Q1 2008

					    A
 GLOBAL
PLATFORM
                 GAZIT-GLOBE LTD.
INTERIM FINANCIAL STATEMENTS AS OF MARCH 31, 2008




        LOCATION
        LOCATION
        LOCATION
     UPDATE TO THE DESCRIPTION OF THE COMPANY’S BUSINESS FOR THE 2007
       PERIODIC REPORT OF GAZIT-GLOBE LTD. (hereinafter – “the Company”)



Pursuant to Regulation 39A of the Securities Regulations (Periodic and Immediate Reports), 1970,
details are presented below concerning material changes and developments that have taken place in
the Company’s business since the publication of the Company’s Periodic Report for 2007
(hereinafter – “the Periodic Report”), for each matter that has to be described in the Periodic Report.



Update to Section 1 - The Company’s activities and the description of its business
development

As to the acquisition of another shopping center in Brazil, in May 2008, at a cost of approximately
$ 38 million (including the cost to complete the development), by a wholly owned subsidiary of the
Company, see note 3a to the financial statements.



Update to Section 3 - Dividend distributions in the last two years

A.    On April 13, 2008, the Company distributed a dividend to its shareholders in the amount of
      NIS 37,572 thousand.

B.    As to the dividend declared subsequent to balance sheet date, see note 4d to the financial
      statements.



Update to Section 7 - Products and services – Income-producing properties - EQY

A.    As to the agreement entered into by EQY for the sale of 7 properties for a consideration of
      approximately $ 197.4 million (and the consequent performance of the sale of 5 of these
      properties) to a joint venture established by EQY and Global Retail Investors, LLC in April
      2008, see note 3d to the financial statements.

B.    With regard to the joint venture that EQY entered into with DRA Advisors, see note 4b to the
      financial statements.
Update to Section 21 - Complementary activities of the Company (outside its principal field of
operation)

As to the issuance of NIS 125 million par value of debentures (series D) by U. Dori Engineering in
April 2008, pursuant to a shelf prospectus that it published in November 2007, see note 4a to the
financial statements.



Update to Section 23 – Human capital

As to stock options exercisable into Company shares that were allocated to officers of the
Company, including the Executive Vice Chairman of the Company’s Board of Directors, see note 3i
to the financial statements.



Update to Section 25 – Financing

As to the Company’s issuance of NIS 140 million par value of debentures (series I), by way of
series extension, in February 2008, see note 3h to the financial statements.



Update to Section 26 – Supplementary information – financing of EQY, FCR, CITYCON,
Gazit Development, Gazit Europe and ProMed

As to the revolving credit facility agreement entered into by Citycon for it to be provided with a
revolving line of credit in the amount of € 50 million for a five-year period, see note 3j to the
financial statements.
                                                        GAZIT-GLOBE LTD.
                                      Board of Directors’ Report to Equity Holders
                                           For the Period Ended on March 31, 2008


The Board of Directors of Gazit-Globe Ltd. (hereinafter – “the Company”) is pleased to present the revised financial
statements(1) of the Company and its consolidated subsidiaries for the period ended on March 31, 2008:

1.        A.     General

                 The Company – directly and through its consolidated subsidiaries (hereinafter, collectively – “the Group”)
                 is engaged in the acquisition, development and management of income-producing properties in North
                 America, Brazil, Europe and Israel.          Within the framework of its activities in the income-producing
                 property sector, the Group focuses mainly on supermarket-anchored shopping centers.                Within this
                 framework, the Group is also active in the medical office buildings sector in North America. In addition,
                 the Company is active in the senior housing communities sector in the U.S.A. Since September 2007, the
                 Company, through a proportionately consolidated subsidiary, is also active in the property sector in Israel
                 and Eastern Europe, in the development, redevelopment, management and construction of projects,
                 primarily for residential, industrial and office buildings. Furthermore, the Group continues to seek and
                 realize business opportunities by acquiring properties and/or companies that are active within its core
                 business or similar asset classes, both in regions where it operates and in new territories. As to the
                 series of agreements entered into for the purpose of investing in Atrium European Real Estate Ltd.
                 (hereinafter – “ATR”) (formerly, Meinl European Land Ltd.), see section 2J below.


          B.      Properties

                 As of March 31, 2008, the Group owns and administers 469 properties, as follows:

                      412 shopping centers and stores

                      23 shopping centers under development

                      14 senior housing communities (with approx. 1,484 units)

                      2 senior housing communities under development

                      7 medical office building and 2 multi-story parking garages

                      11 other properties

                  The above properties have a gross leasable area (“G.L.A.”) of approximately 4.7 million square meters
                  (50.6 million square feet). They are recorded in the Company’s books at their fair value of NIS 42.2
                  billion and generate annual rental revenue of NIS 3.7 billion (Annual rental revenue data are based on
                  the gross annual rent from the properties owned and the exchange rates as of March 31, 2008).

__________________________
(1)
      With regard to the restatement of the financial statements for the above period, refer to section 1G below.




                                                                    1
In the U.S.A., the Company operates mainly through Equity One Inc. (hereinafter – “EQY”), a public
company listed on the New York Stock Exchange (NYSE: EQY). EQY is a self-administrated, self-managed
REIT (Real Estate Investment Trust) for U.S. tax purposes. As of March 31, 2008, the Company owns,
directly and indirectly (through the subsidiary, First Capital Realty Inc., as described below), 48.2% of
EQY. EQY’s properties are located primarily in growing metropolitan areas in the southeastern United
States (mainly in Florida and Georgia) and in the Boston, Massachusetts metropolitan area. EQY owns 162
income-producing properties (156 operating shopping centers and 6 other properties), with a G.L.A. of
1.6 million square meters (approximately 17.2 million square feet), as well as 3 shopping centers under
development.

The Company is also active in the United States through Royal Senior Care (hereinafter – “RSC”), and
ProMed Properties Inc. and ProMed Properties (CA) Inc. (hereinafter, collectively – “ProMed”). RSC, in
which the Company holds a 50% interest, is active in the senior housing communities sector in the
southeastern United States. RSC owns 14 senior housing communities, encompassing approximately
1,484 units, as well as 2 senior housing communities under development. ProMed, which is wholly
(100%) owned, is engaged in the medical office buildings sector. ProMed owns 7 medical office buildings
in North America (the U.S.A. and Canada), with a G.L.A. of 73 thousand square meters (approximately
786,000 square feet), as well as 2 multi-story parking garages.

In Canada, the Company mainly operates through First Capital Realty Inc. (“FCR”), a public company listed
on the Toronto Stock Exchange (TSX: FCR). As of March 31, 2008, the Company holds approximately
52.9% of FCR. FCR’s properties are located primarily in growing metropolitan areas in the provinces of
Ontario, Quebec, Alberta and British Columbia in Canada. FCR owns 156 shopping centers with a G.L.A. of
approximately 1.8 million square meters (approximately 19.4 million square feet), and 8 shopping centers
under development. In addition, FCR owns approximately 14 million shares of EQY.

In Europe, the Company operates mainly through Citycon Oyj. (hereinafter – “Citycon”), a Finnish public
company, whose shares are listed on the Helsinki Stock Exchange (OMX). As of March 31, 2008, the
Company owns approximately 39.4% of Citycon’s share capital. Citycon is active in Northern Europe (as of
March 31, 2008, in Finland, Sweden, Estonia and Lithuania) and owns 85 shopping centers and retail
properties, which are leased primarily to supermarkets and other retail chains, with a total G.L.A. of
approximately 0.9 million square meters (approximately 9.7 million square feet). The Company also
operates in the shopping centers sector in Germany, through wholly owned subsidiaries (hereinafter –
“Gazit Europe”), and owns 5 shopping centers with a G.L.A. of approximately 64 thousand square meters
(approximately 689,000 square feet), and 2 shopping centers under development. The Company is also
active in Bulgaria, through wholly owned subsidiaries of Gazit-Globe Israel (Development) Ltd.
(hereinafter – “Gazit Development (Bulgaria)”), where it owns a shopping center with a G.L.A. of
approximately 7 thousand square meters (approximately 75,000 square feet), and 3 plots of land for the
future development of shopping centers and offices, with an area of approximately 388 thousand square
meters (approximately 4.1 million square feet).


                                             2
In Israel, the Company operates through Gazit-Globe Israel (Development) Ltd. (hereinafter – “Gazit
Development”), which is 75% owned by the Company. Gazit Development is an owner, developer and
operator of shopping centers in Israel and Bulgaria. It owns 8 income-producing shopping centers in
Israel, with a G.L.A. of approximately 93.2 thousand square meters (approximately 1 million square feet)
and has 7 shopping centers under development.

In addition, since September 2007, the Company also operates in Israel through Acad Building &
Investments Ltd. (hereinafter – “Acad”), 50% of whose shares had been acquired as of the above date,
and which is proportionally consolidated. Acad’s main activity is the holding, directly and indirectly, of
74% (54% on a fully diluted basis) of the share capital and voting rights of U. Dori Engineering Works
Corp. Ltd. (hereinafter – “U. Dori”), a public company listed on the Tel-Aviv Stock Exchange. U. Dori is
primarily engaged in the development, redevelopment, construction and sale of real estate projects in
Israel and Eastern Europe, the management and performance of contract work in the real estate sector,
and also the ownership (either wholly or jointly) and management of income-producing properties. In
addition, U. Dori also owns 18.75% of the company, Dorad Energy Ltd., which is involved in the
construction of a private power station in the Ashkelon region of Israel. Besides its holdings in U. Dori,
Acad also operates as a contractor in Nigeria and is the part-owner of rights in an income-producing
property in Israel.

In Brazil, the Company operates through Gazit Brazil LTDA. (hereinafter – “Gazit Brazil”), which is wholly
owned by the Company. Gazit Brazil is active in the acquisition, development, and management of
shopping centers in Brazil, and owns an income-producing shopping center with a GLA of approximately
14.3 thousand square meters (approximately 154,000 square feet) in Brazil.

Other publicly accessible data concerning the Group, including up-to-date presentations, supplemental
packages with information regarding assets, liabilities and other information (it is hereby clarified that
such information does not constitute part of this report and is also not included as an invitation), can be
found on the Group’s Internet website - www.gazit-globe.com

And the Internet websites of the Group’s companies:

www.equityone.net
www.firstcapitalrealty.ca
www.citycon.fi




                                             3
          C.     Highlights for the First Quarter of 2008 (hereinafter – “Reporting period”)

                 -    The Group’s investments totaled NIS 0.8 billion, compared to approximately NIS 2 billion in the
                      corresponding quarter last year.

                 -    Income from rental of buildings totaled approximately NIS 922 million, an increase of approximately
                      18% compared to the corresponding quarter last year. The increase was due to the enlargement of
                      the property portfolio as a result of the acquisition of new properties, net of properties sold, the
                      development properties coming on-line and the increase in the average rent per square meter
                      received on the Group’s properties. In addition, as a result of the acquisition of Acad, the Group also
                      had – with effect from the fourth quarter of 2007 – revenues totaling NIS 127 million from the sale of
                      land and buildings and the performance of contract work.

                 -    NOI(1) totaled NIS 617 million, compared to NIS 553 million in the corresponding quarter, an increase
                      of 10%.

                 -    Gross profit totaled NIS 617 million, compared to NIS 549 million in the corresponding quarter, an
                      increase of 12%.

                 -    The average exchange rate of the US Dollar and the Euro against the New Israeli Shekel in the
                      reporting period has decreased by approximately 14% and 2%, respectively, compared to those
                      exchange rates in the corresponding quarter last year. Compared to the corresponding quarter last
                      year, and discounting the average exchange rates of the corresponding quarter, rental revenue, NOI,
                      and gross profit have increase by 17%, 16%, and 18%, respectively (as opposed to 11%, 10%, and
                      12%, respectively according to actual exchange rates.

                 -    Cash inflows from operating activities totaled NIS 92 million, compared to NIS 172 million in the
                      corresponding quarter last year. The decrease is due to timing differences on payments and intakes
                      from third parties (mainly debtors and creditors), and the decrease in exchange rates, as
                      abovementioned. When these timing differences and the effect of the exchange rate are neutralized,
                      the cash inflows from operating activities are similar to the corresponding quarter.

                 -    FFO(2) totaled NIS 126 million, NIS 1.0 per share, compared to NIS 112 million, NIS 0.95 per share,
                      in the corresponding quarter last year, an increase of 12%.

                 -    Net income totaled NIS 371 million, compared to net income of NIS 786 million in the corresponding
                      quarter last year. The decrease is due to a rise in the value of the investment property, and to a one-
                      time profit from the completion of selling the shares of The Mills Corporation (hereinafter – “MLS”),
                      in the corresponding quarter last year.




(1)
      NOI – Income from rental of buildings, net of property operating expenses.
(2)
      See section 2C below.

                                                                   4
               -   Net income attributable to the equity holders of the Company (income net of minority interest)
                   totaled NIS 226 million, NIS 1.80 per share on a fully diluted basis, compared to net income of
                   NIS 415 million, NIS 3.45 per share on a fully diluted basis in the corresponding quarter last year.
                   The decrease in income is due mainly to the rise in the value of investment property in the
                   corresponding quarter last year, as aforementioned. When the rise in the value of the investment
                   property and the one-time profit from the completion of selling the shares of MLS are neutralized,
                   the net income attributable to the equity holders of the Company for the corresponding quarter last
                   year totaled NIS 98 million (NIS 0.81 per share on a fully diluted basis).

               -   The Group raised a net amount of NIS 0.5 billion in net share capital from the public, a similar
                   amount to that in the corresponding quarter last year.

               -   Debt to market capitalization (derived largely from the presentation of investment property at fair
                   value) totaled, as of March 31, 2008, 56.9%,        compared to 54.1% as of March 31, 2007, and
                   compared to 55.8% as of December 31, 2007.

               -   Equity of the Company’s equity holders amounted to NIS 5.2 billion as of March 31, 2008 (NIS 41.7
                   per share), compared to NIS 4.7 billion (NIS 39.9 per share) as of March 31, 2007.

               -   The Company’s net asset value per share (EPRA NAV(1)) totaled NIS 47.3 per share as of March 31,
                   2008, compared to NIS 54.7 per share as of December 31, 2007.                The EPRA NNNAV(3) totaled
                   NIS 48.6 per share as of March 31, 2008, compared to NIS 52.7 per share as of December 31, 2007.

