Group has pledged some cash as
collateral, for more information see note 1.15.



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|1.38 | Capital management
|---- | ------------------

The Group manages its capital to provide stability and reduce risk while generating
a solid return over the long term to shareholders through improving the capital structure and efficiency of the Groups balance sheet. The Groups capital strategy remains unchanged from 2012.

The capital structure of the Group consists of borrowings (as detailed in note 1.18), cash and cash equivalents and the equity.

The capital structure of the Group is reviewed regularly. As part of this review, the cost of capital and the risks associated with each class of capital are
considered. Based on the Board of Directors decision, the Group manages its capital structure mainly by dividend distributions, debt raising and loan repayments.

Atrium corporate credit rating by S&P and Fitch is BBB-.

For information about loans and bond covenants see note 1.18 and for information about the capital structure of the Group see note 1.16.



|1.39 | Risk management
|---- | ---------------

The objective of the Group is to manage, invest and develop commercial real estate in
Central and Eastern Europe, South Eastern Europe and Russia in order to increase their intrinsic value. The Group has always applied a conservative funding strategy.

The risk exposures of the Group are constantly assessed and reported to the Board of Directors and full Board meetings are held at least quarterly.

Development risk

Since 2004, the Group has been active
in property development and is therefore exposed to certain development risks.

Development risk relates to the construction of investment properties. The
main risks are commercial, financial, technical and procedural risks. Examples of commercial and financial risks are letting risks and risks connected with foreign exchange rate fluctuations. To mitigate commercial and financial risks, before any
project is started a detailed analysis of the market conditions is performed and the situation is monitored during the whole construction process. Technical risks include for example design risk, construction risk and environmental risks. Procedural
and technical risks are also mitigated by a primary detailed analysis. Furthermore, the Group uses external professionals to deal with procedural actions, project design, project management, construction and other associated matters. Although
controls have been implanted to mitigate the development risk, the turbulence on the global real estate markets has required redesign and reconsideration of many of the projects.

Credit risk

Credit risk is defined as unforeseen losses
on financial assets if counterparties should default.



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The credit worthiness of tenants is closely monitored by a regular review of accounts receivable. Rents from
tenants are generally payable in advance.

Atrium attempts to minimise concentration of credit risk by spreading the exposure over a large number of
counterparties.

The credit risk exposure is comprised of normal course of business transactions with third parties and associates.

Furthermore, the Group holds collateral from tenants which would reduce the financial impact on the Group in the event of default. The collateral is
represented by deposits from tenants and covers rents of one to three months. In 2013, the Group had secured long term deposits from tenants amounting to 21.4 million (2012: 18.9 million) and short term deposits amounting to
2.5 million (2012: 2.4 million) and secured bank guarantees.

The table in note 1.12 provides an ageing analysis of receivables from
tenants and an overview of the allowances made for doubtful balances.

The credit exposure of the Group arising from the financial assets, as disclosed in
note 1.37, represents the maximum credit exposure due to financial assets.

To spread the risk connected to the potential insolvency of financial
institutions, the Group deposits cash balances at various international banking institutions. Before a deposit is made, a review of the credit ratings of the banking institutions is undertaken and only banks with credit ratings of an investment
grade or better are selected.

Liquidity risk

Liquidity within the Group is managed by appropriate liquidity planning and through an adequate financing structure.

The Groups liquidity requirements arise primarily from the need to fund its development projects, property acquisitions and other capital expenditures,
debt servicing costs, property management services and operating expenses. To date, these have been funded through a combination of equity funding, bonds and bank borrowings, and, to a lesser extent, from cash flow from operations (including rental
income and service charges).

Liquid funds, comprising cash and cash equivalents as disclosed in note 1.15, amounted to 305.6 million as at
31 December 2013 (2012: 207.8 million). The total net liquid funds calculated as cash and cash equivalents less short term borrowings, amounted to 300.1 million (2012: 132.9 million).



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The following tables analyse the Groups financial liabilities, including interest payments, based on
maturity:

The amounts disclosed in the table are the contractual undiscounted cash flows.



|                    |  |                |         |  |                            |  |           |                 |  |  |                 |  |  |                  |         |  |                     |  |         |  |  |  |         | 
|------------------- |  | -------------- | ------- |  | -------------------------- |  | --------- | --------------- |  |  | --------------- |  |  | ---------------- | ------- |  | ------------------- |  | ------- |  |  |  | ------- | 
|2013                |  | Carryingamount |         |  | Totalcontractualcash flows |  |           | One yearor less |  |  | One to twoyears |  |  | Two to fiveyears |         |  | More than fiveyears | 
|                    |  | 000          |         |  | 000                      |  |           | 000           |  |  | 000           |  |  | 000            |         |  | 000               | 
|Borrowings*         |  |                | 815,721 |  |                            |  | 983,234   |                 |  |  | 50,202          |  |  |                  | 107,762 |  |                     |  | 339,005 |  |  |  | 486,265 | 
|Derivatives         |  |                | 11,756  |  |                            |  | 11,817    |                 |  |  | 5,933           |  |  |                  | 4,030   |  |                     |  | 1,854   |  |  |  |        | 
|Other liabilities** |  |                | 118,232 |  |                            |  | 377,684   |                 |  |  | 55,222          |  |  |                  | 9,396   |  |                     |  | 34,042  |  |  |  | 279,024 | 
|Total               |  |                | 945,709 |  |                            |  | 1,372,735 |                 |  |  | 111,357         |  |  |                  | 121,188 |  |                     |  | 374,901 |  |  |  | 765,289 | 
|                    |  |                |         |  |                            | 
|2012                |  | Carryingamount |         |  | Totalcontractualcash flows |  |           | One yearor less |  |  | One to twoyears |  |  | Two to fiveyears |         |  | More than fiveyears | 
|                    |  | 000          |         |  | 000                      |  |           | 000           |  |  | 000           |  |  | 000            |         |  | 000               | 
|Borrowings*         |  |                | 540,734 |  |                            |  | 632,418   |                 |  |  | 99,875          |  |  |                  | 25,329  |  |                     |  | 388,361 |  |  |  | 118,853 | 
|Derivatives         |  |                | 17,828  |  |                            |  | 17,904    |                 |  |  | 5,126           |  |  |                  | 4,837   |  |                     |  | 7,526   |  |  |  | 415     | 
|Other liabilities** |  |                | 107,171 |  |                            |  | 334,089   |                 |  |  | 45,249          |  |  |                  | 17,156  |  |                     |  | 23,852  |  |  |  | 247,832 | 
|Total               |  |                | 665,733 |  |                            |  | 984,411   |                 |  |  | 150,250         |  |  |                  | 47,322  |  |                     |  | 419,739 |  |  |  | 367,100 | 



|* | Borrowings include accrued interest.
|- | ------------------------------------

|** | Other liabilities comprise long term liabilities from leases, other long term liabilities, trade and other payables, payables related to acquisitions, liabilities held for sale and accrued expenditure.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Market risk

Market risk embodies
the potential for both losses and gains and includes price risk, currency risk and interest rate risk.

The Groups strategy for managing market risk
is driven by the Groups investment objective which is managing and administrating the existing property portfolio and identifying potentially attractive new investments in the market, conducting due diligence for acquisitions and managing all
the stages of the acquisition process. The Groups market risk is managed on a daily basis in accordance with the policies and procedures in place.

The Groups overall market positions are monitored on a monthly basis.

Information about the key unobservable inputs used in fair value measurement is disclosed in note 1.36.

Price risk

The Groups investment properties are
valued at fair value. These fair values are influenced by the recent turbulence in the global markets as well as the limited amount of publicly available and up to date data relating to the real estate markets in the countries in which the Group
operates. The Group is therefore exposed to price risks resulting from movements in the Groups asset values that could change significantly during subsequent periods, see also note 1.36. At present, it is not possible to assess with accuracy
the extent of such changes.



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Currency risk

The Group is exposed to currency risk on cash balances that are denominated in foreign currencies. Investment properties and financial instruments denominated
in the Groups functional currency do not represent a currency risk.

To eliminate the risk of transactions in foreign currencies, the Group attempts
to match its income with its expense in the same currency, thus reducing the currency risk.

The Group is mainly financed in EUR. The rents payable to the
Group under the various lease agreements with tenants are mainly denominated in EUR. The Group currently has 78% of GRI denominated in EUR (2012: 78%), 10 % in CZK (2012: 11%), 4% in USD (2012: 4%) and 8% in other local currencies (2012: 7%).
GRI denominated in USD is mainly generated in Russia. However, the income of most tenants is denominated in the local currency of the relevant country in which they are based. The occupancy cost ratio, which reflects the tenants rental cost as
a proportion of turnover, can be affected by fluctuations in the euro, the currency in which rent is based or payable, against the relevant local currency in which the tenant generates turnover. Accordingly, a weakening of the local currency against
the euro could result in the Groups properties becoming less attractive, or over-rented. Such fluctuations could also result in these rents becoming unsustainable for the tenants concerned, leading to the respective tenants demanding discounts
or even defaulting.

The following tables set out the exposure to foreign currency risk and net exposure to foreign currencies of the Groups
financial assets and liabilities:



|     |  |                 |        |  |                      |  |         |              |  |  |         |  
|---- |  | --------------- | ------ |  | -------------------- |  | ------- | ------------ |  |  | ------- | -
|2013 |  | Financialassets |        |  | Financialliabilities |  |         | Net exposure | 
|     |  | 000           |        |  | 000                |  |         | 000        | 
|CZK  |  |                 | 9,371  |  |                      |  | (36,654 | )            |  |  | (27,283 | )
|HUF  |  |                 | 2,296  |  |                      |  | (1,782  | )            |  |  | 514     |  
|PLN  |  |                 | 16,672 |  |                      |  | (48,622 | )            |  |  | (31,950 | )
|RON  |  |                 | 1,190  |  |                      |  | (641    | )            |  |  | 549     |  
|RUB  |  |                 | 7,292  |  |                      |  | (23,415 | )            |  |  | (16,123 | )
|TRY  |  |                 | 5      |  |                      |  | (2,812  | )            |  |  | (2,807  | )
|LVL  |  |                 | 250    |  |                      |  | (796    | )            |  |  | (546    | )
|BGN  |  |                 | 12     |  |                      |  | (53     | )            |  |  | (41     | )
|UAH  |  |                 | 2      |  |                      |  | (54     | )            |  |  | (52     | )
|GEL  |  |                 |       |  |                      |  | (166    | )            |  |  | (166    | )
|USD  |  |                 | 417    |  |                      |  | (1,200  | )            |  |  | (783    | )



|     |  |                 |        |  |                      |  |         |              |  |  |         |  
|---- |  | --------------- | ------ |  | -------------------- |  | ------- | ------------ |  |  | ------- | -
|2012 |  | Financialassets |        |  | Financialliabilities |  |         | Net exposure | 
|     |  | 000           |        |  | 000                |  |         | 000        | 
|CZK  |  |                 | 6,290  |  |                      |  | (43,273 | )            |  |  | (36,983 | )
|HUF  |  |                 | 3,081  |  |                      |  | (1,335  | )            |  |  | 1,746   |  
|PLN  |  |                 | 42,147 |  |                      |  | (48,650 | )            |  |  | (6,503  | )
|DKK  |  |                 | 2      |  |                      |  | (27     | )            |  |  | (25     | )
|RON  |  |                 | 722    |  |                      |  | (322    | )            |  |  | 400     |  
|RUB  |  |                 | 7,454  |  |                      |  | (19,431 | )            |  |  | (11,977 | )
|TRY  |  |                 | 2      |  |                      |  | (2,190  | )            |  |  | (2,188  | )
|LVL  |  |                 | 197    |  |                      |  | (653    | )            |  |  | (456    | )
|BGN  |  |                 | 5      |  |                      |  | (78     | )            |  |  | (73     | )
|UAH  |  |                 |       |  |                      |  | (31     | )            |  |  | (31     | )
|GEL  |  |                 | 3      |  |                      |  | (15     | )            |  |  | (12     | )
|USD  |  |                 | 886    |  |                      |  | (1,108  | )            |  |  | (222    | )



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Sensitivity Analysis

The table below indicates how a 10% point strengthening of the currencies stated below against the euro as at 31 December 2013 and 31 December 2012
would have increased/(decreased) the profit in the income statement. This analysis assumes that all other variables remain constant. The recording and measurement of foreign currency results is undertaken in accordance with the principles outlined
in standard IAS 21.

The table below does not take into account potential gains and losses on investment properties measured at fair value which are
sensitive to foreign exchange fluctuations (e.g. rents in Russia denominated in USD) nor does it take into account the impact on any other non-financial assets or liabilities.



|    |  |             |        |   |             |  |        |  
|--- |  | ----------- | ------ | - | ----------- |  | ------ | -
|    |  | 2013        |        |   | 2012        | 
|    |  | Gain/(Loss) |        |   | Gain/(Loss) | 
|    |  | 000       |        |   | 000       | 
|CZK |  |             | (2,728 | ) |             |  | (3,698 | )
|HUF |  |             | 51     |   |             |  | 175    |  
|PLN |  |             | (3,195 | ) |             |  | (650   | )
|DKK |  |             |       |   |             |  | (3     | )
|RON |  |             | 55     |   |             |  | 40     |  
|RUB |  |             | (1,612 | ) |             |  | (1,198 | )
|TRY |  |             | (281   | ) |             |  | (219   | )
|LVL |  |             | (55    | ) |             |  | (46    | )
|BGN |  |             | (4     | ) |             |  | (7     | )
|UAH |  |             | (5     | ) |             |  | (3     | )
|GEL |  |             | (17    | ) |             |  | (1     | )
|USD |  |             | (78    | ) |             |  | (22    | )

Interest rate risk

The
majority of financial instruments bear interest on a fixed interest basis. The interest rate risks associated with the Groups financial instruments bearing variable interest rates are mainly hedged by making use of financial derivatives
(interest rate swaps), see also note 1.36. As all financial instruments, other than the derivatives, were measured at amortised cost in 2013, there were no value movements due to interest rate risk fluctuations in 2013. The interest rate risk was,
therefore, reduced to the impact on the income statement of the interest paid on borrowings bearing variable interest rates. The carrying amount of the borrowings bearing variable interest rates was 154.3 million as at 31 December
2013 (2012: 190.4 million).

Interest rate exposure arising from long term borrowings is analysed on a regular basis. As at 31 December 2013,
81% (2012: 65%) of the Groups borrowings were at a fixed interest rate. Various scenarios are simulated taking into consideration refinancing, renewal of existing positions and alternative financing through bonds.

Numerous general economic factors cause interest rates to fluctuate; in addition, interest rates are highly sensitive to a governments monetary policy,
domestic and international economic and political conditions, the situation in the financial markets and inflation rates. Interest rates on real estate loans are also affected by other factors specific to real estate finance and equity markets, such
as changes in real estate values and overall liquidity in the real estate debt and equity markets.



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Increases in interest rates could adversely affect the Groups ability to finance or refinance
additional borrowings, as the availability of financing and refinancing proceeds may be reduced to the extent that income from properties fails to increase sufficiently to maintain debt service coverage.

Sensitivity Analysis

The Group seeks to safeguard its
results and cash flow against interest rate fluctuations by using financial derivatives (interest rate swaps) to hedge financial instruments bearing variable interest rates.

As at 31 December 2013 and 31 December 2012, it was estimated that a general increase (decrease) of one percentage point (100 basis points) in
interest rates would increase (decrease) the Groups interest expenses arising from variable interest rate instruments and subsequently decrease (increase) the profit for the year by approximately 1.5 million (2012: 1.9
million).



|1.40 | Transactions with related parties
|---- | ---------------------------------

To the best of managements knowledge, during the year ended
31 December 2013 and 31 December 2012, no single shareholder of Atrium held more than 5% of the listed ordinary shares, except for:



| |  | Gazit-Globe Ltd (Gazit-Globe) which held 149,325,178 shares (2012: 128,908,715 shares) in Atrium, representing approximately 39.8% (2012: 34.5%) of Atriums total shares as at 31 December 2013 and;
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Apollo Global Real Estate (Apollo) which held 52,069,621 shares (2012: 72,486,084 shares) in Atrium, representing approximately 13.9% (2012: 19.4%) of Atriums total shares as at 31 December 2013.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Gazit-Globe and Apollo jointly held approximately 53.7% (2012: 53.9%) of Atriums shares in issue as at 31 December 2013.

In August 2013, Gazit-Globe Ltd. (Gazit-Globe) purchased 20,416,463 shares from Apollo Global Real Estate (Apollo), representing
approximately 5.5% of Atriums total shares.

Transactions between Atrium and its subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note.

Except as described in the following paragraphs, the directors have not entered into any transactions
with Atrium and its subsidiaries, do not own shares in Atrium and have not invested in any debt issued by the Group.



|a. | Chaim Katzman, Director and Chairman of the Board of Directors together with family members held 255,000 shares in Atrium as at 31 December 2013 and as at 31 December 2012. In total, Mr. Katzman and his
family, through his holdings in Norstar Holdings Inc and Gazit-Globe indirectly held 28,689,624 of Atriums shares (2012: 31,429,124 shares), as at 31 December 2013. Together, these direct and indirect holdings represented approximately
7.7% of Atriums total shares as at 31 December 2013. In November 2013, the Compensation and Nominating Committee approved the grant of 200,000 options of the ESOP 2013 option plan to Mr. Katzman. Chaim Katzman is also the Chairman of
the Board of Directors of Gazit-Globe.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|b. | Aharon Soffer, Director, through his holding of Gazit-Globe shares, indirectly held 16,989 of Atriums shares (2012: 15,504 shares), as at 31 December 2013. This indirect holding represents approximately
0.005% (2012: 0.004%) of Atriums total shares as at 31 December 2013.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|c. | Dipak Rastogi retired from the board on 11 November 2013. Through his family trust, he held an indirect investment of 435,755 shares in Atrium as at 31 December 2012; the shares were sold in August 2013.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|d. | Joseph Azrack, Director, held 13,831 shares in Atrium and an indirect beneficial ownership of 10,661 shares in Atrium as at 31 December 2013 and as at 31 December 2012. In addition, Joseph Azrack is the
Managing Partner of Apollo. Apollo and its affiliates advise and manage a syndicate of investors who in aggregate own 52,069,621 Atrium shares as detailed above.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|e. | Thomas Wernink, Director, held 5,000 shares in Atrium as at 31 December 2013 and as at 31 December 2012.
|-- | --------------------------------------------------------------------------------------------------------



|f. | In September 2013, Peter Linneman, Director, elected to receive 2,369 shares in Atrium in lieu of 10,000 of his annual directors fee. Peter Linneman held 26,629 shares in Atrium as at 31 December 2013
and 24,260 as at 31 December 2012.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|g. | Simon Radford, Director, held 11,065 shares in Atrium as at 31 December 2013 and as at 31 December 2012.
|-- | --------------------------------------------------------------------------------------------------------



|h. | In March 2013, the Compensation and Nominating Committee determined employee annual bonus payments for 2012. Rachel Lavine, Chief Executive Officer, was awarded a total bonus award of 625,000 which was settled
partially by the guaranteed payment of 375,000 in cash and partially via the issuance of 34,958 new shares on 22 April 2013, at 4.539 per share, net of tax. These shares are not subject to any lock-up period.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In April 2013, Rachel Lavine exercised 1,000,000 fully vested employee share options and accordingly received 532,184 new shares, net of tax,
as a result of a cashless exercise pursuant to a separate agreement with Atrium in accordance with the terms of ESOP 2009.

In 2013, the
Compensation and Nominating Committee approved the following amendments to the employment agreement of Rachel Lavine: a 30,000 increase of her basic salary per annum to 655,000 with effect from 1st April 2013, a grant of 1,600,000 options of the ESOP 2013 option plan and 400,000 allotted shares to be issued over a four year period after 1 August 2013 with one quarter, i.e. one
hundred thousand, allotted shares to be issued on the first, second, third and fourth anniversaries of 1 August 2013, provided that Rachel is still employed by the Company at each date of issue.

Based on a consultancy agreement with the Group, Chaim Katzman, Chairman of the Board was entitled to consultancy fees of 550,000 in 2013 (2012:
550,000) and expenses as permitted under his agreement.

Atrium has paid flight and travel expenses of 0.4 million (2012: 0.2
million) to MGN Icarus Inc, a subsidiary of Gazit-Globe. Such travel expenses were at arms length and were incurred by the Chairman of the Board and other members of staff for property tours and other business activities.



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In addition, Gazit-Globe reimbursed Atrium for audit expenses of 0.3 million which were paid by
Atrium on its behalf (2012: 0.5 million).

The total remuneration of the non-executive directors arising from their directors contracts
amounted to 0.5 million for the year 2013 (2012: 0.6 million).

The aggregate annual remuneration paid or payable to the Group Executive
Management team for the year ended 31 December 2013, including base salary, annual guaranteed bonus, allowances and benefits was 3.5 million (2012: 3.3 million) (which includes remuneration of three Group Executive Management
personnel - Soňa Hýbnerová, Liad Barzilai and Ljudmila Popova - prior to their respective promotions). In addition, the share based payment expenses for the Group Executive Management team amounted to 0.4 million (2012:
0.9 million).

The Group contracted legal services from Atlas Legal Consultancy Services B.V., a consultancy company controlled by Marc Lavine, a
related party to Rachel Lavine, amounting to 0.3 million in 2013 (2012: 0.5 million). Amounts were billed on the basis of arms length rates for such services.

Atrium has a contract with Aztec Financial Services (Jersey) Limited for the provision of administration and company secretarial services under which it paid
fees amounting to 0.3 million in 2013 (2012: 0.2 million). Aztec Financial Services (Jersey) Limited is part of Aztec Group where Simon Radford is a director and shareholder.



|1.41 | Contingencies
|---- | -------------

The circumstances of the acquisition of 88,815,500 Austrian Depositary Certificate
(ADCs) representing shares of Atrium announced in August 2007 (the ADC Purchases), security issuances and associated events have been subject to regulatory investigations and other proceedings that continue in Austria.

In 2012, following an investigation, the Jersey Financial Services Commission reconfirmed its conclusions, that the ADC Purchases involved no breach of the
Jersey Companies (Jersey) Law and that its investigation has concluded without any finding of wrong doing.

Atrium is, however, involved in certain claims
submitted by ADC holders alleging losses derived from price fluctuations in 2007 and associated potential claims. As at 10 March 2014, the latest practicable date prior to authorisation of this report, the aggregate amount claimed in
proceedings to which Atrium was then a party in this regard was approximately 14.6 million. The number of claims and amounts claimed are expected to fluctuate over time as proceedings develop, are dismissed, withdrawn or otherwise
resolved. The claims are at varying stages of development and are expected to be resolved over a number of years. While a provision has been recorded in respect of these proceedings, based on current knowledge and management assumptions
and includes the estimated associated expenses, the actual outcome of the claims and the timing of their resolution cannot be estimated reliably by the Company at this time. The further information ordinarily required by IAS 37, Provisions,
contingent liabilities and contingent assets has not been disclosed on the grounds that it can be expected to seriously prejudice the outcome of the claims. Atrium rejects the claims and is defending them vigorously.



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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 Atrium investors, 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 criminal investigation proceedings 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. In any event, Atrium believes a finding of liability on its part would be inappropriate and,
accordingly, intends to actively defend itself.

The continuing uncertainty in the various economies in which the Group has its operations and assets,
especially the euro zone and the developing markets in which the Group invests, could lead to significant changes in the values of the Groups assets during subsequent periods. Management is not presently able to assess with accuracy the extent
of any such changes.



|1.42 | Subsequent events
|---- | -----------------

In February 2014, Josip Kardun joined Atriums Group Executive Management Team
as Chief Operating Officer following the departure of Nils-Christian Hakert who leaves the Group at the end of March. Mr Kardun also acts as Deputy Chief Executive Officer.



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|2. | 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



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LOGO

Atrium European Real Estate Limited

Consolidated Financial Statements 2012



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##### Table of Contents

ATRIUM EUROPEAN REAL ESTATE LIMITED

Contents



|                                     |  |  |       | 
|------------------------------------ |  |  | ----- | 
|1. Consolidated Financial Statements |  |  | F-233 | 
|Notes to the Financial Statements    |  |  | F-238 | 
|2. Independent Auditors Report      |  |  | F-303 | 



F-232



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##### Table of Contents

ATRIUM EUROPEAN REAL ESTATE LIMITED

1. Consolidated Financial Statements

Consolidated Statement of Financial Position at 31 December 2012



|                                          |  |      |      |  |       |  |           |       |  |  |           |  |  |       |           |   |  |  |           | 
|----------------------------------------- |  | ---- | ---- |  | ----- |  | --------- | ----- |  |  | --------- |  |  | ----- | --------- | - |  |  | --------- | 
|                                          |  |      |      |  | 2012  |  |           | 2011  | 
|                                          |  | Note |      |  | 000 |  |           | 000 |  |  | 000     |  |  | 000 |          
|Assets                                    |  |      |      |  |       |  |           |       |  |  |           |  |  |       |           |   |  |  |           | 
|Non-current assets                        |  |      |      |  |       |  |           |       |  |  |           |  |  |       |           |   |  |  |           | 
|Standing investments                      |  |      | 1.4  |  |       |  | 2,185,336 |       |  |  |           |  |  |       | 2,077,246 |   |  |  |           | 
|Developments and land                     |  |      | 1.5  |  |       |  | 538,395   |       |  |  |           |  |  |       | 587,351   |   |  |  |           | 
|Property, plant and equipment             |  |      | 1.6  |  |       |  | 3,111     |       |  |  |           |  |  |       | 2,196     |   |  |  |           | 
|                                          |  |      |      |  |       |  |           |       |  |  | 2,726,842 |  |  |       |           |   |  |  | 2,666,793 | 
|Intangible assets and goodwill            |  |      | 1.7  |  |       |  | 16,483    |       |  |  |           |  |  |       | 14,811    |   |  |  |           | 
|Equity-accounted investees                |  |      | 1.8  |  |       |  | 1,455     |       |  |  |           |  |  |       |          |   |  |  |           | 
|Deferred tax assets                       |  |      | 1.9  |  |       |  | 8,742     |       |  |  |           |  |  |       | 2,330     |   |  |  |           | 
|Long term loans                           |  |      | 1.10 |  |       |  | 36,592    |       |  |  |           |  |  |       | 41,240    |   |  |  |           | 
|Other assets                              |  |      | 1.11 |  |       |  | 27,003    |       |  |  |           |  |  |       | 40,201    |   |  |  |           | 
|                                          |  |      |      |  |       |  |           |       |  |  | 90,275    |  |  |       |           |   |  |  | 98,582    | 
|Current assets                            |  |      |      |  |       |  |           |       |  |  |           |  |  |       |           |   |  |  |           | 
|Inventory                                 |  |      | 1.5  |  |       |  | 2,214     |       |  |  |           |  |  |       |          |   |  |  |           | 
|Receivables from tenants                  |  |      | 1.12 |  |       |  | 18,037    |       |  |  |           |  |  |       | 14,267    |   |  |  |           | 
|Prepayments                               |  |      | 1.13 |  |       |  | 12,504    |       |  |  |           |  |  |       | 14,777    |   |  |  |           | 
|Other receivables                         |  |      | 1.14 |  |       |  | 8,599     |       |  |  |           |  |  |       | 8,693     |   |  |  |           | 
|Income tax receivable                     |  |      |      |  |       |  | 2,168     |       |  |  |           |  |  |       | 2,564     |   |  |  |           | 
|Short term loans                          |  |      | 1.10 |  |       |  | 59        |       |  |  |           |  |  |       | 101       |   |  |  |           | 
|Cash and cash equivalents                 |  |      | 1.15 |  |       |  | 207,843   |       |  |  |           |  |  |       | 234,924   |   |  |  |           | 
|                                          |  |      |      |  |       |  |           |       |  |  | 251,424   |  |  |       |           |   |  |  | 275,326   | 
|Total assets                              |  |      |      |  |       |  |           |       |  |  | 3,068,541 |  |  |       |           |   |  |  | 3,040,701 | 
|Equity and liabilities                    |  |      |      |  |       |  |           |       |  |  |           |  |  |       |           |   |  |  |           | 
|Equity                                    |  |      |      |  |       |  |           |       |  |  |           |  |  |       |           |   |  |  |           | 
|Stated capital                            |  |      | 1.16 |  |       |  | 2,836,658 |       |  |  |           |  |  |       | 2,899,118 |   |  |  |           | 
|Other reserves                            |  |      | 1.17 |  |       |  | (9,562    | )     |  |  |           |  |  |       | (3,768    | ) |  |  |           | 
|Retained earnings                         |  |      |      |  |       |  | (457,158  | )     |  |  |           |  |  |       | (531,131  | ) |  |  |           | 
|Currency translation                      |  |      |      |  |       |  | (85,505   | )     |  |  |           |  |  |       | (84,393   | ) |  |  |           | 
|Non-controlling interest                  |  |      |      |  |       |  | (3,061    | )     |  |  |           |  |  |       | (15,283   | ) |  |  |           | 
|                                          |  |      |      |  |       |  |           |       |  |  | 2,281,372 |  |  |       |           |   |  |  | 2,264,543 | 
|Non-current liabilities                   |  |      |      |  |       |  |           |       |  |  |           |  |  |       |           |   |  |  |           | 
|Long term borrowings                      |  |      | 1.18 |  |       |  | 462,075   |       |  |  |           |  |  |       | 542,662   |   |  |  |           | 
|Derivatives                               |  |      | 1.19 |  |       |  | 17,828    |       |  |  |           |  |  |       | 9,060     |   |  |  |           | 
|Provisions                                |  |      |      |  |       |  | 1,000     |       |  |  |           |  |  |       | 589       |   |  |  |           | 
|Deferred tax liabilities                  |  |      | 1.20 |  |       |  | 98,775    |       |  |  |           |  |  |       | 76,758    |   |  |  |           | 
|Long term liabilities from finance leases |  |      | 1.21 |  |       |  | 47,320    |       |  |  |           |  |  |       | 44,483    |   |  |  |           | 
|Other long term liabilities               |  |      | 1.22 |  |       |  | 19,730    |       |  |  |           |  |  |       | 17,457    |   |  |  |           | 
|                                          |  |      |      |  |       |  |           |       |  |  | 646,728   |  |  |       |           |   |  |  | 691,009   | 
|Current liabilities                       |  |      |      |  |       |  |           |       |  |  |           |  |  |       |           |   |  |  |           | 
|Trade and other payables                  |  |      | 1.23 |  |       |  | 37,989    |       |  |  |           |  |  |       | 36,338    |   |  |  |           | 
|Payables related to acquisitions          |  |      |      |  |       |  | 389       |       |  |  |           |  |  |       | 485       |   |  |  |           | 
|Accrued expenditure                       |  |      | 1.24 |  |       |  | 26,131    |       |  |  |           |  |  |       | 22,959    |   |  |  |           | 
|Short term borrowings                     |  |      | 1.18 |  |       |  | 74,986    |       |  |  |           |  |  |       | 25,330    |   |  |  |           | 
|Income tax payable                        |  |      |      |  |       |  | 946       |       |  |  |           |  |  |       | 37        |   |  |  |           | 
|                                          |  |      |      |  |       |  |           |       |  |  | 140,441   |  |  |       |           |   |  |  | 85,149    | 
|Total equity and liabilities              |  |      |      |  |       |  |           |       |  |  | 3,068,541 |  |  |       |           |   |  |  | 3,040,701 | 



F-233



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ATRIUM EUROPEAN REAL ESTATE LIMITED

The financial statements were approved and authorised for issue by the Board of Directors on 12 March 2013 and were duly signed on the Boards
behalf by Rachel Lavine, Chief Executive Officer and Chaim Katzman, Chairman.

