Mivne Real Estate (K D) : Report of the board of directors and Financial Statements, Q3 2022

Mivne Real Estate (K.D)

Ltd.

)"The company"(

Report of the Board of Directors on the State of

Corporate Affairs

As of September 30th, 2022

This is an English translation of the Hebrew consolidated Interim financial statements, that was published on November 22, 2022 (reference no.: 2022-01-139966) (hereafter: "the Hebrew Version").

This English version is only for convenience purposes. This is not an official translation and has no binding force. Whilst reasonable care and skill have been exercised in the preparation hereof, no translation can ever perfectly reflect the Hebrew Version. In the event of any discrepancy between the Hebrew Version and this translation, the Hebrew Version shall prevail.

Mivne

Report of the Board of

Directors on the State

of the Corporation's

Affairs

September 30 2022 Quarterly Report

September 30 2022 Periodic Report | Board of Directors' Report on the State of the Company's Affairs

Overview

14,116

September

30 2022		1,140

Total Investment Property

(Millions of NIS)

Of This, Real Estate Under Construction

(Millions of NIS)

Projects under	6
construction
September	152
30 2022
1,144

189-205

Projects Under Construction and In Development

Scope

(Thousands of m²)

Estimated Cost Balance

(Millions of NIS)

Expected NOI at Project Completion*

(Millions of NIS)

• For details see table under "concentrated data on projects in stages of construction, planning and development" below.

Data from the Consolidated Statements

1-9.22

	560		(MillionsNOI	of NIS)
	10.2%		Same Properties NOI in Israel
		Increase compared to corresponding
			period last year
	396		FFO
		(Millions of NIS)
		Increase of 17.2% compared to the
			corresponding period last year
	5,943		Unrestricted Assets
		(Millions of NIS)
			Constituting 42% of total real estate
	1.95%		CPI-linked weighted debt
		interest
	1,050		Cash and credit frameworks as of
		the publication date of the
		Statements
			(Millions of NIS)
	94.2%		Occupancy Rate in Israel
		Increase of 1.2% compared to
			December 31 2021

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September 30 2022 Periodic Report | Board of Directors' Report on the State of the Company's Affairs

Report of the Board of Directors on the State of Corporate Affairs

For the Period Ending September 30 2022

The Board of Directors of Mivne Real Estate (C.D.) is honored to submit the Financial Statements of the Company and its subsidiaries ("the Company") for the period ending September 30 2022 ("The Reported Period").

This report must be read in conjunction with the 2021 Periodic report published on March 20 2022 (reference no.: 2022-01-031300) (hereinafter: "the 2021 Periodic Report"), presented here by way of referral.

Business Environment

Description of the Company and its Business Environment1

The Company is active in the field of cash- generating real estate and deals, by itself and through its investees, in varied real estate activity centering on Israel. For further details see Section

1.2 of the Report on the Corporation's Business in the 2021 Periodic Report. The Company (including associates) owns some 1,933,000 m² of cash-generating space, of which 1,604,000 m² is in Israel. The Company has land reserves and unused rights to the amount of 741,000 m²

Since 2009, inflation in Israel has been decreasing, and in 2014 to 2020 inflation rates were particularly low and move almost each year within a 1% range. Since 2021 inflation rates have risen in Israel and the world. In 2021 the Israeli Consumer Price Index increased by a rate of 2.8% and the CPI increase in September 2022 reflected a yearly growth of 4.6% in the past twelve months.

The price increases are part of a global trend, 8.2% in the U.S., 10.1% in the UK and 10.7% in the EU.

In response to the price increase and the continued increases in interest rates of central banks in Europe and the United States, starting from April 2022 the Bank of Israel decide to increase the interest rate and it increased by a number of pulses from a negligible rate (where it had been for 7 years) to its current level, which amounts to 2.75%, and in accordance with the forecasts of the Bank of Israel Research Division, the monetary interest rate is expected to amount to 3.5% on average in the third quarter of 2023. The Bank of Israel explained this decision based on the fact that the Israeli economy has been recording strong economic activity, accompanied by a tight labor market with an increase in the inflationary environment.

1 Sources of information in this section - Bank of Israel report on the subject of monetary policy for the first half of 2022.