               -   As of March 31, 2008, the Group had 25 properties under development with a gross area of
                   approximately 271 thousand square meters (approximately 2.9 million square feet), 26 properties
                   being redeveloped, and additional land reserves, costing approximately NIS 2.3 billion, which have
                   been earmarked for future development. The additional cost to complete these properties under
                   development and redevelopment totals NIS 3.2 billion.




(1) See section F3 below.
                                                             5
D.   The Company’s Major Holdings are Shown Below (Ownership Percentages are as of March 31, 2008):




                                                      52.9%




                                                      29.2%




                                                      100%
                                        Brazil                         Gazit Brazil




                                                  6
          E.      Breakdown of Net Operating Income (“NOI”)(1), According to the Company’s Operating
                  Regions:


                   Q1 2008                                                                              Q1 2007


                                 Israel
                                                                               Europe          Israel
                                   6%
               Europe                                       USA                 22%            4%
                                                                                                                       USA
                24%                                        30%                                                        31%




                         Canada                                                  Canada
                           40%                                                    43%




          F.      Additional Information Concerning the Company’s Assets and Liabilities
                  1.    The following table presents additional information summarizing the Company’s assets as described
                        above, as of March 31, 2008:

                                                                                                                      Market value
                                                                              Holding           Book value
                       Name of       Type of security/       Holding                                                      as of
                                                                             percentage          (NIS in
                       company           property           (millions)                                              March 31, 2008
                                                                                (%)              millions)
                                                                                                                    (NIS in millions)
                         (2)
                  EQY               Shares (NYSE)              21.4              29.2               1,552                1,824
                  FCR               Shares (TSX)               45.3              52.9               3,519                3,466
                  FCR               Convertible
                                    debentures (TSX)          118.8              51.0                427                  393
                  Citycon           Shares (OMX)               87                39.4               2,115                1,895
                  Citycon           Convertible
                                    debentures (OMX)            37               33.6               214                   228
                  U. Dori(3)        Shares (TASE)              42.5              36.9               193                   129
                  RSC(4)            Income-producing
                                    property                      -                -                420                     -
                  Property in       Income-producing
                  Europe            property                      -                -                1,237                   -
                  ProMed            Income-producing
                                    property                      -                -                929                     -
                  Brazil            Income-producing
                                    property                      -                -                116                     -
                  Property in       Income-producing
                  Israel            property                      -                -               1,738                    -
                  Total                                                                           12,460                    -




(1)
      As to the Company’s share (“by proportionate consolidation”), see section F2 below.
(2)
      Represents only the Company’s direct interest in EQY. (In addition, FCR owns 14 million shares of EQY).
(3)
      Represents linked holding in U. Dori.
(4)
      Presented at the fair value of the properties, in accordance with International Accounting Standard No. 16.
                                                                      7
                Below are the Company’s monetary balances (including balances of subsidiaries that are not public
                companies) as of March 31, 2008 (NIS in millions):




                    Debentures and debts to financial institutions *                                  8,669
                    Monetary liabilities, other than debentures and debts to financial institutions     408
                    Total monetary liabilities                                                        9,077
                    Less – monetary assets                                                            1,839
                    Monetary liabilities, net                                                         7,238


                *     Below are the annual repayments of the debentures and debts to other financial institutions (NIS in
                      millions):
                                          Year                     Total                   %
                                     2008                              271                   3
                                     2009                              217                   3
                                     2010                              577                   7
                                     2011                              627                   7
                                     2012                              557                   6
                                     2013                              682                   8
                                     2014                              833                  10
                                     2015                              758                   9
                                     2016                              865                  10
                                     2017                              700                   8
                                     2018                              709                   8
                                     2019                              555                   6
                                     2020                              556                   6
                                     2021                              656                   8
                                     2022 and after                    106                   1
                                     Total                          8,669                  100


                 2. Additional information is presented below concerning the Company’s share in the income-producing
                    properties owned by the Group as of March 31, 2008, based on capitalized net operating income
                    (“NOI”)(1) methodology. The presentation of this information is intended to provide additional
                    information, based on methodology that is generally accepted in the regions in which the Company
                    operates, which might serve as an additional method in analyzing the value of the Company’s
                    properties on the basis of the Company’s financial results for the reporting period. It is emphasized
                    that this information does not represent the Company’s present or future value of its assets.
                       The sensitivity analyses shown in the table below describes the implied value of the income-
                       producing properties(2) owned by the Group according to the range of different cap rates generally
                       accepted in the regions in which the Group operates, as of the date of publishing the financial
                       statements. It should be noted that this presentation does not take into account additional building
                       rights that exist in respect of the Group’s income-producing properties.
                       In calculating the NOI, assumptions regarding the following were made:
                       a.   The NOI for the period for each of the Group companies.
                       b.   The Company’s proportionate share in the NOI of the Group companies.




(1)
      NOI – Income from rental of buildings, net of property operating expenses.
(2)
      NOI divided by the cap rate.
                                                                   8
                                                            For the 3 months ended                        For the year ended
                                                                      March 31                           December 31, 2007
                                                          2008                         2007                       2007
                                                                       NIS        in    million s
                   Income from rental of
                                                           922                          828                       3,607
                   buildings
                   Property operating
                   expenses, net of
                                                          (312)                        (275)                     (1,181)
                   depreciation
                   NOI for the period                      610                          553                       2,426

                   Less – minority’s share in
                                                          (307)                        (298)                     (1,236)
                   NOI
                   NOI for the period                     303                           255                      1,190
                                                                                               (1)
                   NOI for the year                      1,211(1)                      1,021                     1,190



                   Cap Rate:                                             6.00%          6.25%         6.50%          6.75%
                   Value of proportionately consolidated income-
                       producing property (NIS in millions)(2)           20,180         19,372        18,627        17,937


                  New properties and properties under development, which have not yet come on line and which are
                  presented at their carrying values in the Company’s books (according to the proportionate consolidation
                  method) as of March 31, 2008, amounted to NIS 1,780 million.

                  The Group’s liabilities, net of monetary assets (by the proportionate consolidation method) as of March
                  31, 2008, amounted to NIS 14,387 million.


                 3.   Net Asset Value (EPRA NAV and EPRA NNNAV)

                      As is customary in the European countries in which the Group is active, and in line with the position
                      paper of the European Public Real Estate Association (“EPRA”), the objective of which is to promote
                      greater transparency, uniformity and comparability of the financial information reported by property
                      companies, the Company publishes net asset value data (EPRA NAV), which is an index that reflects
                      the net asset value of the Company, with certain adjustments, e.g., the neutralization of the fair
                      value revaluation adjustments in respect of derivative financial instruments, which are treated as
                      hedging instruments from an economic perspective, but which do not meet the criteria for hedge
                      accounting, and deferred taxes in respect of the revaluation of assets to their fair value; the
                      Company also publishes EPRA NNNAV data, which is another index reflecting net asset value (EPRA
                      NAV), adjusted for the fair value of financial instruments of the kind referred to above and for the
                      fair value of financial liabilities, and also with certain adjustments to the provision for deferred taxes.
                      The Company considers that presentation of EPRA NAV and EPRA NNNAV data enables the
                      Company’s results to be compared with those of other European property companies. At the same
                      time, the data does not constitute a valuation of the Company and does not replace the data




(1)
      NOI for the first quarter multiplied by 4.
(2)
      According to NOI for the first quarter of 2008.


                                                                  9
                      presented in the financial statements; rather, they provide an additional aspect of the Company’s
                      results in accordance with the recommendations of EPRA.
                      Presented below is the calculation of the EPRA NAV and EPRA NNNAV:

                                                                                                  As of                 As of
                                                                                                 March 31          December 31
                                                                                                  2008                  2007
                                                                                                        NIS in millions
                        a. EPRA NAV
                            Equity attributable to the equity holders of the
                               Company, per financial statements                                    5,222                     5,748

                            Adjustments for neutralization of fair value of derivative
                               financial instruments                                                (439)                     (118)

                            Add – Provision for tax on revaluation of investment
                               property to fair value (net of minority’s share)                     1,142                     1,225
                            Net asset value - EPRA NAV
                            Equity attributable to the equity holders of the                        5,925                     6,855
                               Company, per financial statements


                            EPRA NAV per share (NIS)                                                47.3                      54.7


                        b. EPRA NNNAV

                            EPRA NAV                                                                5,925                     6,855

                            Adjustment for addition of fair value of derivative
                               financial instruments                                                 439                       118
                            Adjustments of financial liabilities to fair value                       277                       217
                                                                                    (1)
                            Other adjustments to provision for deferred taxes                       (554)                     (591)
                            “Adjusted” net asset value - EPRA NNNAV                                 6,087                     6,599
                            EPRA NNNAV per share (in NIS)                                           48.6                      52.7


                 4.   As of March 31, 2008, the Company’s issued share capital comprises 125.2 million shares (excluding
                      treasury shares held by the Company).




(1)
      This adjustment does not include a provision for tax in respect of the revaluation of investment property in territories where, upon
      disposing of property, the Company customarily defers the payment of the capital gains tax.
                                                                    10
G.   Restatement of the Balance Sheet as of March 31, 2008 and December 31, 2007 and of the
     Statement of Income for the Periods Ended on those Dates due to the Accounting Treatment
     of Derivatives
     The Company has re-examined the accounting treatment of the linkage-basis swap transactions into
     which it had entered for hedging purposes. Pursuant to the examination carried out, it was found that
     several swap transactions (which were entered into on dates that preceded the date set by the Company
     as the date to commence implementing hedge accounting, viz., July 1, 2007) are not in compliance with
     the conditions stipulated in the international accounting standards in order for them to be treated as
     derivative instruments. The non-compliance relates to a certain defect found in the documentation of the
     hedging relationships and in the method of testing the effectiveness of these transactions. In several
     other swap transactions, where the date on which they were entered into was the same as the date on
     which hedge accounting commenced, a certain defect was found in the documentation relating to the
     manner in which the components of the transaction were split. It should be emphasized that no change
     has occurred in the swap transactions’ fair value, as included in the Company’s financial statements. As a
     result of the aforesaid, the Company concluded that, although the above transactions hedge the
     economic exposure of the Company, they do not meet the criteria specified for them to be classified as
     accounting hedge transactions. Accordingly, with effect from the reporting period, all changes in their
     fair value have to be carried to the statement of income.

     Since the effect of the aforementioned revision is not material with regard to the financial statements for
     2007, the Company has not reissued the financial statements for 2007, and the effect of the revision is
     expressed through the restatement of the figures for 2007 that appear in the financial statements for
     2008 as comparative data. The financial statements to March 31, 2008 and June 30, 2008 have been
     restated and reissued (including the revision of the comparative data to December 31, 2007) in order to
     retroactively reflect the aforementioned effect on the statements of income for the reporting periods
     ended on those dates. As to the effect of the aforementioned revision on the financial statements, refer
     to note 2C of the financial statements. This Board of Directors’ report is being presented anew with
     respect to these revised financial statements.




                                                  11
2.   The Group and its Business Environment – Key Events and Changes During the Reporting Period

     General
     During the reporting period, the Group’s investments in the acquisition and development of new properties and
     in the redevelopment, expansion and construction of various existing properties totaled NIS 0.8 billion. Other
     investments totaled NIS 0.2 billion. The effect of these investments on the operating results will be reflected in
     the remainder of the year.


     A.     Property Activities

            1.        During the reporting period, the Group acquired 3 income-producing properties, with a total
                      G.L.A. of approximately 34 thousand square meters (approximately 366,000 square feet), and 1
                      plot of land for future development, at a total consideration of NIS 0.2 billion. In addition, the
                      Group has developed new properties and redeveloped existing properties at a total consideration
                      of NIS 0.6 billion.


            2.        FCR
                      -   As of March 31, 2008, the average basic monthly rent was 13.14 Canadian Dollars per square
                          meter (as of March 31, 2007, it was 12.61 Canadian Dollars per square meter).
                      -   The net inflow from identical properties has increased by an average of 2.3% compared with
                          the corresponding quarter.
                      -   As of March 31, 2008, the average occupancy rate was 95.5% (95.0% as of March 31, 2007).
                      -   Leases were renewed on an area of 20.9 thousand square meters (approximately 225,000
                          square feet), with an increase in the average basic rent for these leases by 13.8%, to 13.77
                          Canadian Dollars per square meter.

                  -         New leases were signed on an area of 9.2 thousand square meters (approximately 99,000
                            square feet), at an average basic rent of 14.14 Canadian Dollars per square meter.


            3.        EQY
                      -   As of March 31, 2008, the average basic monthly rent was USD 10.5 per square meter (as of
                          March 31, 2007, it was USD 9.99 per square meter).
                      -   The net inflow from identical properties has increased by an average of 1.3% compared with
                          the corresponding quarter.
                      -   As of March 31, 2008, the average occupancy rate was 92.7% (as of March 31, 2007 –
                          94.1%).
                      -   Leases were renewed on an area of 21.2 thousand square meters (approximately 228,000
                          square feet), with an increase in the average basic rent for these leases of 8.1%, to USD
                          14.49 per square meter.
                      -   New leases were signed on an area of 9.3 thousand square meters (approximately 100,000
                          square feet), at an average basic rent of USD 15.03 per square meter.


            4.        Citycon
                      -   The net inflow from identical properties has increased by an average of 3.1% compared with
                          the corresponding quarter.


                                                           12
     -   As of March 31, 2008, the average occupancy rate was 96.0% (as of March 31, 2007 –
         96.7%).


5.   ProMed
     -   As of March 31, 2008, the average basic monthly rent was USD 26.8 per square meter (as of
         March 31, 2007, it was USD 25.74 per square meter).
     -   As of March 31, 2008, the average occupancy rate was 98.1% (as of March 31, 2007 –
         100%).


6.   Gazit Development
     -   As of March 31, 2008, the average basic monthly rent was NIS 78.5 per square meter (as of
         March 31, 2007, it was NIS 69.5 per square meter).
     -   As of March 31, 2008, the average occupancy rate was 88.0% (as of March 31, 2007 –
         93.6%).


7.   Gazit Europe
     -   As of March 31, 2008, the average basic monthly rent was EUR 11.81 per square meter (as of
         March 31, 2007, it was EUR 11.0 per square meter).
     -   As of March 31, 2008, the average occupancy rate was 95.5% (as of March 31, 2007 –
         97.7%).