Consolidated Income Statementfor the year ended 31 December
2012



|                                                                        |  |      |         |  |       |  |         |       |  |  |         |  |  |       |         |   |  |  |         | 
|----------------------------------------------------------------------- |  | ---- | ------- |  | ----- |  | ------- | ----- |  |  | ------- |  |  | ----- | ------- | - |  |  | ------- | 
|                                                                        |  |      |         |  | 2012  |  |         | 2011  | 
|                                                                        |  | Note |         |  | 000 |  |         | 000 |  |  | 000   |  |  | 000 |        
|Gross rental income                                                     |  |      | 1.25    |  |       |  | 193,475 |       |  |  |         |  |  |       | 172,173 |   |  |  |         | 
|Service charge income                                                   |  |      | 1.26    |  |       |  | 73,762  |       |  |  |         |  |  |       | 68,431  |   |  |  |         | 
|Net property expenses                                                   |  |      | 1.27    |  |       |  | (85,958 | )     |  |  |         |  |  |       | (85,734 | ) |  |  |         | 
|Net rental income                                                       |  |      |         |  |       |  |         |       |  |  | 181,279 |  |  |       |         |   |  |  | 154,870 | 
|Net result on acquisitions and disposals                                |  |      | 1.28    |  |       |  | 793     |       |  |  |         |  |  |       | 31,791  |   |  |  |         | 
|Costs connected with developments                                       |  |      |         |  |       |  | (6,161  | )     |  |  |         |  |  |       | (4,660  | ) |  |  |         | 
|Revaluation of investment properties                                    |  |      | 1.4,1.5 |  |       |  | (4,961  | )     |  |  |         |  |  |       | 77,321  |   |  |  |         | 
|Other depreciation, amortisation and impairments                        |  |      | 1.29    |  |       |  | (1,835  | )     |  |  |         |  |  |       | (1,392  | ) |  |  |         | 
|Administrative expenses                                                 |  |      | 1.30    |  |       |  | (29,125 | )     |  |  |         |  |  |       | (37,770 | ) |  |  |         | 
|Net operating profit                                                    |  |      |         |  |       |  |         |       |  |  | 139,990 |  |  |       |         |   |  |  | 220,160 | 
|Interest income                                                         |  |      | 1.31    |  |       |  | 3,883   |       |  |  |         |  |  |       | 6,120   |   |  |  |         | 
|Interest expense                                                        |  |      | 1.31    |  |       |  | (23,103 | )     |  |  |         |  |  |       | (23,242 | ) |  |  |         | 
|Other financial income/(expenses)                                       |  |      | 1.32    |  |       |  | (4,697  | )     |  |  |         |  |  |       | (33,341 | ) |  |  |         | 
|Profit before taxation                                                  |  |      |         |  |       |  |         |       |  |  | 116,073 |  |  |       |         |   |  |  | 169,697 | 
|Taxation charge for the year                                            |  |      | 1.33    |  |       |  | (19,898 | )     |  |  |         |  |  |       | (26,451 | ) |  |  |         | 
|Profit after taxation for the year                                      |  |      |         |  |       |  |         |       |  |  | 96,175  |  |  |       |         |   |  |  | 143,246 | 
|Attributable to:                                                        |  |      |         |  |       |  |         |       |  |  |         |  |  |       |         |   |  |  |         | 
|Owners of the parent                                                    |  |      |         |  |       |  | 98,712  |       |  |  |         |  |  |       | 145,270 |   |  |  |         | 
|Non-controlling interest                                                |  |      |         |  |       |  | (2,537  | )     |  |  |         |  |  |       | (2,024  | ) |  |  |         | 
|                                                                        |  |      |         |  |       |  |         |       |  |  | 96,175  |  |  |       |         |   |  |  | 143,246 | 
|Basic and diluted earnings per share in , attributable to shareholders |  |      | 1.34    |  |       |  |         |       |  |  | 0.26    |  |  |       |         |   |  |  | 0.39    | 



F-234



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##### Table of Contents

ATRIUM EUROPEAN REAL ESTATE LIMITED

Consolidated Statement of Comprehensive Incomefor the year ended 31 December 2012



|                                                                                        |  |       |        |   |       |  |        |       |  |  |         |   |  |  |         | 
|--------------------------------------------------------------------------------------- |  | ----- | ------ | - | ----- |  | ------ | ----- |  |  | ------- | - |  |  | ------- | 
|                                                                                        |  | 2012  |        |   | 2011  | 
|                                                                                        |  | 000 |        |   | 000 |  |        | 000 |  |  | 000   |  
|Profit for the year                                                                     |  |       | 96,175 |   |       |  |        |       |  |  | 143,246 |   |  |  |         | 
|Items that may be reclassified subsequently to income statement:                        |  |       |        |   |       |  |        |       |  |  |         |   |  |  |         | 
|Exchange differences arising on translation of foreign operations (net of deferred tax) |  |       | (1,108 | ) |       |  |        |       |  |  | 7,663   |   |  |  |         | 
|Movements in hedging reserves (net of deferred tax)                                     |  |       | (7,102 | ) |       |  |        |       |  |  | (7,339  | ) |  |  |         | 
|Total comprehensive income for the year                                                 |  |       |        |   |       |  | 87,965 |       |  |  |         |   |  |  | 143,570 | 
|Attributable to:                                                                        |  |       |        |   |       |  |        |       |  |  |         |   |  |  |         | 
|Owners of the parent                                                                    |  |       | 90,498 |   |       |  |        |       |  |  | 146,175 |   |  |  |         | 
|Non-controlling interest                                                                |  |       | (2,533 | ) |       |  | 87,965 |       |  |  | (2,605  | ) |  |  | 143,570 | 



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ATRIUM EUROPEAN REAL ESTATE LIMITED

Consolidated Cash Flow Statementfor the year ended 31 December 2012



|                                                                        |  |      |      |  |       |  |          |       |  |  |          |  
|----------------------------------------------------------------------- |  | ---- | ---- |  | ----- |  | -------- | ----- |  |  | -------- | -
|                                                                        |  |      |      |  | 2012  |  |          | 2011  | 
|                                                                        |  | Note |      |  | 000 |  |          | 000 | 
|Cash flows from operating activities                                    |  |      |      |  |       |  |          |       |  |  |          |  
|Profit before taxation                                                  |  |      |      |  |       |  | 116,073  |       |  |  | 169,697  |  
|Adjustments for:                                                        |  |      |      |  |       |  |          |       |  |  |          |  
|Other depreciation, amortisation and impairments                        |  |      |      |  |       |  | 1,835    |       |  |  | 1,392    |  
|Revaluation of investment properties                                    |  |      |      |  |       |  | 4,961    |       |  |  | (77,321  | )
|Foreign exchange loss/(gain)                                            |  |      |      |  |       |  | (7,860   | )     |  |  | 22,290   |  
|Change in provisions and share based payments                           |  |      |      |  |       |  | 1,718    |       |  |  | 1,763    |  
|(Profit)/loss on disposal of investment properties and financial assets |  |      |      |  |       |  | (793     | )     |  |  | (31,791  | )
|Impairment loss on financial assets and other financial expenses        |  |      |      |  |       |  | 16,013   |       |  |  | 11,451   |  
|(Profit) /loss on purchase of financial liabilities                     |  |      |      |  |       |  | (4,477   | )     |  |  | (923     | )
|Interest expense                                                        |  |      |      |  |       |  | 23,103   |       |  |  | 23,242   |  
|Interest income                                                         |  |      |      |  |       |  | (3,883   | )     |  |  | (6,120   | )
|Operating cash flows before working capital changes                     |  |      |      |  |       |  | 146,690  |       |  |  | 113,680  |  
|Decrease in trade and other receivables                                 |  |      |      |  |       |  | 1,290    |       |  |  | 11,466   |  
|(Increase)/decrease in prepayments                                      |  |      |      |  |       |  | 2,273    |       |  |  | (1,301   | )
|Decrease in trade and other payables                                    |  |      |      |  |       |  | (4,215   | )     |  |  | (2,984   | )
|Increase/(decrease) in accrued expenditure                              |  |      |      |  |       |  | 5,318    |       |  |  | (368     | )
|Cash generated from operating activities                                |  |      |      |  |       |  | 151,356  |       |  |  | 120,493  |  
|Interest paid                                                           |  |      |      |  |       |  | (23,876  | )     |  |  | (20,926  | )
|Interest received                                                       |  |      |      |  |       |  | 547      |       |  |  | 3,192    |  
|Corporation taxes paid                                                  |  |      |      |  |       |  | (1,534   | )     |  |  | (1,358   | )
|Net cash generated from operating activities                            |  |      |      |  |       |  | 126,493  |       |  |  | 101,401  |  
|Cash flows from investing activities                                    |  |      |      |  |       |  |          |       |  |  |          |  
|Payments related to investment properties and other assets              |  |      |      |  |       |  | (47,872  | )     |  |  | (478,421 | )
|Proceeds from the disposal of investment properties                     |  |      |      |  |       |  | 1,006    |       |  |  | 170,555  |  
|Deconsolidating of subsidiary                                           |  |      | 1.15 |  |       |  | (417     | )     |  |  |         |  
|Payment related to other financial assets                               |  |      |      |  |       |  | (273     | )     |  |  |         |  
|Sale of subsidiaries net of cash acquired                               |  |      |      |  |       |  |         |       |  |  | (6,511   | )
|Acquisition of subsidiaries net of cash acquired                        |  |      |      |  |       |  |         |       |  |  | (3,799   | )
|Net cash used in investing activities                                   |  |      |      |  |       |  | (47,556  | )     |  |  | (318,176 | )
|Net cash flow before financing activities                               |  |      |      |  |       |  | 78,937   |       |  |  | (216,775 | )
|Cash flows from financing activities                                    |  |      |      |  |       |  |          |       |  |  |          |  
|Proceeds from issuance of share capital                                 |  |      |      |  |       |  | 814      |       |  |  | 310      |  
|Repayment of long term loans                                            |  |      |      |  |       |  | (74,304  | )     |  |  | (105,154 | )
|Receipt of long term loans                                              |  |      |      |  |       |  | 48,784   |       |  |  | 248,065  |  
|Payments for land leases                                                |  |      |      |  |       |  | (8,103   | )     |  |  | (6,130   | )
|Purchase of non-controlling interest                                    |  |      |      |  |       |  | (9,409   | )     |  |  |         |  
|Dividends paid                                                          |  |      |      |  |       |  | (63,431  | )     |  |  | (52,198  | )
|Net cash generated/(used) in financing activities                       |  |      |      |  |       |  | (105,649 | )     |  |  | 84,893   |  
|Net decrease in cash and cash equivalents                               |  |      |      |  |       |  | (26,712  | )     |  |  | (131,882 | )
|Cash and cash equivalents at the beginning of year                      |  |      |      |  |       |  | 234,924  |       |  |  | 373,524  |  
|Effect of exchange rate fluctuations on cash held                       |  |      |      |  |       |  | (369     | )     |  |  | (6,718   | )
|Cash and cash equivalents at the end of year                            |  |      | 1.15 |  |       |  | 207,843  |       |  |  | 234,924  |  



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##### Table of Contents

ATRIUM EUROPEAN REAL ESTATE LIMITED

Consolidated Statement of Changes in Equityfor the year ended 31 December 2012



|                                        |  |      |      |  |                    |  |           |                    |  |  |                      |   |  |                       |         |   |                          |  |          |                                                   |  |  |                              |   |  |                   |           |   |  |  |         |   |  |  |           |  
|--------------------------------------- |  | ---- | ---- |  | ------------------ |  | --------- | ------------------ |  |  | -------------------- | - |  | --------------------- | ------- | - | ------------------------ |  | -------- | ------------------------------------------------- |  |  | ---------------------------- | - |  | ----------------- | --------- | - |  |  | ------- | - |  |  | --------- | -
|                                        |  | Note |      |  | Statedcapital000 |  |           | Otherreserves000 |  |  | Hedgingreserves000 |   |  | Retainedearnings000 |         |   | Currencytranslation000 |  |          | Equityattributableto controllingshareholders000 |  |  | Non-controllinginterest000 |   |  | Total equity000 |          
|Balance as at 1 January 2012            |  |      |      |  |                    |  | 2,899,118 |                    |  |  | 3,571                |   |  |                       | (7,339  | ) |                          |  | (531,131 | )                                                 |  |  | (84,393                      | ) |  |                   | 2,279,826 |   |  |  | (15,283 | ) |  |  | 2,264,543 |  
|Total comprehensive income              |  |      |      |  |                    |  |          |                    |  |  |                     |   |  |                       | (7,102  | ) |                          |  | 98,712   |                                                   |  |  | (1,112                       | ) |  |                   | 90,498    |   |  |  | (2,533  | ) |  |  | 87,965    |  
|Transactions with owners                |  |      |      |  |                    |  |           |                    |  |  |                      |   |  |                       |         |   |                          |  |          |                                                   |  |  |                              |   |  |                   |           |   |  |  |         |   |  |  |           |  
|Share based payment                     |  |      | 1.17 |  |                    |  |          |                    |  |  | 1,465                |   |  |                       |        |   |                          |  |         |                                                   |  |  |                             |   |  |                   | 1,465     |   |  |  |        |   |  |  | 1,465     |  
|Issue of no par value shares            |  |      | 1.17 |  |                    |  | 971       |                    |  |  | (157                 | ) |  |                       |        |   |                          |  |         |                                                   |  |  |                             |   |  |                   | 814       |   |  |  |        |   |  |  | 814       |  
|Dividends                               |  |      | 1.16 |  |                    |  | (63,431   | )                  |  |  |                     |   |  |                       |        |   |                          |  |         |                                                   |  |  |                             |   |  |                   | (63,431   | ) |  |  |        |   |  |  | (63,431   | )
|Deconsolidated non-controlling interest |  |      |      |  |                    |  |          |                    |  |  |                     |   |  |                       |        |   |                          |  |         |                                                   |  |  |                             |   |  |                   |          |   |  |  | (540    | ) |  |  | (540      | )
|Acquisition of non-controlling interest |  |      |      |  |                    |  |          |                    |  |  |                     |   |  |                       |        |   |                          |  | (24,739  | )                                                 |  |  |                             |   |  |                   | (24,739   | ) |  |  | 15,295  |   |  |  | (9,444    | )
|Balance as at 31 December 2012          |  |      |      |  |                    |  | 2,836,658 |                    |  |  | 4,879                |   |  |                       | (14,441 | ) |                          |  | (457,158 | )                                                 |  |  | (85,505                      | ) |  |                   | 2,284,433 |   |  |  | (3,061  | ) |  |  | 2,281,372 |  
|                                        |  |      |      |  |                    |  |           |                    | 
|                                        |  |      |      |  | Statedcapital000 |  |           | Otherreserves000 |  |  | Hedgingreserves000 |   |  | Retainedearnings000 |         |   | Currencytranslation000 |  |          | Equityattributableto controllingshareholders000 |  |  | Non-controllinginterest000 |   |  | Total equity000 |          
|Balance as at 1 January 2011            |  |      |      |  |                    |  | 2,950,951 |                    |  |  | 1,828                |   |  |                       |        |   |                          |  | (676,401 | )                                                 |  |  | (92,637                      | ) |  |                   | 2,183,741 |   |  |  | 3,234   |   |  |  | 2,186,975 |  
|Total comprehensive income              |  |      |      |  |                    |  |          |                    |  |  |                     |   |  |                       | (7,339  | ) |                          |  | 145,270  |                                                   |  |  | 8,244                        |   |  |                   | 146,175   |   |  |  | (2,605  | ) |  |  | 143,570   |  
|Transactions with owners                |  |      |      |  |                    |  |           |                    |  |  |                      |   |  |                       |         |   |                          |  |          |                                                   |  |  |                              |   |  |                   |           |   |  |  |         |   |  |  |           |  
|Share based payment                     |  |      | 1.17 |  |                    |  |          |                    |  |  | 1,798                |   |  |                       |        |   |                          |  |         |                                                   |  |  |                             |   |  |                   | 1,798     |   |  |  |        |   |  |  | 1,798     |  
|Issue of no par value shares            |  |      | 1.17 |  |                    |  | 365       |                    |  |  | (55                  | ) |  |                       |        |   |                          |  |         |                                                   |  |  |                             |   |  |                   | 310       |   |  |  |        |   |  |  | 310       |  
|Dividends                               |  |      | 1.16 |  |                    |  | (52,198   | )                  |  |  |                     |   |  |                       |        |   |                          |  |         |                                                   |  |  |                             |   |  |                   | (52,198   | ) |  |  |        |   |  |  | (52,198   | )
|Acquisition of non-controlling interest |  |      |      |  |                    |  |          |                    |  |  |                     |   |  |                       |        |   |                          |  |         |                                                   |  |  |                             |   |  |                   |          |   |  |  | (15,912 | ) |  |  | (15,912   | )
|Balance as at 31 December 2011          |  |      |      |  |                    |  | 2,899,118 |                    |  |  | 3,571                |   |  |                       | (7,339  | ) |                          |  | (531,131 | )                                                 |  |  | (84,393                      | ) |  |                   | 2,279,826 |   |  |  | (15,283 | ) |  |  | 2,264,543 |  



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Notes to the Financial Statements

1.1 Reporting entity

Atrium European Real Estate Limited
(Atrium) is a company incorporated and domiciled in Jersey. Its registered office and principal place of business is 11-15 Seaton Place, St. Helier, Jersey, Channel Islands.

The consolidated financial statements of Atrium as at and for the year ended 31 December 2012 comprise Atrium and its subsidiaries (the
Group) and its interest in associates.

The principal activity of the Group is the ownership, management and development of commercial real
estate in the retail sector.

The Group primarily operates in Poland, the Czech Republic, Slovakia, Russia, Hungary and Romania.

1.2 Basis of preparation

Statement of compliance

The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRSs) as
issued by the International Accounting Standards Board (IASB).

Basis of measurement

The consolidated financial statements are prepared on the historical cost basis, except for the following material items in the statement of financial
position:



| |  | Standing investments and developments and land (investment property) are measured at fair value; and
|- |  | ------------------------------------------------------------------------------------------------------



| |  | Derivative financial instruments are measured at fair value.
|- |  | ------------------------------------------------------------

Functional and presentation currency

These financial statements are presented in euro (), which is considered by the Groups management to be the appropriate presentation
currency due to the fact that the majority of the transactions of the Group are denominated in or based on this currency. All financial information presented in euro has been rounded to the nearest thousand, unless stated otherwise.

The individual financial statements of each of the Group entities use the currency of the primary economic environment in which the entity operates as its
functional currency. The currency in which the entity generates rental income is the primary driver for determining the functional currency of that entity, but other cash flows are also taken into account.

The euro has been determined to be the functional currency for the Group companies in Jersey, Poland, the Czech Republic (except certain subsidiaries, which
have CZK as their functional currency), Slovakia, Russia, Hungary, Romania, Latvia, Turkey, Bulgaria, Georgia and Ukraine and also for the intermediate holding companies in Cyprus, Denmark, Italy, Luxembourg, Spain, Sweden and The Netherlands.
Certain subsidiaries in Cyprus have US dollars (USD) as their functional currency.



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As of 1 January 2011, the functional currency for the Russian entities owning developments and land, an
entity in Georgia as well as all the Ukrainian entities was determined to be the euro. The main triggers which were applied to determine the euro as the functional currency were the financing currency, the functional currency of the parent company,
the dependency of those entities on the parent company and the assessment of whether cash flows from the activities of those entities are sufficient to service existing and anticipated debt obligations without funds being made available by the
parent company.

Once the investment properties are rented out, the functional currency of the entity may be changed based on the currency in which rents
are determined or to which rents are bound and taking into account other cash flows.

Amendments to and interpretations of existing standards effective
in the current period

The Group has adopted the following amended IFRSs during 2012:



| |  | IAS 12 (Amendments, December 2010) Deferred Tax: Recovery of Underlying Assets. In December 2010 the IASB issued the Amendments to IAS 12 with an effective date of 1 January 2012. The amendment provides an
exception to the measurement principle in respect of investment property measured using the fair value model. Under the exception, the measurement of deferred tax assets and liabilities is based on a rebuttable presumption that the carrying amount
of the investment property will be recovered entirely through sale. The amendment did not have a material impact on the Groups financial statements.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | IAS 1 (Amendments, June 2011) Presentation of Items of Other Comprehensive Income requires items that will never be recognised in income statement to be presented separately in other comprehensive income from
those that are subject to subsequent reclassification. The amendments only affected disclosure and did not have a material impact on the Groups financial statements. Atrium has early adopted these amendments, as the amendments are effective
for the periods beginning after 1 July 2012.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

New standards, amendments to and interpretations of existing standards that are not
yet effective and have not been adopted by the Group early

The following standards and amendments to existing standards have been published and are
mandatory for the annual accounting periods beginning on or after 1 January 2013.



| |  | IFRS 10 Consolidated Financial Statements which replaces SIC-12 ConsolidationSpecial Purpose Entities and the consolidation elements of the existing IAS 27 Consolidated and Separate
Financial Statements.The new standard adopts a single definition of control: a reporting entity controls another entity when the reporting entity has the power to direct the activities of that other entity to generate returns for the reporting
entity. The standard will not have a material impact on the Groups financial statements.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | IFRS 11 Joint Arrangements which supersedes IAS 31 Interests in Joint Ventures(2011). IFRS 11 distinguishes between joint operations and joint ventures. A joint operation is a joint arrangement whereby
the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. An entity holding a joint operation will recognise its share in the assets, the liabilities, revenues
and costs. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. An entity holding a joint venture will represent its investment in it using the equity
method in accordance with IAS 28 Investments in Associates and Joint Ventures(2011). The standard will not have a material impact on the Groups financial statements.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  | IFRS 12 Disclosure of Interests in Other Entities covers disclosures for entities reporting under IFRS 10 Consolidated Financial Statements and IFRS 11 Joint Arrangements replacing those in IAS 28
Investments in Associates and Joint Ventures(2011) and IAS 27 Separate Financial Statements(2011). Entities are required to disclose information that helps financial statement readers evaluate the nature, risks and financial
effects associated with an entitys interests in subsidiaries, associates and joint arrangements and in unconsolidated structured entities. The standard only affects disclosure and will not have a material impact on the Groups financial
statements.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | IFRS 13 Fair Value Measurement which sets out a single IFRS framework for defining and measuring fair value and requiring disclosures about fair value measurements. IFRS 13 defines fair value as 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. IFRS 13 determines that an entity shall use valuation techniques that are appropriate in the
circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. It does not require fair value measurements in addition to those already
required or permitted by other IFRSs and is not intended to establish valuation standards or affect valuation practices outside financial reporting. The standard only affects disclosure and will not have a material impact on the Groups
financial statements.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | IAS 27Separate Financial Statements (2011) comprises those parts of the existing IAS 27 (2008) that dealt with separate financial statements. IAS 27 (2011) supersedes IAS 27 (2008). IAS 27
(2011) carries forward the existing accounting and disclosure requirements for separate financial statements, with some minor clarification. The standard will not have a material impact on the Groups financial statements.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | IAS 28 Investments in Associates and Joint Ventures(2011) covers joint ventures as well as associates; both must be accounted for using the equity method. The mechanics of the equity method are unchanged.
The standard will not have a material impact on the Groups financial statements.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | IFRS 10, IFRS 11, IFRS 12 (Amendments, June 2012) Transition Guidance. The amendments explain that the date of initial application in IFRS 10 means the beginning of the annual reporting period in which IFRS 10 is
applied for the first time. Consequently, an entity is not required to make adjustments to the previous accounting for its involvement with entities if the consolidation conclusion reached at the date of initial application is the same when applying
IAS 27 Consolidated and Separate Financial Statementsand SIC-12 Consolidation-Special Purpose Entitiesand when applying IFRS 10. The amendments also provide transition relief by limiting the requirement to present adjusted
comparative information to the period immediately preceding the date of initial application (the immediately preceding period) if the consolidation conclusion is different. Presentation of adjusted comparatives for earlier periods is permitted but
not required. The Board has also amended IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entitiesto provide similar relief from the presentation or adjustment of comparative information for periods prior to the
immediately preceding period. IFRS 12 is further amended to provide additional transition relief by eliminating the requirement to present comparatives for the disclosures relating to unconsolidated structured entities for any period before the
first annual period for which IFRS 12 is applied. The amendments will not have a material impact on the Groups financial statements.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  | Annual Improvements to IFRSs 2009-2011(May 2012),addressed the following amendments:IAS 1 Presentation of Financial Statements  clarification of the requirements for
comparative information, IAS32 Financial Instruments: Presentation  tax effect on distributions to holders of equity instruments andIAS 34 Interim Financial Reporting interim financial reporting and segment information
for total assets and liabilities. Entities are required to apply the amendments for annual periods beginning on or after 1 January 2013. The amendments will not have a material impact on the Groups financial statements.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | IFRS 9Financial Instruments. In November 2009, the IASB issued IFRS 9, as a first step in its project to replace IAS 39 Financial Instruments: Recognition and Measurement (the standard is effective for
annual periods beginning on or after 1 January 2015 but may be applied earlier). IFRS 9 (2009) retains but simplifies the mixed measurement model and establishes two primary measurement categories for financial assets: amortised at cost
and fair value. The basis of classification depends on the entitys business model and the contractual cash flow characteristics of the financial asset. The guidance in IAS 39 on impairment of financial assets and hedge accounting continues to
apply. The Group is currently reviewing the standard to determine its effect on the Groups financial reporting.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | IFRS 9 Financial Instruments (Amendments, October 2010) adds the requirements related to classification and measurement of financial liabilities, and derecognition of financial assets and liabilities to the
version issued in November 2009. It also includes those paragraphs of IAS 39 dealing with how to measure fair value and accounting for derivatives embedded in a contract that contains a host that is not a financial asset, as well as the requirements
of IFRIC 9 Reassessment of Embedded Derivatives. Entities are required to apply the amendments for annual periods beginning on or after 1 January 2015. The Group is currently reviewing the standard to determine its effect on the
Groups financial reporting.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | IFRS 7 Financial Instruments: Disclosures-Offsetting Financial Assets and Financial Liabilities (Amendments, December 2011), amends the required disclosures to include information that will enable users of an
entitys financial statements to evaluate the effect or potential effect of netting arrangements, including rights of set-off associated with the entitys recognised financial assets and recognised financial liabilities, on the
entitys financial position. Entities are required to apply the amendments for annual periods beginning on or after 1 January 2015. The Group is currently reviewing the standard to determine its effect on the Groups financial
reporting.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | IAS 32 Financial Instruments: Presentation-Offsetting Financial Assets and Financial Liabilities (Amendments, December 2011), deleted paragraph AG38 and added paragraphs AG38AAG38F. An entity shall apply
those amendments for annual periods beginning on or after 1 January 2014. An entity shall apply those amendments retrospectively. Earlier application is permitted. If an entity applies those amendments from an earlier date, it shall disclose
that fact and shall also make the disclosures required by Disclosures-Offsetting Financial Assets and Financial Liabilities(Amendments to IFRS 7) issued in December 2011. The Group is currently reviewing the standard to determine its effect
on the Groups financial reporting.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Use of judgements and estimates

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application
of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on experience and various other factors that are believed to be reasonable under the circumstances, the results of
which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and associated assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

In particular, significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most significant effect on
the amounts recognised in the financial statements relate to standing investments (note 1.4), developments and land (note 1.5), goodwill (note 1.7), deferred taxes ( notes 1.9 and note 1.20), derivatives (note 1.19) and contingencies (note 1.41).

1.3 Significant accounting policies

The accounting
policies set out below have been applied consistently for all periods presented in these consolidated financial statements, except for newly effective standards as described above and have been applied consistently by entities within the Group.

Certain comparative amounts in the consolidated statement of financial position have been reclassified to conform with the current years presentation
(see note 1.7 Intangible assets and goodwill).

Basis of consolidation

Subsidiaries

Subsidiaries are all those entities
controlled by Atrium. Control exists when Atrium has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that are
currently exercisable or convertible are taken into account.

The financial statements of subsidiaries are included in the consolidated financial
statements from the date that control commences until the date that control ceases. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with those used by the Group.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement and the consolidated statement of
comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Full consolidation requires a
combination of the financial statements of Atrium and its subsidiaries line by line by adding together like items of assets, liabilities, equity, income and expenses. Further steps in accordance with IAS 27Consolidated and Separate Financial
Statementare performed in order that the consolidated financial statements present financial information about the Group as that of a single economic entity.



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Loss of control

On the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity
related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in the income statement. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date the
control is lost. Subsequently that retained interest is accounted for using the equity method if significant influence is retained.

Associates

Associates are all entities over which the Group has significant influence but not control, generally through a shareholding of between 20% and 50% of
the voting rights. Investments in associates are accounted for using the equity method and are initially recognised at cost. The cost of the investment includes transaction costs. The Groups share of its associates post-acquisition
profits or losses is recognised in the consolidated income statement. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Groups share of losses in an associate equals or exceeds its
interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations to or made payments on behalf of the associate.

Non-controlling interest

Non-controlling interest
consists of the amount of those interests at the date of the original business combination and the non-controlling share of changes in equity since the date of the combination. Non-controlling interests at initial recognition are measured at their
proportionate interest in all net assets of the subsidiary including recognised goodwill.

Non-controlling interest is presented in the consolidated
statement of financial position within equity, separately from the equity of the owners of the parent. In accordance with IAS 27 Consolidated and Separate Financial Statements total comprehensive income is attributed to the owners of the
parent company and to the non-controlling interest even if this results in the non-controlling interest having a deficit balance.

Changes in a
parents ownership interest in a subsidiary that do not result in the loss of control are accounted for within equity. When an entity loses control of a subsidiary, any gain or loss is recognised in the income statement. Transaction costs in
respect of transactions with non-controlling interests are also recorded in equity. Cash flows from transactions with non-controlling interests are classified in the consolidated cash flow statement as cash flows from financing activities.

Transactions eliminated on consolidation

Intra-group
balances and any realised and unrealised gains and losses arising from intra-group transactions are eliminated in preparing the consolidated financial statements. The majority of intra-group transactions consist of management and consultancy
services, interest income and expenses arising from loans provided within the Group.