In the first nine months of 2022 the Consumer Price Index increased by 4.4%. The Company has loans and debentures linked to the Consumer Price Index and which bear interest linked to the CPI. Therefore, the increase in CPI has led to an increase in the Company's financing costs. Against this, the Company's cash-generating property in Israel, the current value of which is

11.7 billion NIS, is rented in CPI-linked rental agreements, and the Company sees this as long- term inflationary protection. As a result, the increase in CPI has led to an increase in the Company's revenues from building rentals and to an increase in the fair value of its properties. For further details see the "Summary of Primary Data" and the "Summary of Business Expenses" table in this report.

The Company cannot estimate the future impact, if any, of all of the above factors, on the real estate industry in Israel in general, and on the Company's activity in particular. The Company estimates that its financial fortitude and the state of its assets, along with its cash balances and current cash flows it generates, will allow it to continue financing its activity and upholding its obligations.

The estimates and forecasts presented in this section above constitute forward-looking information, as defined in the Securities Law, 1968

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Events During and Subsequent to theReported Period

Acquisitions

Acquisition of Properties from the Bank Mizrahi Group

In September 2021 agreements were reached with a number of companies from the Bank Mizrahi Tefahot Group regarding the purchase of their rights to 24 land properties in Israel with different zoning, including offices and commercial ("the Purchased Properties") in return for a total of 531.6 million NIS plus VAT. The transaction was completed in February 2022. 23 of the 24 Purchased Properties were rented to one of the sellers for variable periods. The total rental fees for the Purchased Properties are expected to amount to 26 million NIS. For further details see immediate report from January 31 2022 (reference no.: 2022-01- 013006), presented here by way of referral.

of 645 million NIS. The effective interest embodied in the offering is 0.31%.

The debentures (series 23) - the Company issued 118,732,000 NIS NV in return for a total of 141 million NIS. The effective negative interest embodied in the offering is -0.97%.

In August 2022 the Company issued a commercial paper type: CP (Series 1) at an amount of 100 million NV, in return for a total of 100 million NIS. The CP is redeemable after 365 days pass from its deposit date with an existing option to renew it for 4 additional periods of 365 days each to August 2027. The CP can be redeemed immediately at any time with 7 business days' advance notice.

Midroog set a rating of P-1.il for the CP.

Development

Yad Hanna

In July 2022 the Company closed a transaction in accordance with an agreement with Yad Hanna Homesh Cooperative Village and Hutzot Shefayim to purchase shares of Yad Hanna Homesh Industries - Agricultural Cooperative Association Ltd. (hereinafter - the Association) with a total area of 10 hectares, in such a manner that the Company holds shares constituting 50% of the issued and paid-up stock capital of the Association, fully diluted, and joined the Association as a member. In accordance with the plan applicable to part of the Land, the use permitted for them today is for industry, including storage. The Association intends to deal in the planning and promotion of a project for the construction of a cash- generating employment compound on the Land. The proceeds for the shares sold amounted to a total of 140 million NIS, plus VAT. In addition, the Company provided the Association a capital note to the sum of 43 million NIS.

Capital Raised

In March 2022 the Company issued, by way of expansion, debentures (Series 20 and 23)

The debentures (series 20) - the Company issued 530,610,000 NIS NV in return for a total

Tel Aviv-Yafo - Hameitav, Stage B

In April 2022 the protocol of the committee approving the decision of the Local Committee for Planning and Construction Tel Aviv-Yafo from March 23 2022, on the deposit of Plan no. 507-0892091 "TA/MK/4974 - Ayalon Region" was approved, subject to fulfilling certain conditions ("the Plan") regarding part of Parcel 64 in Block 7069, located between Yigal Alon Street west of the Bitzron Neighborhood, Aminadav Street on the south and Meitav Street on the east ("the Land"), which is held by the Company via capitalized lease.

The plan, as approved by the Local Committee, includes the construction of three buildings: a 47-story residential building, two 47-story employment buildings, and an additional employment structure of the "Mashbir Hamerkazi" building regarding which the plan has established it as a building for preservation.

The Plan area includes 1.3 hectares from the construction rights utilization, as follows:

a. Construction rights for housing - 41,600 m² primary area (constituting 400 housing units).

b. Construction rights for commerce and employment: some 125,000 m². The plan was approved for deposit and was deposited.

3