8.   Data of properties in developmenet, redevelopment, and expansion


                                                 Properties in Development
                                         Total investment as           Cost for              Area
         Company            No. of        of March 31, 2008          completion           (thousand
          name            properties       (NIS in millions)       (NIS in millions)     sq. meters)
     FCR                      8                   249                     194                41.6
     EQY                      3                    96                     112                17.7
     Gazit Europe             2                    91                     358                43.0
     Gazit
     Development                7                 530                     570                103.0
     Gazit
     Development
     (Bulgaria)                 3                 182                     140               (*)
                                                                                              63.0



                       * First stage of a number of stages, which will include 375 thousand sq. meters



                                    Properties in Redevelopment and Expansion
                                          Total investment as          Cost for              Area
         Company             No. of        of March 31, 2008         completion           (thousand
          name             properties       (NIS in millions)      (NIS in millions)     sq. meters)
            FCR                16                  267                    395                79.8
           EQY                  3                  18                      44                10.3
          Citycon               7                  570                   1,404               122.8


                    * First stage out of a number of stages, which will include 375 thousand sq. meters


                                          13
     9.    As of March 31, 2008, the occupancy rate in the properties of RSC was 87% (as of March 31,
            2007, 92.2%). The average rent per unit is approximately USD 2,900, and the NOI rate for the
            report period is approximately 35%.

            RSC owns land reserves of 2 plots for the construction of additional senior housing communities,
            the consideration for which as of March 31, 2008 totaled USD 19 million (approx. NIS 68 million).
            The expected additional cost for completion is approximately USD 60 million (approx. NIS 213
            million), and they are intended to include 471 units.


B.   As to the acquisition of a first shopping center in Sao Paulo, Brazil, please refer to note 3A of the
     financial statements.


C.   As to the issuance of debentures by the Company by way of a shelf prospectus – see notes 3G and 3H of the
     financial statements.

D.   As to Citycon’s entering into an agreement for the placement of a revolving line of credit – refer to note
     3J of the financial statements.


E.   As to the allocation of stock options to officers – refer to note 3I of the financial statements.


F.   As to the approval of the general meeting to change the appointment of Mr. Dori Segal, such that as of
     the date of approval by the general meeting Mr. Segal ceased to serve as the President of the Company,
     and was appointed Executive Vice Chairman of the Company’s Board without change in his terms of
     employment – refer to note 3B of the financial statements.


G.   As to the raising of capital by FCR and the participation of the Company in this capital raising – refer to
     note 3E of the financial statements.


H.   As to the sale of 40% of a shopping center in Helsinki by Citycon, refer to note 3C of the financial
     statements.


I.   As to the establishment of a joint venture by EQY and Global Retail Investor, LLC, for investment in
     shopping centers in the U.S and their management, and the sale of shopping centers by EQY to the joint
     venture – refer to note 3D of the financial statements.


J.   Investment in ATR
     1.     On March 20, 2008, the Company entered into a series of agreements for joint investment
            (hereinafter, collectively, "the investment agreement"), together with the CPI European Fund, a
            part of the Citibank International plc Group, in ATR, at an initial amount of up to EUR 800 million.
            The transaction was closed on August 1, 2008 and on that date the Company implemented the
            first stage of the investment agreement by making an investment of EUR 270 million in the
            convertible debentures of ATR. On the same date, the Company was allotted 16.2 million options
            for shares in ATR at no additional cost.




                                                   14
2.   ATR, which was founded in 1997 and incorporated on the island of Jersey, is an income-
     producing property company, focusing on supermarket-anchored shopping centers, and is listed
     on the Vienna Stock-Exchange (symbol: ATR), having made its IPO in 2002. ATR focuses on the
     leasing, management and development of shopping centers in 11 countries in Central and Eastern
     Europe, primarily in Russia, Poland, the Czech Republic, Turkey and Romania. ATR’s activity is
     both in the acquisition of existing properties and in the development of new properties, with the
     proportion of ATR’s overall activity represented by its development activity constantly growing in
     recent years.
3.   According to the financial statements of ATR as of December 31, 2007, it owns (either wholly or
     partially) 162 properties, as well as land held for future development, which are presented at their
     fair value of EUR 1.9 billion. These properties and land are spread over 904 thousand square
     meters (approximately 9.7 million square feet) in 8 countries (as of said date, there were no
     active income-producing properties in the other 3 countries in which ATR operates). ATR also
     owns 34 properties under development with a total cost (including cost for completion) estimated
     at EUR 3.3 billion (through December 31, 2007, EUR 782 million had been invested in projects
     under development). Also, as of the aforesaid date, ATR owned 11 plots of land for future
     development, with a total area of 1.8 million square meters (approximately 19.4 million square
     feet). ATR’s portfolio of income-producing property consists mainly of regional and neighborhood
     shopping centers, service centers and retail stores. As of December 31, 2007, ATR had cash
     reserves of approximately EUR 1.34 billion, which, as a result of effecting the investment
     agreement, is expected to reach an overall scope of more than EUR 2 billion.
4.   The Company has entered into an agreement with Bank Hapoalim to establish a designated line
     of credit at the bank, which may incorporate in the funding other banks and financial institutions,
     at a sum of EUR 400 million for a period of 3 years, with an option for an extension by another
     year, at the terms that were acceptable in the Israeli banking system at that time.
5.   As of March 31, 2008, the Company holds approximately 5.6 million shares of ATR, at an
     investment of NIS 228 million (EUR 7.21 per share), which are presented under the “Investment
     in available-for-sale securities” at their value according to the ATR share price on the Vienna
     Stock Exchange as of the date of the statement, and in addition, 4.3 million ATR debentures, at
     an investment of NIS 21 million.
6.   For further details, refer to note 3F of the financial statements.




                                            15
K.   Dividend Distribution Policy

     Pursuant to the Company’s dividend policy, the Company announces at the end of each year the
     anticipated dividend for the subsequent year.       The Company has decided that the dividend to be
     declared in 2008 will not be less than NIS 0.30 per share per quarter (NIS 1.20 per share on an
     annualized basis).
     In September 2008, the Company decided to update its dividend policy in such a manner as, with effect
     from the fourth quarter of 2008 and thereafter, the dividend will not be less than NIS 0.34 per share per
     quarter (NIS 1.36 per share on an annualized basis).
     The above is subject to the existence of adequate amounts of 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.


     The Company’s dividend growth in the years 1999-2008 is shown in the graph below:

                 ‫אגורות למניה‬
         Agurot per share                                                                  120
       (100 Agurot = NIS 1) 120
                                 110
                                                                                     108
                                 100
                                                                               100
                                                                          89
                                  90
                                  80
                                                                     76
                                                               71
                                  70                     64
                                  60
                                                    57
                                  50
                                              47
                                        39
                                  40
                                  30
                                  20
                                       1999 2000 2001 2002 2003 2004 2005 2006 20072008*



         *   Projected, assuming the decision of the Board regarding the dividend distribution for 2008 is
             applied as abovementioned.




                                                   16
3.        A.     Results of Operations


                                                                              For the 3 months ended March             For the year
                                                                                           31                             ended
                                                                                                                       December 31
                                                                                  2008                   (1 )              2007
                                                                                                 2007
                                                                                              NIS in millions
                                                                                   (other than earnings per share data)
                  Income from rental of buildings                                        922               828                  3,607

                  Revenues from sale of buildings, land and
                   contractual works performed                                           127                      -               108

                  Total revenues                                                     1,049                 828                  3,715

                  Rental property operating expenses                                     314               279                  1,182

                  Cost of sale of buildings, land and contractual
                   works performed                                                       118                      -                90

                  Total cost of revenues                                                 432               279                  1,272

                  Gross profit                                                           617               549                  2,443

                  Fair value (gain) loss of investment property,
                   net                                                                    (2)              533                  1,862

                  General and administrative expenses                             (*) (135)               (144)                  (553)

                  Other expenses                                                          (4)                   (1)                   -

                  Other income                                                             -                     -                 25

                  Company’s share in earnings of affiliates                          (**) -                      3                   4

                  Operating income                                                       476               938                  3,781

                  Financial expenses                                                  (380)               (286)             (*) (1,459)

                  Financial income                                                 (*) 364                 312                    560

                  Loss from impairment of investments                                    (12)                    -                (30)

                  Income before taxes on income                                          448               966                  2,852

                  Taxes on income                                                   (*) 77                 180                    604

                  Net income                                                             371               786                  2,248

                  Attributable to:
                    Equity holders of the Company                                  (*) 226                 415                (*) 961

                    Minority interests                                                   145               371                  1,287

                                                                                         371               786                  2,248

                  Net earnings per share attributable to ordinary
                  equity holders of the Company (in NIS)
                  Basic net earnings                                             (*) 1.80                3.52                (*) 8.13

                  Diluted net earnings                                           (*) 1.79                3.45                (*) 8.02


      (*)        Restated, refer to note 2B of the financial statements and section 2G above
      (**)       Represents a sum lower than NIS 1 million.


(1)
      The financial statements are presented according to International Financial Reporting Standards (IFRS). Regarding the effect of
      the transition to IFRS standards on the financial statements as of March 31, 2007 and the three months ended on that date, refer
      to note 6 of the financial statements.

                                                                   17
B.   Analysis of Results of Operations for Q1 of 2008 (reporting period)
     Income from rental of buildings

     The 11% increase compared to the corresponding quarter last year is due to the enlargement of the
     property portfolio, as a result of the acquisition of new properties, net of properties sold, development
     properties coming on-line and also an increase in the average rent per square meter received on the
     Group’s properties. This increase was offset by the changes in the average exchange rates of the US
     Dollar and the Euro against the Shekel between the periods.

     Revenues from sale of buildings, land and contractual works performed

     Starting with the last quarter of 2007, the Company consolidates in its reports the activity of Acad, which
     is active in the development, establishment and sale of real-estate projects in Israel and Eastern Europe,
     and the management and performance of contract work in the real estate sector.

     Property operating expenses

     The increase in rental operating expenses, compared to the corresponding quarter, is mainly due to the
     enlargement of the property portfolio. Rental property operating expenses, as a percentage of income
     from rental of buildings, has risen from 3.37% in the corresponding period, to 34.1% in the reporting
     period.

     Gross profit from Property Leasing Operations

     Gross profit from building rental activity totaled NIS 608 million (66% of total income from rental of
     buildings); this compares to NIS 550 million (66.4% of income from rental of buildings) in the
     corresponding period – an increase of 11%.

     Fair value (gain) loss of investment property, net
     The Company implements the fair value model, as prescribed in International Accounting Standard
     No. 40 – “Investment Property”.      As a result of implementing this standard, the Company made an
     adjustment, in the reporting period, to the fair value of its properties in the gross amount of NIS 200
     million (the Company’s share therein being NIS 20 million).        This compares to an adjustment in the
     corresponding period last year of NIS 533 million (the Company’s share, gross, therein being NIS 261
     million).
     General and administrative expenses
     The decrease in general and administrative expenses is mainly due to the decrease in wages expenses
     related to the net profit of the Company in the corresponding period last year.

     Financial expenses

     The change in financial expenses results from an increase in the Group’s loans from an average balance
     of NIS 20.8 billion in the first quarter of 2007 to an average balance of NIS 26.6 billion in the first quarter
     of 2008, due to the Group’s investments in the acquisition, development and redevelopment of
     properties. The financial expenses reflect an average nominal annual interest of 5.8% for the Group’s
     loans, similar to the corresponding period last year.




                                                   18
Financial income
Financial income includes an amount of NIS 27.6 million from investments in listed securities (including
NIS 25.5 million from dividends), compared to income of NIS 243.5 million received in the corresponding
period last year, which included income of NIS 190 million from the selling of MLS shares (which included
NIS 26.9 million from dividends). Also, the financial income includes NIS 317 million in respect of the
revaluation of derivative financial instruments, compared to an amount of NIS 58 million in the
corresponding period

Other income (expenses)

This item consists mainly of gains and losses in respect of capital transactions, such as the dilution of
holdings in investee companies, and real estate sales.

As a result of the dilution of holdings in investee companies (primarily in respect of the issuance of
shares and stock options), the Company recorded a loss of NIS 9.3 million, compared to NIS 4.4 million
in the corresponding period.

Company’s share in earnings of affiliates, net

The decrease in this item is due to the consolidation of a consolidated subsidiary, which was formerly an
affiliate.




                                            19
         C.      FFO and FFO per share:
                 The Company’s practice is to publish its FFO results, which is the net reported income, after neutralizing
                 income and expenditure of a non-recurring nature (including gains and losses resulting from the sale of
                                                                                             (1)
                 properties, the adjustment of the fair value of investment property               and the changes in the percentage
                 stake held in investee companies) and with the addition of the Company’s share of depreciation of rental
                              (2)
                 properties         and other writedowns. It also publishes FFO per share results, as is already the accepted
                 practice in those countries in which the Company operates and in accordance with the position paper
                 issued by the NAREIT – the U.S.-based National Association of Real Estate Investment Trusts.

                 In addition, as of the beginning of 2006, Israel has adopted a REIT tax regime for companies that are
                 real estate investment trusts, similar to that in effect in various other countries throughout the world.
                 Such companies, under certain conditions, do not pay corporate tax. The Company therefore considers
                 that the presentation of FFO and FFO per share data, after neutralizing expenses and income in respect
                 of deferred taxes (i.e., tax income and expenses that are not on a cash flow basis) provides a better
                 comparison of the Company’s operating results with those of other REIT companies in Israel and
                 overseas.

                 In its FFO results, the Company includes the operations relating to its income-producing properties and
                 excludes its other operations relating to the initiation, development and execution of residential housing
                 projects in the real estate sector, as well as contract work for third parties.

                 As is also clarified in the NAREIT position paper, the FFO (Funds From Operations) index does not
                 represent cash flow from current operations according to accepted accounting principles, nor does it
                 reflect the cash held by a company or its ability to distribute that cash, and it is not a substitute for the
                 reported net income. Furthermore, it is also clarified that the FFO is not part of the data audited by the
                 Company’s independent auditors.

                 The Company is of the opinion that FFO and FFO per share accurately reflect an additional aspect of the
                 Company’s operating results, providing a more appropriate basis for comparing the Company’s operating
                 results for a given period to those for previous periods and for comparing the Company’s operating
                 results to those of other property companies.