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Consolidation group

The Group consists of Atrium and the following entities at 31 December 2012:



|                                        |  |         |                |  |           |  |     |  
|--------------------------------------- |  | ------- | -------------- |  | --------- |  | --- | -
|Company name                            |  | Country |                |  | Ownership | 
|SOFIA PARK AD                           |  |         | Bulgaria       |  |           |  | 100 | %
|ABERGAVENNY INVESTMENTS LIMITED         |  |         | Cyprus         |  |           |  | 70  | %
|ATTILO HOLDINGS LIMITED                 |  |         | Cyprus         |  |           |  | 100 | %
|BROADVALE HOLDINGS LIMITED              |  |         | Cyprus         |  |           |  | 100 | %
|DALSEN SERVICES LIMITED                 |  |         | Cyprus         |  |           |  | 90  | %
|DANELDEN ENTERPRISES LIMITED            |  |         | Cyprus         |  |           |  | 100 | %
|ETHERLAND INVESTMENTS LIMITED           |  |         | Cyprus         |  |           |  | 100 | %
|MALL GALLERY 1 LIMITED*                 |  |         | Cyprus         |  |           |  | 63  | %
|MALL GALLERY 2 LIMITED                  |  |         | Cyprus         |  |           |  | 100 | %
|MD CE HOLDING LIMITED                   |  |         | Cyprus         |  |           |  | 100 | %
|MD REAL ESTATE MANAGEMENT LTD           |  |         | Cyprus         |  |           |  | 100 | %
|MD RUSSIA HOLDING LIMITED               |  |         | Cyprus         |  |           |  | 100 | %
|MD TIME HOLDING LIMITED                 |  |         | Cyprus         |  |           |  | 100 | %
|NOKITON INVESTMENTS LIMITED             |  |         | Cyprus         |  |           |  | 51  | %
|PATTONGATE TRADING LIMITED              |  |         | Cyprus         |  |           |  | 100 | %
|Atrium Alfa Czech Republic s.r.o.       |  |         | Czech Republic |  |           |  | 100 | %
|Atrium Beta Czech Republic s.r.o.       |  |         | Czech Republic |  |           |  | 100 | %
|Atrium Černého Czech Republic s.r.o.    |  |         | Czech Republic |  |           |  | 100 | %
|Atrium Delta Czech Republic s.r.o.      |  |         | Czech Republic |  |           |  | 100 | %
|Atrium Flóra a.s                        |  |         | Czech Republic |  |           |  | 100 | %
|Atrium Gamma Czech Republic s.r.o.      |  |         | Czech Republic |  |           |  | 100 | %
|Atrium Kappa Czech Republic s.r.o.      |  |         | Czech Republic |  |           |  | 100 | %
|Atrium Lambda Czech Republic s.r.o.     |  |         | Czech Republic |  |           |  | 100 | %
|Atrium Ostrava Czech Republic s.r.o.    |  |         | Czech Republic |  |           |  | 100 | %
|Atrium Pardubice Czech Republic s.r.o.  |  |         | Czech Republic |  |           |  | 100 | %
|Atrium Sigma Czech Republic s.r.o.      |  |         | Czech Republic |  |           |  | 100 | %
|Atrium Zlín Czech Republic s.r.o.       |  |         | Czech Republic |  |           |  | 100 | %
|Euro Mall Brno Real Estate s.r.o.       |  |         | Czech Republic |  |           |  | 100 | %
|FLÓRA-SEN s.r.o.                        |  |         | Czech Republic |  |           |  | 100 | %
|MANHATTAN Development s.r.o.            |  |         | Czech Republic |  |           |  | 100 | %
|Manhattan Real Estate Management s.r.o. |  |         | Czech Republic |  |           |  | 100 | %
|Veveří Centre s.r.o.                    |  |         | Czech Republic |  |           |  | 100 | %
|FORAS HOLDING A/S                       |  |         | Denmark        |  |           |  | 100 | %
|PoloniaCo ApS                           |  |         | Denmark        |  |           |  | 100 | %
|EUROPE & Co LLC                         |  |         | Georgia        |  |           |  | 100 | %
|Atrium Alpha LLC                        |  |         | Georgia        |  |           |  | 100 | %
|ALFAPIAC Kft.                          |  |         | Hungary        |  |           |  | 100 | %
|Atrium Alfa HU Kft.                     |  |         | Hungary        |  |           |  | 100 | %
|Atrium Beta HU Kft.                     |  |         | Hungary        |  |           |  | 100 | %
|Magnum Hungaria Invest Kft.             |  |         | Hungary        |  |           |  | 100 | %



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ATRIUM EUROPEAN REAL ESTATE LIMITED



|                                             |  |  |             |  |  |  |     |  
|-------------------------------------------- |  |  | ----------- |  |  |  | --- | -
|Manhattan Development Alfa Kft.              |  |  | Hungary     |  |  |  | 100 | %
|Manhattan Development Global Kft.            |  |  | Hungary     |  |  |  | 100 | %
|Manhattan Development Invest Kft.            |  |  | Hungary     |  |  |  | 100 | %
|Manhattan Development Kft.                   |  |  | Hungary     |  |  |  | 100 | %
|Manhattan Development Projekt Kft.           |  |  | Hungary     |  |  |  | 100 | %
|Manhattan Development Property Kft.          |  |  | Hungary     |  |  |  | 100 | %
|Manhattan Development Tanne Kft.             |  |  | Hungary     |  |  |  | 100 | %
|Manhattan Real Estate Management Kft.        |  |  | Hungary     |  |  |  | 100 | %
|THESIS Srl**                                 |  |  | Italy       |  |  |  | 100 | %
|Atrium European Real Estate Nominees Limited |  |  | Jersey      |  |  |  | 100 | %
|Atrium Treasury Services Limited             |  |  | Jersey      |  |  |  | 100 | %
|SIA Manhattan Real Estate Management         |  |  | Latvia      |  |  |  | 100 | %
|SIA MD Galerija Azur                         |  |  | Latvia      |  |  |  | 100 | %
|Hedan S.A.                                   |  |  | Luxemburg   |  |  |  | 100 | %
|Atrium Europe B.V.                           |  |  | Netherlands |  |  |  | 100 | %
|Atrium European Coöperatief U.A.             |  |  | Netherlands |  |  |  | 100 | %
|Atrium European Management N.V.              |  |  | Netherlands |  |  |  | 100 | %
|Atrium Hungarian Holding 1 B.V.              |  |  | Netherlands |  |  |  | 100 | %
|Atrium Hungarian Holding 2 B.V.              |  |  | Netherlands |  |  |  | 100 | %
|Atrium Hungarian Holding 3 B.V.              |  |  | Netherlands |  |  |  | 100 | %
|Atrium Hungarian Holding 4 B.V.              |  |  | Netherlands |  |  |  | 100 | %
|Atrium Hungarian Holding 5 B.V.              |  |  | Netherlands |  |  |  | 100 | %
|Atrium Hungarian Holding 6 B.V.              |  |  | Netherlands |  |  |  | 100 | %
|Atrium Hungarian Holding 7 B.V.              |  |  | Netherlands |  |  |  | 100 | %
|Atrium Hungarian Holding 8 B.V.              |  |  | Netherlands |  |  |  | 100 | %
|Atrium Russian Holding 1 B.V.                |  |  | Netherlands |  |  |  | 100 | %
|Atrium Russian Holding 2 B.V.                |  |  | Netherlands |  |  |  | 100 | %
|Atrium Turkey Adana Bossa B.V.               |  |  | Netherlands |  |  |  | 100 | %
|Atrium Turkey B.V.                           |  |  | Netherlands |  |  |  | 100 | %
|Atrium Turkey Goeztepe B.V.                  |  |  | Netherlands |  |  |  | 100 | %
|Atrium Turkey Kahramanmaras B.V.             |  |  | Netherlands |  |  |  | 100 | %
|Atrium Turkey Samsun B.V.                    |  |  | Netherlands |  |  |  | 100 | %
|Atrium Turkey Urfa B.V.                      |  |  | Netherlands |  |  |  | 100 | %
|Morning Rise B.V.                            |  |  | Netherlands |  |  |  | 100 | %
|AGROMEX DEVELOPMENT Sp. z o.o.               |  |  | Poland      |  |  |  | 100 | %
|Allegra Investments Sp. z o.o.               |  |  | Poland      |  |  |  | 100 | %
|Atrium Biała Sp. z o.o.**                    |  |  | Poland      |  |  |  | 100 | %
|Atrium Felicity Sp. z o.o.**                 |  |  | Poland      |  |  |  | 100 | %
|Atrium Koszalin Sp. z.o.o.                   |  |  | Poland      |  |  |  | 100 | %
|Atrium Plejada Sp. z o.o.**                  |  |  | Poland      |  |  |  | 100 | %
|Atrium Poland 1 Sp. z.o.o.                   |  |  | Poland      |  |  |  | 100 | %



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|                                                                |  |  |         |  |  |  |     |  
|--------------------------------------------------------------- |  |  | ------- |  |  |  | --- | -
|Atrium Poland 2 Sp. z.o.o.                                      |  |  | Poland  |  |  |  | 100 | %
|Atrium Poland 3 Sp. z.o.o.                                      |  |  | Poland  |  |  |  | 100 | %
|Atrium Poland Real Estate Management Sp. z.o.o                  |  |  | Poland  |  |  |  | 100 | %
|Atrium Targówek Sp. z o.o.**                                    |  |  | Poland  |  |  |  | 100 | %
|Atrium Reduta Sp. z o.o.**                                      |  |  | Poland  |  |  |  | 100 | %
|CENTRUM HANDLOWE NEPTUNCITY Sp. z o.o.                          |  |  | Poland  |  |  |  | 100 | %
|EURO MALL POLSKA XVI Sp. z o.o.*                                |  |  | Poland  |  |  |  | 24  | %
|EURO MALL POLSKA XIX Sp. z o.o.*                                |  |  | Poland  |  |  |  | 24  | %
|EURO MALL POLSKA XX Sp. z o.o.*                                 |  |  | Poland  |  |  |  | 24  | %
|Foras Targówek Sp. z o.o.                                       |  |  | Poland  |  |  |  | 100 | %
|GALERIA COPERNICUS TORUN Sp. z o.o.                             |  |  | Poland  |  |  |  | 100 | %
|GALERIA COPERNICUS TORUN 2 Sp. z o.o.                           |  |  | Poland  |  |  |  | 100 | %
|GALERIA NA WYSPIE Sp. z o.o.                                    |  |  | Poland  |  |  |  | 100 | %
|INVESTIM Sp. z o.o.                                             |  |  | Poland  |  |  |  | 51  | %
|Ipopema 77 FIZ                                                  |  |  | Poland  |  |  |  | 100 | %
|L.P.H. Sp. z o.o.                                               |  |  | Poland  |  |  |  | 100 | %
|MANHATTAN DEVELOPMENT Sp. z o.o.                                |  |  | Poland  |  |  |  | 100 | %
|MD JASTRZEBIE ZDROJ Sp. z o.o.                                  |  |  | Poland  |  |  |  | 100 | %
|MD POLAND I Sp. z o.o.                                          |  |  | Poland  |  |  |  | 100 | %
|MD POLAND II Sp. z o.o.                                         |  |  | Poland  |  |  |  | 100 | %
|MD POLAND III Sp. z o.o.                                        |  |  | Poland  |  |  |  | 100 | %
|PROGRES 77 Sp. z o.o.                                           |  |  | Poland  |  |  |  | 51  | %
|PROJEKT ECHO-35 Sp. z o.o.                                      |  |  | Poland  |  |  |  | 100 | %
|Wiosenny Atrium Poland Real Estate Management Sp. z o.o. S.K.A. |  |  | Poland  |  |  |  | 100 | %
|Zielony Atrium Poland Real Estate Management Sp. z o.o. S.K.A.  |  |  | Poland  |  |  |  | 100 | %
|Atrium Romania Real Estate Management SRL                       |  |  | Romania |  |  |  | 100 | %
|Land Development Project SRL                                    |  |  | Romania |  |  |  | 100 | %
|PROPERTY DEVELOPMENT ONE SRL                                    |  |  | Romania |  |  |  | 100 | %
|PROPERTY DEVELOPMENT TWO SRL                                    |  |  | Romania |  |  |  | 100 | %
|OOO Bugry                                                       |  |  | Russia  |  |  |  | 100 | %
|OOO Delta                                                       |  |  | Russia  |  |  |  | 100 | %
|OOO Engineerics*                                                |  |  | Russia  |  |  |  | 63  | %
|OOO Everest                                                     |  |  | Russia  |  |  |  | 100 | %
|OOO Foras Volzhsky                                              |  |  | Russia  |  |  |  | 100 | %
|OOO Mall Management                                             |  |  | Russia  |  |  |  | 100 | %
|OOO Manhattan Brateevo                                          |  |  | Russia  |  |  |  | 100 | %
|OOO Manhattan Development                                       |  |  | Russia  |  |  |  | 100 | %
|OOO Manhattan Real Estate Management                            |  |  | Russia  |  |  |  | 100 | %
|OOO Manhattan Signalny                                          |  |  | Russia  |  |  |  | 100 | %
|OOO Manhattan Yekaterinburg                                     |  |  | Russia  |  |  |  | 100 | %
|OOO MD Togliatti                                                |  |  | Russia  |  |  |  | 100 | %



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|                                                            |  |  |          |  |  |  |      |  
|----------------------------------------------------------- |  |  | -------- |  |  |  | ---- | -
|OOO Retail Togliatti                                        |  |  | Russia   |  |  |  | 100  | %
|OOO Sodruzhestvo                                            |  |  | Russia   |  |  |  | 100  | %
|OOO Stroyremmontazh                                         |  |  | Russia   |  |  |  | 100  | %
|OOO Zvezdnyi Gorod                                          |  |  | Russia   |  |  |  | 100  | %
|ZAO Dialog                                                  |  |  | Russia   |  |  |  | 100  | %
|ZAO Megapolis                                               |  |  | Russia   |  |  |  | 100  | %
|ZAO Nautilus                                                |  |  | Russia   |  |  |  | 100  | %
|ZAO Patera                                                  |  |  | Russia   |  |  |  | 100  | %
|ZAO Rubikon                                                 |  |  | Russia   |  |  |  | 100  | %
|ZAO Universal                                               |  |  | Russia   |  |  |  | 51   | %
|ZAO Universal-Ural                                          |  |  | Russia   |  |  |  | 51   | %
|Manhattan Development SK a.s.                               |  |  | Slovakia |  |  |  | 100  | %
|Manhattan Real Estate Management Sk s.r.o.                  |  |  | Slovakia |  |  |  | 100  | %
|PALM Corp s.r.o.                                            |  |  | Slovakia |  |  |  | 100  | %
|SLOVAK INVESTMENT GROUP a.s.                                |  |  | Slovakia |  |  |  | 100  | %
|Atrium European Real Estate Spain S.L.U.                    |  |  | Spain    |  |  |  | 100  | %
|Trettioencorp AB                                            |  |  | Sweden   |  |  |  | 100  | %
|BALCOVA GAYRIMENKUL YATIRIM INSAAT VE TICARET A.S.          |  |  | Turkey   |  |  |  | 100  | %
|Istmar Tem Gayrimenkul Yatirim Insaat Ve Ticaret A.S.       |  |  | Turkey   |  |  |  | 100  | %
|Manhattan Gayrimenkul Yönetimi Limited Sirketi              |  |  | Turkey   |  |  |  | 100  | %
|MEL 1 GAYRIMENKUL GELISTIRME YATIRIM INSAAT VE TICARET A.S. |  |  | Turkey   |  |  |  | 100  | %
|MEL 6 GAYRIMENKUL GELISTIRME YATIRIM INSAAT VE TICARET A.S. |  |  | Turkey   |  |  |  | 100  | %
|A.Kharkiv 1 LLC                                             |  |  | Ukraine  |  |  |  | 99.9 | %
|A.Kharkiv 2 LLC                                             |  |  | Ukraine  |  |  |  | 99.9 | %
|A.Kharkiv 3 LLC                                             |  |  | Ukraine  |  |  |  | 99.9 | %
|A.Kyiv LLC                                                  |  |  | Ukraine  |  |  |  | 100  | %
|ENGINEERICS UKRAINE LLC*                                    |  |  | Ukraine  |  |  |  | 63   | %
|OJSC Ipodrom                                                |  |  | Ukraine  |  |  |  | 90   | %
|VORONTSOVSKI VEZHI LLC                                      |  |  | Ukraine  |  |  |  | 70   | %



|* | These entities are equity accounted for as at 31 December 2012. MALL GALLERY 1 LIMITED, OOO Engineerics and ENGINEERICS UKRAINE LLC were fully consolidated in year 2011 and deconsolidated as of
31 December 2012. The financial impact of those entities is not material to the Groups consolidated financial statements.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|** | Companies renamed during 2012:
|-- | ------------------------------



| |  | Atrium Targówek Sp. z o.o. previously FORAS TARGOWEK PROPERTY Sp. z o.o.
|- |  | ------------------------------------------------------------------------



| |  | Atrium Biała Sp. z o.o. previously GALERIA BIALYSTOK Sp. z o.o.
|- |  | ---------------------------------------------------------------



| |  | Atrium Felicity Sp. z o.o. previously CENTRUM HANDLOWE FELIN Sp. z o.o.
|- |  | -----------------------------------------------------------------------



| |  | Atrium Reduta Sp. z o.o. previously Foras Reduta Property Sp. z o.o.
|- |  | --------------------------------------------------------------------



| |  | Atrium Plejada Sp. z o.o. previously Bytom Property Sp. z o.o.
|- |  | --------------------------------------------------------------



| |  | THESIS Srl previously THESIS S.p.a.
|- |  | -----------------------------------



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Foreign currency

Foreign currency transactions

Transactions in
foreign currencies are translated to the respective functional currency of Group entities at the foreign exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date
are translated into the functional currency at the foreign exchange rate prevailing at that date. Non monetary assets and liabilities denominated in foreign currencies that are measured in terms of historical cost in a foreign currency are
translated using the exchange rate at the date of the transaction. Non monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated into the functional currency at the foreign exchange rates
prevailing at the dates the fair values are determined.

Foreign currency exchange gains and losses resulting from the settlement of foreign currency
transactions and balances and from the translation at year-end exchange rates are recognised in the income statement.

Foreign operations

On consolidation, the assets and liabilities of the Groups foreign entities with a functional currency different from the presentation
currency are translated into euro at exchange rates prevailing on the reporting date. Income and expense items are translated at the average exchange rates for the period.

The exchange differences that arise from the translation of the statement of financial position and the income statement from the functional to the
presentation currency are recognised in other comprehensive income and presented as a separate component of equity until the disposal of the foreign entity, when the cumulative amount in equity is reclassified to the income statement as part of the
gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interest.
When the Group disposes of only part of its investment in an associate that includes a foreign operation while retaining significant influence, the relevant proportion of the cumulative amount is reclassified to the income statement. If the foreign
operation is a non-wholly owned subsidiary then the relevant proportion of the translation difference is allocated to non-controlling interests. Exchange differences arising on items, which in substance form part of the net investment in a foreign
entity, are also presented in the statement of comprehensive income and as a separate component of equity until the disposal of the net investment.

Standing investments

Standing investments comprise
properties held to earn rental income and land related to those properties. Standing investments are recognised at cost on initial recognition and subsequently at fair value. The fair values of all standing investments were determined by Group
executive management based on the valuations received from Cushman & Wakefield and Jones Lang LaSalle. Both are external independent international valuation companies and real estate consultants, having an appropriately recognised
professional qualification and recent experience in the respective locations and categories of properties being valued. The valuations were prepared in accordance with the Royal Institution of Chartered Surveyors Valuation Standards published by the
Royal Institution of Chartered Surveyors (the Red Book).



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The fair values are based on market values, being the estimated amount for which a property could be
exchanged on the date of the valuation between a willing buyer and a willing seller in an arms length transaction after proper marketing and the parties having each acted knowledgeably, prudently and without compulsion.

Each property has been valued individually and not as part of a portfolio. The valuations are prepared by considering the aggregate of the net annual rental
income receivable from the properties and, where relevant, associated costs. A yield which reflects the risks inherent in the net cash flows is then applied to the net annual rental income to arrive at the property valuation. The yield used for the
valuation depends on the country and the risk assessment of the asset.

Valuations of standing investments reflect, where appropriate: the type of tenants
actually in occupation or responsible for meeting lease commitments or likely to be in occupation after letting of vacant accommodation and the markets general perception of their creditworthiness; the allocation of maintenance and insurance
responsibilities between lessor and lessee; and the remaining economic life of the property. The calculations are based on recently observable market data to the extent that it is available.

When technical improvements or extensions are constructed or added to an existing standing investment, the property will continue to be classified as a
standing investment, which is measured at fair value.

Any gain or loss arising from a change in fair value of standing investments is recognised in the
consolidated income statement under the caption revaluation of investment properties. In the case of entities whose functional currency is the local currency (i.e. not the euro) the revaluation gain/loss in the local currency is converted into euro
using the average foreign exchange rate for the period. The remaining foreign exchange difference (being the difference arising from the conversion of the standing investments in the statement of financial position at the period end rates and the
conversion of the revaluation gain/loss using the average period rate) is recognised in the statement of comprehensive income and in equity as a foreign exchange difference.

Developments and land

Developments and land comprise
capitalised development costs and land, except for the land on which standing investments are situated. Developments and land are recognised at cost on initial recognition and subsequently at fair value with any change therein recognised in the
income statement.

All costs directly associated with the purchase and development of a property, and all subsequent capital expenditure that qualify as
acquisition costs, are capitalised. The Group capitalises borrowing costs if they are directly attributable to the acquisition or construction of a qualifying asset. Capitalisation of borrowing costs commences when the activities to prepare the
asset for its intended use have started and expenditure and borrowing costs are incurred. Capitalisation of borrowing costs may continue until the assets are substantially ready for their intended use. Capitalisation ceases when the project has been
stopped. The capitalisation rate is determined by reference to the actual rate payable on borrowings for the respective development or by the Groups average rate.



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The commencement of development with a plan or prior agreement to sale represents a change in use and
accordingly the project is transferred from developments to inventories. Inventory is measured at the lower of cost and net realisable value. The amount of any write-down of inventories to net realisable value and all losses associated with
inventories shall be recognised as an expense in the income statement in the period the write-down or loss occurs. Developing for sale is not Atriums core business. At the completion of the transaction the fair value of the proceeds from sale
less the cost of the inventory will be presented as net profit or loss in other income/ (expenses).

The fair value of most of the developments and land
as at 31 December 2012 was determined by Group executive management based on valuations received from Cushman & Wakefield and Jones Lang LaSalle, external independent international valuation companies. Approximately 11% (2011: 80%) was
valued internally by Group executive management. The yields used in 2011 for this purpose ranged from 8.3% to 18.3% depending on the geographical area and the project type. Furthermore, in addition to the yields mentioned above, an additional risk
premium was applied for discounting during the construction period. This risk premium ranged from 1.0% to 4.8%, depending on the status of the developments.

The determination of the fair value of the land plots was based on the value for which the land could be sold in the market using different methods of
calculation. Approximately 21% of the fair value of development and land was determined using the comparable method, while the remaining part was determined to be the gross development value of the completed project less cost to complete (including
financing costs) and an appropriate developers profit (residual value).

The comparable method uses the sales (offering and listing)
prices of similar properties that have recently been transacted in the open market. Sales prices are analysed by applying appropriate units of comparison and are adjusted for differences with the valued property on the basis of elements of
comparison as location, size of the plot, zoning and etc.

The gross development value is defined as the present value of future rents which are expected
to be achieved from the standing investment once it is developed. The rental levels are set at the current market levels discounted at the pre-tax yield.

The pre-tax yield reflects the current market assessment of observable market yields for comparable assets as provided by the external independent
international valuations companies, the time value of money and the risk specific to the asset.

Any gain or loss arising from a change in fair value of
development and land is recognised in the consolidated income statement under the caption revaluation of investment properties. In the case of entities whose functional currency is the local currency (i.e. not the euro) the revaluation gain/loss in
the local currency is converted into euro using the average foreign exchange rate for the period. The remaining foreign exchange difference (being the difference arising from the conversion of the development and land in the statement of financial
position at the period end rates and the conversion of the revaluation gain/loss using the average period rate) is recognised in the statement of comprehensive income and in equity as a foreign exchange difference.

Property, plant and equipment

Property, plant and
equipment are measured at cost less accumulated depreciation and accumulated impairment losses.



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The useful life of the assets is usually between five and ten years.

Depreciation is charged on the asset from the date that is available for use, for the entire useful life of the asset or until the date of its disposal.
Depreciation is provided in equal monthly instalments over the estimated useful life of the assets.

Goodwill

Goodwill initially represents the excess of the aggregate of the cost of the acquisition and any non-controlling interests over the fair value of the
Groups share of the identifiable net assets acquired.

Goodwill is subsequently measured at cost less accumulated impairment losses. Goodwill is
tested for impairment annually or whenever there is an indication that assets may be impaired.

Determining whether goodwill is impaired requires an
estimation of the recoverable amount of the cash-generating units to which goodwill has been allocated. The Groups cash-generating units are located in the countries in which the Group operates. The recoverable amount is the higher amount of
the fair value less the cost to sell or the value in use of the cash generating unit. Determination of the value in use requires the Group to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate
in order to calculate the present value.

Future cash flows of real estate companies are mainly derived from the cash flows of the standing investment
properties and future standing investment properties and are therefore reflected in the fair values of investment properties. Goodwill itself mainly arises due to the recognition of deferred tax liabilities in the course of the purchase price
allocation. Therefore, goodwill impairment testing is carried out by comparing the goodwill recognised to the carrying value of deferred tax liabilities per country. Any excess of goodwill over deferred tax liabilities is considered as a goodwill
impairment loss.

Impairment losses are recognised immediately in the income statement. Impairment losses in respect of goodwill are not reversed.

Intangible assets

Intangible assets are defined as
identifiable, non monetary assets without physical substance, which are expected to generate future economic benefits. Intangible assets include assets with an estimated useful life greater than one year and for the Group comprise primarily
software.

Intangible assets that are acquired by the Group are measured at cost less accumulated amortisation and accumulated impairment losses.

Amortisation of intangible assets is recorded on a straight line basis over their estimated useful lives. The useful lives of the assets are usually between
four and ten years.

Amortisation is charged on an asset from the date it is available for use to the date of its disposal.



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Financial instruments

Classes

Financial instruments of the Group are broken
down into the following classes according to the characteristics of the financial instruments. For more details see also note 1.38.

Financial assets:



| |  | Loans;
|- |  | ------



| |  | Receivables from tenants;
|- |  | -------------------------



| |  | Other receivables;
|- |  | ------------------



| |  | Cash and cash equivalents.
|- |  | --------------------------

Financial liabilities:



| |  | Borrowings;
|- |  | -----------



| |  | Derivatives;
|- |  | ------------



| |  | Liabilities from leases;
|- |  | ------------------------



| |  | Other long term liabilities;
|- |  | ----------------------------



| |  | Trade and other payables;
|- |  | -------------------------



| |  | Payables related to acquisitions;
|- |  | ---------------------------------



| |  | Accrued expenditure.
|- |  | --------------------

Non-derivative financial assets

Non-derivative financial assets of the Group are classified in the category loans and receivables.

The Group initially recognises loans and receivables on the date that they are originated. The Group derecognises loans and receivables when the contractual
rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the loans and receivables are transferred.

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially
at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost, using the effective interest method, less impairment.

Loans and receivables comprise cash and cash equivalents, receivables from tenants, loans and other receivables.

Cash and cash equivalents

Cash and cash equivalents are
measured at amortised cost.

Cash and cash equivalents comprise cash in hand, deposits on demand, and other short term highly liquid assets that are
readily convertible to a known amount of cash and are subject to an insignificant risk of change in value.



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Non-derivative financial liabilities

The Group classifies non-derivative financial liabilities into the other financial liabilities category. Such financial liabilities are recognised initially at
fair value less any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective interest method.

Derivative financial instruments, including hedge accounting

The Group holds derivative financial instruments to hedge its interest rate risk exposure.

On initial designation of the derivative as the hedging instrument, the Group formally documents the relationship between the hedging instrument and hedged
item, including the risk management objectives and strategy in undertaking the hedge transaction and the hedged risk, together with the methods that will be used to assess the effectiveness of the hedging relationship. The Group makes an assessment,
both at the inception of the hedge relationship as well as on an ongoing basis, of whether the hedging instruments are expected to be highly effective in offsetting the changes in the fair value or cash flows of the respective hedged
items attributable to the hedged risk, and whether the actual results of each hedge are within a range of 80%  125%.

Derivatives are recognised
initially at fair value; any attributable transaction costs are recognised in the income statement as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.

Cash flow hedges

When a derivative is designated as the
hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction that could affect profit or loss, the effective portion of
changes in the fair value of the derivative is recognised in other comprehensive income and presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in the income
statement. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. If the forecast transaction is
no longer expected to occur, then the balance in equity is reclassified to the income statement.

Impairment

At each reporting date, Group executive management reviews the carrying amount of the Groups assets, other than investment properties measured at fair
value, goodwill and deferred tax assets, to determine whether there is any objective evidence that it is impaired. An asset is impaired if there is objective evidence of impairment as a result of one or more events that occurred after the initial
recognition of the asset, and that loss event(s) had an impact on the estimated future cash flows of that asset that can be estimated reliably.

Objective
evidence that assets are impaired includes default or delinquency by a debtor, indications that a debtor will enter bankruptcy, adverse changes in the payment status of borrowers or economic conditions that correlate with defaults. An impairment
loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement immediately.

In respect of other assets, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.



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An impairment loss is reversed only to the extent that the assets carrying amount does not exceed the
carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Other non-current
assets

Other non-current assets are stated at their cost less accumulated impairment losses.

Other current assets

Other current assets comprise of
prepayments and income tax receivable and are stated at their cost less accumulated impairment losses.

Stated capital

The stated capital account consists of the proceeds received and receivable by Atrium from the issue of its ordinary shares, net of direct issue costs.

Dividends

Dividends on ordinary shares are
recognised as a liability in the period in which they are declared. Dividends declared during the period have been presented as a reduction in the stated capital of Atrium.

Other reserves

Other reserves comprise equity settled
share based payments.

Share based payments

Atrium operates an Employee Share Option Plan (ESOP) under which the Group receives services from key employees selected by the Board in
consideration for equity instruments settled in shares. The costs of these transactions are measured at the fair value of options granted at the date of grant.

The cost of the ESOP is recognised in the income statement, together with a corresponding increase in equity, over the period in which the service conditions
are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting period). The cumulative expense, recognised for equity settled transactions at each reporting date until the vesting date,
reflects the extent to which the vesting period has expired and the Groups best estimate of the number of equity instruments that will ultimately be vested. The charge or credit to the income statement represents the movement in cumulative
expense recognised at the beginning and at the end of that reported period.

Borrowings

Borrowings are recorded as the proceeds received, net of direct issuance costs, and are amortised to the settlement amount using the effective interest method.
Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accrual basis in the income statement using the effective interest method.

Short term borrowings represent borrowings that are due within 12 months. Long term borrowings represent borrowings due after more than 12 months.



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When an element of bonds issued by the Group is repurchased before maturity, the carrying amount of the bond
is allocated between the element that continues to be recognised and the element that is derecognised based on the relative fair values of such element on the date of repurchase. The difference between (a) the carrying amount allocated to the
element derecognised and (b) the consideration paid is recognised as profit or loss on repurchase of bonds in the income statement.

Provisions

A provision is recognised in the statement of financial position if, as a result of a past event, the Group has a present legal or otherwise binding
obligation that can be estimated reliably, and it probable (i.e. more likely than not) that an outflow of economic benefits will be required to settle the obligation.

Liabilities from leases

Leases are classified as finance
leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

At the inception of the lease, assets held under a finance lease are recognised at their fair value or, if lower, at the present value of the minimum lease
payments. Subsequently such assets are measured in analogy to other assets held under the relevant caption (e.g. standing investments and developments and land  at fair value; property, plant and equipment  costs less accumulated
depreciation and accumulated impairment losses). The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. Minimum lease payments are apportioned between finance charges and the
reduction of the outstanding liability. The finance charge shall be allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Finance charges are charged directly
against income, within the caption other financial income and expenses.

Other non-financial long term and current liabilities

Other non-financial long term and current liabilities are measured at cost. They comprise primarily VAT payable, other taxes and fees payables, deferred
revenue and other advance payments from tenants.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services and goods provided in the
normal course of business, net of discounts, value added tax (VAT) and other sales related taxes.

Rental income from operating leases is
recognised on a straight line basis over the term of the relevant lease. Utility costs incurred by the Group on properties that are leased to third parties are largely reinvoiced to the lessees, and the subsequent income and expense is recognised on
an accrual basis.



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Service charge income

Service charge income includes payments received by the Group for utilities and other services provided to tenants. Generally, reinvoiceable utilities are a
pass through item for the Group recorded on a gross basis. The rental agreements normally specify which cost items are reinvoiceable by the Group and can be charged to tenants. There are two different categories of reinvoiceable income and expenses:

 Utilities such as gas, water, electricity or telephone services which can be measured individually for each tenant;

 Fixed cost items such as centre management, marketing, cleaning or security services which cannot be directly measured individually for
each tenant. These costs are normally calculated on a pro-rata basis per square metre occupied by each tenant.

Tenants are normally required to make a
security deposit and monthly prepayments for the reinvoiceable service charges. Once a year, the prepayments are netted against the actual cost and the difference is, if contractually agreed, settled between the Groups company and the tenants.
To the extent that there are vacancies in a property, the Group has to bear the cost of covering the allocated and pro-rata reinvoiceable service charges.

Other income and expenses

All other significant
operating income or expenses are recognised on an accrual basis.

The net results on acquisition or disposal of properties is determined as the difference
between the sale proceeds and the carrying value of the property and is recognised in the income statement when the significant risks and rewards of ownership have been transferred to the buyer.

Interest income and expenses, other financial income and expenses

Interest income and expenses are accounted for using the effective interest method.

Other financial income and expenses comprise mainly foreign currency gains and losses, net profit or loss from bond buybacks and the impairment of financial
instruments.

Taxation

Taxation charge comprises
current and deferred tax.

Current tax

Current tax is the expected tax payable or receivable on the taxable income or loss for the year using tax rates enacted or substantively enacted at the
reporting date, and any adjustment to tax payable in respect of previous years. Current tax is recognised in the income statement.

The taxable profit
differs from the net loss or profit as reported in the income statement because it is adjusted for items of income or expense that are taxable or deductible in other years and for items that are either not taxable or not deductible.

Deferred tax

Deferred tax is recognised in
respect of temporary differences between the carrying amounts of assets or liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied to
temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date. Deferred tax is computed on the total amount of the revaluation adjustment for investment properties.



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Deferred tax is recognised in the income statement except to the extent that it relates to items recognised
directly in equity or in other comprehensive income, in which case it is recognised in equity or in other comprehensive income.

A deferred tax asset
shall be recognised on unused tax losses carried forward and unused tax credits to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilised.

Deferred tax assets are offset against deferred tax liabilities within one entity only if the entity has a legally enforceable right to set off current tax
assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on the same taxable entity.

Tax exposures

In determining the amount of
current and deferred tax, the Group takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. This assessment relies on estimates and assumptions and may involve a series of judgements about
future events. New information may become available that causes Atrium to change its judgement regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is
made.

Earnings per share

Earnings per share are
calculated by dividing the profit or loss after taxation attributable to the ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

Segment reporting

An operating segment is a component of
the Group that is engaged in business activities from which it may earn revenues and incur expenses, and whose operating results are regularly reviewed by the Groups chief operating decision maker, (the executive management of Atrium), in
order to allocate resources to the segment and assess its performance, and for which discrete financial information is available.

The Group has two
reportable segments:



| |  | The standing investment segment includes all commercial real estate held to generate rental income of the Group;
|- |  | ----------------------------------------------------------------------------------------------------------------



| |  | The development segment includes all development activities and activities related with land plots.
|- |  | ---------------------------------------------------------------------------------------------------

The
reconciling item includes mainly holding activities and other items that relate to activities other than the standing investment segment and the development segment.

The Groups reportable segments are strategic business sectors which carry out different business activities and are managed separately.



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The accounting policies of the operating segments are the same as those described in the summary of
significant accounting policies. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reliable basis. The Group evaluates performance of the standing investment segment
on the basis of profit or loss from operations before tax excluding foreign exchange gains and losses. The performance of the development segment is evaluated based on expected yield on cost.

Geographical information is based on the geographical locations of the investment properties. The Group operates in the following countries: Poland, the Czech
Republic, Slovakia, Russia, Hungary, Romania, Latvia, Turkey and Bulgaria. In addition, the Group has its holding, management or other companies in Cyprus, Denmark, Georgia, Italy, Luxembourg, the Netherlands, Spain, Sweden, Ukraine and the parent
company in Jersey.

