Harel Insurance Investments & Financial Services : Financial Statements - Q1 2023

Harel Insurance Investments and Financial Services Ltd.

Interim Report as at

March 31, 2023

Contents

1	Description of the Company	Page
1.1	General
1
1.2	Shareholders in the Company
1
2	Financial position and results of operations, equity and cash flows
3
2.1	Material changes in the Group's business and events in the Reporting Period
3
2.2	Material changes in the Group's business and events after the Reporting Period
3
2.3	Developments in the macroeconomic environment of the Group
4
2.4	Summary of the legislative arrangements and provisions of law in the Group's operating
6
	segments
2.5	Condensed data from the consolidated financial statements of Harel Investments
11
2.6	Other key information and effects by segment
17
2.7	Liquidity and sources of finance
22
3	Market risks - exposure and management
22
4	Disclosure concerning the economic solvency ratio
23

Board of Directors Report

Harel Insurance Investments and Financial	Board of Directors Report for the three months
Services Ltd.	ended March 31, 2023

Harel Insurance Investments and Financial Services Ltd.

Board of Directors Report

for the three months ended March 31, 2023

The Board of Directors Report for the three months ended March 31, 2023 ("the Reporting Period"), reflects the principal changes in the state of the business of Harel Insurance Investments & Financial Services Ltd. ("Harel Investments" or "the Company") during this period, and it was prepared assuming that the reader is also in possession of the Group's full Periodic Report for 2022 which was published on March 30, 2023 ("the Periodic Report").

The Board of Directors' Report also contains forward-looking information, as defined in the Securities Law, 1968. Forward-looking information is uncertain information concerning the future based on information in the company's possession at the time of publishing the report and which includes the company's assessments or intentions at the date of the report. Actual performance may differ substantially from the results estimated or inferred from this information. In certain instances, sections can be found that contain forward-looking information, where words such as: "the Company/the Group estimates", "the Company/the Group believes", "the Company/the Group anticipates", and the like appear, and such forward-looking information may also be worded differently.

1 Description of the Company

1.1 General

Harel Insurance Investments and Financial Services Ltd. is a public company whose shares have been traded on the Tel Aviv Stock Exchange since 1982. The Company, together with its subsidiaries, ("the Group") operates principally in the following areas:

1. In the various sectors of insurance, the Company operates through the following subsidiaries: Harel Insurance Company Ltd. (under full control) ("Harel Insurance"); Interasco Societe Anonyme General Insurance Company S.A.G.I (in which the Company holds 94%) ("Interasco" - which operates in non-life insurance in Greece; Turk Nippon Sigorta A.S. (fully controlled) ("Turk Nippon"), operating in Turkey; EMI - Ezer Mortgage Insurance Company Ltd. (fully controlled) ("EMI"); and ICIC - Israel Credit Insurance Company Ltd. (with a 50% holding) ("ICIC").
2. In the long-term savings sector, the Company operates through the following subsidiaries that are provident fund and pension fund management companies: Harel Pension and Provident Ltd. (fully controlled) ("Harel Pension & Provident"), which manages pension and provident funds; Tzva Hakeva Savings Fund - Provident Funds Management Company Ltd. (under full control) ("Tzva Hakeva Saving Fund - Provident Funds Management Company Ltd. (fully controlled) ("Tzva Hakeva") which manages an education fund for IDF career soldiers and pensioners; LeAtid Pension Funds Management Company Ltd. (in which the Company has a 79% stake), which manages an old pension fund ("LeAtid").

1

Harel Insurance Investments and Financial	Board of Directors Report for the three months
Services Ltd.	ended March 31, 2023

1. In the financial services and capital market segment - the Company operates through the subsidiary Harel Finance Holdings Ltd. ("Harel Finance") (fully controlled by the Company) and its principal subsidiaries: Harel Mutual Funds Ltd. ("Harel Mutual Funds") - a mutual fund management company; Harel Finance Investment Management Ltd. ("Harel Finance Investments") - which is a licensed portfolio manager and manages investment portfolios; Harel Index Trade Ltd. - a company involved in market making for the ETFs managed by Harel Mutual Funds; Alfa Tech Investment Management Ltd., a licensed portfolio manager which manages investments for funds issued by Harel Mutual Funds using computerized models; Harel Finance Alternative Ltd., a company that serves as a general partner and investor in the partnerships Harel Alternative Real Estate and Harel Finance Alternative Hamagen, limited partnerships registered in the USA and Harel Finance Alternative Hamagen Europe, a limited partnership registered in Luxembourg; Harel Exchange Traded Deposit Ltd., a company that issued bonds backed by deposits.
2. In the credit sector - through the subsidiary Hamazpen Shutaphim Laderech Ltd. (in which the Company holds 70%) ("Hamazpen") that creates innovative financing solutions for quality entrepreneurs providing credit to small and medium businesses, including the provision of mezzanine loans; through a company fully owned by Harel Insurance, Harel 60+ Ltd. ("Harel 60+") that provides mortgage loans, including "reverse mortgage" which is a loan provided to borrowers aged 60 or more in the form of a lien on their homes; within the framework of development property finance activity, including sale guarantees in Harel Insurance; and also in the provision of financial guarantees and operating services for mortgage portfolios guaranteed by third parties through Harel Insurance and EMI.
   At March 31, 2023, the credit sector does not constitute an operating segment in the financial statements. Accordingly, the assets, liabilities and results of operations in the credit sector are included in the Company's different operating segments as follows: Harel 60+ activity is included in the health insurance segment, activity relating to the provision of Sales Law guarantees forms part of the non-life insurance segment; while any other credit sector activity, including development property finance, is included in the segment "not attributed to operating segments and other".

The Company's separate activity centers on the management, control and supervision of the subsidiaries, on-going planning of the Group's operations, and initiating activity and investments, both directly and through the Group companies.

1.2 The Company's shareholders

Yair Hamburger, Gideon Hamburger and Nurit Manor are the principal shareholders in the Company (in this section: "the Shareholders"), holding 47.78% of the voting rights and the issued share capital of the Company.

The Shareholders hold the Company principally through G.Y.N. Investment Management & Economic Consulting 2017 Limited Partnership, a limited partnership fully owned and controlled by the Shareholders, which they hold, as limited partners, through private companies fully owned by them ("G.Y.N. Partnership") and they also hold the general partner in G.Y.N. Partnership.

2