(1)
      As defined in International Accounting Standard No. 40.
(2)
      With regard to those assets that are subject to International Accounting Standard No. 16.
                                                                   20
                   The table below presents the breakdown of the Company’s FFO and FFO per share for the stated
                   periods:
                                                                                                                        For the year
                                                                                For the 3 months ended                     ended
                                                                                       March 31                         December 31
                                                                                  2008             2007             2007
                                                                                                NIS in millions
                                                                                       (other than FFO per share data)
                    Net income attributable to equity holders of the
                     Company                                                          139                   415                    961
                    Adjustments to net income:
                    Fair value gain (loss) of investment property, net                    2                (261)                  (894)
                    Depreciation and amortization1)                                    (36)                (182)                    (87)
                    Losses (gains) from dilution in holdings of
                    consolidated subsidiaries                                             9                    3                      7
                    Losses (gains) from the sale of properties                            -                   (1)                     1
                    Deferred tax expenses                                                14                 108                     310
                                         (2)
                    Other adjustments                                                    (2)                  30                     71
                    Total adjustments to net income                                   (13)                (303)                  (592)


                    FFO                                                               126                   112                    369

                    Basic FFO per share (in NIS)                                     1.01                  0.95                   3.12

                    Diluted FFO per share (in NIS)                                   1.00                  0.95                   3.11

                    Number of shares used to calculate diluted
                    income per share (in thousands of shares)                    125,360              118,340                118,870




(1)
      Includes the adjustment to the value of available-for-sale securities.
        Expenses that are directly related to the income and expense items adjusted against the net income for the purpose of calculating
(2)


        FFO.

                                                                     21
4.   Financial Status

     Liquidity

     The Group has a policy of maintaining a high level of liquidity that enables the pursuit of business opportunities
     in its areas of operations.

     The sources of the Group’s liquid assets are its cash reserves (derived from its income-producing properties),
     credit facilities, mortgages and long-term loans and raisings of debentures, convertible debentures and equity.
     As stated, these liquid assets are applied in the acquisition, development and redevelopment of income-
     producing properties, the settlement of liabilities, investments in affiliates, other investments and the payment
     of dividends.

     As of March 31, 2008, the liquid assets available to the Group, including short-term investments, totaled
     NIS 1,079 million, compared to NIS 639 million as of December 31, 2007. In addition, as of March 31, 2008,
     the Group had unutilized credit facilities available for immediate drawdown of NIS 5.3 billion, compared to
     NIS 4.5 billion as of December 31, 2007.

     As of March 31, 2008, the Group had unpledged investment property, which is carried in the books at a cost of
     NIS 27.7 billion.

     In aggregate, the Group has cash reserves and unutilized credit facilities available for immediate
     drawdown as of balance-sheet date totaling NIS 6.4 billion.

     Current Assets

     Current assets, as of March 31, 2008, total NIS 2.2 billion, compared to NIS 1.8 billion as of December 31,
     2007. The increase relates mainly to the item “cash and cash equivalents”, as a result of debt raisings that had
     yet to be utilized at the end of the quarter.

     Long-Term Investments and Loans

     Long-term investments and loans, as of March 31, 2008, total NIS 118 million, compared to NIS 311 million as
     of December 31, 2007. The long-term investments mainly consist of a long-term deposit that is earmarked for
     investment in investment property and investment property under development.

     Investments in Available-for-Sale Securities

     As of December 31, 2007, investments in available-for-sale securities, which are presented at their fair value,
     totaled NIS 892 million, compared to NIS 1,023 million as of December 31, 2007. The investments in available-
     for-sale securities include marketable securities of companies that operate in the same business sector as the
     Company (including shares and debentures of MEL), or in sectors that are complementary to the Company’s
     business sector, as well as securities of North American public funds that are engaged in the renewable energy
     sector and that distribute current dividends on a regular basis. The change in the balance of investments in
     available-for-sale securities is due, on the one hand, to additional investments during the reporting period in
     securities and on the other hand, from the sale of securities and also from the change in the fair value of the
     aforementioned securities.




                                                         22
Derivative Financial Instruments

As of March 31, 2008, derivative financial instruments, which are presented at their fair value, totaled NIS 475
million, compared to NIS 245 million as of December 31, 2007. The increase is due mainly to changes in the
fair value.

Investment Property, Investment Property under Development and Fixed Assets, Net

Investment property, investment property under development and fixed assets, net, as of March 31, 2008,
totaled NIS 42.2 billion, compared to NIS 44.3 billion as of December 31, 2008.

During the reporting period, the Group acquired income-producing properties and fixed assets, developed new
properties and redeveloped existing properties at a total cost of NIS 0.8 billion.        On the other hand, the
depreciation of the US Dollar, the Canadian Dollar and the Euro against the Shekel, has caused a decrease of
approximately NIS 2.8 billion in these items.

Current Liabilities

Current liabilities, as of March 31, 2008, totaled NIS 3.3 billion, compared to NIS 2.9 billion at the end of 2007.
The balance primarily consists of the line item “credit from banks and others”, which mainly comprises the
current maturities of long-term liabilities in the amount of NIS 2 billion, compared to NIS 1.6 billion at the end of
2007. The aforesaid increase arises from short-term credit that was repaid after the balance-sheet date.
The balance of current maturities includes the final settlement of loans, in the amount of NIS 0.3 billion (at the
end of 2007 –- NIS 0.4 billion), which are secured by a charge on the properties. Based on past experience,
the Group usually renews most of these loans by taking new, long-term secured and unsecured loans.

Long-Term Liabilities

Long-term liabilities, as of March 31, 2008 total NIS 27.2 billion, compared to NIS 28.5 billion at the end of
2007.
The decrease in this item is due mainly to the depreciation of the US Dollar, the Canadian Dollar and the Euro
against the Shekel.

Minority Interests

Minority interests, as of March 31, 2008, mainly consist of the interests of EQY’s other equity holders, who, as of
the above date, accounted for 52% of EQY’s equity, the interests of FCR’s other equity holders, who, as of the
above date, accounted for 47% of FCR’s equity, and also the interests of Citycon’s other equity holders, who, as
of the above date, accounted for 61% of Citycon’s equity.

The change in this item is mainly due to the effect of FCR’s issuance of shares during the reporting period to its
equity holders, net of the minority share acquisitions in EQY and FCR made by Group companies, the minority
interest in the Groups’ earnings and, additionally, the depreciation of the US Dollar, the Canadian dollar and the
Euro against the shekel in the reporting period, which reduced the shekel amount of Citycon’s, EQY’s, and FCR’s
equity.




                                                     23
         Equity Attributable to the equity holders of the Company

         The change in equity attributable to the equity holders of the Company from NIS 5,748 million as of
         December 31, 2007 to NIS 5,222 million as of March 31, 2008 results mainly from the net income for the
         reporting period in the amount of NIS 226 million, from the decrease in the item “other capital reserves” in the
         amount of NIS 714 million (mostly due to foreign currency translation adjustments of foreign operations as a
         result of the depreciation of the US Dollar, the Canadian Dollar and the Euro against the Shekel), and net the
         dividends of NIS 38 million paid and declared by the Company.
          Equity per share as of March 31, 2008 totaled NIS 41.7 per share, compared to NIS 45.9 per share as of
          December 31, 2007. This is after a dividend distribution of NIS 0.30 per share during the reporting period.

         Ratio of Debt to Total Assets

         The ratio of the Group’s interest-bearing debt to its total assets (derived mainly from the presentation of
         investment property on the basis of its fair value) stood at 56.9% as of March 31, 2008, compared to 55.8% as
         of December 31, 2007.
          The ratio of the Group’s interest-bearing debt to total market capitalization stood at 58.9% as of March 31,
          2008, compared to 57.4% as of December 31, 2007.

         Cash Flows

         Cash inflows from operating activities in the reporting period totaled NIS 92 million, compared to NIS 172
         million in the corresponding period last year. The decrease, as mentioned, is due to timing differences on
         payments and intakes from third parties (mainly debtors and creditors), and the depreciation of the US Dollar,
         and the Euro against the Shekel.


                                                                                         For the 3 months ended March 31
                                                                                             2008                         2007
                                                                                                     NIS in millions


                              Net cash from operating activities                               92                          172
                              Changes in asset and liability items
                              neutralized, net(1)                                              66                           9
                              Effect of the depreciation of the US Dollar, and
                              the Euro against the Shekel                                      18                           -


                                                                                               176                         181

          In the reporting period, the Group’s activities were funded by means of capital raised by its consolidated
          subsidiaries in an amount of NIS 491 million, and loans received and credit facilities drawn on in a net amount
          of NIS 21 million. These cash flows were used mainly for investment in long-lived assets in a net sum of NIS
          797 million, the continued acquisition of minority shares in consolidated subsidiaries in a total sum of NIS 142
          million, and further long-term investments in a net sum of NIS 48 million.




(1)
      See Appendix A (“Adaptations Required for Presenting Cash Inflows from Operating Activities”), for consolidated reports of cash
      flows.

                                                                   24
5.   Additional Information and Subsequent Events
     A.   As to the acquisition of a shopping center in Caxias do Sul, Brazil, refer to note 3A(2) of the financial
          statements.
     B.   As to the issuance of NIS 125 million in debentures (series D) by U. Dori, refer to note 4A of the financial
          statements.
     C.   As to EQY’s entering into an agreement for a joint project of real-estate investments, refer to note 4B of
          the financial statements.
     D.   On May 19, 2008, the board of directors approved the publication of a shelf forecast for the issuance of
          Company shares, which was published to the public on May 21, 2008. On October 29, 2008, the Board
          of Directors of the Company approved an amendment to the prospectus, making it possible for shares
          and securities convertible into shares to be offered.
     E.   As to changes in exchange-rates from April 1, 2008, to the date of publication of this report, and their
          influence on the Company, refer to section 8 below.
     F.   As to the share offerings made by FCR and EQY, refer to notes 4D and 4E of the financial statements.
     G.   As to the announcement by S&P Maalot and Midrug of the downgrading of the rating on the Company’s
          debentures, refer to nor 4F of the financial statements.
     H.   As to the acquisition of a further 10% from the property company of RSC, refer to note 4G of the
          financial statements.
     I.   As to Citycon’s buy-back of convertible debentures issued by it, refer to note 4H of the financial
          statements.

     J.   As to the renewal of a credit facility by EQY, refer to note 4H of the financial statements.
     K.   As to the closing of the investment in ATR and the agreement entered into by the Company with Israeli
          banks for the provision of a designated credit facility to finance the aforesaid investment, refer to section
          2J above.




                                                        25
6.   Donations

     The Company customarily makes donations to charities and to projects for community welfare and education in
     the various countries in which it operates. In the framework of this activity the Company has pledged to support
     a number of agencies through a perennial donation framework, as follows: :

     A.     The Company makes donations to Tel-Aviv University, which operates an institute focusing on research
            and studies of all manner of real estate-related topics (The Chaim Katzman – Gazit-Globe Real Estate
            Institute). In this connection, the Company has pledged to make an annual donation of US$ 150,000 for
            a period of 7 years (commenced in 2005).

     B. The Company donates to the “College for All” charity – a not-for-profit organization working to close the
          gaps in education by means of creating equal opportunities. The organization strives to realize its vision of
          excellence through the provision of learning and other tools to students with ability and motivation, who
          come from underprivileged neighborhoods. The goal is to encourage such students into academic studies.
          Within the framework of this organization, the Company has pledged to provide assistance to a group of
          students for a period of 5 years (commenced in 2005).

     C.   The Company has adopted a battalion of front-line conscripts within the framework of the “Adopt a Front-
          Line Soldier” Project. Within the framework of this project, the Company has pledged to make an annual
          donation of NIS 100,000 for 3 years (commenced in 2007).

     In addition, the Group makes donations to numerous other bodies.

     During the reporting period, the Group’s donations amounted to NIS 707 thousand.


7.   Critical Accounting Estimates

     While preparing the financial statements, the Company’s management is required to make estimates and
     assessments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of
     contingent assets and liabilities.

     Management bases its estimates and assessments on past experience and other factors that, in its opinion, are
     relevant taking the particular circumstances into account. Actual results could differ from these assessments
     under different assumptions or conditions. The Company has identified the estimates and assessments detailed
     below as being critical estimates, since any change in such estimates and assumptions has the potential of
     having a material effect on the financial statements.

8.   Reporting of Exposures to Market Risks and their Management

     Since the annual report of the Company for 2007, which was submitted on March 30, 2008, there have not been
     any significant changes in the types of market risks and their management. From January 1, 2008 to March, 31,
     2008, the US Dollar, the Canadian Dollar and the Euro have depreciated against the Shekel by 7.6%, 11.25%,
     and 0.7%, respectively. As to the effect of exchange rates on the Company’s equity, see the Linkage Bases
     Report for March 31, 2008, attached as Appendix A to the Board’s report.

     From April 1, 2008 until the date that the financial statements were approved, the Canadian Dollar and the Euro
     have weakened against the Shekel by 11.7%, and 10.2%, respectively, while the US Dollar has strengthened
     against the Shekel by 10.3%.


                                                         26
As is the case during the rest of the year, in the period from January 1, 2008 to the date that the financial
statements were signed, the individuals responsible for managing and reporting the Company’s market risks
(Mr. Michael Bar Haim, the Company’s President, and Mr. Gil Kotler, the Company’s Chief Financial Officer),
have held and continue to hold frequent discussions on the exposure to market risks, including changes in
exchange rates, and the Company’s management discusses the issue on a weekly basis. During the said period
the Company’s board discussed the said risks and the Company’s policy regarding them in meetings, in which
the financial statements for December 31, 2007 and for March 31, 2008, were approved. As in the past, it is the
Company's policy to maintain as close a correlation as possible between the currency in which properties are
acquired and the currency in which the liabilities to finance the acquisition of those properties are taken out,
with an intent to hold its equity in the currencies of the various markets in which it is active, and in the same
proportions as the assets in each such currency bear to the total assets, while making occasional transactions to
minimize the said exposure to changes in exchange rates.




 As of March 31, 2008, the economic exposure of the Company’s equity (NIS 5.2 billion) to the various
 currencies, is distributed as follows:



                                                       NIS
                        EURO                          8.40%
                        31.60%

                                                               US Dollar
                                                                25.80%




                                    Canadian Dollar
                                       34.20%




                                                      27
9.    Disclosure Regarding Financial Statements Approval Process

      The Board of Directors is the organ responsible for the overall control over the Company.

      Within the framework of the process of the Company’s financial statements being approved by the Board of
      Directors, a draft of the financial statements, and a draft of the other parts of the periodic report too, as well as
      a draft of the presentation reviewing the periods’ operations are sent for the perusal of the members of the
      Board several days before the date of the Board meeting at which the financial statements are to be approved.