1.4 Standing investments

The
current portfolio of standing investments consists of 156 properties (2011: 155); which comprise 21 properties in Poland (2011: 20), 98 properties in the Czech Republic (2011: 98), 3 properties in Slovakia (2011: 3), 7 properties in Russia (2011:
7), 25 properties in Hungary (2011: 25), 1 property in Romania (2011: 1) and 1 property in Latvia (2011: 1). A roll forward of the total standing investments portfolio is provided in the table below:



|                                             |  |       |           |  |       |  |           |  
|-------------------------------------------- |  | ----- | --------- |  | ----- |  | --------- | -
|                                             |  | 2012  |           |  | 2011  | 
|Standing investments                         |  | 000 |           |  | 000 | 
|Balance as at 1 January                      |  |       | 2,077,246 |  |       |  | 1,503,301 |  
|Additionsnew properties                     |  |       |          |  |       |  | 413,574   |  
|Additionstechnical improvements, extensions |  |       | 33,629    |  |       |  | 17,886    |  
|Movementsfinancial leases                   |  |       | 3,861     |  |       |  | 19,630    |  
|Transfers from developments and land         |  |       | 6,750     |  |       |  |          |  
|Currency translation difference              |  |       | 5,317     |  |       |  | (5,851    | )
|Revaluation of standing investments          |  |       | 58,533    |  |       |  | 128,706   |  
|Balance as at 31 December                    |  |       | 2,185,336 |  |       |  | 2,077,246 |  

In June 2012, Atrium signed sale and purchase agreements with IKP Togliatti (Invest Kino Project IKP) and IKP
Volgograd, relating to premises in the Groups shopping centres in Volgograd and Togliatti. The sale and purchase agreement with IKP Yekaterinburg for premises in the Groups shopping centre in Yekaterinburg, Russia was signed in July
2012. IKP Togliatti, IKP Volgograd and IKP Yekaterinburg are subsidiaries of Russian Cinema Holdings (RCH) and were the co-owners and local operators of the cinemas in those three shopping centres. Atrium contracted to acquire both the
premises and the associated land. These transactions have allowed Atrium to gain increased ownership of the buildings and land for a total consideration of 9.3 million. RCH has also signed new lease agreements whereby they have remained a
tenant of the Group at these locations.

During the second half of 2012 Atrium finalised two development projects and transferred them from developments
and land to standing investments at fair value of 6.8 million. The two projects included a stand-alone retail box in Gdynia, Poland, handed over to the tenant Media Markt and Phase II of Atrium Galeria Mosty in Plock, Poland.



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In 2011 the Group completed three shopping mall acquisitions, two in Poland and one in the Czech Republic.
These new acquisitions added a further 117,600 sqm to the gross lettable area and had a fair value 449.8 million as at 31 December 2011.

The Promenada shopping centre in Warsaw, Poland, was acquired in May 2011 for 171.4 million. In September 2011, the Palác Flóra shopping
centre (Flora) in Prague, the Czech Republic, was purchased at a price of 190.8 million, which was subsequently revised to 186.0 million due to adjustments at initial recognition. In December 2011, Atrium purchased
the Molo shopping centre in Szczecin, Poland for consideration of 55.0 million.

The total value of the land leases was 31.8 million as
at 31 December 2012 (2011: 27.8 million). The yield diversification across the Groups income producing portfolio is stated in the table below:



|                     |  |                              |      |   |      |  |      |  
|-------------------- |  | ---------------------------- | ---- | - | ---- |  | ---- | -
|                     |  | EPRA Net initial yield (NIY) |     
|Standing investments |  | 2012                         |      |   | 2011 | 
|Poland               |  |                              | 7.0  | % |      |  | 7.0  | %
|Czech Republic       |  |                              | 7.8  | % |      |  | 7.9  | %
|Slovakia             |  |                              | 7.5  | % |      |  | 7.8  | %
|Russia               |  |                              | 12.6 | % |      |  | 12.5 | %
|Hungary              |  |                              | 8.8  | % |      |  | 8.2  | %
|Romania              |  |                              | 8.8  | % |      |  | 9.0  | %
|Latvia               |  |                              | 2.4  | % |      |  | 2.0  | %
|Average              |  |                              | 8.3  | % |      |  | 8.3  | %

Fair value of collateral

As at 31 December 2012, the Group had pledged a total of 77 standing investments (2011: 78) with a fair value of 1,365.9 million (2011:
1,234.1 million) and one development and land plot with a fair value of 1.5 million in favour of bondholders and various commercial banks, same as in year 2011.

Certain assets have been provided as collateral against bonds issued and loans held by the Group. The analysis of assets charged as collateral is as follows:



|                     |  |            |    |  |               |  |           |                 |  |  |         |   
|-------------------- |  | ---------- | -- |  | ------------- |  | --------- | --------------- |  |  | ------- | --
|Standing investments |  |            |    |  | Fair value of |  |           | Collateralised  | 
|2012                 |  | No. of     |    |  | collateral    |  |           | bonds and loans | 
|Country              |  | collateral |    |  | 000         |  |           | 000           | 
|Poland               |  |            | 15 |  |               |  | 852,576   |                 |  |  | 341,572 |   
|Czech Republic       |  |            | 38 |  |               |  | 301,021   |                 |  |  | 155,974 | **
|Russia               |  |            |   |  |               |  |          |                 |  |  |        |   
|Hungary              |  |            | 20 |  |               |  | 46,310    |                 |  |  |        |   
|Others*              |  |            | 4  |  |               |  | 165,990   |                 |  |  | 46,074  |   
|Total                |  |            | 77 |  |               |  | 1,365,897 |                 |  |  | 543,620 |   



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|               |  |            |    |  |               |  |           |                 |  |  |         |   
|-------------- |  | ---------- | -- |  | ------------- |  | --------- | --------------- |  |  | ------- | --
|               |  |            |    |  | Fair value of |  |           | Collateralised  | 
|2011           |  | No. of     |    |  | collateral    |  |           | bonds and loans | 
|Country        |  | collateral |    |  | 000         |  |           | 000           | 
|Poland         |  |            | 14 |  |               |  | 690,373   |                 |  |  | 292,164 |   
|Czech Republic |  |            | 40 |  |               |  | 334,279   |                 |  |  | 224,269 | **
|Russia         |  |            |   |  |               |  |          |                 |  |  |        |   
|Hungary        |  |            | 20 |  |               |  | 51,410    |                 |  |  |        |   
|Others*        |  |            | 4  |  |               |  | 158,075   |                 |  |  | 48,934  |   
|Total          |  |            | 78 |  |               |  | 1,234,137 |                 |  |  | 565,367 |   



|* | Represents properties in Romania and Slovakia.
|- | ----------------------------------------------

|** | Although the collateral for the 2003 Bond is identified as relating only to the Czech Republic in fact some of the assets pledged are in the Hungary and Others fair value collateral balances. We are
presenting the total value of the bond against the Czech balance as it represents the majority of the collateral value.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

1.5
Developments and land



|                                        |  |       |         |   |       |  |         |  
|--------------------------------------- |  | ----- | ------- | - | ----- |  | ------- | -
|                                        |  | 2012  |         |   | 2011  | 
|Developments and land                   |  | 000 |         |   | 000 | 
|Balance as at 1 January                 |  |       | 587,351 |   |       |  | 634,616 |  
|Additionscost of land and construction |  |       | 26,161  |   |       |  | 19,724  |  
|Movementsfinancial leases              |  |       | (1,139  | ) |       |  | 10,549  |  
|Transfer to inventory                   |  |       | (1,744  | ) |       |  |        |  
|Transfer to standing investments        |  |       | (6,750  | ) |       |  |        |  
|Disposals                               |  |       | (3,310  | ) |       |  | (28,799 | )
|Interest capitalised                    |  |       | 1,320   |   |       |  | 2,628   |  
|Currency translation difference         |  |       |        |   |       |  | 18      |  
|Revaluation of developments and land    |  |       | (63,494 | ) |       |  | (51,385 | )
|Balance as at 31 December               |  |       | 538,395 |   |       |  | 587,351 |  

In July 2012 Atrium signed definitive contracts with a general contractor for the construction of its new development project
in Lublin, Poland. Total costs of construction for 2012 were 6.4 million and total net incremental costs to complete the project are approximately 59.6 million. The hypermarket component of the project will be developed and then
sold to a major international food retailer in line with a forward sale agreement concluded in June 2012. As development with a prior agreement to sale represents a change in use, 1.7 million was transferred from developments to
inventory. With further construction works undertaken, inventory subsequently increased to 2.2 million at 31 December 2012.

In Torun,
Atrium finalized in July 2012 the acquisition of the 38,000 sqm land plot adjacent to our existing Atrium Copernicus shopping centre and transferred 8.9 million from other assets to developments and land. Our first priority at the site is
to increase the size of the car park, for which the incremental costs to complete the project are approximately 4.0 million.

During the second half
of 2012 Atrium finalised two developments projects (Gdynia and Phase II of Atrium Galeria Mosty) and transferred them from developments and land to standing investments at fair value of 6.8 million (note 1.4).



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In 2011, Atrium acquired the public ground lease of a land plot adjacent to the Promenada shopping centre in
Warsaw, Poland for 9.3 million. Also in 2011, the Group sold three wholly owned subsidiaries which owned land plots in Turkey with an aggregate book value of 28.5 million.

The capitalisation rate used for capitalisation of borrowing costs was 4.4% for the year 2012 (2011: 4.6%) .

The total value of the land leases was 15.5 million (2011: 17.2 million) as at 31 December 2012.

1.6 Property, plant and equipment



|                                    |  |           |       |  |           |  |       | 
|----------------------------------- |  | --------- | ----- |  | --------- |  | ----- | 
|Property, plant and equipment       |  | 2012000 |       |  | 2011000 | 
|Cars and motor vehicles             |  |           | 114   |  |           |  | 137   | 
|Office equipment                    |  |           | 899   |  |           |  | 1,003 | 
|Other property, plant and equipment |  |           | 2,098 |  |           |  | 1,056 | 
|Total                               |  |           | 3,111 |  |           |  | 2,196 | 

1.7 Intangible assets and goodwill



|                               |  |           |        |  |           |  |        | 
|------------------------------ |  | --------- | ------ |  | --------- |  | ------ | 
|Intangible assets and goodwill |  | 2012000 |        |  | 2011000 | 
|Intangible assets              |  |           | 5,458  |  |           |  | 3,336  | 
|Goodwill                       |  |           | 11,025 |  |           |  | 11,475 | 
|Total                          |  |           | 16,483 |  |           |  | 14,811 | 

Intangible assets relate mainly to software.

Change in classification

During the year 2012, the Group
modified the consolidated statement of financial position classification of intangible assets from Other assets to Intangible assets and goodwill, as this resulted in a more relevant presentation of the nature of these
assets. Comparative amounts in the consolidated statement of financial position as at 31 December 2011 were reclassified for comparative purposes, which resulted in 3.3 million being reclassified from Other assets to
Intangible assets and goodwill. The Group does not believe that these adjustments are material to any of its previously issued consolidated financial statements.



|                                         |  |           |         |   |           |  |         |  
|---------------------------------------- |  | --------- | ------- | - | --------- |  | ------- | -
|Goodwill                                 |  | 2012000 |         |   | 2011000 | 
|Cost                                     |  |           |         |   |           |  |         |  
|As at 1 January                          |  |           | 42,561  |   |           |  | 42,561  |  
|Accumulated impairment losses            |  |           |         |   |           |  |         |  
|As at 1 January                          |  |           | (31,086 | ) |           |  | (31,086 | )
|Impairment losses recognised in the year |  |           | (450    | ) |           |  |        |  
|As at 31 December                        |  |           | (31,536 | ) |           |  | (31,086 | )
|Carrying amount                          |  |           |         |   |           |  |         |  
|As at 1 January                          |  |           | 11,475  |   |           |  | 11,475  |  
|As at 31 December                        |  |           | 11,025  |   |           |  | 11,475  |  



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Goodwill arose in respect of the following cash generating units:



|                      |  |           |        |  |           |  |        | 
|--------------------- |  | --------- | ------ |  | --------- |  | ------ | 
|Cash generating units |  | 2012000 |        |  | 2011000 | 
|Hungary               |  |           | 3,408  |  |           |  | 3,858  | 
|Poland                |  |           | 3,263  |  |           |  | 3,263  | 
|Russia                |  |           | 2,323  |  |           |  | 2,323  | 
|Slovakia              |  |           | 2,031  |  |           |  | 2,031  | 
|Total                 |  |           | 11,025 |  |           |  | 11,475 | 

1.8 Equity-accounted investees

The following associates are directly and indirectly owned by the company:



|                       |  |               |        |  |                              |  |    |                         |  |  |       |   |  |       |       |  |  |  |   | 
|---------------------- |  | ------------- | ------ |  | ---------------------------- |  | -- | ----------------------- |  |  | ----- | - |  | ----- | ----- |  |  |  | - | 
|                       |  |               |        |  | Stake in equity of
associate |  |    | Investment in associate | 
|                       |  | Country of    |        |  | 2012                         |  |    | 2011                    |  |  | 2012  |   |  | 2011  |      
|Name of associate      |  | incorporation |        |  | 000                        |  |    | 000                   |  |  | 000 |   |  | 000 |      
|MALL GALLERY 1 LIMITED |  |               | Cyprus |  |                              |  | 63 | %                       |  |  | 63    | % |  |       | 1,186 |  |  |  |  | 
|OOO Engineerics *      |  |               | Russia |  |                              |  | 63 | %                       |  |  | 63    | % |  |       | 269   |  |  |  |  | 
|Total                  |  |               |        |  |                              |  |    |                         |  |  |       |   |  |       | 1,455 |  |  |  |  | 



|* | Indirectly owned by the company.
|- | --------------------------------

As of 31 December 2012 the Group has no power to govern the
financial and operating activities of MALL GALLERY 1 LIMITED and OOO Engineerics but still has a significant influence over them. Therefore, at the reporting date these entities are accounted for using the equity method.

1.9 Deferred tax assets



|                                                                    |  |                     |        |   |                                                        |  |        |                     |  |  |       |  
|------------------------------------------------------------------- |  | ------------------- | ------ | - | ------------------------------------------------------ |  | ------ | ------------------- |  |  | ----- | -
|Deferred tax assets 2012                                            |  | Openingbalance000 |        |   | Deferred taxcredit/(charge) tothe incomestatement000 |  |        | Closingbalance000 | 
|Deferred tax assets arise from the following temporary differences: |  |                     |        |   |                                                        |  |        |                     |  |  |       |  
|Investment properties                                               |  |                     | (4,269 | ) |                                                        |  | 7,132  |                     |  |  | 2,863 |  
|Other assets                                                        |  |                     | 257    |   |                                                        |  | (345   | )                   |  |  | (88   | )
|Liabilities and provisions                                          |  |                     | 5,339  |   |                                                        |  | (1,284 | )                   |  |  | 4,055 |  
|Tax losses carried forward                                          |  |                     | 387    |   |                                                        |  | 1,762  |                     |  |  | 2,149 |  
|Other                                                               |  |                     | 616    |   |                                                        |  | (853   | )                   |  |  | (237  | )
|Total deferred tax assets                                           |  |                     | 2,330  |   |                                                        |  | 6,412  |                     |  |  | 8,742 |  



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|                                                                    |  |                     |       |   |                                                        |  |        |                                           |  |  |                     |  |  |  |        |  
|------------------------------------------------------------------- |  | ------------------- | ----- | - | ------------------------------------------------------ |  | ------ | ----------------------------------------- |  |  | ------------------- |  |  |  | ------ | -
|Deferred tax assets 2011                                            |  | Openingbalance000 |       |   | Deferred taxcredit/(charge) tothe incomestatement000 |  |        | Deferredtax chargeddirectly toequity000 |  |  | Closingbalance000 | 
|Deferred tax assets arise from the following temporary differences: |  |                     |       |   |                                                        |  |        |                                           |  |  |                     |  |  |  |        |  
|Investment properties                                               |  |                     | (175  | ) |                                                        |  | (4,094 | )                                         |  |  |                    |  |  |  | (4,269 | )
|Other assets                                                        |  |                     | (238  | ) |                                                        |  | 495    |                                           |  |  |                    |  |  |  | 257    |  
|Liabilities and provisions                                          |  |                     | 434   |   |                                                        |  | 3,299  |                                           |  |  | 1,606               |  |  |  | 5,339  |  
|Tax losses carried forward                                          |  |                     | 1,120 |   |                                                        |  | (733   | )                                         |  |  |                    |  |  |  | 387    |  
|Other                                                               |  |                     | 663   |   |                                                        |  | (47    | )                                         |  |  |                    |  |  |  | 616    |  
|Total deferred tax assets                                           |  |                     | 1,804 |   |                                                        |  | (1,080 | )                                         |  |  | 1,606               |  |  |  | 2,330  |  

The amount of 1.6 million charged directly to equity relates to the deferred tax asset on the hedging instrument of
0.5 million and the deferred tax asset on foreign exchange differences of 1.1 million.

1.10 Loans



|                                                            |  |           |         |   |           |  |         |  
|----------------------------------------------------------- |  | --------- | ------- | - | --------- |  | ------- | -
|Loans                                                       |  | 2012000 |         |   | 2011000 | 
|Loans to associates                                         |  |           | 42,519  |   |           |  | 35,441  |  
|Impairment of loans to associates                           |  |           | (14,016 | ) |           |  | (4,847  | )
|Loans to third parties                                      |  |           | 16,403  |   |           |  | 27,218  |  
|Impairment of loans to third parties                        |  |           | (8,255  | ) |           |  | (16,471 | )
|Total                                                       |  |           | 36,651  |   |           |  | 41,341  |  
|Amount due within 12 months (included under current assets) |  |           | 59      |   |           |  | 101     |  
|Amount due after more than 12 months                        |  |           | 36,592  |   |           |  | 41,240  |  

Loans to associates with a book value of 42.5 million (2011: 35.4 million) as at 31 December 2012 have a
fixed interest rate of 6.7% per year and are secured. The loans were impaired to reflect the fair value of the underlying securities.

Loan to third
parties with book value of 16.3 million (2011: 15.8 million) as at 31 December 2012 have a variable interest of 3 month EURIBOR plus 150 basis points per annum and is not secured. The loan was impaired to reflect the
recoverable amount.

The carrying amount of loans approximates their fair value.

1.11 Other assets



|                                  |  |           |        |  |           |  |        | 
|--------------------------------- |  | --------- | ------ |  | --------- |  | ------ | 
|Other assets                      |  | 2012000 |        |  | 2011000 | 
|VAT receivables                   |  |           | 26,965 |  |           |  | 31,129 | 
|Acquisition deposit for land plot |  |           |       |  |           |  | 8,945  | 
|Other                             |  |           | 38     |  |           |  | 127    | 
|Total                             |  |           | 27,003 |  |           |  | 40,201 | 



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Long term VAT receivables arise primarily from the development of investment property in Russia and Turkey.
VAT receivables will either be netted off against any VAT payables once payables arise or will be repaid by the relevant tax authority.

1.12
Receivables from tenants



|                                                 |  |            |        |  |                                      |  |         |          |  |  |        | 
|------------------------------------------------ |  | ---------- | ------ |  | ------------------------------------ |  | ------- | -------- |  |  | ------ | 
|Receivables from tenants 2012
Receivables aging: |  | Gross000 |        |  | Allowances for impairedbalances000 |  |         | Net000 | 
|Due within term                                  |  |            | 10,515 |  |                                      |  | (183    | )        |  |  | 10,332 | 
|Overdue 0-30 days                                |  |            | 5,738  |  |                                      |  | (685    | )        |  |  | 5,053  | 
|Overdue 31-90 days                               |  |            | 2,709  |  |                                      |  | (1,114  | )        |  |  | 1,595  | 
|Overdue 91-180 days                              |  |            | 1,472  |  |                                      |  | (1,138  | )        |  |  | 334    | 
|Overdue 181-360 days                             |  |            | 1,702  |  |                                      |  | (1,409  | )        |  |  | 293    | 
|Overdue 361 days and more                        |  |            | 6,460  |  |                                      |  | (6,030  | )        |  |  | 430    | 
|Total                                            |  |            | 28,596 |  |                                      |  | (10,559 | )        |  |  | 18,037 | 
|                                                 |  |            |       
|Receivables from tenants 2011
Receivables aging: |  | Gross000 |        |  | Allowances for impairedbalances000 |  |         | Net000 | 
|Due within term                                  |  |            | 8,759  |  |                                      |  | (424    | )        |  |  | 8,335  | 
|Overdue 0-30 days                                |  |            | 4,783  |  |                                      |  | (460    | )        |  |  | 4,323  | 
|Overdue 31-90 days                               |  |            | 1,556  |  |                                      |  | (641    | )        |  |  | 915    | 
|Overdue 91-180 days                              |  |            | 1,182  |  |                                      |  | (919    | )        |  |  | 263    | 
|Overdue 181-360 days                             |  |            | 1,761  |  |                                      |  | (1,657  | )        |  |  | 104    | 
|Overdue 361 days and more                        |  |            | 9,096  |  |                                      |  | (8,769  | )        |  |  | 327    | 
|Total                                            |  |            | 27,137 |  |                                      |  | (12,870 | )        |  |  | 14,267 | 

The description of collateral held as security in relation to tenants is provided in note 1.39 under credit risk.

Allowances for bad debts are calculated individually on the basis of managements knowledge of the tenants, business and the market.

The table below provides a reconciliation of changes in allowances during the year:



|                        |  |           |         |   |           |  |         |  
|----------------------- |  | --------- | ------- | - | --------- |  | ------- | -
|Allowances for bad debs |  | 2012000 |         |   | 2011000 | 
|At 1 January            |  |           | (12,870 | ) |           |  | (12,759 | )
|Release                 |  |           | 5,394   |   |           |  | 5,273   |  
|Addition                |  |           | (3,083  | ) |           |  | (5,384  | )
|At 31 December          |  |           | (10,559 | ) |           |  | (12,870 | )



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1.13 Prepayments



|                                   |  |           |        |   |           |  |        |  
|---------------------------------- |  | --------- | ------ | - | --------- |  | ------ | -
|Prepayments                        |  | 2012000 |        |   | 2011000 | 
|Prepaid utilities                  |  |           | 1,328  |   |           |  | 2,013  |  
|Prepayments for land               |  |           | 14,820 |   |           |  | 15,937 |  
|Other                              |  |           | 2,408  |   |           |  | 2,886  |  
|Gross total                        |  |           | 18,556 |   |           |  | 20,836 |  
|Impairment of prepayments for land |  |           | (6,052 | ) |           |  | (6,059 | )
|Total                              |  |           | 12,504 |   |           |  | 14,777 |  

1.14 Other receivables



|                                      |  |           |       |  |           |  |       | 
|------------------------------------- |  | --------- | ----- |  | --------- |  | ----- | 
|Other receivables                     |  | 2012000 |       |  | 2011000 | 
|Total other financial receivables     |  |           | 2,584 |  |           |  | 3,062 | 
|Other taxes and fees receivables      |  |           | 132   |  |           |  | 654   | 
|VAT receivable                        |  |           | 5,883 |  |           |  | 4,977 | 
|Total other non-financial receivables |  |           | 6,015 |  |           |  | 5,631 | 
|Total                                 |  |           | 8,599 |  |           |  | 8,693 | 

1.15 Cash and cash equivalents

At the year end the Group held cash and cash equivalents in total amount of 207.8 million (2011: 234.9 million). The Group held cash of
18.7 million (2011: 21.4 million) as backing for guarantees and/or other restricted cash issued by various banks on the Groups behalf.

Additional information to the Consolidated cash flow statement regarding deconsolidated subsidiary as at 31 December 2012 (see also note1.8):



|                                |  |           |       |  
|------------------------------- |  | --------- | ----- | -
|Deconsolidating of subsidiaries |  | 2012000 |      
|Property, plant and equipment   |  |           | 231   |  
|Other assets                    |  |           | 668   |  
|Other receivables               |  |           | 1,274 |  
|Trade and other payables        |  |           | (590  | )
|Cash of subsidiary              |  |           | 417   |  

1.16 Stated capital

As
at 31 December 2012, Atriums authorised and issued ordinary shares were unlimited with no par value.

As at 31 December 2012, the total
number of ordinary shares issued was 373,388,756 (2011: 372,892,253 shares), of which 373,377,680 ordinary shares were registered in the name of Nederlands Centraal Instituut voor Giraal Effectenverkeer B.V. (trading as Euroclear),
11,075 ordinary shares were registered in the name of an individual shareholder and one ordinary share in the name of Aztec Financial Services (Jersey) Limited.



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|Changes | in the stated capital account during the year 2012 were as follows:
|------- | -------------------------------------------------------------------



| | Issue of shares to satisfy the exercise of options of 0.7 million (2011: 0.3 million);
|- | ----------------------------------------------------------------------------------------



| | Issue of shares in lieu of directors remuneration 0.3 million (2011: 0.1 million).
|- | -------------------------------------------------------------------------------------



| | Dividend payments of 63.4 million (2011: 52.2 million). For the year 2012, Atrium adopted a dividend policy of 0.17 per ordinary share per year, payable in quarterly instalments. In November
2012, the Board has approved an increase of Atriums annual dividend payment for 2013 from 0.17 to at least 0.20 per share.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Following the approval of the shareholders on 18 May 2010 to authorise the directors to issue ordinary shares in lieu of directors remuneration by
agreement with the relevant directors, the Board adopted a Restricted Share Plan on 16 May 2011 (the Plan), which confers on eligible directors of Atrium the right to opt (on a semi-annual basis) to receive ordinary shares in Atrium
in lieu of their annual directors fees. The Plan further gives directors the ability to opt (on a semi-annual basis) to subscribe for ordinary shares, up to the value of their annual directors fees. Directors will be given the
opportunity to opt as referred to above in semi-annual option periods, being the four week free-dealing periods following the announcement of each of the Companys half year and full year results. The strike price for the ordinary shares to be
issued pursuant to any option notice (being the average market price over the 30 dealing days preceding) will be notified to directors at the start of each option period. Atrium retains the discretion (subject to the approval of the Board) to refuse
to satisfy an option notice in certain circumstances.

1.17 Other reserves

Other reserves of 9.6 million (2011: 3.8 million) comprise equity settled share based payment transactions and hedging reserves.

Share based payments

In 2009, Atrium established and
shareholders approved an Employee Share Option Plan (ESOP), under which the Board can grant share options to key employees. The total number of options which the Board can grant under the ESOP is 8,500,000. Each option may be exercised
by the issue of a new ordinary share in Atrium. The exercise price shall be determined by the Board, and shall be not less than the market value of a share on the dealing day immediately preceding the date of grant, or averaged over the 30 dealing
days immediately preceding the date of grant. Unless stated otherwise, option periods expire five years after the date of grant. Option holders can, in most cases, exercise one third of the total number of the options granted on or after each of the
first, second and third anniversaries respectively of the date of grant.

In August 2012, the Compensation and Nominating Committee approved the grant of
127,119 options to Mr. Katzman, Director and Chairman, in lieu of a consultancy fee of 0.15 million.



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The movement in the number of share options outstanding and their related average exercise price is as
follows:



|                     |  |                                                 |      |  |                         |  |           |  
|-------------------- |  | ----------------------------------------------- | ---- |  | ----------------------- |  | --------- | -
|2012                 |  | Weighted averageexercise price ofshare options |      |  | Number of share options | 
|As at 1 January      |  |                                                 | 2.99 |  |                         |  | 5,372,171 |  
|Granted              |  |                                                 | 3.63 |  |                         |  | 227,119   |  
|Exercised            |  |                                                 | 1.21 |  |                         |  | (408,333  | )
|Returned to the pool |  |                                                 | 0.97 |  |                         |  | (59,998   | )
|As at 31 December    |  |                                                 | 2.98 |  |                         |  | 5,130,959 |  



|                     |  |                                                 |      |  |                         |  |           |  
|-------------------- |  | ----------------------------------------------- | ---- |  | ----------------------- |  | --------- | -
|                     |  |                                                
|2011                 |  | Weighted averageexercise price ofshare options |      |  | Number of share options | 
|As at 1 January      |  |                                                 | 2.97 |  |                         |  | 5,022,169 |  
|Granted              |  |                                                 | 3.69 |  |                         |  | 986,668   |  
|Exercised            |  |                                                 | 1.22 |  |                         |  | (171,667  | )
|Returned to the pool |  |                                                 | 3.44 |  |                         |  | (464,999  | )
|As at 31 December    |  |                                                 | 2.99 |  |                         |  | 5,372,171 |  

Share options outstanding as at 31 December 2012 have the following vesting year and weighted average exercise prices:



|             |  |                                                 |      |  |                         |  |           | 
|------------ |  | ----------------------------------------------- | ---- |  | ----------------------- |  | --------- | 
|             |  |                                                
|Vesting year |  | Weighted averageexercise price ofshare options |      |  | Number of share options | 
|2009         |  |                                                 | 0.82 |  |                         |  | 18,335    | 
|2010         |  |                                                 | 0.84 |  |                         |  | 626,667   | 
|2011         |  |                                                 | 2.21 |  |                         |  | 1,255,173 | 
|2012         |  |                                                 | 3.74 |  |                         |  | 1,146,831 | 
|2013         |  |                                                 | 3.85 |  |                         |  | 1,310,168 | 
|2014         |  |                                                 | 3.44 |  |                         |  | 346,666   | 
|2015         |  |                                                 | 3.38 |  |                         |  | 427,119   | 



|Note: | Exercise prices take into account dividends paid.
|----- | -------------------------------------------------

Out of the total of 7,212,621 granted share options,
3,047,006 share options were exercisable at 31 December 2012 and 408,333 share options were exercised during the year 2012. The total number of the outstanding options was 5,130,959 as at 31 December 2012.

The weighted average fair value of options granted was determined using Black-Scholes options valuation model as at the date of grant and was approximately
1.24 per option for the year 2012. The significant inputs into the model were the weighted average share price as at the date of grant of 3.73 for the year 2012, the exercise price shown above, a volatility of 31.00% -61.61%
depending on the grant date, the time remaining to the vesting date, and an annual risk-free interest rate of 0.84% -0.97% depending on the grant date. The volatility measured at the standard deviation of continuously compounded share returns is
based on statistical analysis of daily share prices over the last five years. The volatility and annual risk-free interest rate were consulted with a third party expert.

Hedging reserves

The hedging reserve comprises the
effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred.



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1.18 Borrowings



|            |  |           |         |  |           |  |         | 
|----------- |  | --------- | ------- |  | --------- |  | ------- | 
|Borrowings  |  | 2012000 |         |  | 2011000 | 
|Bonds       |  |           | 193,958 |  |           |  | 242,826 | 
|Bank loans  |  |           | 343,103 |  |           |  | 315,934 | 
|Other loans |  |           |        |  |           |  | 9,232   | 
|Total       |  |           | 537,061 |  |           |  | 567,992 | 

The borrowings are repayable as follows:



|                                 |  |           |         |  |           |  |         | 
|-------------------------------- |  | --------- | ------- |  | --------- |  | ------- | 
|Borrowings total                 |  | 2012000 |         |  | 2011000 | 
|Due within one year              |  |           | 74,986  |  |           |  | 25,330  | 
|In second year                   |  |           | 6,557   |  |           |  | 126,277 | 
|In third to fifth year inclusive |  |           | 347,089 |  |           |  | 191,006 | 
|After five years                 |  |           | 108,429 |  |           |  | 225,379 | 
|Total                            |  |           | 537,061 |  |           |  | 567,992 | 

Bonds

On 29 June
2012, Atrium announced 50.6 million nominal value of acceptances of its 2003 bond buy back tender offer. The offer closed on 28 June 2012 and settlement took place on 3 July 2012. The net loss resulting from the bond buy back
was 1.5 million.

During 2011, Atrium completed various bond buy backs at their nominal value; being 20.0 million of the 2008 bond,
24.6 million of the 2005 bond, 10.1 million of the 2003 bond and 11.1 million of the 2001 bond. The Group redeemed all the remaining 2001 bonds upon their maturity in December 2011 for the nominal value of 22.4
million.



|                                         |  |          |     |  |              |  |     |                 |  |  |          |  |  |                 |      |  |                 |  |         |                        |  |  |         |  |  |  |     |  
|---------------------------------------- |  | -------- | --- |  | ------------ |  | --- | --------------- |  |  | -------- |  |  | --------------- | ---- |  | --------------- |  | ------- | ---------------------- |  |  | ------- |  |  |  | --- | -
|2012
Bond/Issue year                     |  | Currency |     |  | Interestrate |  |     | Averagematurity |  |  | Maturity |  |  | Book value000 |      |  | Fair value000 |  |         | Effectiveinterest rate | 
|Atrium European Real Estate Limited 2003 |  |          | EUR |  |              |  | 6.0 | %*              |  |  | 0.6      |  |  |                 | 2013 |  |                 |  | 11,975  |                        |  |  | 12,277  |  |  |  | 6.2 | %
|Atrium European Real Estate Limited 2003 |  |          | EUR |  |              |  | 5.5 | %*              |  |  | 0.6      |  |  |                 | 2013 |  |                 |  | 27,181  |                        |  |  | 27,883  |  |  |  | 5.6 | %
|Atrium European Real Estate Limited 2005 |  |          | EUR |  |              |  | 4.4 | %**             |  |  | 2.6      |  |  |                 | 2015 |  |                 |  | 40,003  |                        |  |  | 42,825  |  |  |  | 5.1 | %
|Atrium European Real Estate Limited 2005 |  |          | EUR |  |              |  | 4.0 | %***            |  |  | 4.7      |  |  |                 | 2017 |  |                 |  | 82,990  |                        |  |  | 87,855  |  |  |  | 4.5 | %
|Atrium European Real Estate Limited 2005 |  |          | CZK |  |              |  | 2.4 | %****           |  |  | 2.6      |  |  |                 | 2015 |  |                 |  | 31,809  |                        |  |  | 31,665  |  |  |  | 2.9 | %
|Total/Average                            |  |          |     |  |              |  | 4.1 | %               |  |  | 3.5      |  |  |                 |      |  |                 |  | 193,958 |                        |  |  | 202,505 |  |  |  | 4.6 | %



|                                         |  |          |     |  |              |  |     |                 |  |  |          |  |  |                 |      |  |                 |  |         |                        |  |  |         |  |  |  |     |  
|---------------------------------------- |  | -------- | --- |  | ------------ |  | --- | --------------- |  |  | -------- |  |  | --------------- | ---- |  | --------------- |  | ------- | ---------------------- |  |  | ------- |  |  |  | --- | -
|2011
Bond/Issue year                     |  | Currency |     |  | Interestrate |  |     | Averagematurity |  |  | Maturity |  |  | Book value000 |      |  | Fair value000 |  |         | Effectiveinterest rate | 
|Atrium European Real Estate Limited 2003 |  |          | EUR |  |              |  | 6.0 | %*              |  |  | 1.6      |  |  |                 | 2013 |  |                 |  | 25,914  |                        |  |  | 26,716  |  |  |  | 6.6 | %
|Atrium European Real Estate Limited 2003 |  |          | EUR |  |              |  | 5.5 | %*              |  |  | 1.6      |  |  |                 | 2013 |  |                 |  | 63,617  |                        |  |  | 65,407  |  |  |  | 5.9 | %
|Atrium European Real Estate Limited 2005 |  |          | EUR |  |              |  | 4.4 | %**             |  |  | 3.6      |  |  |                 | 2015 |  |                 |  | 39,985  |                        |  |  | 40,392  |  |  |  | 5.0 | %
|Atrium European Real Estate Limited 2005 |  |          | EUR |  |              |  | 4.0 | %***            |  |  | 5.7      |  |  |                 | 2017 |  |                 |  | 82,419  |                        |  |  | 79,452  |  |  |  | 4.5 | %
|Atrium European Real Estate Limited 2005 |  |          | CZK |  |              |  | 2.7 | %****           |  |  | 3.6      |  |  |                 | 2015 |  |                 |  | 30,891  |                        |  |  | 28,938  |  |  |  | 3.2 | %
|Total/Average                            |  |          |     |  |              |  | 4.5 | %               |  |  | 3.6      |  |  |                 |      |  |                 |  | 242,826 |                        |  |  | 240,905 |  |  |  | 5.0 | %



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Bonds bear variable interest rates:



|* | EUR bonds issued in 2003 and due in 2013, interest rate of 6% for tranche A and SWAP 10Y EURO (30/360) for tranche B payable on an annual basis in July of every year, but minimum 5.5% p.a.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|** | EUR bonds issued in 2005 and due in 2015, interest rate of 4.35% payable on an annual basis in August of every year
|-- | -------------------------------------------------------------------------------------------------------------------

|*** | EUR bonds issued in 2005 and due in 2017, interest rate of SWAP 10Y EURO (30/360) payable on an annual basis in August of every year, but minimum 4.0% p.a.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

|**** | CZK bonds issued in 2005 and due in 2015, interest rate of 6M Pribor + 120 basis points payable twice a year in February and in August of every year
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------



|           |  |                       |         |  |                       |  |         | 
|---------- |  | --------------------- | ------- |  | --------------------- |  | ------- | 
|           |  | Fair value of pledged |         |  | Fair value of pledged | 
|           |  | investment properties |         |  | investment properties | 
|           |  | 2012                  |         |  | 2011                  | 
|Collateral |  | 000                 |         |  | 000                 | 
|Bond 2003  |  |                       | 153,460 |  |                       |  | 152,696 | 
|Bond 2005  |  |                       | 447,223 |  |                       |  | 434,214 | 
|Total      |  |                       | 600,683 |  |                       |  | 586,910 | 

Loans

In December 2012,
an Atrium subsidiary entered into a new loan agreement of 50 million with Berlin-Hannoversche Hypothekenbank AG. During the year ended 31 December 2012, Atrium also completed early repayments of four loans totalling
16.4 million of which two loans of 10.6 million issued by EUROHYPO AG bank including 0.2 million costs connected with these early repayments. The loans were originally scheduled to mature in October 2012. Two other
loans of 5.8 million were repaid to Österreichische Volksbanken-AG bank including 0.4 million costs connected with these early repayments. The loans were originally scheduled to mature in December 2015 and April 2016. Also
during 2012, Atrium settled a third party loan of 9.2 million with Bulwer International Inc.

In 2011, Atrium subsidiaries entered into three
new loan agreements of 105.0 million, 31.0 million and 115.0 million in order to finance two acquisitions of shopping centres in Poland and one in the Czech Republic, respectively. Additionally, Atrium repaid the
loan of 12.0 million from Bank für Arbeit und Wirtschaft AG upon maturity.

In order to mitigate interest rate risks associated with two
loan agreements of 105.0 million and 115.0 million, the Group entered into interest rate swap agreements under which it receives 3-month Euribor as at the interest payment dates and pays a fixed interest. The cash outflow as a
result of interest payments will then match the cash inflow received under the swap agreement.



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Most of the loans are subject to normal course of business Loan To Value (LTV) and Debt Service
Coverage Ratio (DSCR) covenant tests, all of which were met throughout the year.



|                                                              |  |          |     |  |              |  |     |                 |  |  |          |  |  |                 |      |  |                 |  |         |                       |  |  |         |  |  |  |     |  
|------------------------------------------------------------- |  | -------- | --- |  | ------------ |  | --- | --------------- |  |  | -------- |  |  | --------------- | ---- |  | --------------- |  | ------- | --------------------- |  |  | ------- |  |  |  | --- | -
|2012
Lender                                                   |  | Currency |     |  | Interestrate |  |     | Averagematurity |  |  | Maturity |  |  | Book value000 |      |  | Fair value000 |  |         | Effectiveinterestrate | 
|Berlin-Hannoversche Hypothekenbank AG                         |  |          | EUR |  |              |  | 4.7 | %**             |  |  | 3.4      |  |  |                 | 2016 |  |                 |  | 102,831 |                       |  |  | 102,421 |  |  |  | 5.1 | %
|Rel Ibis Sp. z.o.o.                                           |  |          | EUR |  |              |  | 4.0 | %               |  |  | 0.9      |  |  |                 | 2013 |  |                 |  | 29,938  |                       |  |  | 30,404  |  |  |  | 4.5 | %
|Berlin-Hannoversche Hypothekenbank AG                         |  |          | EUR |  |              |  | 3.1 | %               |  |  | 5.0      |  |  |                 | 2017 |  |                 |  | 48,793  |                       |  |  | 50,792  |  |  |  | 3.6 | %
|Berlin-Hannoversche Hypothekenbank AG and Erste Group Bank AG |  |          | EUR |  |              |  | 4.1 | %**             |  |  | 8.9      |  |  |                 | 2021 |  |                 |  | 113,105 |                       |  |  | 112,700 |  |  |  | 4.3 | %
|Erste bank AG                                                 |  |          | EUR |  |              |  | 3.0 | %*              |  |  | 2.8      |  |  |                 | 2015 |  |                 |  | 2,360   |                       |  |  | 2,394   |  |  |  | 3.0 | %
|UniCredit Bank Slovakia, a.s.                                 |  |          | EUR |  |              |  | 2.7 | %*              |  |  | 4.3      |  |  |                 | 2017 |  |                 |  | 30,484  |                       |  |  | 30,921  |  |  |  | 2.7 | %
|UniCredit Bank Slovakia, a.s.                                 |  |          | EUR |  |              |  | 2.7 | %*              |  |  | 4.3      |  |  |                 | 2017 |  |                 |  | 14,092  |                       |  |  | 14,294  |  |  |  | 2.7 | %
|Ceskoslovenska obchodna banka a.s.                            |  |          | EUR |  |              |  | 1.6 | %*              |  |  | 8.9      |  |  |                 | 2021 |  |                 |  | 1,500   |                       |  |  | 1,452   |  |  |  | 1.6 | %
|Total/Average                                                 |  |          |     |  |              |  | 3.9 | %               |  |  | 5.3      |  |  |                 |      |  |                 |  | 343,103 |                       |  |  | 345,378 |  |  |  | 4.2 | %



|* | The loans bear variable interest rates in the range between 3 month Euribor + 0.22% to 1.39% .
|- | ----------------------------------------------------------------------------------------------

|** | Hedged interest rates.
|-- | ----------------------



|                                                              |  |          |     |  |              |  |     |                 |  |  |          |  |  |                 |      |  |                 |  |         |                       |  |  |         |  |  |  |     |  
|------------------------------------------------------------- |  | -------- | --- |  | ------------ |  | --- | --------------- |  |  | -------- |  |  | --------------- | ---- |  | --------------- |  | ------- | --------------------- |  |  | ------- |  |  |  | --- | -
|2011
Lender                                                   |  | Currency |     |  | Interestrate |  |     | Averagematurity |  |  | Maturity |  |  | Book value000 |      |  | Fair value000 |  |         | Effectiveinterestrate | 
|Berlin-Hannoversche Hypothekenbank AG                         |  |          | EUR |  |              |  | 4.7 | %**             |  |  | 4.4      |  |  |                 | 2016 |  |                 |  | 103,535 |                       |  |  | 106,060 |  |  |  | 5.1 | %
|Rel Ibis Sp. z.o.o.                                           |  |          | EUR |  |              |  | 4.0 | %               |  |  | 1.9      |  |  |                 | 2013 |  |                 |  | 30,332  |                       |  |  | 31,244  |  |  |  | 4.5 | %
|Berlin-Hannoversche Hypothekenbank AG and Erste Group Bank AG |  |          | EUR |  |              |  | 4.1 | %**             |  |  | 9.9      |  |  |                 | 2021 |  |                 |  | 113,596 |                       |  |  | 114,808 |  |  |  | 4.3 | %
|Österreichische Volksbanken-AG                                |  |          | EUR |  |              |  | 3.4 | %*              |  |  | 4.3      |  |  |                 | 2016 |  |                 |  | 2,652   |                       |  |  | 2,757   |  |  |  | 3.4 | %
|Österreichische Volksbanken-AG                                |  |          | EUR |  |              |  | 6.8 | %               |  |  | 4.1      |  |  |                 | 2015 |  |                 |  | 3,324   |                       |  |  | 3,802   |  |  |  | 6.8 | %
|Erste bank AG                                                 |  |          | EUR |  |              |  | 4.1 | %*              |  |  | 3.8      |  |  |                 | 2015 |  |                 |  | 3,019   |                       |  |  | 3,357   |  |  |  | 4.1 | %
|EUROHYPO AG                                                   |  |          | EUR |  |              |  | 6.4 | %               |  |  | 0.8      |  |  |                 | 2012 |  |                 |  | 10,226  |                       |  |  | 10,534  |  |  |  | 6.4 | %
|EUROHYPO AG                                                   |  |          | EUR |  |              |  | 6.1 | %               |  |  | 0.8      |  |  |                 | 2012 |  |                 |  | 316     |                       |  |  | 325     |  |  |  | 6.1 | %
|UniCredit Bank Slovakia, a.s.                                 |  |          | EUR |  |              |  | 3.9 | %*              |  |  | 5.3      |  |  |                 | 2017 |  |                 |  | 32,345  |                       |  |  | 33,605  |  |  |  | 3.9 | %
|UniCredit Bank Slovakia, a.s.                                 |  |          | EUR |  |              |  | 3.9 | %*              |  |  | 5.3      |  |  |                 | 2017 |  |                 |  | 14,944  |                       |  |  | 15,527  |  |  |  | 3.9 | %
|Ceskoslovenska obchodna banka a.s.                            |  |          | EUR |  |              |  | 2.7 | %*              |  |  | 9.9      |  |  |                 | 2021 |  |                 |  | 1,645   |                       |  |  | 1,619   |  |  |  | 2.7 | %
|Total/Average                                                 |  |          |     |  |              |  | 4.3 | %               |  |  | 6.2      |  |  |                 |      |  |                 |  | 315,934 |                       |  |  | 323,638 |  |  |  | 4.6 | %



|* | The loans bear variable interest rates in the range between 3 month Euribor + 1.35% to 2.75% .
|- | ----------------------------------------------------------------------------------------------

|** | Hedged interest rates.
|-- | ----------------------



|                                                      |  |                       |         |  |                       |  |         | 
|----------------------------------------------------- |  | --------------------- | ------- |  | --------------------- |  | ------- | 
|                                                      |  | Fair value of pledged |         |  | Fair value of pledged | 
|                                                      |  | investment properties |         |  | investment properties | 
|                                                      |  | 2012                  |         |  | 2011                  | 
|Collateral                                            |  | 000                 |         |  | 000                 | 
|Berlin-Hannoversche Hypothekenbank AG                 |  |                       | 549,762 |  |                       |  | 393,662 | 
|Ceska sporitelna a.s. (mortgaged under finance lease) |  |                       | 302     |  |                       |  | 267     | 
|Ceskoslovenska obchodna banka a.s.                    |  |                       | 9,110   |  |                       |  | 8,945   | 
|Erste Bank AG                                         |  |                       | 15,069  |  |                       |  | 13,660  | 
|EUROHYPO AG                                           |  |                       |        |  |                       |  | 30,530  | 
|Österreichische Volksbanken-AG                        |  |                       |        |  |                       |  | 16,406  | 
|Rel Ibis Sp. z o.o.                                   |  |                       | 55,610  |  |                       |  | 56,145  | 
|UniCredit Bank Slovakia, a.s.                         |  |                       | 136,880 |  |                       |  | 129,130 | 
|Total                                                 |  |                       | 766,733 |  |                       |  | 648,745 | 

Fair value

The fair
values of loans and bonds were determined by an external expert. The fair values were determined using discounted cash flow models, zero-cost derivative strategies for fixing the future values of market variables and option pricing models of the
Black-Scholes type.

Fair values have been determined with reference to market inputs, the most significant of which are:



| | Quoted EUR yield curve;
|- | -----------------------



| | Quoted CZK yield curve;
|- | -----------------------



| | Volatility of EUR swap rates;
|- | -----------------------------



| | Spot exchange rates CZK/EUR; and
|- | --------------------------------



| | Fair values of effected market transactions.
|- | --------------------------------------------



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1.19 Derivatives

The Group entered into two interest rate swap contracts (IRSs) during 2011. These swaps exchange floating interest rates to fixed interest rates.
The swaps are cash flow hedges which are designed to reduce the Groups cash flow exposure from variable interest rates on certain borrowings.

The
IRSs are in a liability position as at 31 December 2012, and have a fair value of approximately 17.8 million (2011: 9.1 million). The fair value measurements of the IRSs are derived from inputs other than quoted prices in
active markets.

The used inputs are either directly (i.e. as prices) or indirectly (i.e. derived from prices) derived. Therefore, these IRSs are
classified as Level 2 Fair value measurements under IFRS 7.

The interest rate swaps have quarterly coupons. The floating rate on
the IRSs is the 3 month Euribor and the fixed rates are 2.17% and 2.89%.

The payments and receipts for the IRSs occur simultaneously with the interest
payments on the loans. The Group will settle the difference between the fixed and floating interest amounts for the IRSs on a net basis with the respective counter party. The two swaps mature in 2016 and 2018 respectively.

1.20 Deferred tax liabilities



|                                                                         |  |                     |          |   |                                                        |  |         |                                                        |  |  |                     |  |  |  |          |  
|------------------------------------------------------------------------ |  | ------------------- | -------- | - | ------------------------------------------------------ |  | ------- | ------------------------------------------------------ |  |  | ------------------- |  |  |  | -------- | -
|Deferred tax liabilities 2012                                            |  | Openingbalance000 |          |   | Deferred taxcredit/(charge)to the incomestatement000 |  |         | Deferred taxrecognised inothercomprehensiveincome000 |  |  | Closingbalance000 | 
|Deferred tax liabilities arise from the following temporary differences: |  |                     |          |   |                                                        |  |         |                                                        |  |  |                     |  |  |  |          |  
|Investment properties                                                    |  |                     | (109,064 | ) |                                                        |  | (25,775 | )                                                      |  |  | 118                 |  |  |  | (134,721 | )
|Other assets                                                             |  |                     | 391      |   |                                                        |  | (461    | )                                                      |  |  |                    |  |  |  | (70      | )
|Liabilities and provisions                                               |  |                     | 11,749   |   |                                                        |  | (557    | )                                                      |  |  | 1,253               |  |  |  | 12,445   |  
|Tax losses carried forward                                               |  |                     | 18,717   |   |                                                        |  | 2,925   |                                                        |  |  |                    |  |  |  | 21,642   |  
|Other                                                                    |  |                     | 1,449    |   |                                                        |  | 480     |                                                        |  |  |                    |  |  |  | 1,929    |  
|Total deferred tax liabilities                                           |  |                     | (76,758  | ) |                                                        |  | (23,388 | )                                                      |  |  | 1,371               |  |  |  | (98,775  | )



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The amounts recognised in other comprehensive income relate to the net deferred tax asset on the hedging
instrument of 1.3 million (0.4 million deferred tax liabilities related to FX hedge) and the deferred tax asset on foreign exchange differences which relate to the investment properties of 0.1 million.



|                                                                         |  |                     |         |   |                                                        |  |         |                                                        |  |  |                     |  |  |  |          |  
|------------------------------------------------------------------------ |  | ------------------- | ------- | - | ------------------------------------------------------ |  | ------- | ------------------------------------------------------ |  |  | ------------------- |  |  |  | -------- | -
|Deferred tax liabilities 2011                                            |  | Openingbalance000 |         |   | Deferred taxcredit/(charge)to the incomestatement000 |  |         | Deferred taxrecognised inothercomprehensiveincome000 |  |  | Closingbalance000 | 
|Deferred tax liabilities arise from the following temporary differences: |  |                     |         |   |                                                        |  |         |                                                        |  |  |                     |  |  |  |          |  
|Investment properties                                                    |  |                     | (86,510 | ) |                                                        |  | (23,638 | )                                                      |  |  | 1,084               |  |  |  | (109,064 | )
|Other assets                                                             |  |                     | 574     |   |                                                        |  | (183    | )                                                      |  |  |                    |  |  |  | 391      |  
|Liabilities and provisions                                               |  |                     | 7,980   |   |                                                        |  | 2,522   |                                                        |  |  | 1,247               |  |  |  | 11,749   |  
|Tax losses carried forward                                               |  |                     | 18,555  |   |                                                        |  | 162     |                                                        |  |  |                    |  |  |  | 18,717   |  
|Other                                                                    |  |                     | 1,500   |   |                                                        |  | (51     | )                                                      |  |  |                    |  |  |  | 1,449    |  
|Total deferred tax liabilities                                           |  |                     | (57,901 | ) |                                                        |  | (21,188 | )                                                      |  |  | 2,331               |  |  |  | (76,758  | )

The amounts recognised in other comprehensive income relate to the deferred tax asset on the hedging instrument of
1.2 million and the deferred tax asset on foreign exchange differences which relate to the investment properties of 1.1 million.

1.21
Liabilities from financial leases

The liabilities from financial leases as at 31 December 2012 consist of the liabilities related to long term
land leases in Poland, the Czech Republic, Slovakia, Russia, and Latvia. Lease payments are due as follows:



|                                     |  |                           |        |  |                                     |  |         |                           |  |  |                                     |  |  |  |         | 
|------------------------------------ |  | ------------------------- | ------ |  | ----------------------------------- |  | ------- | ------------------------- |  |  | ----------------------------------- |  |  |  | ------- | 
|Liabilities from financial leases    |  | 2012Net presentvalue000 |        |  | 2012Undiscountedlease payments000 |  |         | 2011Net presentvalue000 |  |  | 2011Undiscounted leasepayments000 | 
|Due within one year                  |  |                           | 5,998  |  |                                     |  | 6,767   |                           |  |  | 5,475                               |  |  |  | 6,278   | 
|Due within two to five years         |  |                           | 18,830 |  |                                     |  | 26,203  |                           |  |  | 19,752                              |  |  |  | 25,716  | 
|Due after five years                 |  |                           | 28,490 |  |                                     |  | 244,138 |                           |  |  | 24,731                              |  |  |  | 220,545 | 
|Total                                |  |                           | 53,318 |  |                                     |  | 277,108 |                           |  |  | 49,958                              |  |  |  | 252,539 | 
|Amount due within 12 months          |  |                           | 5,998  |  |                                     |  | 6,767   |                           |  |  | 5,475                               |  |  |  | 6,278   | 
|Amount due after more than 12 months |  |                           | 47,320 |  |                                     |  | 270,341 |                           |  |  | 44,483                              |  |  |  | 246,261 | 

The lease obligations are mainly denominated in the local currencies of the respective countries. The Group has two material
lease arrangements; Atrium Promenada, in Poland, with net present value (NPV) 14.7 million (2011: 13.5 million) and Kazan Park House, in Russia, with NPV 10.7 million (2011: 10.5 million). Four of the
properties in the Czech Republic have been financed on the basis of finance lease contracts (2011: 4) with a fair value of 9.3 million (2011: 9.3 million).

1.22 Other long term liabilities

Other long term
liabilities of 19.7 million (2011: 17.5 million) principally comprise long term deposits from tenants amounting to 18.9 million (2011: 16.9 million), and long term retentions from construction companies.



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1.23 Trade and other payables



|                                                 |  |           |        |  |           |  |        | 
|------------------------------------------------ |  | --------- | ------ |  | --------- |  | ------ | 
|Trade and other payables                         |  | 2012000 |        |  | 2011000 | 
|Payables for utilities                           |  |           | 2,251  |  |           |  | 1,288  | 
|Payables for consultancy and audit services      |  |           | 788    |  |           |  | 1,017  | 
|Payables for repairs and maintenance             |  |           | 907    |  |           |  | 888    | 
|Payables connected with development/construction |  |           | 3,201  |  |           |  | 2,778  | 
|Short term liabilities from leasing              |  |           | 5,998  |  |           |  | 5,475  | 
|Short term deposits from tenants                 |  |           | 7,947  |  |           |  | 5,594  | 
|Payables for other services                      |  |           | 1,383  |  |           |  | 1,086  | 
|Other                                            |  |           | 332    |  |           |  | 5,407  | 
|Total other financial payables                   |  |           | 22,807 |  |           |  | 23,533 | 
|VAT payables                                     |  |           | 2,507  |  |           |  | 3,414  | 
|Other taxes and fees payables                    |  |           | 2,905  |  |           |  | 1,433  | 
|Deferred revenue                                 |  |           | 3,164  |  |           |  | 3,128  | 
|Other advance payments from tenants              |  |           | 6,606  |  |           |  | 4,830  | 
|Total other non-financial payables               |  |           | 15,182 |  |           |  | 12,805 | 
|Total                                            |  |           | 37,989 |  |           |  | 36,338 | 

1.24 Accrued expenditure



|                                            |  |           |        |  |           |  |        | 
|------------------------------------------- |  | --------- | ------ |  | --------- |  | ------ | 
|Accrued expenditure                         |  | 2012000 |        |  | 2011000 | 
|Accruals for utilities                      |  |           | 1,272  |  |           |  | 2,292  | 
|Accruals for consultancy and audit services |  |           | 2,869  |  |           |  | 1,948  | 
|Accruals for construction services          |  |           | 6,292  |  |           |  | 1,322  | 
|Accruals for interest                       |  |           | 3,673  |  |           |  | 4,856  | 
|Accruals for employees compensation         |  |           | 3,434  |  |           |  | 2,993  | 
|Accruals for taxes                          |  |           | 2,981  |  |           |  | 1,554  | 
|Other                                       |  |           | 5,610  |  |           |  | 7,994  | 
|Total                                       |  |           | 26,131 |  |           |  | 22,959 | 

1.25 Gross rental income

Gross rental income (GRI) includes rental income from the lease of investment properties, rent from advertising areas, communication equipment and
other sources.

GRI by country is as follows:



|               |  |           |         |  |                    |  |       |           |  |  |                    |  |  |  |       |  
|-------------- |  | --------- | ------- |  | ------------------ |  | ----- | --------- |  |  | ------------------ |  |  |  | ----- | -
|Country        |  | 2012000 |         |  | 2012% of total GRI |  |       | 2011000 |  |  | 2011% of total GRI | 
|Poland         |  |           | 73,851  |  |                    |  | 38.2  | %         |  |  | 64,099             |  |  |  | 37.2  | %
|Czech Republic |  |           | 38,629  |  |                    |  | 20.0  | %         |  |  | 29,687             |  |  |  | 17.2  | %
|Slovakia       |  |           | 11,248  |  |                    |  | 5.8   | %         |  |  | 10,808             |  |  |  | 6.3   | %
|Russia         |  |           | 52,940  |  |                    |  | 27.4  | %         |  |  | 45,190             |  |  |  | 26.2  | %
|Hungary        |  |           | 8,567   |  |                    |  | 4.4   | %         |  |  | 8,222              |  |  |  | 4.8   | %
|Romania        |  |           | 7,172   |  |                    |  | 3.7   | %         |  |  | 7,000              |  |  |  | 4.1   | %
|Latvia         |  |           | 1,068   |  |                    |  | 0.5   | %         |  |  | 963                |  |  |  | 0.6   | %
|Turkey         |  |           |        |  |                    |  |      |           |  |  | 6,204              |  |  |  | 3.6   | %
|Total          |  |           | 193,475 |  |                    |  | 100.0 | %         |  |  | 172,173            |  |  |  | 100.0 | %



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1.26 Service charge income

Service charge income of 73.8 million (2011: 68.4 million) represents income from services reinvoiced to tenants and results mainly from
reinvoiced utilities, marketing, repairs and maintenance. Expenses to be reinvoiced to tenants are presented under net property expenses together with other operating costs that are not reinvoiced to tenants.

1.27 Net property expenses



|                                                               |  |           |         |   |           |  |         |  
|-------------------------------------------------------------- |  | --------- | ------- | - | --------- |  | ------- | -
|Net property expenses                                          |  | 2012000 |         |   | 2011000 | 
|Utilities                                                      |  |           | (29,559 | ) |           |  | (27,608 | )
|Security, cleaning & other facility related costs              |  |           | (11,121 | ) |           |  | (13,051 | )
|Real estate tax                                                |  |           | (12,492 | ) |           |  | (12,397 | )
|Repairs, maintenance and facility management fees              |  |           | (10,857 | ) |           |  | (9,771  | )
|Direct employment costs                                        |  |           | (10,724 | ) |           |  | (10,438 | )
|Marketing and other consulting                                 |  |           | (6,940  | ) |           |  | (7,033  | )
|Office related expenses                                        |  |           | (734    | ) |           |  | (780    | )
|Travel and transport cost                                      |  |           | (646    | ) |           |  | (637    | )
|Creation of allowance and written off receivables from tenants |  |           | (1,559  | ) |           |  | (867    | )
|Other                                                          |  |           | (1,326  | ) |           |  | (3,152  | )
|Total                                                          |  |           | (85,958 | ) |           |  | (85,734 | )

1.28 Net result on acquisitions and disposals

The Groups disposal of investment properties generated a profit of 0.8 million (2011: 31.8 million) during the year ended
31 December 2012. The profit on the divestment of standing investments was 0.4 million (2011: 15.6 million) and on the land plots 0.4 million (2011: 16.2 million).

1.29 Other depreciation, amortisation and impairments



|                                                 |  |           |        |   |           |  |        |  
|------------------------------------------------ |  | --------- | ------ | - | --------- |  | ------ | -
|Other depreciation, amortisation and impairments |  | 2012000 |        |   | 2011000 | 
|Impairment of goodwill                           |  |           | (450   | ) |           |  |       |  
|Other depreciation and amortisation              |  |           | (1,385 | ) |           |  | (1,392 | )
|Total                                            |  |           | (1,835 | ) |           |  | (1,392 | )



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1.30 Administrative expenses



|                                     |  |           |         |   |           |  |         |  
|------------------------------------ |  | --------- | ------- | - | --------- |  | ------- | -
|Administrative expenses              |  | 2012000 |         |   | 2011000 | 
|Legal fees                           |  |           | (3,585  | ) |           |  | (5,720  | )
|Legacy legal matters                 |  |           | (3,255  | ) |           |  | (12,550 | )
|Employee costs                       |  |           | (9,299  | ) |           |  | (8,217  | )
|Consultancy and other advisory fees  |  |           | (4,450  | ) |           |  | (4,395  | )
|Audit, audit related and review fees |  |           | (1,683  | ) |           |  | (1,485  | )
|Expenses related to directors        |  |           | (816    | ) |           |  | (528    | )
|Share based payments                 |  |           | (1,447  | ) |           |  | (1,798  | )
|Other                                |  |           | (4,590  | ) |           |  | (3,077  | )
|Total                                |  |           | (29,125 | ) |           |  | (37,770 | )

The Group does not have significant defined benefit pension plans.

1.31 Interest income and interest expenses

Interest
income of 3.9 million (2011: 6.1 million) was mainly derived from bank deposits and interest on the loans provided to third parties, which was subsequently impaired. The decline in interest income in 2012 was mainly due to low
interest rates on bank deposits.

The Groups interest expense of 23.1 million (2011: 23.2 million) consists of interest expense on
bank loans 13.1 million (2011: 9.7 million) and bonds of 9.8 million (2011: 11.3 million). The remaining amount relates to the amortised financing expenses of 1.5 million. In addition to the above mentioned
interest expense an additional amount of 1.3 million (2011: 2.6 million) was capitalised to the development projects, see note 1.5.

1.32 Other financial income and expenses



|                                      |  |           |         |   |           |  |         |  
|------------------------------------- |  | --------- | ------- | - | --------- |  | ------- | -
|Other financial income and expenses   |  | 2012000 |         |   | 2011000 | 
|Foreign currency differences          |  |           | 7,860   |   |           |  | (22,290 | )
|Net profit/(loss) from bond buy backs |  |           | (1,519  | ) |           |  | 923     |  
|Impairment of financial instruments   |  |           | (11,184 | ) |           |  | (9,323  | )
|Other financial income/(expenses)     |  |           | 146     |   |           |  | (2,651  | )
|Total                                 |  |           | (4,697  | ) |           |  | (33,341 | )

1.33 Taxation charge for the year



|                                                      |  |           |         |   |           |  |         |  
|----------------------------------------------------- |  | --------- | ------- | - | --------- |  | ------- | -
|Taxation charge for the year                          |  | 2012000 |         |   | 2011000 | 
|The taxation for the year consists of:                |  |           |         |   |           |  |         |  
|Corporate income tax current year charge              |  |           | (2,846  | ) |           |  | (3,756  | )
|Deferred tax charge                                   |  |           | (16,976 | ) |           |  | (23,316 | )
|Adjustments to corporate income tax previous years    |  |           | (76     | ) |           |  | 621     |  
|Income tax charged to the income statement            |  |           | (19,898 | ) |           |  | (26,451 | )
|Income tax credited/(charged) to comprehensive income |  |           | 1,371   |   |           |  | 3,937   |  

The subsidiary companies are subject to taxes for their respective businesses in countries of their registration at the rates
prevailing in those jurisdictions.