      During the Board meeting, the CFO, Mr. Gil Kotler, provides a review of the Company’s financial position, its
      operating results and its cash flows, and presents data concerning the Company’s activities and their
      comparison with prior periods. A discussion takes place during which the Company’s management (including
      the Chairman of the Board of Directors, the Executive Vice Chairman of the Board of Directors, the President of
      the Company and the CFO of the Company) reviews the major financial reporting issues that have arisen in the
      course of preparing the financial statements (including a review of transactions, if any, not within the normal
      course of business, the significant assessments and critical estimates used in the financial statements and the
      accounting policies applied and the changes thereto, if any); management also responds to questions from the
      directors.   The Company’s independent auditors are present at Board meetings at which the financial
      statements are discussed and approved in order to both respond to questions, if any, raised in connection with
      the financial statements, and also to bring up other matters that they wish to place before the Board of
      Directors.

      At the meeting of the Board of Directors held on November 27, 2008, at which the financial statements were
      approved, all members of the Board of Directors serving at that time were present (for their names and other
      particulars, see the immediate report from August 12, 2008, reference number 2008-01-233157, containing
      details of the senior officers; the information contained therein is hereby presented by means of this reference).
      Among others, the Company’s President, its CFO and representatives of the independent auditors, as referred to
      above, were also present.

      Following the aforementioned discussion, a vote is taken to approve the financial statements.



     November 27, 2008                   _____________________                       _____________________
      Date of Approval                        Chaim Katzman                              Michael Bar Haim
     of Directors’ Report            Chairman of the Board of Directors                     President




                                                           28
                                                        Appendix A to the Directors’ Report
                                                              Linkage Bases Report


                                                                                 As of March 31, 2008
                               Linked to    In US$ or     In C$ or linked        In Unlinked     In Euros       Other      Unlinked   Total
                                  the         linked          thereto                NIS                      currencies
                               consumer      thereto
                                 price
                                 index
                                                                                    NIS in millions
Monetary assets
Cash and cash                      1           133             159                   283              421        35           -       1,032
equivalents
Short-term investments             -           29               16                    -                 -         -           2         47
Trade receivables,
accrued income and
other accounts
receivable                        21           87              153                   161               53        55          117       647
Long-term investments,
loans and receivables             10           89               15                    -                 -                     4        118
Investments in available-
for-sale securities                -            -                -                    -                 -         -          892       892
Derivatives                        -           -                -                     -                -          -          475       475
Deferred taxes                     -           -                -                     -                -          -           95        95
                                  32          338              343                   444              474        90         1,585     3,306
Non-monetary
assets (1)1                        -         12,015           14,214                2,343         13,739         437         259      43,007

                                  32         12,353           14,557                2,787        14,213          527        1,844     46,313

Monetary liabilities
Short-term credit from
banks and others                   -           107              85                   232              335        90           -        849
Trade and other
payables and other credit
balances                          85           396             309                   207               49        287          24      1,357
Advances from
customers and buyers of
apartment                          -            -                -                    -                 -         -          58         58
Debentures                       2,522        3,934            3,413                 254              1,416       -           -       11,539
Debentures convertible
into shares of investees          34            -              364                    -               352         -           -        750
Interest-bearing liabilities
to financial institutions
and others                        76          2,232            5,011                 90               4,397     1,871         -       13,677
Long-term derivatives              -            -                -                    -                 -         -          46         46

Other financial liabilities       17           41               49                    -                4          -           -        111
Employee benefits
liabilities                        -            2                -                    1                 -         -           -         3
Deferred taxes                     -            -                -                    -                 -         -         2,200     2,200

                                2,734         6,712           9,231                  784          6,553         2,248       2,328     30,590
Equity attributable to
equity holders of the
Company                            -            -                -                    -                 -         -          5,222     5,222
Minority interests                 -            -                -                    -                 -         -         10,501    10,501

                                2,734         6,712           9,231                  784          6,553         2,248      18,051     46,313




               (1)
                     Mostly investment property, development investment property under development, and long-lived assets
                                                                            29
                                         GAZIT-GLOBE LTD.


                      INTERIM CONSOLIDATED FINANCIAL STATEMENTS


                                        AS OF MARCH 31, 2008


                                            UNAUDITED




                                                INDEX


                                                                  Page

Review of Interim Consolidated Financial Statements                 2

Consolidated Balance Sheets                                        3-4

Consolidated Statements of Income                                   5

Consolidated Statements of Changes in Equity                       6-8

Consolidated Statements of Cash Flows                             9 - 13

Notes to Interim Consolidated Financial Statements                14 - 30




                                               --------
                                                                                    Kost Forer Gabbay & Kasierer
                                                                                    3 Aminadav St.
                                                                                    Tel-Aviv 67067, Israel
                                                                                    Tel: 972 (3)6232525
                                                                                    Fax: 972 (3)5622555
                                                                                    www.ey.com/il




The Board of Directors
Gazit-Globe Ltd.


                         Re:   Review of unaudited interim consolidated financial statements
                               for the three months ended March 31, 2008


       At your request, we have reviewed the interim consolidated balance sheet of Gazit-Globe Ltd. as of
March 31, 2008 and the related interim consolidated statements of income, changes in equity and cash flows for
the three months then ended. Our review was made in accordance with procedures established by the Institute of
Certified Public Accountants in Israel. These procedures included reading the above mentioned interim
consolidated financial statements, reading minutes of meetings of the shareholders and of the board of directors
and its committees, and making inquiries of persons responsible for financial and accounting matters.


      We have been furnished with reports of other accountants in respect of the review of the interim financial
statements of certain subsidiaries, whose assets constitute approximately 31% of total consolidated assets as of
March 31, 2008 and whose revenues constitute approximately 38% of total consolidated revenues for the three
months then ended.


      A review is substantially less in scope than an audit in accordance with generally accepted auditing
standards and, accordingly, we do not express an opinion on the interim consolidated financial statements.


       Based on our review and the reports of other accountants referred to above, we are not aware of any
material modifications that should be made to the interim consolidated financial statements in order for them to
be in conformity with International Financial Reporting Standard IAS 34, "Interim Financial Reporting", and
with the disclosure requirements of the Israeli Securities Regulations (Periodic and Immediate Reports), 1970.




Tel-Aviv, Israel                                                     KOST FORER GABBAY & KASIERER
May 25, 2008                                                          A Member of Ernst & Young Global




                                                     -2-
                                                                                            GAZIT-GLOBE LTD.
CONSOLIDATED BALANCE SHEETS

                                                                         March 31,               December 31,
                                                                  2008               2007            2007
                                                                         Unaudited                 Audited
                                                                               NIS in millions
    ASSETS

CURRENT ASSETS:
 Cash and cash equivalents                                           1,032              814            600
 Short-term investments                                                 47               93             39
 Trade receivables and accrued income                                  296              156            255
 Other accounts receivable                                             352              306            316
 Inventories of buildings for sale                                     518                -            546
 Current income tax assets                                              13               20             32

                                                                     2,258             1,389         1,788

ASSETS HELD FOR SALE                                                  734               131              2

NON-CURRENT ASSETS:
 Investments in affiliates                                              9                  3             7
 Long-term investments, loans and receivables                         118                 92           311
 Investments in available-for-sale securities                         892                666         1,023
 Derivatives                                                          475                 99           245
 Investment property                                               38,586             35,187        41,715
 Investment property under development                              2,322              1,464         2,071
 Non-current inventories of land                                       21                  -            21
 Fixed assets, net                                                    558                328           546
 Goodwill                                                             240                154           236
 Intangible assets, net                                                18                  1            19
 Deferred taxes                                                        82                 14            83

                                                                   43,321             38,008        46,277

                                                                   46,313             39,528        48,067




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




                                                      -3-
                                                                                               GAZIT-GLOBE LTD.
CONSOLIDATED BALANCE SHEETS

                                                                            March 31,                December 31,
                                                                     2008               2007             2007
                                                                            Unaudited                  Audited
                                                                                  NIS in millions
       LIABILITIES AND EQUITY

CURRENT LIABILITIES:
 Credit from banks and others                                          1,990              1,378           1,602
 Trade payables                                                          343                211             417
 Advances from customers and buyers of apartments                         58                  -              48
 Current income tax liabilities                                           17                 43               3
 Other accounts payable                                                  797                604             830
 Dividend declared                                                        38                 32              34

                                                                       3,243              2,268           2,934
     Liabilities attributable to assets held for sale                    165                 33               -

                                                                       3,408              2,301           2,934
LONG-TERM LIABILITIES:
 Debentures                                                           11,487              8,643          11,032
 Debentures convertible into shares of investees                         742                775             807
 Interest-bearing liabilities to financial institutions and
   others                                                             12,678             11,290          14,154
 Derivatives                                                              46                 34              83
 Other financial liabilities                                             111                108             139
 Employee benefits liabilities                                             3               *) -               7
 Deferred taxes                                                        2,139              1,669           2,246

                                                                      27,206             22,519          28,468
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF
 THE COMPANY:
 Share capital                                                           179                171             179
 Share premium                                                         2,465              2,124           2,465
 Foreign currency translation adjustments of foreign
  operations                                                            (595)              (214)           (116)
 Other capital reserves                                                   46                 49             139
 Retained earnings                                                     3,128              2,609           3,079
 Loans for purchase of shares                                             (4)                (9)             (4)
 Treasury shares                                                         (21)               (25)            (21)

                                                                       5,198              4,705           5,721
     MINORITY INTERESTS                                               10,501             10,003          10,944

Total equity                                                          15,699             14,708          16,665

                                                                      46,313             39,528          48,067
*)       Represents an amount lower than NIS 1 million.

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

    May 25, 2008
Date of approval of the               Chaim Katzmann              Michael Bar Haim                  Gil Kotler
 financial statements               Chairman of the Board            President                        CFO



                                                            -4-
                                                                                         GAZIT-GLOBE LTD.
CONSOLIDATED STATEMENTS OF INCOME

                                                                  Three months ended          Year ended
                                                                       March 31,             December 31,
                                                                  2008           2007            2007
                                                                       Unaudited               Audited
                                                                             NIS in millions

Property rental revenues                                              922              828       3,607
Revenues from sale of buildings, land and contractual
  works performed                                                     127                 -        108

Total revenues                                                       1,049             828       3,715

Rental property operating expenses                                    314              279       1,182
Cost of sale of buildings, land and contractual works
 performed                                                            118                 -         90

Total cost of revenues                                                432              279       1,272

Gross profit                                                          617              549       2,443

Fair value gain (loss) of investment property, net                     (2)             533       1,862
General and administrative expenses                                   121              144         553

Operating income                                                      494              938       3,752

Financial expenses                                                    (392)           (286)      (1,467)
Financial income                                                       167             312          560

                                                                      269              964       2,845
Other income (expenses), net                                           (4)              (1)         25
Company's share in earnings of affiliates, net                       *) -                3           4

Income before taxes on income                                         265              966       2,874
Taxes on income                                                        33              180         604

Net income                                                            232              786       2,270

Attributable to:
 Equity holders of the Company                                         87              415         983
 Minority interests                                                   145              371       1,287

                                                                      232              786       2,270

Net earnings per share attributable to Ordinary equity
 holders of the Company (in NIS):

Basic net earnings                                                    0.69             3.52        8.32

Diluted net earnings                                                  0.68             3.45        8.21

*)    Represents an amount lower than NIS 1 million.

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



                                                         -5-
                                                                                                                                                               GAZIT-GLOBE LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

                                                                                       Attributable to equity holders of the Company
                                                                                      Foreign
                                                                                     currency
                                                                                    translation                                  Less -
                                                                                   adjustments       Other                     loans for
                                                               Share      Share      of foreign      capital     Retained      purchase    Treasury              Minority    Total
                                                               capital   premium    operations      reserves      earnings     of shares    shares    Total      interests   equity
                                                                                                                     NIS in millions

For the three months period ended March 31, 2008:

Balance as of January 1, 2008 (audited)                           179      2,465       (116)           139         3,079            (4)        (21)   5,721       10,944     16,665

Loss from revaluation of derivatives, net                            -         -           -            (18)            -            -           -      (18)         (16)       (34)
Loss from available-for-sale financial assets, net                   -         -           -            (70)            -            -           -      (70)         (26)       (96)
Foreign currency translation adjustments of foreign
  operations                                                         -         -       (479)             (7)            -            -           -     (486)        (675)    (1,161)

Total expenses recognized directly in equity                         -         -       (479)            (95)            -            -           -     (574)        (717)    (1,291)

Net income                                                           -         -           -              -           87             -           -       87          145       232

Total comprehensive net income (loss)                                -         -       (479)            (95)          87             -           -     (487)        (572)    (1,059)

Issue of shares less issuance expenses                           *) -      *) -            -              -            -             -           -        -            -          -
Revaluation of loans for purchase of shares                         -         -            -              -         *) -          *) -           -        -            -          -
Cost of share-based payment                                         -         -            -              2            -             -           -        2            4          6
Dividend declared                                                   -         -            -              -          (38)            -           -      (38)        (125)      (163)
Issue to minority and acquisition of minority interests, net        -         -            -              -            -             -           -        -          336        336
Dividend paid to minority                                           -         -            -              -            -             -           -        -          (86)       (86)

Balance as of March 31, 2008 (unaudited)                          179      2,465       (595)            46         3,128            (4)        (21)   5,198       10,501     15,699




*)     Represents an amount lower than NIS 1 million.