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Effective tax rate

A reconciliation between the current year income tax charge and the accounting profit before tax is shown below:



|                                                                           |  |       |         |    |      |  |     |       |  |  |         |    |  |  |     |  
|-------------------------------------------------------------------------- |  | ----- | ------- | -- | ---- |  | --- | ----- |  |  | ------- | -- |  |  | --- | -
|                                                                           |  | 2012  |         |    | 2012 |  |     | 2011  |  |  | 2011    |   
|                                                                           |  | 000 |         |    | %    |  |     | 000 |  |  | %       |   
|Profit before taxation                                                     |  |       | 116,073 |    |      |  |     |       |  |  | 169,697 |    |  |  |     |  
|Income tax credit/(charge) using the weighted average applicable tax rates |  |       | 2,237   |    |      |  | 1.9 | %     |  |  | (3,575  | )  |  |  | 2.1 | %
|Tax effect of non-taxable income/(non-deductible expenses)                 |  |       | 5,008   |    |      |  |     |       |  |  | (21,484 | )  |  |  |     |  
|Tax effect of losses previously not recognised                             |  |       | 7,015   |    |      |  |     |       |  |  | 4,881   |    |  |  |     |  
|Deferred tax asset not recognised                                          |  |       | (33,957 | )  |      |  |     |       |  |  | (10,583 | )  |  |  |     |  
|Tax adjustment of previous years                                           |  |       | (76     | )  |      |  |     |       |  |  | 621     |    |  |  |     |  
|Other                                                                      |  |       | (125    | )  |      |  |     |       |  |  | 3,689   |    |  |  |     |  
|Tax charge                                                                 |  |       | (19,898 | )  |      |  |     |       |  |  | (26,451 | )  |  |  |     |  
|Effective tax rate                                                         |  |       | (17.1   | %) |      |  |     |       |  |  | (15.6   | %) |  |  |     |  

The Group has not recognised deferred tax assets of 147.5 million (2011: 120.6 million) as it is not probable
that future taxable profit will be available against which the Group can utilise these benefits. These unrecognised deferred tax assets arose primarily from negative revaluation of investment properties and will expire over a number of years,
commencing in 2013, in accordance with local tax legislation.



|                                 |  |       |         |  |       |  |         | 
|-------------------------------- |  | ----- | ------- |  | ----- |  | ------- | 
|Unrecognised deferred tax assets |  | 2012  |         |  | 2011  | 
|Country                          |  | 000 |         |  | 000 | 
|Poland                           |  |       | 14,626  |  |       |  | 8,955   | 
|Czech Republic                   |  |       | 1,080   |  |       |  | 881     | 
|Russia                           |  |       | 84,934  |  |       |  | 70,260  | 
|Slovakia                         |  |       | 33      |  |       |  |        | 
|Hungary                          |  |       | 2,043   |  |       |  | 1,454   | 
|Romania                          |  |       | 6,193   |  |       |  | 4,859   | 
|Latvia                           |  |       | 16      |  |       |  | 2,504   | 
|Turkey                           |  |       | 11,481  |  |       |  | 11,276  | 
|Netherlands                      |  |       | 6,370   |  |       |  | 5,009   | 
|Georgia                          |  |       | 6,963   |  |       |  | 5,439   | 
|Ukraine                          |  |       | 6,686   |  |       |  | 6,572   | 
|Cyprus                           |  |       | 6,950   |  |       |  | 3,358   | 
|Bulgaria                         |  |       | 133     |  |       |  |        | 
|Total                            |  |       | 147,508 |  |       |  | 120,567 | 



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The Group is liable for taxation on taxable profits in the following jurisdictions at the rates below:



|                           |  |      |      |    |      |  |      |   
|-------------------------- |  | ---- | ---- | -- | ---- |  | ---- | --
|Corporate income tax rates |  | 2012 |      |    | 2011 | 
|Poland                     |  |      | 19.0 | %  |      |  | 19.0 | % 
|Czech Republic             |  |      | 19.0 | %  |      |  | 19.0 | % 
|Slovakia                   |  |      | 19.0 | %  |      |  | 19.0 | % 
|Russia                     |  |      | 20.0 | %  |      |  | 20.0 | % 
|Hungary                    |  |      | 10.0 | %1 |      |  | 10.0 | %1
|Romania                    |  |      | 16.0 | %  |      |  | 16.0 | % 
|Latvia                     |  |      | 15.0 | %  |      |  | 15.0 | % 
|Turkey                     |  |      | 20.0 | %  |      |  | 20.0 | % 
|Bulgaria                   |  |      | 10.0 | %  |      |  | 10.0 | % 
|Cyprus                     |  |      | 10.0 | %  |      |  | 10.0 | % 
|Denmark                    |  |      | 25.0 | %  |      |  | 25.0 | % 
|Georgia                    |  |      | 15.0 | %  |      |  | 15.0 | % 
|Italy                      |  |      | 27.5 | %2 |      |  | 27.5 | %2
|Jersey                     |  |      | 0.0  | %  |      |  | 0.0  | % 
|Netherlands                |  |      | 25.0 | %3 |      |  | 25.0 | %3
|Sweden                     |  |      | 26.3 | %  |      |  | 26.3 | % 
|Spain                      |  |      | 30.0 | %4 |      |  | 30.0 | %4
|Ukraine                    |  |      | 21.0 | %5 |      |  | 23.0 | %5



|1. | Effective from 1 July 2010, a 10% tax rate applies to a tax base up to HUF 500 million, with a 19% rate applying to a tax base exceeding this amount.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------

|2. | The corporate income tax rate is 27.5% plus local tax due (generally 3.9%) .
|-- | ----------------------------------------------------------------------------

|3. | As of 1 January 2011, the rate applying to taxable profits exceeding 0.2 million is 25%. Below this amount a 20% tax rate is applicable to taxable profit.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

|4. | The regular corporate income tax rate is 30 %, however a 25% rate is imposed on profits up to 0.3million and if the annual turnover is less than 10 million.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | The rate decreased from 23% to 21% on 1 January 2012.
|-- | -----------------------------------------------------

Deferred taxes were calculated in accordance with these tax rate changes.



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1.34 Earnings per share

The calculation of basic earnings per share of 0.26 (2011: 0.39) as at 31 December 2012 was based on the profit after taxation attributable to
ordinary shareholders of 98.7 million (2011: 145.3 million) and the weighted average number of ordinary shares outstanding of 373,075,076 (2011: 372,840,525).

The basic and diluted earnings per share are the same for the years ended 31 December 2012 and 31 December 2011.



|                                                 |  |      |             |  |      |  |             | 
|------------------------------------------------ |  | ---- | ----------- |  | ---- |  | ----------- | 
|Number of shares                                 |  | 2012 |             |  | 2011 | 
|Issued ordinary shares at 1 January              |  |      | 372,892,253 |  |      |  | 372,696,326 | 
|Shares issued in January 2011                    |  |      |             |  |      |  | 55,000      | 
|Shares issued in April 2011                      |  |      |             |  |      |  | 116,667     | 
|Shares issued in October 2011                    |  |      |             |  |      |  | 24,260      | 
|Shares issued in January 2012                    |  |      | 25,000      |  |      |  |             | 
|Shares issued in April 2012                      |  |      | 63,274      |  |      |  |             | 
|Shares issued in June 2012                       |  |      | 30,000      |  |      |  |             | 
|Shares issued in July 2012                       |  |      | 25,000      |  |      |  |             | 
|Shares issued in September 2012                  |  |      | 249,896     |  |      |  |             | 
|Shares issued in October 2012                    |  |      | 40,000      |  |      |  |             | 
|Shares issued in December 2012                   |  |      | 63,333      |  |      |  |             | 
|Total number of shares at 31 December            |  |      | 373,388,756 |  |      |  | 372,892,253 | 
|Weighted average number of shares at 31 December |  |      | 373,075,076 |  |      |  | 372,840,525 | 



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1.35 Segment reporting



|                                          |  |                                |           |   |                         |  |         |                       |  |  |            |   |  |  |           |  
|----------------------------------------- |  | ------------------------------ | --------- | - | ----------------------- |  | ------- | --------------------- |  |  | ---------- | - |  |  | --------- | -
|Reportable segments in 2012               |  | Standinginvestmentsegment000 |           |   | Developmentsegment000 |  |         | Reconciling item000 |  |  | Total000 |  
|                                          |  |                                |           |  
|                                          |  |                                |           |  
|For the year ended
31 December 2012       |  |                                |           |  
|Gross rental income                       |  |                                | 193,475   |   |                         |  |        |                       |  |  |           |   |  |  | 193,475   |  
|Service charge income                     |  |                                | 73,762    |   |                         |  |        |                       |  |  |           |   |  |  | 73,762    |  
|Net property expenses                     |  |                                | (85,958   | ) |                         |  |        |                       |  |  |           |   |  |  | (85,958   | )
|Net rental income                         |  |                                | 181,279   |   |                         |  |        |                       |  |  |           |   |  |  | 181,279   |  
|Net result on acquisitions and disposals  |  |                                | 427       |   |                         |  | 366     |                       |  |  |           |   |  |  | 793       |  
|Cost connected with developments and land |  |                                |          |   |                         |  | (6,161  | )                     |  |  |           |   |  |  | (6,161    | )
|Revaluation of investment properties      |  |                                | 58,533    |   |                         |  | (63,494 | )                     |  |  |           |   |  |  | (4,961    | )
|Other depreciation and amortisation       |  |                                | (1,430    | ) |                         |  |        |                       |  |  | (405       | ) |  |  | (1,835    | )
|Administrative expenses                   |  |                                | (11,278   | ) |                         |  | (1,081  | )                     |  |  | (16,766    | ) |  |  | (29,125   | )
|Net operating profit/(loss)               |  |                                | 227,531   |   |                         |  | (70,370 | )                     |  |  | (17,171    | ) |  |  | 139,990   |  
|Interest income                           |  |                                | 219       |   |                         |  | 19      |                       |  |  | 3,645      |   |  |  | 3,883     |  
|Interest expense                          |  |                                | (22,363   | ) |                         |  | (735    | )                     |  |  | (5         | ) |  |  | (23,103   | )
|Other financial income/(expenses)         |  |                                | (6,899    | ) |                         |  | 8,732   |                       |  |  | (6,530     | ) |  |  | (4,697    | )
|Profit/loss before taxation for the year  |  |                                | 198,488   |   |                         |  | (62,354 | )                     |  |  | (20,061    | ) |  |  | 116,073   |  
|Taxation credit/(charge) for the year     |  |                                | (19,272   | ) |                         |  | 562     |                       |  |  | (1,188     | ) |  |  | (19,898   | )
|Profit/(loss) after taxation for the year |  |                                | 179,216   |   |                         |  | (61,792 | )                     |  |  | (21,249    | ) |  |  | 96,175    |  
|Investment properties                     |  |                                | 2,185,336 |   |                         |  | 538,395 |                       |  |  |           |   |  |  | 2,723,731 |  
|Additions to investment properties        |  |                                | 40,379    |   |                         |  | 27,481  |                       |  |  |           |   |  |  | 67,860    |  
|Segment assets                            |  |                                | 2,262,704 |   |                         |  | 586,947 |                       |  |  | 218,890    | * |  |  | 3,068,541 |  
|Segment liabilities                       |  |                                | 695,464   |   |                         |  | 83,150  |                       |  |  | 8,555      |   |  |  | 787,169   |  



|* | The amount mainly relates to cash and cash equivalents.
|- | -------------------------------------------------------



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|                                           |  |                                   |           |    |                         |  |         |                       |  |  |            |   |  |  |           |  
|------------------------------------------ |  | --------------------------------- | --------- | -- | ----------------------- |  | ------- | --------------------- |  |  | ---------- | - |  |  | --------- | -
|Reportable segments in 2011                |  | Standing
investment segment
000 |           |    | Developmentsegment000 |  |         | Reconciling item000 |  |  | Total000 |  
|                                           |  |                                   |           |   
|                                           |  |                                   |           |   
|For the year ended
31 December 2011        |  |                                   |           |   
|Gross rental income                        |  |                                   | 172,173   |    |                         |  |        |                       |  |  |           |   |  |  | 172,173   |  
|Service charge income                      |  |                                   | 68,431    |    |                         |  |        |                       |  |  |           |   |  |  | 68,431    |  
|Net properties expenses                    |  |                                   | (85,734   | )  |                         |  |        |                       |  |  |           |   |  |  | (85,734   | )
|Net rental income                          |  |                                   | 154,870   |    |                         |  |        |                       |  |  |           |   |  |  | 154,870   |  
|Net result on acquisitions and disposals   |  |                                   | 15,567    | ** |                         |  | 16,224  |                       |  |  |           |   |  |  | 31,791    |  
|Cost connected with developments and land  |  |                                   |          |    |                         |  | (4,660  | )                     |  |  |           |   |  |  | (4,660    | )
|Revaluation of investment properties       |  |                                   | 128,706   |    |                         |  | (51,385 | )                     |  |  |           |   |  |  | 77,321    |  
|Other depreciation and amortisation        |  |                                   | (417      | )  |                         |  |        |                       |  |  | (975       | ) |  |  | (1,392    | )
|Administrative expenses                    |  |                                   | (9,612    | )  |                         |  | (1,147  | )                     |  |  | (27,011    | ) |  |  | (37,770   | )
|Net operating profit/(loss)                |  |                                   | 289,114   |    |                         |  | (40,968 | )                     |  |  | (27,986    | ) |  |  | 220,160   |  
|Interest income                            |  |                                   | 806       |    |                         |  |        |                       |  |  | 5,314      |   |  |  | 6,120     |  
|Interest expense                           |  |                                   | (19,035   | )  |                         |  | (3,121  | )                     |  |  | (1,086     | ) |  |  | (23,242   | )
|Other financial expenses                   |  |                                   | (5,956    | )  |                         |  | (6,682  | )                     |  |  | (20,703    | ) |  |  | (33,341   | )
|Profit/ (loss) before taxation of the year |  |                                   | 264,929   |    |                         |  | (50,771 | )                     |  |  | (44,461    | ) |  |  | 169,697   |  
|Taxation credit/(charge) for the year      |  |                                   | (27,707   | )  |                         |  | 1,790   |                       |  |  | (534       | ) |  |  | (26,451   | )
|Profit/(loss) after taxation for the year  |  |                                   | 237,222   |    |                         |  | (48,981 | )                     |  |  | (44,995    | ) |  |  | 143,246   |  
|Investment properties                      |  |                                   | 2,077,246 |    |                         |  | 587,351 |                       |  |  |           |   |  |  | 2,664,597 |  
|Additions to investment properties         |  |                                   | 431,460   |    |                         |  | 22,352  |                       |  |  |           |   |  |  | 453,812   |  
|Segment assets                             |  |                                   | 2,156,277 |    |                         |  | 639,880 |                       |  |  | 244,544    | * |  |  | 3,040,701 |  
|Segment liabilities                        |  |                                   | 665,095   |    |                         |  | 105,116 |                       |  |  | 5,947      |   |  |  | 776,158   |  



|* | The amount mainly relates to cash and cash equivalents.
|- | -------------------------------------------------------

|** | The amount mainly relates to the settlement agreement with Multi investment BV.
|-- | -------------------------------------------------------------------------------



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Geographical segments by business sector in 2012



|                                          |  |                                |           |   |                         |  |         |                       |  |  |             |   |  |                                |           |   |                         |  |         |                       |  |  |            |   |  |  |       |   |  |  |         |  
|----------------------------------------- |  | ------------------------------ | --------- | - | ----------------------- |  | ------- | --------------------- |  |  | ----------- | - |  | ------------------------------ | --------- | - | ----------------------- |  | ------- | --------------------- |  |  | ---------- | - |  |  | ----- | - |  |  | ------- | -
|                                          |  | Poland                         |           |   | Czech Republic          | 
|For the year ended
31 December 2012       |  | Standinginvestmentsegment000 |           |   | Developmentsegment000 |  |         | Reconcilingitem 000 |  |  | Total 000 |   |  | Standinginvestmentsegment000 |           |   | Developmentsegment000 |  |         | Reconcilingitem 000 |  |  | Total000 |  
|Gross rental income                       |  |                                | 73,851    |   |                         |  |        |                       |  |  |            |   |  |                                | 73,851    |   |                         |  | 38,629  |                       |  |  |           |   |  |  |      |   |  |  | 38,629  |  
|Service charge income                     |  |                                | 27,949    |   |                         |  |        |                       |  |  |            |   |  |                                | 27,949    |   |                         |  | 11,424  |                       |  |  |           |   |  |  |      |   |  |  | 11,424  |  
|Net property expenses                     |  |                                | (28,223   | ) |                         |  |        |                       |  |  |            |   |  |                                | (28,223   | ) |                         |  | (15,036 | )                     |  |  |           |   |  |  |      |   |  |  | (15,036 | )
|Net rental income                         |  |                                | 73,577    |   |                         |  |        |                       |  |  |            |   |  |                                | 73,577    |   |                         |  | 35,017  |                       |  |  |           |   |  |  |      |   |  |  | 35,017  |  
|Net result on acquisitions and disposals  |  |                                | 427       |   |                         |  | (24     | )                     |  |  |            |   |  |                                | 403       |   |                         |  |        |                       |  |  |           |   |  |  |      |   |  |  |        |  
|Cost connected with developments and land |  |                                |          |   |                         |  | 109     |                       |  |  |            |   |  |                                | 109       |   |                         |  |        |                       |  |  |           |   |  |  |      |   |  |  |        |  
|Revaluation of investment properties      |  |                                | 25,681    |   |                         |  | (11,677 | )                     |  |  |            |   |  |                                | 14,004    |   |                         |  | 59      |                       |  |  | 2,433      |   |  |  |      |   |  |  | 2,492   |  
|Other depreciation and amortisation       |  |                                | (222      | ) |                         |  |        |                       |  |  |            |   |  |                                | (222      | ) |                         |  | (263    | )                     |  |  |           |   |  |  |      |   |  |  | (263    | )
|Administrative expenses                   |  |                                | (4,939    | ) |                         |  | (226    | )                     |  |  | 513         |   |  |                                | (4,652    | ) |                         |  | (3,086  | )                     |  |  | (11        | ) |  |  | 146   |   |  |  | (2,951  | )
|Net operating profit/(loss)               |  |                                | 94,524    |   |                         |  | (11,818 | )                     |  |  | 513         |   |  |                                | 83,219    |   |                         |  | 31,727  |                       |  |  | 2,422      |   |  |  | 146   |   |  |  | 34,295  |  
|Interest income                           |  |                                | 108       |   |                         |  | 9       |                       |  |  | 9           |   |  |                                | 126       |   |                         |  | 58      |                       |  |  |           |   |  |  |      |   |  |  | 58      |  
|Interest expense                          |  |                                | (10,016   | ) |                         |  | (186    | )                     |  |  |            |   |  |                                | (10,202   | ) |                         |  | (6,441  | )                     |  |  | (5         | ) |  |  |      |   |  |  | (6,446  | )
|Other financial expenses                  |  |                                | (4,489    | ) |                         |  | (235    | )                     |  |  | (100        | ) |  |                                | (4,824    | ) |                         |  | (1,097  | )                     |  |  | (3         | ) |  |  | (5    | ) |  |  | (1,105  | )
|Profit/(loss) before taxation             |  |                                | 80,127    |   |                         |  | (12,230 | )                     |  |  | 422         |   |  |                                | 68,319    |   |                         |  | 24,247  |                       |  |  | 2,414      |   |  |  | 141   |   |  |  | 26,802  |  
|Taxation credit/(charge) for the year     |  |                                | (7,084    | ) |                         |  | 174     |                       |  |  | (135        | ) |  |                                | (7,045    | ) |                         |  | (3,873  | )                     |  |  | (12        | ) |  |  | (376  | ) |  |  | (4,261  | )
|Profit/(loss) after taxation for the year |  |                                | 73,043    |   |                         |  | (12,056 | )                     |  |  | 287         |   |  |                                | 61,274    |   |                         |  | 20,374  |                       |  |  | 2,402      |   |  |  | (235  | ) |  |  | 22,541  |  
|Investment properties                     |  |                                | 1,030,350 |   |                         |  | 143,125 |                       |  |  |            |   |  |                                | 1,173,475 |   |                         |  | 445,901 |                       |  |  | 4,776      |   |  |  |      |   |  |  | 450,677 |  
|Additions to investment properties        |  |                                | 14,785    |   |                         |  | 23,018  |                       |  |  |            |   |  |                                | 37,803    |   |                         |  | 5,164   |                       |  |  | 425        |   |  |  |      |   |  |  | 5,589   |  
|Segment assets                            |  |                                | 1,059,616 |   |                         |  | 153,154 |                       |  |  | 2,657       |   |  |                                | 1,215,427 |   |                         |  | 461,909 |                       |  |  | 4,783      |   |  |  | 1,071 |   |  |  | 467,763 |  
|Segment liabilities                       |  |                                | 343,680   |   |                         |  | 23,249  |                       |  |  | 27          |   |  |                                | 366,956   |   |                         |  | 176,827 |                       |  |  | 251        |   |  |  |      |   |  |  | 177,078 |  



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|                                          |  |                                |         |   |                         |  |     |                       |  |  |            |   |  |                                |         |   |                         |  |         |                       |  |  |            |   |  |  |       |   |  |  |         |  
|----------------------------------------- |  | ------------------------------ | ------- | - | ----------------------- |  | --- | --------------------- |  |  | ---------- | - |  | ------------------------------ | ------- | - | ----------------------- |  | ------- | --------------------- |  |  | ---------- | - |  |  | ----- | - |  |  | ------- | -
|                                          |  | Slovakia                       |         |   | Russia                  | 
|For the year ended
31 December 2012       |  | Standinginvestmentsegment000 |         |   | Developmentsegment000 |  |     | Reconcilingitem 000 |  |  | Total000 |   |  | Standinginvestmentsegment000 |         |   | Developmentsegment000 |  |         | Reconcilingitem 000 |  |  | Total000 |  
|Gross rental income                       |  |                                | 11,248  |   |                         |  |    |                       |  |  |           |   |  |                                | 11,248  |   |                         |  | 52,940  |                       |  |  |           |   |  |  |      |   |  |  | 52,940  |  
|Service charge income                     |  |                                | 5,703   |   |                         |  |    |                       |  |  |           |   |  |                                | 5,703   |   |                         |  | 22,157  |                       |  |  |           |   |  |  |      |   |  |  | 22,157  |  
|Net property expenses                     |  |                                | (5,803  | ) |                         |  |    |                       |  |  |           |   |  |                                | (5,803  | ) |                         |  | (27,408 | )                     |  |  |           |   |  |  |      |   |  |  | (27,408 | )
|Net rental income                         |  |                                | 11,148  |   |                         |  |    |                       |  |  |           |   |  |                                | 11,148  |   |                         |  | 47,689  |                       |  |  |           |   |  |  |      |   |  |  | 47,689  |  
|Net result on acquisitions and disposals  |  |                                |        |   |                         |  |    |                       |  |  |           |   |  |                                |        |   |                         |  |        |                       |  |  | 377        |   |  |  |      |   |  |  | 377     |  
|Cost connected with developments and land |  |                                |        |   |                         |  |    |                       |  |  |           |   |  |                                |        |   |                         |  |        |                       |  |  | (3,307     | ) |  |  |      |   |  |  | (3,307  | )
|Revaluation of investment properties      |  |                                | 6,593   |   |                         |  | (13 | )                     |  |  |           |   |  |                                | 6,580   |   |                         |  | 37,523  |                       |  |  | (38,028    | ) |  |  |      |   |  |  | (505    | )
|Other depreciation and amortisation       |  |                                | (214    | ) |                         |  |    |                       |  |  |           |   |  |                                | (214    | ) |                         |  | (88     | )                     |  |  |           |   |  |  |      |   |  |  | (88     | )
|Administrative expenses                   |  |                                | (754    | ) |                         |  | (1  | )                     |  |  | 50         |   |  |                                | (705    | ) |                         |  | (1,450  | )                     |  |  | (618       | ) |  |  | (101  | ) |  |  | (2,169  | )
|Net operating profit/(loss)               |  |                                | 16,773  |   |                         |  | (14 | )                     |  |  | 50         |   |  |                                | 16,809  |   |                         |  | 83,674  |                       |  |  | (41,576    | ) |  |  | (101  | ) |  |  | 41,997  |  
|Interest income                           |  |                                | 1       |   |                         |  |    |                       |  |  |           |   |  |                                | 1       |   |                         |  | 27      |                       |  |  | 3          |   |  |  |      |   |  |  | 30      |  
|Interest expense                          |  |                                | (1,727  | ) |                         |  |    |                       |  |  |           |   |  |                                | (1,727  | ) |                         |  | (3,104  | )                     |  |  | (151       | ) |  |  |      |   |  |  | (3,255  | )
|Other financial income/(expenses)         |  |                                | (34     | ) |                         |  |    |                       |  |  | (3         | ) |  |                                | (37     | ) |                         |  | (889    | )                     |  |  | 1,371      |   |  |  | (63   | ) |  |  | 419     |  
|Profit/(loss) before taxation             |  |                                | 15,013  |   |                         |  | (14 | )                     |  |  | 47         |   |  |                                | 15,046  |   |                         |  | 79,708  |                       |  |  | (40,353    | ) |  |  | (164  | ) |  |  | 39,191  |  
|Taxation credit/(charge) for the year     |  |                                | (3,274  | ) |                         |  | (2  | )                     |  |  | (70        | ) |  |                                | (3,346  | ) |                         |  | (5,155  | )                     |  |  | 42         |   |  |  | (301  | ) |  |  | (5,414  | )
|Profit/(loss) after taxation for the year |  |                                | 11,739  |   |                         |  | (16 | )                     |  |  | (23        | ) |  |                                | 11,700  |   |                         |  | 74,553  |                       |  |  | (40,311    | ) |  |  | (465  | ) |  |  | 33,777  |  
|Investment properties                     |  |                                | 145,990 |   |                         |  | 54  |                       |  |  |           |   |  |                                | 146,044 |   |                         |  | 394,375 |                       |  |  | 145,230    |   |  |  |      |   |  |  | 539,605 |  
|Additions to investment properties        |  |                                | 1,320   |   |                         |  | 13  |                       |  |  |           |   |  |                                | 1,333   |   |                         |  | 16,962  |                       |  |  | 3,884      |   |  |  |      |   |  |  | 20,846  |  
|Segment assets                            |  |                                | 151,421 |   |                         |  | 56  |                       |  |  | 653        |   |  |                                | 152,130 |   |                         |  | 412,614 |                       |  |  | 149,953    |   |  |  | 3,085 |   |  |  | 565,652 |  
|Segment liabilities                       |  |                                | 64,964  |   |                         |  | 51  |                       |  |  |           |   |  |                                | 65,015  |   |                         |  | 87,779  |                       |  |  | 24,113     |   |  |  | 506   |   |  |  | 112,398 |  



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|                                          |  |                                |        |   |                         |  |   |                       |  |  |            |   |  |                                |        |   |                         |  |        |                       |  |  |            |   |  |  |     |   |  |  |         |  
|----------------------------------------- |  | ------------------------------ | ------ | - | ----------------------- |  | - | --------------------- |  |  | ---------- | - |  | ------------------------------ | ------ | - | ----------------------- |  | ------ | --------------------- |  |  | ---------- | - |  |  | --- | - |  |  | ------- | -
|                                          |  | Hungary                        |        |   | Romania                 | 
|For the year ended
31 December 2012       |  | Standinginvestmentsegment000 |        |   | Developmentsegment000 |  |   | Reconcilingitem 000 |  |  | Total000 |   |  | Standinginvestmentsegment000 |        |   | Developmentsegment000 |  |        | Reconcilingitem 000 |  |  | Total000 |  
|Gross rental income                       |  |                                | 8,567  |   |                         |  |  |                       |  |  |           |   |  |                                | 8,567  |   |                         |  | 7,172  |                       |  |  |           |   |  |  |    |   |  |  | 7,172   |  
|Service charge income                     |  |                                | 3,383  |   |                         |  |  |                       |  |  |           |   |  |                                | 3,383  |   |                         |  | 2,151  |                       |  |  |           |   |  |  |    |   |  |  | 2,151   |  
|Net property expenses                     |  |                                | (4,900 | ) |                         |  |  |                       |  |  |           |   |  |                                | (4,900 | ) |                         |  | (2,894 | )                     |  |  |           |   |  |  |    |   |  |  | (2,894  | )
|Net rental income                         |  |                                | 7,050  |   |                         |  |  |                       |  |  |           |   |  |                                | 7,050  |   |                         |  | 6,429  |                       |  |  |           |   |  |  |    |   |  |  | 6,429   |  
|Net result on acquisitions and disposals  |  |                                |       |   |                         |  |  |                       |  |  |           |   |  |                                |       |   |                         |  |       |                       |  |  |           |   |  |  |    |   |  |  |        |  
|Cost connected with developments and land |  |                                |       |   |                         |  |  |                       |  |  |           |   |  |                                |       |   |                         |  |       |                       |  |  | (54        | ) |  |  |    |   |  |  | (54     | )
|Revaluation of investment properties      |  |                                | (9,644 | ) |                         |  |  |                       |  |  |           |   |  |                                | (9,644 | ) |                         |  | (1,068 | )                     |  |  | (9,365     | ) |  |  |    |   |  |  | (10,433 | )
|Other depreciation and amortisation       |  |                                | (559   | ) |                         |  |  |                       |  |  |           |   |  |                                | (559   | ) |                         |  | (58    | )                     |  |  |           |   |  |  |    |   |  |  | (58     | )
|Administrative expenses                   |  |                                | (517   | ) |                         |  |  |                       |  |  | (54        | ) |  |                                | (571   | ) |                         |  | (486   | )                     |  |  | (5         | ) |  |  | (73 | ) |  |  | (564    | )
|Net operating profit/(loss)               |  |                                | (3,670 | ) |                         |  |  |                       |  |  | (54        | ) |  |                                | (3,724 | ) |                         |  | 4,817  |                       |  |  | (9,424     | ) |  |  | (73 | ) |  |  | (4,680  | )
|Interest income                           |  |                                | 15     |   |                         |  |  |                       |  |  | 1          |   |  |                                | 16     |   |                         |  | 10     |                       |  |  |           |   |  |  |    |   |  |  | 10      |  
|Interest expense                          |  |                                | (425   | ) |                         |  |  |                       |  |  |           |   |  |                                | (425   | ) |                         |  | (446   | )                     |  |  | (47        | ) |  |  |    |   |  |  | (493    | )
|Other financial income/(expenses)         |  |                                | (363   | ) |                         |  |  |                       |  |  | 1          |   |  |                                | (362   | ) |                         |  | (5     | )                     |  |  | (3         | ) |  |  | (2  | ) |  |  | (10     | )
|Profit/(loss) before taxation             |  |                                | (4,443 | ) |                         |  |  |                       |  |  | (52        | ) |  |                                | (4,495 | ) |                         |  | 4,376  |                       |  |  | (9,474     | ) |  |  | (75 | ) |  |  | (5,173  | )
|Taxation credit for the year              |  |                                | 724    |   |                         |  |  |                       |  |  |           |   |  |                                | 724    |   |                         |  |       |                       |  |  |           |   |  |  | 8   |   |  |  | 8       |  
|Profit/(loss) after taxation for the year |  |                                | (3,719 | ) |                         |  |  |                       |  |  | (52        | ) |  |                                | (3,771 | ) |                         |  | 4,376  |                       |  |  | (9,474     | ) |  |  | (67 | ) |  |  | (5,165  | )
|Investment properties                     |  |                                | 82,870 |   |                         |  |  |                       |  |  |           |   |  |                                | 82,870 |   |                         |  | 70,700 |                       |  |  | 12,173     |   |  |  |    |   |  |  | 82,873  |  
|Additions to investment properties        |  |                                | 1,529  |   |                         |  |  |                       |  |  |           |   |  |                                | 1,529  |   |                         |  | 468    |                       |  |  |           |   |  |  |    |   |  |  | 468     |  
|Segment assets                            |  |                                | 90,006 |   |                         |  |  |                       |  |  | 478        |   |  |                                | 90,484 |   |                         |  | 71,435 |                       |  |  | 12,464     |   |  |  | 294 |   |  |  | 84,193  |  
|Segment liabilities                       |  |                                | 11,011 |   |                         |  |  |                       |  |  |           |   |  |                                | 11,011 |   |                         |  | 7,154  |                       |  |  | 4,801      |   |  |  | 55  |   |  |  | 12,010  |  