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




                                                                                          -6-
                                                                                                                                                               GAZIT-GLOBE LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

                                                                                       Attributable to equity holders of the Company
                                                                                      Foreign
                                                                                     currency
                                                                                    translation                                  Less -
                                                                                   adjustments       Other                     loans for
                                                               Share      Share      of foreign      capital     Retained      purchase    Treasury              Minority    Total
                                                               capital   premium    operations      reserves      earnings     of shares    shares    Total      interests   equity
                                                                                                                     NIS in millions

For the three months period ended March 31, 2007:

Balance as of January 1, 2007 (audited)                           171      2,124       (139)            90         2,226           (10)        (25)   4,437        9,439     13,876

Gain from revaluation of derivatives, net                            -         -           -              4             -            -           -        4            5          9
Loss from available-for-sale financial assets, net                   -         -           -            (46)            -            -           -      (46)           1        (45)
Foreign currency translation adjustments of foreign
  operations                                                         -         -        (75)              -             -            -           -      (75)        (146)      (221)

Total expenses recognized directly in equity                         -         -        (75)            (42)           -             -           -     (117)        (140)      (257)
Net income                                                           -         -          -               -          415             -           -      415          371        786

Total comprehensive net income (loss)                                -         -        (75)            (42)         415             -           -      298          231       529

Exercise of stock options into shares                            *) -      *) -            -          *) -             -             -           -     *) -            -      *) -
Repayment of loans for purchase of shares                           -         -            -             -             -             1           -        1            -         1
Cost of share-based payment                                         -         -            -             1             -             -           -        1            9        10
Dividend declared                                                   -         -            -             -           (32)            -           -      (32)         (60)      (92)
Issue to minority and acquisition of minority interests, net        -         -            -             -             -             -           -        -          533       533
Dividend paid to minority                                           -         -            -             -             -             -           -        -         (149)     (149)

Balance as of March 31, 2007 (unaudited)                          171      2,124       (214)            49         2,609            (9)        (25)   4,705       10,003     14,708




*)     Represents an amount lower than NIS 1 million.

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




                                                                                          -7-
                                                                                                                                                               GAZIT-GLOBE LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

                                                                                       Attributable to equity holders of the Company
                                                                                      Foreign
                                                                                     currency
                                                                                    translation                                  Less -
                                                                                   adjustments       Other                     loans for
                                                               Share      Share      of foreign      capital     Retained      purchase    Treasury              Minority    Total
                                                               capital   premium    operations      reserves      earnings     of shares    shares    Total      interests   equity
                                                                                                                     NIS in millions

For the year ended December 31, 2007:

Balance as of January 1, 2007 (audited)                           171      2,124       (139)            90         2,226           (10)        (25)   4,437        9,439     13,876

Gain from revaluation of derivatives, net                            -         -           -             18             -            -           -       18           21         39
Revaluation adjustment of fixed assets, net                          -         -           -             91             -            -           -       91            -         91
Loss from available-for-sale financial assets, net                   -         -           -            (71)            -            -           -      (71)          (4)       (75)
Foreign currency translation adjustments of foreign
  operations                                                         -         -         23               -             -            -           -       23         (173)      (150)

Total income (expenses) recognized directly in equity                -         -         23             38             -             -           -       61         (156)       (95)
Net income                                                           -         -          -              -           983             -           -      983        1,287      2,270

Total comprehensive net income                                       -         -         23             38           983             -           -    1,044        1,131      2,175

Exercise of stock options into shares                               8       335            -             (1)           -             -           -      342            -        342
Issue of treasury shares                                            -         6            -              -            -             -           4       10            -         10
Repayment of loans for purchase of shares                           -         -            -              -            -             6           -        6            -          6
Waiver of salary by controlling shareholder, net                    -         -            -              8            -             -           -        8            -          8
Cost of share-based payment                                         -         -            -              4            -             -           -        4           38         42
Dividend declared                                                   -         -            -              -          (34)            -           -      (34)         (44)       (78)
Dividend paid                                                       -         -            -              -          (96)            -           -      (96)           -        (96)
Issue to minority and acquisition of minority interests, net        -         -            -              -            -             -           -        -          763        763
Minority interests in newly consolidated company                    -         -            -              -            -             -           -        -           73         73
Dividend paid to minority                                           -         -            -              -            -             -           -        -         (456)      (456)

Balance as of December 31, 2007 (audited)                         179      2,465       (116)           139         3,079            (4)        (21)   5,721       10,944     16,665




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




                                                                                          -8-
                                                                                         GAZIT-GLOBE LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                  Three months ended          Year ended
                                                                       March 31,             December 31,
                                                                  2008           2007            2007
                                                                       Unaudited               Audited
                                                                             NIS in millions
Cash flows from operating activities:

Net income                                                            232              786       2,270
Adjustments to reconcile net income to net cash
 provided by operating activities (a)                                 (140)           (614)      (1,477)

Net cash provided by operating activities                               92             172         793

Cash flows from investing activities:

Initial consolidation of a company previously included at
  equity (b)                                                             -                -          5
Investment in a jointly controlled entity (c)                            -                -       (138)
Investment in investees                                               (142)             (28)      (396)
Acquisition, construction and development of investment
  property                                                            (788)         (1,962)      (7,226)
Investments in fixed assets                                            (53)            (90)        (106)
Proceeds from realization of investment property and
  investment property under development                                 44              66         305
Proceeds from sale of fixed assets                                       -               -           9
Long-term loans granted                                                (22)             (2)        (27)
Repayment of loans to partners in properties under
  development, net                                                      -                -           6
Repayment of long-term loans granted                                    2                1          20
Short-term investments, net                                           (11)            *) -          12
Purchase of long-term investments                                       -              (18)       (253)
Investment in available-for-sale financial assets                     (81)            (240)       (940)
Proceeds from sale of available-for-sale financial assets              33              732       1,165
Withdrawal of long-term deposits                                      167                 -         12

Net cash used in investing activities                                 (851)         (1,541)      (7,552)




*)    Represents an amount lower than NIS 1 million.

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




                                                      -9-
                                                                                         GAZIT-GLOBE LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                  Three months ended          Year ended
                                                                       March 31,             December 31,
                                                                  2008           2007            2007
                                                                       Unaudited               Audited
                                                                             NIS in millions
Cash flows from financing activities:

Repayment of loans granted for the purchase of Company
  and subsidiary's shares                                                -               1            6
Exercise of stock options into shares                                    -            *) -          343
Sale of treasury shares                                                  -               -           10
Issue of shares to minority in subsidiaries, net                       491             487        1,009
Dividend paid                                                          (34)            (29)        (125)
Dividend paid to minority in subsidiaries                              (86)           (149)        (456)
Receipt of long-term loans                                           1,743           1,030        3,768
Repayment of long-term loans                                        (1,552)           (774)      (1,641)
Withdrawal (repayment) of long-term credit lines from
  banks, net                                                          (528)            630       1,182
Repayment and early redemption of debentures and
  convertible debentures                                              (198)            (12)       (124)
Sale of Company's debentures by subsidiaries                             -               -           5
Short-term bank credit, net                                            358              26          48
Issue of debentures and convertible debentures, net                    998             651       3,116

Net cash provided by financing activities                            1,192           1,861       7,141

Effect of exchange rate differences from cash balances of
 foreign operations                                                     (1)               9        (95)

Increase in cash and cash equivalents                                 432              501         287
Cash and cash equivalents at the beginning of the period              600              313         313

Cash and cash equivalents at the end of the period                   1,032             814         600




*)    Represents an amount lower than NIS 1 million.

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




                                                     - 10 -
                                                                                         GAZIT-GLOBE LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                  Three months ended          Year ended
                                                                       March 31,             December 31,
                                                                  2008           2007            2007
                                                                       Unaudited               Audited
                                                                             NIS in millions
(a)    Adjustments to reconcile net income to net cash
        provided by operating activities:

       Income and expenses not involving cash flows:

       Gain from realization and revaluation of marketable
         securities, net                                               (2)            (217)       (274)
       Company's share in earnings of affiliates, net                *) -               (3)         (4)
       Decrease (increase) in fair value of investment
         property                                                        2            (533)      (1,862)
       Depreciation and amortization                                     8               5           24
       Deferred taxes, net                                              14             160          545
       Revaluation of linked conversion component and
         stock options at fair value                                    (9)             (1)         (1)
       Revaluation of derivatives at fair value                       (119)            (58)       (195)
       Adjustment differences of long-term monetary assets
         and liabilities, net                                           18              35          96
       Impairment of available-for-sale financial assets                12               -          30
       Capital gain                                                     (5)             (7)         (6)
       Increase in employee benefits liabilities, net                    1            *) -           3
       Loss (gain) from decrease in holding rate in
         subsidiaries                                                    9               4          (17)
       Cost of share-based payment                                       7              10           42
       Gain from early redemption of debentures                        (10)              -            -

       Changes in asset and liability items:

       Increase in trade and other accounts receivable                 (74)            (76)         (65)
       Decrease (increase) in inventories of buildings and
         land for sale less advances from customers and
         buyers of apartments, net                                      19                -         (65)
       Increase (decrease) in trade and other accounts
         payable                                                        (8)             63         260
       Increase (decrease) in tenants' security deposits, net           (3)              4          12

                                                                     (140)            (614)      (1,477)




*)    Represents an amount lower than NIS 1 million.

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




                                                        - 11 -
                                                                                         GAZIT-GLOBE LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                  Three months ended          Year ended
                                                                       March 31,             December 31,
                                                                  2008           2007            2007
                                                                       Unaudited               Audited
                                                                             NIS in millions
(b)    Initial consolidation of a company previously
         included at equity:

       The consolidated company's assets and liabilities at
        date of initial consolidation:

       Working capital (excluding cash and cash
        equivalents):
        Current assets                                                   -                -         (1)
        Current liabilities                                              -                -          1

                                                                         -                -          -
       Investment presented at equity method                             -                -          5

                                                                         -                -          5
(c)    Investment in a jointly controlled entity:

       The consolidated company's assets and liabilities at
        date of acquisition:

       Working capital (excluding cash and cash
        equivalents):
        Current assets                                                   -                -       (658)
        Current liabilities                                              -                -        437

                                                                         -                -       (221)

       Fixed assets, long-term investments and loans                     -                -        (91)
       Other assets                                                      -                -        (30)
       Long-term liabilities                                             -                -        156
       Minority interests                                                -                -         74
       Goodwill arising on acquisition                                   -                -        (26)

                                                                         -                -         83

                                                                         -                -       (138)




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




                                                       - 12 -
                                                                                         GAZIT-GLOBE LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                  Three months ended          Year ended
                                                                       March 31,             December 31,
                                                                  2008           2007            2007
                                                                       Unaudited               Audited
                                                                             NIS in millions
(d)    Significant non-cash operations:

       Conversion of convertible debentures into
        subsidiary's shares                                              -                -        65

       Dividend declared                                                38              32         34

(e)    Additional cash flow information:

       Cash paid during the period for:

       Interest                                                       403              218       1,277

       Taxes on income                                                  29              21         130

       Cash received during the period for:

       Interest                                                         17              11         64

       Taxes on income                                                   -                -          1

       Dividend                                                          3                2        44




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




                                                     - 13 -
                                                                                      GAZIT-GLOBE LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1:- GENERAL

        These financial statements have been prepared in a condensed format as of March 31, 2008, and for
        the three months then ended ("interim consolidated financial statements"). These financial
        statements should be read in conjunction with the Company's annual financial statements and
        accompanying notes as of December 31, 2007, and for the year then ended ("annual financial
        statements").


NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES

        Basis of presentation of the interim consolidated financial statements:

        The interim consolidated financial statements have been prepared in accordance with generally
        accepted accounting principles for the preparation of financial statements for interim periods, as
        prescribed in International Financial Reporting Standard IAS 34, "Interim Financial Reporting" and
        in accordance with the disclosure requirements of Chapter D of the Securities Regulations (Periodic
        and Immediate Reports), 1970.

        The significant accounting policies and methods of computation followed in the preparation of the
        interim financial statements are identical to those followed in the preparation of the annual financial
        statements.


NOTE 3:- SIGNIFICANT EVENTS DURING THE REPORTED PERIOD

        a.    1.     In January 2008, a wholly-owned subsidiary of the Company acquired a shopping
                     center in Sao-Paulo, Brazil. The total purchase price is approximately U.S.$ 31 million
                     (approximately NIS 110 million) and it consists of a gross lease area of about 14.3
                     thousand sq.m. with a potential for further expansion. The Company also opened
                     offices in Sao-Paulo and it intends to expand its activity in Latin America.

              2.     In May 2008, a wholly owned subsidiary of the Company completed an acquisition of
                     second shopping center in Caxias do Sul, Brazil. The total purchase price of the
                     property which is in the process of development is approximately U.S.$ 24 million
                     (approximately NIS 85 million) and the expected cost for completion is approximately
                     U.S.$ 14 million (approximately NIS 50 million). The property will consist of a gross
                     lease area of about 16.3 thousand sq.m.

        b.    In February 2008, the Company's general meeting of shareholders approved the appointment
              of Mr. Dori Segal, the Company's outgoing President, as Executive Vice Chairman of the
              Company's Board. The employment terms of Mr. Segal will not be modified.

        c.    In February 2008, Citycon announced that it had entered into an agreement for the sale of
              40% of a shopping center in Helsinki, Finland which had been acquired in September 2007 in
              consideration of approximately € 131.6 million (approximately NIS 0.7 billion), thereby
              reflecting the purchase cost for Citycon. The buyer is an entity controlled by GIC Real Estate,
              the government of Singapore's investment corporation.




                                                  - 14 -
                                                                                  GAZIT-GLOBE LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3:- SIGNIFICANT EVENTS DURING THE REPORTED PERIOD (Cont.)

        d.   In February 2008, EQY announced that it had entered into a joint venture with Global Retail
             Investors, LLC ("GRI"), an entity formed by First Washington Reality Inc. and the California
             Public Employees' Retirement System ("CalPERS") to invest in shopping centers throughout
             the U.S. The joint venture is 90% owned by GRI and 10% owned by EQY. EQY will manage
             the properties acquired by the joint venture in return for management fees. At the date of the
             approval of the financial statements, the joint venture had acquired a shopping center in
             Miami, Florida in consideration of approximately U.S.$ 37 million. Also, in April 2008, EQY
             announced that it had entered into an agreement to contribute seven properties to the joint
             venture in a transaction valued at approximately U.S.$ 197.4 million. The initial contribution
             of five properties has taken place.

        e.   In March 2008, FCR issued 4.9 million shares based on the exercise price of C$ 22.25 per
             share (including the exercise of an option by the underwriters into about 0.6 million shares)
             for the total net consideration of approximately C$ 104.7 million. Gazit Canada has acquired
             one million FCR shares in this issuance at a total investment of approximately C$ 22.3
             million. As a result of this issuance, the Company's stake in FCR decreased from about
             54.6% to about 52.9% and the Company recorded a capital loss of approximately C$ 2.4
             million (approximately NIS 9 million) in the first quarter of 2008.

        f.   On March 20, 2008, the Company entered into a series of agreements for joint investment
             (collectively, "the investment agreement") together with CPI European Fund, the branch of
             Citibank International plc ("CPI") in Meinl European Land Limited ("MEL").

             Description of MEL and financial information:

             MEL, which was founded in 1997 and incorporated on the island of Jersey, is an income-
             producing property company focusing on supermarket-anchored shopping centers, and is
             listed on the Vienna Stock Exchange (symbol: MEL), having made its IPO in 2002. MEL
             focuses on the rental, management and development of shopping centers in 11 countries in
             Central and Eastern Europe, primarily in Russia, Poland, the Czech Republic, Turkey and
             Romania. MEL's activity is both in the acquisition of existing properties and in the
             development of new properties, with the proportion of MEL's overall activity represented by
             its development activity constantly growing in recent years.

             According to MEL's financial statements as of December 31, 2007, it owns (fully or partially)
             162 properties, as well as land held for future development, which are presented at their fair
             value of approximately € 1.9 billion. These properties and land are spread over some 904
             thousand sq.m. in 8 countries (as of said date, there were no active income-producing
             properties in the other three countries in which MEL operates). MEL also owns 34 properties
             under development with a total cost (including cost for completion) estimated at
             approximately € 3.3 billion (through December 31, 2007, approximately € 782 million had
             been invested in projects under development). Also, as of the aforesaid date, MEL owns 11
             plots of land for future development with a total area of some 1.8 million sq.m. Mel's
             portfolio of income production properties consists mainly of regional and neighborhood
             shopping centers, service centers and retails stores. As detailed below, as of December 31,
             2007, MEL had cash reserves of approximately € 1.34 billion, which, as a result of effecting
             the investment agreement, is expected to reach an overall scope of more than € 2 billion.



                                               - 15 -
                                                                                    GAZIT-GLOBE LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3:- SIGNIFICANT EVENTS DURING THE REPORTED PERIOD (Cont.)

             According to MEL's annual financial statements for 2007, at the end of 2007, MEL had over
             2,000 tenants and half of the lease agreements were with international retail groups.
             According to these statements, the largest tenant of MEL is the Austrian retail chain Spar.
             Further, according to these statements, the lease contracts between MEL and its anchor
             tenants are for the most part for periods of 10 to 15 years.

             Following are significant financial data from the financial statements of MEL (prepared
             according to IFRS) (1):

             Balance sheet data (€ in thousands):

                                                                                December 31,
                                                                            2007          2006 (1)

             Investment property                                         1,894,412          1,688,863
             Properties under development                                  781,864            105,232
             Cash and securities                                         1,339,035          4,867,800
             Other assets                                                  335,468            226,872
             Total assets                                                4,350,779          6,888,767
             Total liabilities                                           1,279,524          3,506,469
             Equity                                                      3,071,255          3,382,298

             Statement of income data (€ in thousands, except per share amounts):

                                                                          Year ended December 31
                                                                           2007          2006 (1)

             Rental income                                                120,030              96,451
             Operating income                                             140,043             261,158
             Income before tax                                            193,009             279,032
             Fair value gain of investment property, net                  133,406             228,352
             Net income                                                   154,577             220,736
             Net income attributable to shareholders of MEL               157,438             187,480
             Net earnings per share (in €)                                   0.64                1.06

             (1)   The financial statements of MEL as of December 31, 2006 and for the year then ended
                   were restated in order to reflect the change in the accounting policy regarding
                   recognition of deferred taxes in respect of investment property and reassessment of the
                   functional currency of certain companies of the MEL group.




                                               - 16 -
                                                                                       GAZIT-GLOBE LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3:- SIGNIFICANT EVENTS DURING THE REPORTED PERIOD (Cont.)

             Data about the geographical breakdown of MEL's properties (as of December 31, 2007) (€ in
             millions):

                                                                                                  Cost of
                                                                                                 income-
                                                                                                producing
                                                                             Cost of          properties and
                                                          Fair value of     properties          properties
                                                            income-           under               under
                                                           producing       development         development
                                                           properties           (1)                 (2)

             Poland                                            671               764               1,435
             Russia                                            485             1,191               1,676
             Czech Republic                                    322                 -                 322
             Hungary                                           123                 -                 123
             Slovakia                                          107                32                 139
             Latvia                                             62                 -                  62
             Romania                                            46               339                 385
             Turkey                                             79               615                 694
             Bulgaria                                            -               231                 231
             Ukraine                                             -               123                 123

             (1)   Including expected cost for completion. MEL is not bound to develop all projects
                   under development.

             (2)   Including expected cost for completion of the properties under development.

             To date and to the best of the Company's knowledge, no shareholder in MEL owns 5% or
             more of its issued share capital. S&P has rated MEL as (negative outlook) BB+ and Fitch
             (rating watch negative) BB+.

             Description of the investment transaction in MEL

             Shortly before entering into the investment agreement, the Company and CPI ("the
             investors") entered into an agreement ("the shareholders' agreement") according to which
             they formed an entity that is expected to make the investment in MEL ("the joint entity").
             The joint entity is 84.4% owned by the Company and 15.6% by CPI. The shareholders'
             agreement confers on CPI the option to increase its stake in the joint entity up to 50%, such
             that both parties will have equal holdings in the joint entity. Such option of CPI is exercisable
             within three months from the date of entering into the investment agreement in consideration
             of a price that reflects the cost of the investment in MEL to the Company. The rights to the
             units in the joint entity correspond to the rights of the joint entity in MEL, which are
             exercisable by any of the investors (the Company and CPI) independently. The transfer of the
             rights in the joint entity or the transfer of securities in MEL by any of the investors is subject
             to conferring the other with a right of first refusal.




                                                 - 17 -
                                                                                    GAZIT-GLOBE LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3:- SIGNIFICANT EVENTS DURING THE REPORTED PERIOD (Cont.)

             According to the investment agreement, the joint entity will invest in shares and convertible
             securities of MEL as specified below:

             1.    € 500 million will be invested in debentures (non-marketable) of MEL which are
                   convertible into MEL shares at the conversion price of € 9 per share (subject to
                   standard adjustments relating to changes in MEL's capital). The debentures bear
                   interest at the rate of 10.75% (payable on a quarterly basis). The joint entity may
                   redeem the debentures five years after their issue date (but no later than the elapse of
                   seven years from the issue date). The joint entity has also a conversion option over
                   seven years from the issue date and MEL can force conversion at any time following
                   three years after their issue date, if MEL's shares are traded for 60 consecutive days at
                   a price that is greater than 135% of the conversion price. If MEL is sold or liquidated,
                   the debentures are subordinated to any other debt of MEL but preemptive to rights of
                   MEL's shareholders.

             2.    MEL will issue rights to its shareholders in the scope of € 300 million, at a price of € 7
                   per share and if the shareholders do not use the rights issue to full effect, the joint
                   entity will acquire the shares included in the unused units, as above. According to the
                   rights issue, the holder of every 29.61 MEL shares shall be entitled to acquire 6 shares
                   of MEL and an option to acquire two additional shares according to the terms of the
                   options described below, for no additional consideration.

             3.    The joint venture will have an option to acquire MEL shares at a price of € 7 in the
                   scope of € 200 million (less amounts invested, if invested, by the joint entity as part of
                   the guarantee to issue rights as above). Said option will expire six months following
                   the completion of the above rights issue (which is to take effect within half a year from
                   closing). The shares acquired by virtue of the exercise of this option will also be
                   granted one additional option for every six shares acquired, according to the terms of
                   the options described below.

             4.    Upon closing, the joint entity will receive 30 share options (marketable) of MEL with
                   an exercise price of € 7 and exercisable over a period of four years following their
                   issue date.

             According to the investment agreement, the investors (in accordance with the MEL’s articles
             of association) will receive a right to nominate four members on MEL's Board, including the
             Chairman. These rights will remain in effect as long as the scope of the investment of the
             joint entity in MEL (including in said debentures) is not below € 300 million.

             By virtue of its holding in the joint entity, the Company is entitled to nominate three out of
             four members of that Board (however, if CPI exercises the option granted to it and holds
             more than 31.25% of the rights in the joint venture, the Company will be entitled to nominate
             only two out of these four members and CPI will be entitled to nominate the other two). The
             other members on the Board will be independent directors. It is expected that Mr. Chaim
             Katzmann, the Company's Chairman of the Board, will be nominated as Chairman of MEL’s
             Board once the transaction is closed.




                                               - 18 -
                                                                                      GAZIT-GLOBE LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3:- SIGNIFICANT EVENTS DURING THE REPORTED PERIOD (Cont.)

             Also, according to the investment agreement, provided that the scope of the investment of the
             joint entity is not below € 200 million, the investors will receive extensive consent rights with
             respect to MEL, inter alia, with regard to the scope of its liabilities, changes in its articles of
             association, the issuance of securities under certain circumstances, liabilities in excess of
             € 200 million, other transactions and the like. The investors will also receive rights to
             information and access to MEL.

             The terms of the investment agreement stipulate that the above debentures confer the joint
             entity with the right to vote at the general meeting (through the issuance of special shares),
             under the assumption that the debentures are converted (it is hereby clarified that this voting
             right is conferred on the debenture holders even before the debentures are converted into
             shares).

             Before closing, MEL is managed by an outside management company ("the management
             company"), which is related to the Austrian bank, Meinl Bank AG ("the bank"). According to
             the investment agreement, substantial commitments between MEL and the management
             company and the bank (in connection with the management of MEL, financial services made
             available to MEL and so on) are cancelled and the latter undertakes certain non-competition
             commitments to MEL. In respect of the above, the management company and the bank are
             entitled to (a) € 160 million; (b) about 5.7 million MEL shares; (c) € 80 million par value of
             MEL convertible debentures (these debentures do not confer their holder with voting and
             management rights). Further, the management company has undertaken to provide different
             services to MEL during the transitional period for no additional consideration. As long as
             such securities are owned by the bank, the management company or any person on its behalf,
             the voting rights to which they are entitled will be conferred on the joint entity. These
             securities are subject to selling restrictions for a period of three years following the closing.

             As of the date of the approval of the financial statements, the Company owns about 5.6
             million MEL shares which it acquired at an average price of € 8.9 per share and about € 4.3
             million par value of marketable debentures (which cannot be converted into shares) of MEL.

             Based on the issued capital of MEL according to its financial statements as of December 31,
             2007, upon completion of the steps determined in the investment agreement (including
             cancellation of treasury shares and partly paid shares) and under the assumption that all the
             options for the acquisition of shares in the scope of € 200 million, as above, are exercised, the
             investors will hold, on a cumulative basis (including the existing stake of the Company, as
             above), about 28% of the voting rights in MEL. Under the assumption that all the joint
             entity's undertaking to acquire shares in the scope of € 300 million is effected (that is, if none
             of the shareholders exercises its right by virtue of the rights issue, as above), the investors
             will hold on a cumulative basis about 35% of the voting rights in MEL.

             Closing of the investment agreement is conditional upon several prerequisites, the principal
             of which include the following:

             1.    The approval of MEL's general meeting;

             2.    The approval of the authorized bodies, including the authorities in the island of Jersey
                   and the relevant anti-trust commissioners;


                                                 - 19 -
                                                                                    GAZIT-GLOBE LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3:- SIGNIFICANT EVENTS DURING THE REPORTED PERIOD (Cont.)

             3.    Cancellation of treasury shares and partly paid shares that MEL issued in the past;

             4.    The accuracy of the representations and satisfaction of parties' undertaking by the
                   closing.

             The agreement also contains standard provisions as to the transition period until closing,
             among which are a no-shop commitment on the part of MEL, the management company and
             the bank until September 30, 2008 and a commitment to compensate the investors should
             MEL cancel the transaction if it receives a competitive offer in that period or should the
             transaction not be completed if it is not approved by the shareholders' meeting of MEL.

             The Company's share in the acquisition will be financed from its own resources and bank
             borrowings. For the purpose of the transaction, the Company entered into an agreement with
             Bank Hapoalim for the provision of a special purpose line of credit, which may incorporate
             other banks and financial institutions in the scope of € 400 million for a three-year period,
             including an option to extend by an additional year, under the current standard conditions of
             the banking industry in Israel.

             At this stage, the Company cannot estimate whether it will have additional investments in
             MEL on top of those detailed above, and the Company also has no concrete plans as to
             changing the activity of MEL.

        g.   In January 2008, the Company closed a public offering of debentures according to a shelf
             prospectus published on December 30, 2007, as follows:

             1.    Issue of NIS 292.3 million par value of debentures (series F) in consideration of
                   approximately NIS 273.3 million, by way of series extension.

             2.    Issue of NIS 590 million par value of debentures (series I) at par value. The debentures
                   are linked to the Israeli CPI (principal and interest), bear fixed annual interest at the
                   rate of 5.3% and are redeemable in four payments as follows: the first payment at the
                   rate of 15% of the principal, payable on June 30, 2013, the second and third payments
                   at the rate of 25% of the principal payable on June 30, 2015 and June 30, 2016 and the
                   fourth payment at the rate of 35% of the principal payable on June 30, 2018.

        h.   In February 2008, the Company issued to institutional investors NIS 140 million par value of
             debentures (series I) for the total consideration of approximately NIS 142 million, by way of
             series extension.

        i.   In March 2008, the Company's Board approved an allocation of 88,100 stock options to five
             officers of the Company, including the Executive Vice Chairman of the Company's Board.
             Each of the above options is exercisable into one Ordinary share of the Company at an
             exercise price, which is the higher of (a) the average value of a Company share during the 30
             days preceding the date of grant and (b) NIS 40 per share, linked to the Israeli CPI, subject to
             adjustments (for issue of bonus shares, rights issue and dividends distribution). The optionees
             are also conferred the choice of a cashless exercise.




                                                - 20 -
                                                                                   GAZIT-GLOBE LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3:- SIGNIFICANT EVENTS DURING THE REPORTED PERIOD (Cont.)

             The options vest over three years in three equal portions from the first anniversary of the
             options. In certain cases, each optionee is entitled to acceleration of all vesting periods of
             stock options. The fair value of each stock option at the date of grant based on a binomial
             model is NIS 7.8. The stock options were issued based on section 102 of the Income Tax
             Ordinance under the equity track (with a trustee). After the balance sheet date, the allocation
             of the stock options was completed, except for the allocation to the Executive Vice Chairman
             of the Company's Board which is subject to the approval of the Company's general meeting
             of shareholders.

        j.   During the first quarter of 2008, Citycon entered into an agreement for placing a revolving
             line of credit in the total of € 50 million over a five-year period. At balance sheet date, the
             credit line had not been used.