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|                                          |  |                                |        |   |                                    |  |   |                       |  |  |            |   |  |                                |        |   |                         |  |   |                       |  |  |            |   |  |  |      |   |  |  |         |  
|----------------------------------------- |  | ------------------------------ | ------ | - | ---------------------------------- |  | - | --------------------- |  |  | ---------- | - |  | ------------------------------ | ------ | - | ----------------------- |  | - | --------------------- |  |  | ---------- | - |  |  | ---- | - |  |  | ------- | -
|                                          |  | Latvia                         |        |   | Turkey, Bulgaria, Ukraine, Georgia | 
|For the year ended
31 December 2012       |  | Standinginvestmentsegment000 |        |   | Developmentsegment000            |  |   | Reconcilingitem 000 |  |  | Total000 |   |  | Standinginvestmentsegment000 |        |   | Developmentsegment000 |  |   | Reconcilingitem 000 |  |  | Total000 |  
|Gross rental income                       |  |                                | 1,068  |   |                                    |  |  |                       |  |  |           |   |  |                                | 1,068  |   |                         |  |  |                       |  |  |           |   |  |  |     |   |  |  |        |  
|Service charge income                     |  |                                | 995    |   |                                    |  |  |                       |  |  |           |   |  |                                | 995    |   |                         |  |  |                       |  |  |           |   |  |  |     |   |  |  |        |  
|Net property expenses                     |  |                                | (1,694 | ) |                                    |  |  |                       |  |  |           |   |  |                                | (1,694 | ) |                         |  |  |                       |  |  |           |   |  |  |     |   |  |  |        |  
|Net rental income                         |  |                                | 369    |   |                                    |  |  |                       |  |  |           |   |  |                                | 369    |   |                         |  |  |                       |  |  |           |   |  |  |     |   |  |  |        |  
|Net result on acquisitions and disposals  |  |                                |       |   |                                    |  |  |                       |  |  |           |   |  |                                |       |   |                         |  |  |                       |  |  | 13         |   |  |  |     |   |  |  | 13      |  
|Cost connected with developments and land |  |                                |       |   |                                    |  |  |                       |  |  |           |   |  |                                |       |   |                         |  |  |                       |  |  | (2,003     | ) |  |  |     |   |  |  | (2,003  | )
|Revaluation of investment properties      |  |                                | (611   | ) |                                    |  |  |                       |  |  |           |   |  |                                | (611   | ) |                         |  |  |                       |  |  | (6,844     | ) |  |  |     |   |  |  | (6,844  | )
|Other depreciation and amortisation       |  |                                | (26    | ) |                                    |  |  |                       |  |  |           |   |  |                                | (26    | ) |                         |  |  |                       |  |  |           |   |  |  | (29  | ) |  |  | (29     | )
|Administrative expenses                   |  |                                | (46    | ) |                                    |  |  |                       |  |  | (3         | ) |  |                                | (49    | ) |                         |  |  |                       |  |  | (220       | ) |  |  | (386 | ) |  |  | (606    | )
|Net operating loss                        |  |                                | (314   | ) |                                    |  |  |                       |  |  | (3         | ) |  |                                | (317   | ) |                         |  |  |                       |  |  | (9,054     | ) |  |  | (415 | ) |  |  | (9,469  | )
|Interest income                           |  |                                |       |   |                                    |  |  |                       |  |  |           |   |  |                                |       |   |                         |  |  |                       |  |  | 7          |   |  |  |     |   |  |  | 7       |  
|Interest expense                          |  |                                | (204   | ) |                                    |  |  |                       |  |  |           |   |  |                                | (204   | ) |                         |  |  |                       |  |  | (346       | ) |  |  |     |   |  |  | (346    | )
|Other financial income/(expenses)         |  |                                | (22    | ) |                                    |  |  |                       |  |  | (1         | ) |  |                                | (23    | ) |                         |  |  |                       |  |  | 7,602      |   |  |  | 2    |   |  |  | 7,604   |  
|Loss before taxation                      |  |                                | (540   | ) |                                    |  |  |                       |  |  | (4         | ) |  |                                | (544   | ) |                         |  |  |                       |  |  | (1,791     | ) |  |  | (413 | ) |  |  | (2,204  | )
|Taxation credit/(charge) for the year     |  |                                | (610   | ) |                                    |  |  |                       |  |  |           |   |  |                                | (610   | ) |                         |  |  |                       |  |  | 360        |   |  |  |     |   |  |  | 360     |  
|Loss after taxation for the year          |  |                                | (1,150 | ) |                                    |  |  |                       |  |  | (4         | ) |  |                                | (1,154 | ) |                         |  |  |                       |  |  | (1,431     | ) |  |  | (413 | ) |  |  | (1,844  | )
|Investment properties                     |  |                                | 15,150 |   |                                    |  |  |                       |  |  |           |   |  |                                | 15,150 |   |                         |  |  |                       |  |  | 233,037    |   |  |  |     |   |  |  | 233,037 |  
|Additions to investment properties        |  |                                | 151    |   |                                    |  |  |                       |  |  |           |   |  |                                | 151    |   |                         |  |  |                       |  |  | 141        |   |  |  |     |   |  |  | 141     |  
|Segment assets                            |  |                                | 15,689 |   |                                    |  |  |                       |  |  | 54         |   |  |                                | 15,743 |   |                         |  |  |                       |  |  | 266,551    |   |  |  | 102  |   |  |  | 266,653 |  
|Segment liabilities                       |  |                                | 4,049  |   |                                    |  |  |                       |  |  |           |   |  |                                | 4,049  |   |                         |  |  |                       |  |  | 30,685     |   |  |  |     |   |  |  | 30,685  |  



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|                                          |  |                                |   |  |                         |  |      |                       |  |  |            |   |  |  |         |  
|----------------------------------------- |  | ------------------------------ | - |  | ----------------------- |  | ---- | --------------------- |  |  | ---------- | - |  |  | ------- | -
|                                          |  | Reconciling                    |  
|For the year ended
31 December 2012       |  | Standinginvestmentsegment000 |   |  | Developmentsegment000 |  |      | Reconcilingitem 000 |  |  | Total000 |  
|Gross rental income                       |  |                                |  |  |                         |  |     |                       |  |  |           |   |  |  |        |  
|Service charge income                     |  |                                |  |  |                         |  |     |                       |  |  |           |   |  |  |        |  
|Net property expenses                     |  |                                |  |  |                         |  |     |                       |  |  |           |   |  |  |        |  
|Net rental income                         |  |                                |  |  |                         |  |     |                       |  |  |           |   |  |  |        |  
|Net result on acquisitions and disposals  |  |                                |  |  |                         |  |     |                       |  |  |           |   |  |  |        |  
|Cost connected with developments and land |  |                                |  |  |                         |  | (906 | )                     |  |  |           |   |  |  | (906    | )
|Revaluation of investment properties      |  |                                |  |  |                         |  |     |                       |  |  |           |   |  |  |        |  
|Other depreciation and amortisation       |  |                                |  |  |                         |  |     |                       |  |  | (376       | ) |  |  | (376    | )
|Administrative expenses                   |  |                                |  |  |                         |  |     |                       |  |  | (16,858    | ) |  |  | (16,858 | )
|Net operating loss                        |  |                                |  |  |                         |  | (906 | )                     |  |  | (17,234    | ) |  |  | (18,140 | )
|Interest income                           |  |                                |  |  |                         |  |     |                       |  |  | 3,635      |   |  |  | 3,635   |  
|Interest expense                          |  |                                |  |  |                         |  |     |                       |  |  | (5         | ) |  |  | (5      | )
|Other financial expenses                  |  |                                |  |  |                         |  |     |                       |  |  | (6,359     | ) |  |  | (6,359  | )
|Loss before taxation                      |  |                                |  |  |                         |  | (906 | )                     |  |  | (19,963    | ) |  |  | (20,869 | )
|Taxation charge for the year              |  |                                |  |  |                         |  |     |                       |  |  | (314       | ) |  |  | (314    | )
|Loss after taxation for the year          |  |                                |  |  |                         |  | (906 | )                     |  |  | (20,277    | ) |  |  | (21,183 | )
|Investment properties                     |  |                                |  |  |                         |  |     |                       |  |  |           |   |  |  |        |  
|Additions to investment properties        |  |                                |  |  |                         |  |     |                       |  |  |           |   |  |  |        |  
|Segment assets                            |  |                                |  |  |                         |  |     |                       |  |  | 210,496    |   |  |  | 210,496 |  
|Segment liabilities                       |  |                                |  |  |                         |  |     |                       |  |  | 7,967      |   |  |  | 7, 967  |  



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Geographical segments by business sector in 2011



|                                          |  |                                |           |   |                         |  |         |                      |  |  |            |   |  |                                |           |   |                         |  |         |                      |  |  |            |   |  |  |      |   |  |  |         |  
|----------------------------------------- |  | ------------------------------ | --------- | - | ----------------------- |  | ------- | -------------------- |  |  | ---------- | - |  | ------------------------------ | --------- | - | ----------------------- |  | ------- | -------------------- |  |  | ---------- | - |  |  | ---- | - |  |  | ------- | -
|                                          |  | Poland                         |           |   | Czech Republic          | 
|For the year ended 31
December 2011       |  | Standinginvestmentsegment000 |           |   | Developmentsegment000 |  |         | Reconcilingitem000 |  |  | Total000 |   |  | Standinginvestmentsegment000 |           |   | Developmentsegment000 |  |         | Reconcilingitem000 |  |  | Total000 |  
|Gross rental income                       |  |                                | 64,099    |   |                         |  |        |                      |  |  |           |   |  |                                | 64,099    |   |                         |  | 29,687  |                      |  |  |           |   |  |  |     |   |  |  | 29,687  |  
|Service charge income                     |  |                                | 24,559    |   |                         |  |        |                      |  |  |           |   |  |                                | 24,559    |   |                         |  | 7,961   |                      |  |  |           |   |  |  |     |   |  |  | 7,961   |  
|Net property expenses                     |  |                                | (26,171   | ) |                         |  |        |                      |  |  |           |   |  |                                | (26,171   | ) |                         |  | (11,885 | )                    |  |  |           |   |  |  |     |   |  |  | (11,885 | )
|Net rental income                         |  |                                | 62,487    |   |                         |  |        |                      |  |  |           |   |  |                                | 62,487    |   |                         |  | 25,763  |                      |  |  |           |   |  |  |     |   |  |  | 25,763  |  
|Net result on acquisitions and disposals  |  |                                |          |   |                         |  | 162     |                      |  |  |           |   |  |                                | 162       |   |                         |  |        |                      |  |  |           |   |  |  |     |   |  |  |        |  
|Cost connected with developments and land |  |                                |          |   |                         |  | (731    | )                    |  |  |           |   |  |                                | (731      | ) |                         |  |        |                      |  |  |           |   |  |  |     |   |  |  |        |  
|Revaluation of investment properties      |  |                                | 62,415    |   |                         |  | (15,208 | )                    |  |  |           |   |  |                                | 47,207    |   |                         |  | 9,747   |                      |  |  | (96        | ) |  |  |     |   |  |  | 9,651   |  
|Other depreciation and amortisation       |  |                                | (9        | ) |                         |  |        |                      |  |  | (198       | ) |  |                                | (207      | ) |                         |  | (82     | )                    |  |  |           |   |  |  | (95  | ) |  |  | (177    | )
|Administrative expenses                   |  |                                | (3,798    | ) |                         |  | (241    | )                    |  |  | (29        | ) |  |                                | (4,068    | ) |                         |  | (2,243  | )                    |  |  | (13        | ) |  |  | (42  | ) |  |  | (2,298  | )
|Net operating profit/( loss)              |  |                                | 121,095   |   |                         |  | (16,018 | )                    |  |  | (227       | ) |  |                                | 104,850   |   |                         |  | 33,185  |                      |  |  | (109       | ) |  |  | (137 | ) |  |  | 32,939  |  
|Interest income                           |  |                                | 616       |   |                         |  |        |                      |  |  | 13         |   |  |                                | 629       |   |                         |  | 91      |                      |  |  |           |   |  |  |     |   |  |  | 91      |  
|Interest expense                          |  |                                | (6,471    | ) |                         |  | (442    | )                    |  |  | (1         | ) |  |                                | (6,914    | ) |                         |  | (6,592  | )                    |  |  | (27        | ) |  |  |     |   |  |  | (6,619  | )
|Other financial income/(expenses)         |  |                                | 1,837     |   |                         |  | (282    | )                    |  |  | 6          |   |  |                                | 1,561     |   |                         |  | (723    | )                    |  |  | 30         |   |  |  | (13  | ) |  |  | (706    | )
|Profit/(loss) before taxation             |  |                                | 117,077   |   |                         |  | (16,742 | )                    |  |  | (209       | ) |  |                                | 100,126   |   |                         |  | 25,961  |                      |  |  | (106       | ) |  |  | (150 | ) |  |  | 25,705  |  
|Taxation credit/(charge) for the year     |  |                                | (13,687   | ) |                         |  | 419     |                      |  |  |           |   |  |                                | (13,268   | ) |                         |  | (3,820  | )                    |  |  | (12        | ) |  |  | (224 | ) |  |  | (4,056  | )
|Profit/(loss) after taxation for the year |  |                                | 103,390   |   |                         |  | (16,323 | )                    |  |  | (209       | ) |  |                                | 86,858    |   |                         |  | 22,141  |                      |  |  | (118       | ) |  |  | (374 | ) |  |  | 21,649  |  
|Investment properties                     |  |                                | 986,215   |   |                         |  | 142,276 |                      |  |  |           |   |  |                                | 1,128,491 |   |                         |  | 435,214 |                      |  |  | 1,873      |   |  |  |     |   |  |  | 437,087 |  
|Additions to investment properties        |  |                                | 230,723   |   |                         |  | 15,024  |                      |  |  |           |   |  |                                | 245,747   |   |                         |  | 190,334 |                      |  |  | 96         |   |  |  |     |   |  |  | 190,430 |  
|Segment assets                            |  |                                | 1,009,603 |   |                         |  | 155,310 |                      |  |  |           |   |  |                                | 1,164,913 |   |                         |  | 453,128 |                      |  |  | 1,918      |   |  |  | 223  |   |  |  | 455,269 |  
|Segment liabilities                       |  |                                | 284,340   |   |                         |  | 31,299  |                      |  |  | 1,071      |   |  |                                | 316,710   |   |                         |  | 187,287 |                      |  |  | 327        |   |  |  | 447  |   |  |  | 188,061 |  



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|                                          |  |                                |         |   |                         |  |      |                      |  |  |            |   |  |                                |         |   |                         |  |         |                      |  |  |            |   |  |  |       |   |  |  |         |  
|----------------------------------------- |  | ------------------------------ | ------- | - | ----------------------- |  | ---- | -------------------- |  |  | ---------- | - |  | ------------------------------ | ------- | - | ----------------------- |  | ------- | -------------------- |  |  | ---------- | - |  |  | ----- | - |  |  | ------- | -
|                                          |  | Slovakia                       |         |   | Russia                  | 
|For the year ended 31
December 2011       |  | Standinginvestmentsegment000 |         |   | Developmentsegment000 |  |      | Reconcilingitem000 |  |  | Total000 |   |  | Standinginvestmentsegment000 |         |   | Developmentsegment000 |  |         | Reconcilingitem000 |  |  | Total000 |  
|Gross rental income                       |  |                                | 10,808  |   |                         |  |     |                      |  |  |           |   |  |                                | 10,808  |   |                         |  | 45,190  |                      |  |  |           |   |  |  |      |   |  |  | 45,190  |  
|Service charge income                     |  |                                | 5,675   |   |                         |  |     |                      |  |  |           |   |  |                                | 5,675   |   |                         |  | 21,485  |                      |  |  |           |   |  |  |      |   |  |  | 21,485  |  
|Net property expenses                     |  |                                | (5,861  | ) |                         |  |     |                      |  |  |           |   |  |                                | (5,861  | ) |                         |  | (29,186 | )                    |  |  |           |   |  |  |      |   |  |  | (29,186 | )
|Net rental income                         |  |                                | 10,622  |   |                         |  |     |                      |  |  |           |   |  |                                | 10,622  |   |                         |  | 37,489  |                      |  |  |           |   |  |  |      |   |  |  | 37,489  |  
|Net result on acquisitions and disposals  |  |                                |        |   |                         |  |     |                      |  |  |           |   |  |                                |        |   |                         |  |        |                      |  |  | (55        | ) |  |  |      |   |  |  | (55     | )
|Cost connected with developments and land |  |                                |        |   |                         |  | (100 | )                    |  |  |           |   |  |                                | (100    | ) |                         |  |        |                      |  |  | (1,245     | ) |  |  |      |   |  |  | (1,245  | )
|Revaluation of investment properties      |  |                                | 8,504   |   |                         |  | (78  | )                    |  |  |           |   |  |                                | 8,426   |   |                         |  | 46,839  |                      |  |  | (18,558    | ) |  |  |      |   |  |  | 28,281  |  
|Other depreciation and amortisation       |  |                                | (125    | ) |                         |  |     |                      |  |  | (41        | ) |  |                                | (166    | ) |                         |  | (55     | )                    |  |  |           |   |  |  | (45   | ) |  |  | (100    | )
|Administrative expenses                   |  |                                | (1,279  | ) |                         |  |     |                      |  |  | 13         |   |  |                                | (1,266  | ) |                         |  | (1,025  | )                    |  |  | (277       | ) |  |  | (538  | ) |  |  | (1,840  | )
|Net operating profit/(loss)               |  |                                | 17,722  |   |                         |  | (178 | )                    |  |  | (28        | ) |  |                                | 17,516  |   |                         |  | 83,248  |                      |  |  | (20,135    | ) |  |  | (583  | ) |  |  | 62,530  |  
|Interest income                           |  |                                | 1       |   |                         |  |     |                      |  |  |           |   |  |                                | 1       |   |                         |  | 64      |                      |  |  |           |   |  |  |      |   |  |  | 64      |  
|Interest expense                          |  |                                | (2,084  | ) |                         |  |     |                      |  |  |           |   |  |                                | (2,084  | ) |                         |  | (2,716  | )                    |  |  | (468       | ) |  |  |      |   |  |  | (3,184  | )
|Other financial income /(expenses)        |  |                                | (32     | ) |                         |  |     |                      |  |  |           |   |  |                                | (32     | ) |                         |  | (6,614  | )                    |  |  | 706        |   |  |  | 601   |   |  |  | (5,307  | )
|Profit/(loss) before taxation             |  |                                | 15,607  |   |                         |  | (178 | )                    |  |  | (28        | ) |  |                                | 15,401  |   |                         |  | 73,982  |                      |  |  | (19,897    | ) |  |  | 18    |   |  |  | 54,103  |  
|Taxation credit/(charge) for the year     |  |                                | (2,706  | ) |                         |  |     |                      |  |  | (109       | ) |  |                                | (2,815  | ) |                         |  | (4,272  | )                    |  |  | 34         |   |  |  | (379  | ) |  |  | (4,617  | )
|Profit/(loss) after taxation for the year |  |                                | 12,901  |   |                         |  | (178 | )                    |  |  | (137       | ) |  |                                | 12,586  |   |                         |  | 69,710  |                      |  |  | (19,863    | ) |  |  | (361  | ) |  |  | 49,486  |  
|Investment properties                     |  |                                | 138,075 |   |                         |  | 54   |                      |  |  |           |   |  |                                | 138,129 |   |                         |  | 339,847 |                      |  |  | 178,792    |   |  |  |      |   |  |  | 518,639 |  
|Additions to investment properties        |  |                                | 4,318   |   |                         |  | 78   |                      |  |  |           |   |  |                                | 4,396   |   |                         |  | 4,646   |                      |  |  | 7,927      |   |  |  |      |   |  |  | 12,573  |  
|Segment assets                            |  |                                | 143,433 |   |                         |  | 54   |                      |  |  | 227        |   |  |                                | 143,714 |   |                         |  | 363,911 |                      |  |  | 183,154    |   |  |  |      |   |  |  | 547,065 |  
|Segment liabilities                       |  |                                | 66,139  |   |                         |  |     |                      |  |  | 120        |   |  |                                | 66,259  |   |                         |  | 95,655  |                      |  |  | 23,096     |   |  |  | 1,205 |   |  |  | 119,956 |  



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|                                          |  |                                |        |   |                         |  |   |                      |  |  |            |   |  |                                |        |   |                         |  |        |                      |  |  |            |   |  |  |     |   |  |  |        |  
|----------------------------------------- |  | ------------------------------ | ------ | - | ----------------------- |  | - | -------------------- |  |  | ---------- | - |  | ------------------------------ | ------ | - | ----------------------- |  | ------ | -------------------- |  |  | ---------- | - |  |  | --- | - |  |  | ------ | -
|                                          |  | Hungary                        |        |   | Romania                 | 
|For the year ended 31
December 2011       |  | Standinginvestmentsegment000 |        |   | Developmentsegment000 |  |   | Reconcilingitem000 |  |  | Total000 |   |  | Standinginvestmentsegment000 |        |   | Developmentsegment000 |  |        | Reconcilingitem000 |  |  | Total000 |  
|Gross rental income                       |  |                                | 8,222  |   |                         |  |  |                      |  |  |           |   |  |                                | 8,222  |   |                         |  | 7,000  |                      |  |  |           |   |  |  |    |   |  |  | 7,000  |  
|Service charge income                     |  |                                | 3,393  |   |                         |  |  |                      |  |  |           |   |  |                                | 3,393  |   |                         |  | 2,520  |                      |  |  |           |   |  |  |    |   |  |  | 2,520  |  
|Net property expenses                     |  |                                | (4,790 | ) |                         |  |  |                      |  |  |           |   |  |                                | (4,790 | ) |                         |  | (2,961 | )                    |  |  |           |   |  |  |    |   |  |  | (2,961 | )
|Net rental income                         |  |                                | 6,825  |   |                         |  |  |                      |  |  |           |   |  |                                | 6,825  |   |                         |  | 6,559  |                      |  |  |           |   |  |  |    |   |  |  | 6,559  |  
|Net result on acquisitions and disposals  |  |                                |       |   |                         |  |  |                      |  |  |           |   |  |                                |       |   |                         |  |       |                      |  |  |           |   |  |  |    |   |  |  |       |  
|Cost connected with developments and land |  |                                |       |   |                         |  |  |                      |  |  |           |   |  |                                |       |   |                         |  |       |                      |  |  | (322       | ) |  |  |    |   |  |  | (322   | )
|Revaluation of investment properties      |  |                                | (455   | ) |                         |  |  |                      |  |  |           |   |  |                                | (455   | ) |                         |  | 2,033  |                      |  |  |           |   |  |  |    |   |  |  | 2,033  |  
|Other depreciation and amortisation       |  |                                | (98    | ) |                         |  |  |                      |  |  | (65        | ) |  |                                | (163   | ) |                         |  | (20    | )                    |  |  |           |   |  |  | (24 | ) |  |  | (44    | )
|Administrative expenses                   |  |                                | (584   | ) |                         |  |  |                      |  |  | (29        | ) |  |                                | (613   | ) |                         |  | (527   | )                    |  |  | (38        | ) |  |  | (3  | ) |  |  | (568   | )
|Net operating profit/(loss)               |  |                                | 5,688  |   |                         |  |  |                      |  |  | (94        | ) |  |                                | 5,594  |   |                         |  | 8,045  |                      |  |  | (360       | ) |  |  | (27 | ) |  |  | 7,658  |  
|Interest income                           |  |                                | 16     |   |                         |  |  |                      |  |  | 2          |   |  |                                | 18     |   |                         |  | 9      |                      |  |  |           |   |  |  |    |   |  |  | 9      |  
|Interest expense                          |  |                                | (551   | ) |                         |  |  |                      |  |  |           |   |  |                                | (551   | ) |                         |  | (412   | )                    |  |  | (290       | ) |  |  |    |   |  |  | (702   | )
|Other financial income/(expenses)         |  |                                | 272    |   |                         |  |  |                      |  |  | (4         | ) |  |                                | 268    |   |                         |  | 335    |                      |  |  | (1         | ) |  |  | (2  | ) |  |  | 332    |  
|Profit/(loss) before taxation             |  |                                | 5,425  |   |                         |  |  |                      |  |  | (96        | ) |  |                                | 5,329  |   |                         |  | 7,977  |                      |  |  | (651       | ) |  |  | (29 | ) |  |  | 7,297  |  
|Taxation credit/(charge) for the year     |  |                                | (527   | ) |                         |  |  |                      |  |  | 30         |   |  |                                | (497   | ) |                         |  | (253   | )                    |  |  |           |   |  |  |    |   |  |  | (253   | )
|Profit/(loss) after taxation for the year |  |                                | 4,898  |   |                         |  |  |                      |  |  | (66        | ) |  |                                | 4,832  |   |                         |  | 7,724  |                      |  |  | (651       | ) |  |  | (29 | ) |  |  | 7,044  |  
|Investment properties                     |  |                                | 90,985 |   |                         |  |  |                      |  |  |           |   |  |                                | 90,985 |   |                         |  | 71,300 |                      |  |  | 21,537     |   |  |  |    |   |  |  | 92,837 |  
|Additions to investment properties        |  |                                | 1,125  |   |                         |  |  |                      |  |  |           |   |  |                                | 1,125  |   |                         |  | 277    |                      |  |  |           |   |  |  |    |   |  |  | 277    |  
|Segment assets                            |  |                                | 98,126 |   |                         |  |  |                      |  |  | 56         |   |  |                                | 98,182 |   |                         |  | 72,207 |                      |  |  | 21,852     |   |  |  | 358 |   |  |  | 94,417 |  
|Segment liabilities                       |  |                                | 18,175 |   |                         |  |  |                      |  |  | 359        |   |  |                                | 18,534 |   |                         |  | 9,308  |                      |  |  | 6,150      |   |  |  | 174 |   |  |  | 15,632 |  



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|                                          |  |                                |        |   |                                    |  |   |                      |  |  |            |   |  |                                |        |   |                         |  |        |                      |  |  |            |   |  |  |      |   |  |  |         |  
|----------------------------------------- |  | ------------------------------ | ------ | - | ---------------------------------- |  | - | -------------------- |  |  | ---------- | - |  | ------------------------------ | ------ | - | ----------------------- |  | ------ | -------------------- |  |  | ---------- | - |  |  | ---- | - |  |  | ------- | -
|                                          |  | Latvia                         |        |   | Turkey, Bulgaria, Ukraine, Georgia | 
|For the year ended 31
December 2011       |  | Standinginvestmentsegment000 |        |   | Developmentsegment000            |  |   | Reconcilingitem000 |  |  | Total000 |   |  | Standinginvestmentsegment000 |        |   | Developmentsegment000 |  |        | Reconcilingitem000 |  |  | Total000 |  
|Gross rental income                       |  |                                | 963    |   |                                    |  |  |                      |  |  |           |   |  |                                | 963    |   |                         |  | 6,204  |                      |  |  |           |   |  |  |     |   |  |  | 6,204   |  
|Service charge income                     |  |                                | 931    |   |                                    |  |  |                      |  |  |           |   |  |                                | 931    |   |                         |  | 1,907  |                      |  |  |           |   |  |  |     |   |  |  | 1,907   |  
|Net property expenses                     |  |                                | (1,532 | ) |                                    |  |  |                      |  |  |           |   |  |                                | (1,532 | ) |                         |  | (3,348 | )                    |  |  |           |   |  |  |     |   |  |  | (3,348  | )
|Net rental income                         |  |                                | 362    |   |                                    |  |  |                      |  |  |           |   |  |                                | 362    |   |                         |  | 4,763  |                      |  |  |           |   |  |  |     |   |  |  | 4,763   |  
|Net result on acquisitions and disposals  |  |                                |       |   |                                    |  |  |                      |  |  |           |   |  |                                |       |   |                         |  | 15,567 |                      |  |  | 16,117     |   |  |  |     |   |  |  | 31,684  |  
|Cost connected with developments and land |  |                                |       |   |                                    |  |  |                      |  |  |           |   |  |                                |       |   |                         |  |       |                      |  |  | (1,567     | ) |  |  |     |   |  |  | (1,567  | )
|Revaluation of investment properties      |  |                                | (377   | ) |                                    |  |  |                      |  |  |           |   |  |                                | (377   | ) |                         |  |       |                      |  |  | (17,445    | ) |  |  |     |   |  |  | (17,445 | )
|Other depreciation and amortisation       |  |                                |       |   |                                    |  |  |                      |  |  | (10        | ) |  |                                | (10    | ) |                         |  | (28    | )                    |  |  |           |   |  |  | (37  | ) |  |  | (65     | )
|Administrative expenses                   |  |                                | (55    | ) |                                    |  |  |                      |  |  |           |   |  |                                | (55    | ) |                         |  | (101   | )                    |  |  | (578       | ) |  |  | (115 | ) |  |  | (794    | )
|Net operating profit/( loss)              |  |                                | (70    | ) |                                    |  |  |                      |  |  | (10        | ) |  |                                | (80    | ) |                         |  | 20,201 |                      |  |  | (3,473     | ) |  |  | (152 | ) |  |  | 16,576  |  
|Interest income                           |  |                                |       |   |                                    |  |  |                      |  |  |           |   |  |                                |       |   |                         |  | 9      |                      |  |  |           |   |  |  |     |   |  |  | 9       |  
|Interest expense                          |  |                                | (195   | ) |                                    |  |  |                      |  |  |           |   |  |                                | (195   | ) |                         |  | (15    | )                    |  |  | (1,894     | ) |  |  |     |   |  |  | (1,909  | )
|Other financial income/(expenses)         |  |                                | (55    | ) |                                    |  |  |                      |  |  |           |   |  |                                | (55    | ) |                         |  | (976   | )                    |  |  | (7,135     | ) |  |  | 1    |   |  |  | (8,110  | )
|Profit/(loss) before taxation             |  |                                | (320   | ) |                                    |  |  |                      |  |  | (10        | ) |  |                                | (330   | ) |                         |  | 19,219 |                      |  |  | (12,502    | ) |  |  | (151 | ) |  |  | 6,566   |  
|Taxation charge for the year              |  |                                |       |   |                                    |  |  |                      |  |  |           |   |  |                                |       |   |                         |  | (2,442 | )                    |  |  | 1,349      |   |  |  |     |   |  |  | (1,093  | )
|Profit/(loss) after taxation for the year |  |                                | (320   | ) |                                    |  |  |                      |  |  | (10        | ) |  |                                | (330   | ) |                         |  | 16,777 |                      |  |  | (11,153    | ) |  |  | (151 | ) |  |  | 5,473   |  
|Investment properties                     |  |                                | 15,610 |   |                                    |  |  |                      |  |  |           |   |  |                                | 15,610 |   |                         |  |       |                      |  |  | 242,819    |   |  |  |     |   |  |  | 242,819 |  
|Additions to investment properties        |  |                                | 37     |   |                                    |  |  |                      |  |  |           |   |  |                                | 37     |   |                         |  |       |                      |  |  | (773       | ) |  |  |     |   |  |  | (773    | )
|Segment assets                            |  |                                | 15,869 |   |                                    |  |  |                      |  |  | 70         |   |  |                                | 15,939 |   |                         |  |       |                      |  |  | 277,592    |   |  |  | 111  |   |  |  | 277,703 |  
|Segment liabilities                       |  |                                | 4,191  |   |                                    |  |  |                      |  |  | 35         |   |  |                                | 4,226  |   |                         |  |       |                      |  |  | 44,244     |   |  |  | 22   |   |  |  | 44,266  |  



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|                                          |  |                                |   |  |                         |  |      |                      |  |  |            |   |  |  |         |  
|----------------------------------------- |  | ------------------------------ | - |  | ----------------------- |  | ---- | -------------------- |  |  | ---------- | - |  |  | ------- | -
|                                          |  |                                |   |  | Reconciling             |  |      |                      | 
|For the year ended 31
December 2011       |  | Standinginvestmentsegment000 |   |  | Developmentsegment000 |  |      | Reconcilingitem000 |  |  | Total000 |  
|Gross rental income                       |  |                                |  |  |                         |  |     |                      |  |  |           |   |  |  |        |  
|Service charge income                     |  |                                |  |  |                         |  |     |                      |  |  |           |   |  |  |        |  
|Net property expenses                     |  |                                |  |  |                         |  |     |                      |  |  |           |   |  |  |        |  
|Net rental income                         |  |                                |  |  |                         |  |     |                      |  |  |           |   |  |  |        |  
|Net result on acquisitions and disposals  |  |                                |  |  |                         |  |     |                      |  |  |           |   |  |  |        |  
|Cost connected with developments and land |  |                                |  |  |                         |  | (695 | )                    |  |  |           |   |  |  | (695    | )
|Revaluation of investment properties      |  |                                |  |  |                         |  |     |                      |  |  |           |   |  |  |        |  
|Other depreciation and amortisation       |  |                                |  |  |                         |  |     |                      |  |  | (460       | ) |  |  | (460    | )
|Administrative expenses                   |  |                                |  |  |                         |  |     |                      |  |  | (26,268    | ) |  |  | (26,268 | )
|Net operating loss                        |  |                                |  |  |                         |  | (695 | )                    |  |  | (26,728    | ) |  |  | (27,423 | )
|Interest income                           |  |                                |  |  |                         |  |     |                      |  |  | 5,299      |   |  |  | 5,299   |  
|Interest expense                          |  |                                |  |  |                         |  |     |                      |  |  | (1,085     | ) |  |  | (1,085  | )
|Other financial income/(expenses)         |  |                                |  |  |                         |  |     |                      |  |  | (21,292    | ) |  |  | (21,292 | )
|Loss before taxation                      |  |                                |  |  |                         |  | (695 | )                    |  |  | (43,806    | ) |  |  | (44,501 | )
|Taxation credit for the year              |  |                                |  |  |                         |  |     |                      |  |  | 148        |   |  |  | 148     |  
|Loss after taxation for the year          |  |                                |  |  |                         |  | (695 | )                    |  |  | (43,658    | ) |  |  | (44,353 | )
|Investment properties                     |  |                                |  |  |                         |  |     |                      |  |  |           |   |  |  |        |  
|Additions to investment properties        |  |                                |  |  |                         |  |     |                      |  |  |           |   |  |  |        |  
|Segment assets                            |  |                                |  |  |                         |  |     |                      |  |  | 243,499    |   |  |  | 243,499 |  
|Segment liabilities                       |  |                                |  |  |                         |  |     |                      |  |  | 2,514      |   |  |  | 2,514   |  



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1.36 Investment in Group undertakings

During the year ended 31 December 2012:



| |  | Atrium established new companies in the Czech Republic, Georgia, Hungary, The Netherlands, Poland and Spain in order to facilitate efficient portfolio management initiatives. The new companies were: Atrium Alfa Czech
Republic s.r.o., Atrium Pardubice Czech Republic s.r.o., Atrium Černého Czech Republic s.r.o., Atrium Beta Czech Republic s.r.o., Atrium Gamma Czech Republic s.r.o., Atrium Kappa Czech Republic s.r.o., Atrium Ostrava Czech Republic
s.r.o., Atrium Zlín Czech Republic s.r.o., Atrium Delta Czech Republic s.r.o., and Atrium Lambda Czech Republic s.r.o., Atrium Alpha LLC, Atrium Alfa HU Kft, Atrium Beta HU Kft, Atrium Europe B.V., Atrium Hungarian Holding 1 B.V., Atrium
Hungarian Holding 2 B.V., Atrium Hungarian Holding 3 B.V., Atrium Hungarian Holding 4 B.V., Atrium Hungarian Holding 5 B.V., Atrium Hungarian Holding 6 B.V., Atrium Hungarian Holding 7 B.V., Atrium Hungarian Holding 8 B.V., Atrium Russian Holding 1
B.V., Atrium Russian Holding 2 B.V., Ipopema 77 FIZ and Atrium European Real Estate Spain S.L.U.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Atrium acquired the remaining 23% of the shares in the company MD TIME HOLDING LIMITED and now owns 100% of this entity and its subsidiaries. MD CE Holding Limited, a 100% owned subsidiary of Atrium, purchased 20% of
the shares in the company MD REAL ESTATE MANAGEMENT LTD and now owns 100% of this entity and its subsidiary. Total consideration paid and transaction costs amounted to 9.0 million. Accordingly, as there is no longer any non-controlling
interest (NCI), the negative historic NCI balance of 12.4 million was eliminated.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | BROADVALE HOLDINGS LIMITED, a 100% owned subsidiary of Atrium, purchased 15% of the shares in the company PATTONGATE TRADING LIMITED and now owns 100% of this entity and its subsidiary. Total consideration paid and
transaction costs amounted to 0.4 million. Accordingly, as there is no longer any non-controlling interest (NCI), the negative historic NCI balance of 2.9 million was eliminated.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The change in the parents ownership interest in the respective subsidiaries is accounted for directly in equity as there is no change in control and the
impact was a decrease of 24.7 million.

1.37 Merger

In 2012, OOO Foras Magnitogorsk, OOO Foras Kislovodsk and OOO Foras Sergiev Posad merged into OOO Manhattan Brateevo. All assets and liabilities of OOO Foras
Magnitogorsk, OOO Foras Kislovodsk and OOO Foras Sergiev Posad were combined with OOO Manhattan Brateevo. As a result of the merger, deferred tax assets of 2.0 million were recognised.



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1.38 Categories of financial instruments

The Group distinguishes the following categories of financial instruments:



|                                  |  |                     |         |  |                           |  |         |                                             |  |  |                                          |  |  |  |        | 
|--------------------------------- |  | ------------------- | ------- |  | ------------------------- |  | ------- | ------------------------------------------- |  |  | ---------------------------------------- |  |  |  | ------ | 
|2012                              |  | Carryingamount000 |         |  | Loans andreceivables000 |  |         | Financial liabilitiesat amortised cost000 |  |  | Financial liabilities atfair value 000 | 
|Financial assets                  |  |                     |         |  |                           |  |         |                                             |  |  |                                          |  |  |  |        | 
|Long term loans                   |  |                     | 36,592  |  |                           |  | 36,592  |                                             |  |  |                                         |  |  |  |       | 
|Receivables from tenants          |  |                     | 18,037  |  |                           |  | 18,037  |                                             |  |  |                                         |  |  |  |       | 
|Other receivables                 |  |                     | 2,584   |  |                           |  | 2,584   |                                             |  |  |                                         |  |  |  |       | 
|Short term loans                  |  |                     | 59      |  |                           |  | 59      |                                             |  |  |                                         |  |  |  |       | 
|Cash and cash equivalents         |  |                     | 207,843 |  |                           |  | 207,843 |                                             |  |  |                                         |  |  |  |       | 
|Total financial assets            |  |                     | 265,115 |  |                           |  | 265,115 |                                             |  |  |                                         |  |  |  |       | 
|Financial liabilities             |  |                     |         |  |                           |  |         |                                             |  |  |                                          |  |  |  |        | 
|Long term borrowings              |  |                     | 462,075 |  |                           |  |        |                                             |  |  | 462,075                                  |  |  |  |       | 
|Derivatives                       |  |                     | 17,828  |  |                           |  |        |                                             |  |  |                                         |  |  |  | 17,828 | 
|Long term liabilities from leases |  |                     | 47,320  |  |                           |  |        |                                             |  |  | 47,320                                   |  |  |  |       | 
|Other long term liabilities       |  |                     | 19,730  |  |                           |  |        |                                             |  |  | 19,730                                   |  |  |  |       | 
|Trade and other payables          |  |                     | 22,807  |  |                           |  |        |                                             |  |  | 22,807                                   |  |  |  |       | 
|Payables related to acquisitions  |  |                     | 389     |  |                           |  |        |                                             |  |  | 389                                      |  |  |  |       | 
|Accrued expenditure               |  |                     | 26,131  |  |                           |  |        |                                             |  |  | 26,131                                   |  |  |  |       | 
|Short term borrowings             |  |                     | 74,986  |  |                           |  |        |                                             |  |  | 74,986                                   |  |  |  |       | 
|Total financial liabilities       |  |                     | 671,266 |  |                           |  |        |                                             |  |  | 653,438                                  |  |  |  | 17,828 | 
|                                  |  |                     |         | 
|2011                              |  | Carryingamount000 |         |  | Loans andreceivables000 |  |         | Financial liabilities atamortised cost000 |  |  | Financial liabilities atfair value000  | 
|Financial assets                  |  |                     |         |  |                           |  |         |                                             |  |  |                                          |  |  |  |        | 
|Long term loans                   |  |                     | 41,240  |  |                           |  | 41,240  |                                             |  |  |                                         |  |  |  |       | 
|Receivables from tenants          |  |                     | 14,267  |  |                           |  | 14,267  |                                             |  |  |                                         |  |  |  |       | 
|Other receivables                 |  |                     | 3,062   |  |                           |  | 3,062   |                                             |  |  |                                         |  |  |  |       | 
|Short term loans                  |  |                     | 101     |  |                           |  | 101     |                                             |  |  |                                         |  |  |  |       | 
|Cash and cash equivalents         |  |                     | 234,924 |  |                           |  | 234,924 |                                             |  |  |                                         |  |  |  |       | 
|Total financial assets            |  |                     | 293,594 |  |                           |  | 293,594 |                                             |  |  |                                         |  |  |  |       | 
|Financial liabilities             |  |                     |         |  |                           |  |         |                                             |  |  |                                          |  |  |  |        | 
|Long term borrowings              |  |                     | 542,662 |  |                           |  |        |                                             |  |  | 542,662                                  |  |  |  |       | 
|Derivatives                       |  |                     | 9,060   |  |                           |  |        |                                             |  |  |                                         |  |  |  | 9,060  | 
|Long term liabilities from leases |  |                     | 44,483  |  |                           |  |        |                                             |  |  | 44,483                                   |  |  |  |       | 
|Other long term liabilities       |  |                     | 17,457  |  |                           |  |        |                                             |  |  | 17,457                                   |  |  |  |       | 
|Trade and other payables          |  |                     | 23,533  |  |                           |  |        |                                             |  |  | 23,533                                   |  |  |  |       | 
|Payables related to acquisitions  |  |                     | 485     |  |                           |  |        |                                             |  |  | 485                                      |  |  |  |       | 
|Accrued expenditure               |  |                     | 22,959  |  |                           |  |        |                                             |  |  | 22,959                                   |  |  |  |       | 
|Short term borrowings             |  |                     | 25,330  |  |                           |  |        |                                             |  |  | 25,330                                   |  |  |  |       | 
|Total financial liabilities       |  |                     | 685,969 |  |                           |  |        |                                             |  |  | 676,909                                  |  |  |  | 9,060  | 



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The fair values of bonds and loans presented under long term financial liabilities are disclosed in note
1.18. The remaining financial liabilities are stated at amortised cost which is deemed not to be significantly different from fair value. The fair values of the financial assets are deemed to equal their book values. The Group has pledged some cash
as collateral, for more information see note 1.15.

1.39 Risk management

The objective of the Group is to manage, invest and develop commercial real estate in Central and Eastern Europe, South Eastern Europe and Russia in order to
increase their intrinsic value. In the initial phase of growth a group company (a subsidiary) mainly relies on equity, and to a smaller extent debt, as a source of financing. The Group has always applied a conservative funding strategy.

Group executive management constantly assesses and reports the risk exposures of the Group to the Board of Directors. Together with monthly management
reporting, Board meetings are held at least quarterly.

The capital structure of the Group is described in note 1.16.

Development risk

Since 2004, the Group has been active
in property development and is therefore exposed to certain development risks.

Development risk relates to the construction of investment properties. The
main risks arising on development are commercial, financial, technical and procedural risks. Examples of commercial and financial risks are letting risks and risks connected with foreign exchange rate fluctuations. To mitigate commercial and
financial risks, before any project is started a detailed analysis of the market conditions is performed and the situation is monitored during the whole construction process. Technical risks include for example design risk, construction risk and
environmental risks. Procedural and technical risks are mitigated also by a primary detailed analysis. Further, the Group uses external professionals to deal with procedural actions, project design, project management, construction and other
associated matters. Although management has implemented controls to mitigate development risk, the turbulence on the global real estate markets has required management to redesign and reconsider many of the projects.

Developments which are found to be incompatible with the Groups development objectives are carefully reviewed by the Groups development and design
teams in order to find the best configurations for continued development in the existing market conditions. This may include re-designing the property to allow for a better utilisation of building rights, space and gross lettable area, the thorough
analysis and improvement of development budgets, re-scheduling construction and re-negotiating enabling agreements where appropriate.

Credit risk

Credit risk is defined as unforeseen losses on financial assets if counterparties should default.

The credit worthiness of tenants is closely monitored by a regular review of accounts receivable. Rents from tenants are generally payable in advance.



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Atrium attempts to minimise concentration of credit risk by spreading the exposure over a large number of
counterparties.

The credit risk exposure is comprised of normal course of business transactions with third parties and associates.

Furthermore, the Group holds collateral from tenants which would reduce the financial impact on the Group in the event of default. The collateral is
represented by deposits from tenants and cover rents of one to three months. In 2012, the Group had secured long term deposits from tenants amounting to 18.9 million (2011: 16.9 million) and short term deposits amounting to
7.9 million (2011: 5.6 million).

The table in note 1.12 provides an ageing analysis of receivables from tenants and gives an overview of
the allowances made for doubtful balances.

The credit exposure of the Group arising from the financial assets, as disclosed in note 1.38, represents the
maximum credit exposure from financial assets.

Refer also to the note 1.40 for further discussion on loans to associates.

To spread the risk connected to the potential insolvency of financial institutions, the Group deposits cash balances at various international banking
institutions. Before a deposit is made management reviews the credit ratings of the banking institutions and only banks with credit ratings of an investment grade or better are selected.

Liquidity risk

Liquidity within the Group is managed by
appropriate liquidity planning and through an adequate financing structure.

The Groups liquidity requirements arise primarily from the need to fund
its development projects, property acquisitions and other capital expenditures, debt servicing costs, property management services and operating expenses. To date, these have been funded through a combination of equity funding, bonds and bank
borrowings, and, to a lesser extent, from cash flow from operations (including rental income and service charges).

Liquid funds, comprising cash and cash
equivalents as disclosed in note 1.15, amounted to 207.8 million as at 31 December 2012 (2011: 234.9 million). The total net liquid funds calculated as cash and cash equivalents plus short term loans less short term borrowings,
amounts to 132.9 million (2011: 209.7 million). The table below analyses the Groups financial liabilities, including interest payments, based on maturity. The amounts disclosed in the table are the contractual undiscounted
cash flows.



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|                    |  |                     |         |  |                                 |  |         |                      |  |  |                      |  |  |                       |        |  |                          |  |         |  |  |  |         | 
|------------------- |  | ------------------- | ------- |  | ------------------------------- |  | ------- | -------------------- |  |  | -------------------- |  |  | --------------------- | ------ |  | ------------------------ |  | ------- |  |  |  | ------- | 
|2012                |  | Carryingamount000 |         |  | Totalcontractualcash flows000 |  |         | One yearor less000 |  |  | One to twoyears000 |  |  | Two to fiveyears000 |        |  | More than fiveyears000 | 
|Borrowings*         |  |                     | 540,626 |  |                                 |  | 632,418 |                      |  |  | 99,875               |  |  |                       | 25,329 |  |                          |  | 388,361 |  |  |  | 118,853 | 
|Derivatives         |  |                     | 17,828  |  |                                 |  | 17,904  |                      |  |  | 5,126                |  |  |                       | 4,837  |  |                          |  | 7,526   |  |  |  | 415     | 
|Other liabilities** |  |                     | 112,813 |  |                                 |  | 336,603 |                      |  |  | 47,763               |  |  |                       | 17,156 |  |                          |  | 23,852  |  |  |  | 247,832 | 
|Total               |  |                     | 671,267 |  |                                 |  | 986,925 |                      |  |  | 152,764              |  |  |                       | 47,322 |  |                          |  | 419,739 |  |  |  | 367,100 | 



|* | Borrowings include accrued interest.
|- | ------------------------------------



|** | Other liabilities comprise long term liabilities from leases, other long term liabilities, trade and other payables, payables related to acquisitions and accrued expenditure.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                    |  |                     |         |  |                                 |  |           |                      |  |  |                      |  |  |                       |         |  |                          |  |         |  |  |  |         |  
|------------------- |  | ------------------- | ------- |  | ------------------------------- |  | --------- | -------------------- |  |  | -------------------- |  |  | --------------------- | ------- |  | ------------------------ |  | ------- |  |  |  | ------- | -
|2011                |  | Carryingamount000 |         |  | Totalcontractualcash flows000 |  |           | One yearor less000 |  |  | One to twoyears000 |  |  | Two to fiveyears000 |         |  | More than fiveyears000 | 
|Borrowings*         |  |                     | 572,667 |  |                                 |  | 697,363   |                      |  |  | 50,780               |  |  |                       | 150,270 |  |                          |  | 239,589 |  |  |  | 256,724 |  
|Derivatives         |  |                     | 9,060   |  |                                 |  | 7,809     |                      |  |  | 3,127                |  |  |                       | 3,007   |  |                          |  | 2,921   |  |  |  | (1,246  | )
|Other liabilities** |  |                     | 104,242 |  |                                 |  | 306,894   |                      |  |  | 44,134               |  |  |                       | 8,341   |  |                          |  | 22,285  |  |  |  | 232,134 |  
|Total               |  |                     | 685,969 |  |                                 |  | 1,012,066 |                      |  |  | 98,041               |  |  |                       | 161,618 |  |                          |  | 264,795 |  |  |  | 487,612 |  



|* | Borrowings include accrued interest.
|- | ------------------------------------



|** | Other liabilities comprise long term liabilities from leases, other long term liabilities, trade and other payables, payables related to acquisitions, liabilities held for sale and accrued expenditure.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Market risk

Market risk embodies
the potential for both losses and gains and includes price risk, currency risk and interest rate risk.

The Groups strategy for managing market risk
is driven by the Groups investment objective which is managing and administrating the existing property portfolio and identifying potentially attractive new investments in the market, conducting due diligence for acquisitions and managing all
the stages of the acquisition process. The Groups market risk is managed on a daily basis by the Groups leasing managers in accordance with the policies and procedures in place.

The Groups overall market positions are monitored on a monthly basis by management.

Key factors such as market yields, gross and net rental income are used in the fair value measurement of investment properties. Sensitivity of the fair value
to these factors can be tested by altering the key factors as outlined in the table below.



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|                                                            |  |                                           |           |  |           |  |           | 
|----------------------------------------------------------- |  | ----------------------------------------- | --------- |  | --------- |  | --------- | 
|                                                            |  | Impact on standing investments fair value |          
|Sensitivity Analysis                                        |  | 2012000                                 |           |  | 2011000 | 
|Increase of 0.25% to discount rate                          |  |                                           | 2,121,922 |  |           |  | 2,017,198 | 
|Decrease of 0.25% to discount rate                          |  |                                           | 2,252,657 |  |           |  | 2,140,980 | 
|Increase of 5% in stabilised (forecasted) net rental income |  |                                           | 2,294,603 |  |           |  | 2,181,109 | 
|Decrease of 5% in stabilised (forecasted) net rental income |  |                                           | 2,076,069 |  |           |  | 1,973,384 | 
|Fair Value                                                  |  |                                           | 2,185,336 |  |           |  | 2,077,246 | 



|                                 |  |                                            |         |  |           |  |         | 
|-------------------------------- |  | ------------------------------------------ | ------- |  | --------- |  | ------- | 
|                                 |  | Impact on developments and land fair value |        
|Sensitivity Analysis             |  | 2012000                                  |         |  | 2011000 | 
|Increase of 10% to price per sqm |  |                                            | 590,361 |  |           |  | 644,116 | 
|Decrease of 10% to price per sqm |  |                                            | 486,424 |  |           |  | 530,586 | 
|Increase of 5% to price per sqm  |  |                                            | 564,377 |  |           |  | 613,462 | 
|Decrease of 5% to price per sqm  |  |                                            | 512,408 |  |           |  | 556,697 | 
|Fair Value                       |  |                                            | 538,395 |  |           |  | 587,351 | 

Price risk

The Group is
not materially exposed to price risk resulting from financial instruments as it does not own financial instruments whose value would fluctuate as a result of changes in market prices (other than those arising from interest rate risk or currency
risk).

However, the Groups investment properties are valued at fair value. These fair values are influenced by the recent turbulence in the
global markets as well as the limited amount of publicly available and up to date data relating to the real estate markets in the countries in which the Group operates. The Group is therefore exposed to the price risk resulting from movements in the
Groups asset values that could change significantly during subsequent periods. At present, management is not able to assess with accuracy the extent of such changes.

Currency risk

The Group is exposed to currency risk on
cash balances that are denominated in foreign currencies. Currency risks arising from investment properties and from financial instruments denominated in the functional currency do not represent a currency risk.

To eliminate the risk of transactions in foreign currencies, the Group attempts to match its income with its expense in the same currency, reducing currency
risk.

The Group is mainly financed in EUR. The rents payable to the Group under the various lease agreements with tenants are mainly denominated in euro.
The Group currently has 78% of GRI denominated in EUR (2011: 77%) 11 % in CZK (2011: 14%), 4% in USD (2011: 5%) and 7% in other local currencies (2011: 4%). GRI denominated in USD is generated mainly from Russia. The tenants however, mostly
have their income denominated in the local currency of the relevant country in which they are based. The occupancy cost ratio, which reflects the tenants rental cost as a proportion of its turnover, can be affected by fluctuations of the euro,
the currency in which rent is based or payable, against the relevant local currency in which the tenant generates turnover. Accordingly a weakening of the local currency against the euro could result in the Groups properties becoming less
attractive, or over-rented. Such fluctuations could also result in such rent becoming unsustainable with respect to the concerned tenant leading to a demand for discounts or even default by the respective tenants.



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The following tables set out the Groups total exposure to foreign currency risk and net exposure to
foreign currencies of the financial assets and liabilities:



|     |  |                      |        |  |                           |  |         |                   |  |  |         |  
|---- |  | -------------------- | ------ |  | ------------------------- |  | ------- | ----------------- |  |  | ------- | -
|2012 |  | Financialassets000 |        |  | Financialliabilities000 |  |         | Net exposure000 | 
|CZK  |  |                      | 6,290  |  |                           |  | (43,273 | )                 |  |  | (36,983 | )
|HUF  |  |                      | 3,081  |  |                           |  | (1,335  | )                 |  |  | 1,746   |  
|PLN  |  |                      | 42,147 |  |                           |  | (48,650 | )                 |  |  | (6,503  | )
|DKK  |  |                      | 2      |  |                           |  | (27     | )                 |  |  | (25     | )
|RON  |  |                      | 722    |  |                           |  | (322    | )                 |  |  | 400     |  
|RUB  |  |                      | 7,454  |  |                           |  | (19,431 | )                 |  |  | (11,977 | )
|TRY  |  |                      | 2      |  |                           |  | (2,190  | )                 |  |  | (2,188  | )
|LVL  |  |                      | 197    |  |                           |  | (653    | )                 |  |  | (456    | )
|BGN  |  |                      | 5      |  |                           |  | (78     | )                 |  |  | (73     | )
|UAH  |  |                      |       |  |                           |  | (31     | )                 |  |  | (31     | )
|GEL  |  |                      | 3      |  |                           |  | (15     | )                 |  |  | (12     | )
|USD  |  |                      | 886    |  |                           |  | (1,108  | )                 |  |  | (222    | )
|     |  |                      |       
|2011 |  | Financialassets000 |        |  | Financialliabilities000 |  |         | Net exposure000 | 
|CZK  |  |                      | 7,132  |  |                           |  | (42,680 | )                 |  |  | (35,548 | )
|HUF  |  |                      | 3,044  |  |                           |  | (2,402  | )                 |  |  | 642     |  
|PLN  |  |                      | 45,115 |  |                           |  | (41,000 | )                 |  |  | 4,115   |  
|DKK  |  |                      | 38     |  |                           |  |        |                   |  |  | 38      |  
|RON  |  |                      | 927    |  |                           |  | (633    | )                 |  |  | 294     |  
|RUB  |  |                      | 12,328 |  |                           |  | (19,027 | )                 |  |  | (6,699  | )
|TRY  |  |                      | 2      |  |                           |  | (2,513  | )                 |  |  | (2,511  | )
|LVL  |  |                      | 274    |  |                           |  | (327    | )                 |  |  | (53     | )
|BGN  |  |                      |       |  |                           |  | (24     | )                 |  |  | (24     | )
|UAH  |  |                      | 4      |  |                           |  | (8      | )                 |  |  | (4      | )
|USD  |  |                      | 241    |  |                           |  | (9,425  | )                 |  |  | (9,184  | )

Sensitivity Analysis

The
table below indicates how a 10 percentage point strengthening of the currencies stated below against the euro as at 31 December 2012 and 31 December 2011 would have increased/(decreased) the profit in the income statement. This analysis
assumes that all other variables remain constant. Recording and measurement of foreign currency results follows the principles outlined in standard IAS 21.



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The table below does not take into account potential gains and losses on investment properties measured at
fair value which are sensitive to foreign exchange fluctuations (e.g. rents in Russia denominated in USD) nor does it take into account the impact on any other non financial assets or liabilities.



|    |  |             |        |   |             |  |        |  
|--- |  | ----------- | ------ | - | ----------- |  | ------ | -
|    |  | 2012        |        |   | 2011        | 
|    |  | Gain/(Loss) |        |   | Gain/(Loss) | 
|    |  | 000       |        |   | 000       | 
|CZK |  |             | (3,698 | ) |             |  | (3,555 | )
|HUF |  |             | 175    |   |             |  | 64     |  
|PLN |  |             | (650   | ) |             |  | 412    |  
|DKK |  |             | (3     | ) |             |  | 4      |  
|RON |  |             | 40     |   |             |  | 29     |  
|RUB |  |             | (1,198 | ) |             |  | (670   | )
|TRY |  |             | (219   | ) |             |  | (251   | )
|LVL |  |             | (46    | ) |             |  | (5     | )
|BGN |  |             | (7     | ) |             |  | (2     | )
|UAH |  |             | (3     | ) |             |  | (1     | )
|GEL |  |             | (1     | ) |             |  | (1     | )
|USD |  |             | (22    | ) |             |  | (918   | )

Interest rate risk

The
majority of financial instruments bear interest on a fixed interest basis. The interest rate risks associated with the Groups financial instruments bearing variable interest rates are hedged by making use of financial derivatives (interest
rate swaps). As all financial instruments other than the derivatives, were measured at amortised cost in 2012, there were no value movements due to interest rate risk fluctuations in 2012. The interest rate risk was, therefore, reduced to the impact
on the income statement of the interest paid on borrowings bearing variable interest rates. The carrying amount of the borrowings bearing variable interest rates was 190.4 million (2011: 231.5 million) as at 31 December 2012.

Group executive management analyses interest rate exposure arising from long term borrowings on a regular basis. As at 31 December 2012, 65% (2011:
59%) of the Groups borrowings were at a fixed interest rate. Various scenarios are simulated taking into consideration refinancing, renewal of existing positions and alternative financing through bonds.

Numerous general economic factors cause interest rates to fluctuate; in addition, interest rates are highly sensitive to a governments monetary policy,
domestic and international economic and political conditions, the situation in the financial markets and inflation rates. Interest rates on real estate loans are also affected by other factors specific to real estate finance and equity markets, such
as changes in real estate values and overall liquidity in the real estate debt and equity markets.

Increases in interest rates could adversely affect the
Groups ability to finance or refinance additional borrowings, as the availability of financing and refinancing proceeds may be reduced to the extent that income from properties fails to increase sufficiently to maintain debt service coverage.



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Sensitivity Analysis

The Group seeks to safeguard its results and cash flow against interest rate fluctuations by using financial derivatives (interest rate swaps) to hedge
financial instruments bearing variable interest rates.

As at 31 December 2012 and 31 December 2011, it was estimated that a general increase of
one percentage point (100 basis points) in interest rates would increase the Groups interest expense arising from variable interest rate instruments and subsequently decrease the profit for the year by approximately 1.9 million
(2011: 2.3 million). The same would be true for a one percentage point (100 basis points) decrease, which would increase the profit for the year by approximately the same amount.

1.40 Transactions with related parties

To the best of
managements knowledge, during the year ended 31 December 2012 and 31 December 2011, no single shareholder of Atrium held more than 5% of the listed ordinary shares, except for:

 Gazit-Globe Ltd (Gazit-Globe) which held 128,908,715 shares (2011: 117,862,332 shares) in Atrium, representing approximately 34.5% (2011:
31.6%) of Atriums total shares as at 31 December 2012 and

 Apollo Global Real Estate (Apollo) which held 72,486,084 shares in
Atrium, representing approximately 19.4% (2011: 19.4%) of Atriums total shares as at 31 December 2012 and as at 31 December 2011.

Gazit-Globe and Apollo jointly held approximately 53.9% (2011: 51.0%) of Atriums shares in issue as at 31 December 2012.

Transactions between Atrium and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

Except as described in the following paragraphs, the directors have not entered into any transactions with Atrium and its subsidiaries, do not own shares in
Atrium and have not invested in any debt issued by the Group.

a. Chaim Katzman, Director and Chairman of the Board of Directors together with family
members held 255,000 shares (2011: 240,000 shares) in Atrium as at 31 December 2012. In total, Mr. Katzman and his family, through his holdings in Norstar Holdings Inc and Gazit-Globe held indirectly 31,429,124 of Atriums shares
(2011: 35,645,097 shares), as at 31 December 2012. Together, these direct and indirect holdings represented approximately 8.4% of Atriums total shares as at 31 December 2012. In August 2012, the Compensation and Nominating Committee
approved the grant of 127,119 options to Mr. Katzman in lieu of a consultancy fee of 0.15 million. Chaim Katzman is also the Chairman of the Board of Directors of Gazit-Globe.

b. Aharon Soffer, Director, through his holding of Gazit-Globe shares, held indirectly 5,352 of Atriums shares (2011: 4,521 shares), as at
31 December 2012. This indirect holding represents approximately 0.001% (2011: 0.001%) of Atriums total shares as at 31 December 2012.

c.
Dipak Rastogi, Director, held through his family trust an indirect investment of 435,755 shares in Atrium as at 31 December 2012 and as at 31 December 2011.



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d. Joseph Azrack, Director, acquired 13,831 shares in Atrium during the year 2012, 6,915 of which were
received in lieu of 25,000 of his directors fee and 6,916 of which were purchased with his own funds. He also

held an indirect beneficial
ownership of 10,661 shares in Atrium as at 31 December 2012. In addition, Joseph Azrack is the Managing Partner of Apollo. Apollo and its affiliates advise and manage a syndicate of investors who in aggregate own 72,486,084 Atrium shares,
including the 10,661 shares indirectly beneficially owned by Mr. Azrack.

e. Thomas Wernink, Director, held 5,000 shares in Atrium as at
31 December 2012 and as at 31 December 2011.

f. Peter Linneman, Director, held 24,260 shares in the Atrium as at 31 December 2012 and as
at 31 December 2011.

g. In September 2012, Simon Radford elected to receive 11,065 shares in Atrium in lieu of 40,000 of his annual
directors fee.

h. In March 2012, the Compensation and Nominating Committee approved employee annual bonus payments for 2011. Rachel Lavine, Chief
Executive Officer, was awarded a total bonus award of 729,167 which was settled partially by the guaranteed payment of 375,000 in cash and partially via the issuance of 63,274 shares at 3.63 per share, net of tax. The new
shares were issued on 5 April 2012 and are subject to a lock-up period through to 31 July 2013.

i. Based on a consultancy agreement with the
Group, Chaim Katzman, Chairman of the Board was entitled to consultancy fees of 0.6 million (2011: 0.5 million) and expenses as permitted under his agreement.

Atrium has paid flight and travel expenses of 0.2 million (2011: 0.8 million) to MGN Icarus Inc. a subsidiary of Gazit-Globe. Such travel
expenses were at arms length and were incurred by the Chairman of the Board and management for property tours and other business activities.

The
total remuneration of the non-executive directors arising from their directors contracts amounted to 0.6 million for the year 2012 (2011: 0.4 million).

During the year ended 31 December 2012, the total compensation paid or payable to group executive management personnel amounted to 3.3 million
(2011: 3.9 million) and share based payment expenses amounted to 0.9 million (2011: 1.0 million).

Transactions with associates are
represented by loans provided in 2006 with a book value of 42.5 million (2011: 35.4 million) as at 31 December 2012. The loans are granted to Euro Mall Polska XVI SP zoo, Euro Mall Polska XIX SP zoo and Euro Mall Polska XX SP
zoo, entities in which the Group held a 24% stake at 31 December 2012. These loans have a fixed interest rate of 6.7% per year and are secured over a plot of land in Poland.

The Group contracted for legal services amounting to 0.5 million (2011: 0.6 million) provided by Atlas Legal Consultancy Services B.V., a
consultancy company controlled by Marc Lavine, a related party to Rachel Lavine. Amounts were billed based on arms length rates for such services.

During the year ended 31 December 2012, 227,119 options were granted. Out of the 5,372,171 outstanding options as at 31 December 2011, 408,333
options were exercised and 59,998 options were returned to the option pool. The total number of the outstanding options was 5,130,959 as at 31 December 2012.



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Atrium did not conclude any contracts with Aztec Financial Services (Jersey) Limited except for a services
contract of 0.2 million (2011: 0.2 million), connected with the provision of administration, company secretarial and registrar services for Atrium. Aztec Financial Services (Jersey) Limited is part of Aztec Group where Simon Radford
is a director and shareholder.

1.41 Contingencies

The circumstances of the acquisition of 88,815,500 Austrian Depositary Receipts (ADCs) representing shares of Atrium announced in August 2007 (the
ADC Purchases), security issuances and associated events have been subject to regulatory investigations and other proceedings that continue in Austria.

On 7 February 2012, the Jersey Financial Services Commission reconfirmed its conclusions, following an investigation commenced in July 2008, that the ADC
Purchases involved no breach of the relevant articles of the Jersey Companies (Jersey) Law and that its investigation has concluded without any finding of wrong- doing.

Atrium is involved in certain claims submitted by ADC holders alleging losses derived from price fluctuations in 2007 and associated potential claims. As at
11 March 2013, the latest practicable date prior to authorization of this report, the value of the claims and proceedings to which Atrium was then a party in this regard was approximately 13 million. The number of claims and amounts
claimed are expected to fluctuate over time as proceedings develop or are dismissed. The claims are at varying stages of development and are expected to be resolved over a number of years. While a provision has been recorded in respect of these
proceedings, based on current knowledge and management assumptions and includes the estimated associated expenses, the actual outcome of the claims and the timing of their resolution cannot be estimated reliably by the Company at this time. The
further information ordinarily required by IAS 37, Provisions, contingent liabilities and contingent assets has not been disclosed on the grounds that it can be expected seriously to prejudice the outcome of the claims. Atrium rejects
the claims and is defending them vigorously. Where judgment has been handed down against Atrium in any proceedings, the matter is subject to appeal.

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 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 criminal investigation proceedings against Atrium based on the
Austrian Corporate Criminal Liability Act. This legislation, which came into force in 2006, is of uncertain application. Atriums management believes a finding of liability on its part would be inappropriate. Accordingly, Atrium intends to
actively defend the proceedings.

A settlement agreement dated 17 June 2011 between Atrium, Meinl Bank AG (Meinl Bank), Mr. Julius
Meinl and the other related parties resolved a number of pending legal proceedings and disputes between those parties including a derivative action in the Royal Court of Jersey. An independent committee of the Board also determined that there was no
basis for the claims made in the derivative action and no benefit to Atrium in pursuing the action.



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The continuing uncertainty in the global markets, especially the Euro Zone and real estate markets, as well
as the limited amount of publicly available up-to-date data and research relating to the real estate markets in the countries in which the Group invests could lead to significant changes in the values of the Groups assets during subsequent
periods. Management is not at present able to assess with accuracy the extent of any such changes.

1.42 Subsequent events

In January 2013, MD CE Holding Limited, a 100% owned subsidiary of Atrium, purchased 49% of the shares in Nokiton Investments Limited and now owns 100% of this
entity and its subsidiaries. Total consideration paid and transaction costs amounted to 3.0 million.



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2. 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, 2012 and 2011, 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, 2012. 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, 2012 and 2011, and the results of their operations and their cash flows for each of the years in the two year period ended December 31, 2012, in conformity with
International Financial Reporting Standards as issued by the International Accounting Standards Board.



LOGO

KPMG Channel Islands Limited

Jersey, Channel Islands

March 12, 2013



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