NOTE 4:- EVENTS AFTER THE BALANCE SHEET DATE

        a.   In April 2008, U. Dori issued NIS 125 million par value of debentures (series D), according
             to a shelf offering report published under a shelf prospectus from November 2007. Midroog
             rated the debentures as A3.

        b.   In April 2008, EQY announced that it had entered into a joint venture with DRA Advisors
             ("DRA") to invest in real estate. The joint venture is 80% owned by DRA and 20% owned by
             EQY. At the date of the approval of the financial statements, the joint venture had entered
             into an agreement for the acquisition of two shopping centers and an office building in
             Florida.

        c.   On May 19, 2008, the Company's Board approved the publication of a shelf prospectus for
             the public issuance of the Company's securities which was published on May 21, 2008.

        d.   In May 2008, the Company declared a dividend in the amount of NIS 0.30 per share, to be
             paid in July 2008. The record date is June 16, 2008.




                                               - 21 -
                                                                                       GAZIT-GLOBE LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS


NOTE 5:- GEOGRAPHIC SEGMENTS

                                                  Three months ended March 31, 2008 (unaudited)
                                                                                                     Total -
                                        U.S.     Canada        Europe      Israel        Other    consolidated
                                                                  NIS in millions

        Segment revenues                 274        364           268         136            7      1,049

        Segment results                  168        193           159            8        *) -        528



                                                  Three months ended March 31, 2007 (unaudited)
                                                                                                     Total -
                                        U.S.     Canada        Europe      Israel        Other    consolidated
                                                                  NIS in millions

        Segment revenues                 292        322           197           17           -        828

        Segment results                  168        543           283            9           -      1,003



                                                        Year ended December 31, 2007 (audited)
                                                                                                     Total -
                                        U.S.     Canada        Europe      Israel        Other    consolidated
                                                                  NIS in millions

        Segment revenues               1,200      1,432           927         152            4      3,715

        Segment results                  753      1,201         1,694         308            1      3,957



        *)     Represents an amount lower than NIS 1 million.




                                               - 22 -
                                                                                    GAZIT-GLOBE LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS


NOTE 6:- RECONCILIATIONS BETWEEN ISRAELI GAAP AND IFRS

        IFRS 1 which deals with the first-time adoption of IFRS determines that, in principle, the adoption
        of IFRS in the opening balance sheet as of the date of transition is to be applied retroactively.

        The reconciliations below include the effect of the consolidation of Citycon. Further details are
        given in d5 below.

        a.    The exemptions elected by the Group which have not been retroactively adopted on the
              transition date to IFRS:

              Following are the exemptions elected by the Company pursuant to IFRS 1, which have not
              been retroactively adopted on the transition date to IFRS:

              1.    Business combinations and goodwill:

                    The Group has not retroactively adopted IFRS 3, "Business Combinations" and,
                    accordingly, goodwill and excess of cost arising in business combinations which
                    occurred prior to January 1, 2005 and relating to the acquisition of subsidiaries,
                    affiliates and jointly controlled entities are not accounted for according to IFRS 3 but
                    rather presented as previously accounted for under Israeli GAAP.

              2.    Translation differences:

                    As of January 1, 2005, the Group has not recognized the cumulative foreign currency
                    translation differences that relate to all foreign operations. Therefore, the reserve for
                    foreign currency translation is zero as of January 1, 2005.

              3.    Compound financial instruments:

                    The Company did not separate compound financial instruments into equity and liability
                    components in respect of liabilities that did not exist as of the date of transition.

              4.    Share-based payment:

                    IFRS 2, which deals with share-based payment transactions, has not been adopted with
                    respect to equity instruments that had been granted after November 7, 2002 and had
                    vested prior to the date of transition.




                                                - 23 -
                                                                                         GAZIT-GLOBE LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS


NOTE 6:- RECONCILIATIONS BETWEEN ISRAELI GAAP AND IFRS (Cont.)

        b.   Reconciliation to balance sheets:

                                                                             March 31, 2007 (unaudited)
                                                                                     Effect of
                                                                     Israeli        transition
                                                                     GAAP           to IFRS *)            IFRS
                                                             Note                NIS in millions

             CURRENT ASSETS:
               Cash and cash equivalents                                  699               115                  814
               Short-term investments                                      93                 -                   93
               Tenants                                                    149                 7                  156
               Accounts receivable                                        265                41                  306
               Current tax assets                               d9          -                20                   20

                                                                         1,206              183             1,389

             ASSETS HELD FOR SALE                                         133                 (2)                131

             NON-CURRENT ASSETS:
               Investments in affiliates                        d5      1,773             (1,770)               3
               Long-term investments and loans                            768               (676)              92
               Investment in available-for-sale securities      d7          -                666              666
               Derivatives                                      d8          -                 99               99
               Investment property                                     26,581              8,606           35,187
               Investment property under development                    1,432                 32            1,464
               Fixed assets, net                                          319                  9              328
               Goodwill                                         d3         44                110              154
               Intangible assets, net                                       8                 (7)               1
               Deferred taxes                                               -                 14               14

                                                                       30,925             7,083            38,008

             Total assets                                              32,264             7,264            39,528



             *)      Includes the consolidation of Citycon, see d5 below.




                                                       - 24 -
                                                                                                GAZIT-GLOBE LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS


NOTE 6:- RECONCILIATIONS BETWEEN ISRAELI GAAP AND IFRS (Cont.)

                                                                                    March 31, 2007 (unaudited)
                                                                                             Effect of
                                                                            Israeli         transition
                                                                            GAAP           to IFRS **)           IFRS
                                                                   Note                 NIS in millions

             CURRENT LIABILITIES:
              Credit from banks and others                                       785               593             1,378
              Trade payables                                                     189                22               211
              Current tax liabilities                                d9            -                43                43
              Other accounts payable                                             460               144               604
              Dividend declared                                                   32                 -                32

                                                                                1,466              802             2,268
                  Liabilities attributed to assets held for sale     d4             -               33                33

                                                                                1,466              835             2,301
             LONG-TERM LIABILITIES:
              Debentures                                           d7, 8        8,579               64             8,643
              Debentures convertible into shares of
                 subsidiaries                                        d7          461               314                  775
              Interest-bearing liabilities to financial
                institutions and others                              d7         8,083            3,207            11,290
              Proceeds from issuance of stock options
                in subsidiaries                                      d1           11               (11)                   -
              Proceeds from conversion option in
                subsidiary                                           d2            20              (20)                -
              Derivatives                                            d8             -               34                34
              Other financial liabilities                            d1            70               38               108
              Employee benefits liabilities                                      *) -                -              *) -
              Deferred taxes                                                    1,231              438             1,669

                                                                              18,455             4,064            22,519
             EQUITY ATTRIBUTABLE TO EQUITY
              HOLDERS OF THE COMPANY:
              Share capital                                          d1           171                -               171
              Share premium                                                     2,071               53             2,124
              Foreign currency translation adjustments
                of foreign operations                              a2, 4           32             (246)             (214)
              Other capital reserves                               d7, 8           41                8                49
              Retained earnings                                                 2,547               62             2,609
              Loans for purchase of shares                                         (9)               -                (9)
              Treasury shares                                                     (25)               -               (25)

                                                                                4,828             (123)            4,705
                  MINORITY INTERESTS                               d1, 2,
                                                                    5, 6        7,515            2,488            10,003

             Total equity                                                     12,343             2,365            14,708

             Total liabilities and equity                                     32,264             7,264            39,528

             *)        Represents an amount lower than NIS 1 million.

             **)       Includes the consolidation of Citycon, see d5 below.




                                                            - 25 -
                                                                                          GAZIT-GLOBE LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS


NOTE 6:- RECONCILIATIONS BETWEEN ISRAELI GAAP AND IFRS (Cont.)

        c.   Reconciliation to statements of income:

                                                                     Three months ended March 31, 2007 (unaudited)
                                                                                       Effect of
                                                                      Israeli         transition
                                                                      GAAP            to IFRS *)          IFRS
                                                             Note                   NIS in millions

             Income from rental of buildings                                644               184              828
             Rental property operating expenses                             217                62              279

             Gross profit                                                   427               122              549

             Fair value gain of investment property, net                    353               180              533
             General and administrative expenses                             99                45              144

             Operating income                                               681               257              938

             Financial expenses                              d7, 8         (177)             (109)            (286)
             Financial income                                 d9              -               312              312

                                                                            504               460              964
             Other expenses, net                                d7           (8)                7               (1)

             Income before taxes on income                                  496               467              963
             Taxes on income                                                 82                98              180

             Income after taxes on income                                   414               369              783
             Company's share in earnings of affiliates                       73               (70)               3
             Minority interest in earnings of subsidiaries      d6         (252)              252                -

             Net income                                                     235               551              786

             Attributable to:
               Equity holders of the company                                                                   415
               Minority interests                                                                              371

                                                                                                               786
             Net earnings per share attributable to
               Ordinary equity holders of the company
               (in NIS):

             Basic net earnings                                            1.99              1.53             3.52

             Diluted net earnings                                          1.93              1.52             3.45



             *)     Includes the consolidation of Citycon, see d5 below.




                                                       - 26 -
                                                                                   GAZIT-GLOBE LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS


NOTE 6:- RECONCILIATIONS BETWEEN ISRAELI GAAP AND IFRS (Cont.)

        d.   Notes to the reconciliations to the financial statements:

             Following are the principal reconciliations between the accounting policies adopted in the
             financial statements prepared according to IFRS and the accounting policies according to
             Israeli GAAP as of March 31, 2007 and for the three-month period then ended:

             1.    Share options:

                   According to Israeli GAAP, share options whose exercise price is linked to a foreign
                   currency (other than the Company's functional currency) or to the Israeli CPI are
                   presented in equity. According to IFRS, these equity instruments are classified as
                   liabilities measured at fair value in each reporting period and the changes in fair value
                   are carried to financing in the statement of income. When the option is exercised, the
                   balance is carried to equity.

                   According to Israeli GAAP, share options issued by subsidiaries (which are not defined
                   as a liability) are presented between liabilities and equity, whereas according to IFRS,
                   these options are presented as part of minority interests.

             2.    Debentures convertible into shares of subsidiaries:

                   According to Israeli GAAP, the conversion component of debentures convertible into
                   shares of subsidiaries (which is not defined as a liability) was presented between long-
                   term liabilities and equity. According to IFRS, the conversion component of
                   debentures convertible into shares of subsidiaries is presented in minority interests.

             3.    Goodwill:

                   According to Israeli GAAP, goodwill arising on a business combination was
                   systematically amortized over a period of 20 years until Accounting Standard No. 20
                   (Revised) of the IASB came into effect on January 1, 2006. As of that date, goodwill is
                   no longer amortized except in the event of impairment. According to IFRS 3, including
                   the exemption prescribed by IFRS 1, the amortization of goodwill has been cancelled
                   as of the date of transition subject to the examination of impairment.

                   Also, excess of cost arising on the acquisition of minority interests in subsidiaries was
                   mainly attributed after the date of transition to IFRS to goodwill.

             4.    Assets held for sale and discontinued operations:

                   According to Israeli GAAP, there is no requirement to measure assets held for sale
                   differently. According to IFRS 5, an asset held for sale is presented separately and
                   measured at the lower of the carrying amount and fair value less costs to sell and no
                   depreciation or amortization in respect thereof will be recognized. Also the liabilities
                   for assets held for sale will be presented separately.




                                                - 27 -
                                                                                   GAZIT-GLOBE LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS


NOTE 6:- RECONCILIATIONS BETWEEN ISRAELI GAAP AND IFRS (Cont.)

             5.   Consolidation of the financial statements:

                  In the financial statements prepared according to IFRS, the Company adopts the IASB
                  statement regarding the tests for the existence of effective control. Accordingly, the
                  Company also consolidates the accounts of EQY and of Citycon in the financial
                  statements prepared according to IFRS (Citycon was consolidated for the first time at
                  the end of the first quarter of 2006, since, at that time, special circumstances attesting
                  to the existence of effective control were met). On the other hand, in the financial
                  statements prepared according to Israeli GAAP, only EQY's accounts were
                  consolidated on the basis of effective control.

                  According to Israeli GAAP, potential voting rights are not taken into consideration in
                  the examination of control in a corporation. According to IAS 27, potential voting
                  rights that are exercisable as of balance sheet date are taken into consideration.

             6.   Minority interests:

                  According to Israeli GAAP, minority interests are presented in the balance sheet
                  outside of equity whereas according to IFRS, they are presented in the balance sheet as
                  part of equity. Accordingly, the minority's share in the results of subsidiaries is
                  included as part of the results in the statement of income whereas according to IFRS,
                  the minority's share in said results is not included in the statement of income but rather
                  presented as part of the attribution of income between the shareholders. Further,
                  receipts on account of share options of subsidiaries and equity component of
                  debentures convertible into shares of subsidiaries are presented according to IFRS as
                  part of minority interests.

             7.   Financial instruments:

                  According to Israeli GAAP, the Company presented its investment in marketable
                  securities which met the criteria of "permanent investment" at cost less impairment
                  losses that are other than temporary whereas securities presented as a current
                  investment were recorded at fair value and thus their revaluation was carried to the
                  statement of income. In contrast, according to IAS 39, the Company presents its
                  investment in available-for-sale financial instruments at fair value and revaluation
                  differences are carried to capital reserve, except impairment losses which are carried to
                  the statement of income.

                  Financial liabilities – according to Israeli GAAP, the Company adopted the provisions
                  of Accounting Standard No. 22 of the IASB, effective as of January 1, 2006 whereby
                  discount, premium and deferred debt raising charges are amortized using the effective
                  interest method and presented net of the outstanding liability. According to IAS 32,
                  this policy was adopted as of the date of assuming the liability.




                                              - 28 -
                                                                                  GAZIT-GLOBE LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS


NOTE 6:- RECONCILIATIONS BETWEEN ISRAELI GAAP AND IFRS (Cont.)

             8.   Derivative financial instruments:

                  According to IFRS, derivative financial instruments are initially recognized at fair
                  value and measured at each balance sheet date at fair value. Gains or losses arising
                  from the changes in fair value of derivatives during the year, which are not for
                  accounting hedge purposes, are taken directly to the statement of income as specified
                  below:

                  -     Cash flow hedges:

                        According to Israeli GAAP, the results of the intrinsic value of a derivative
                        financial instrument that met the definition of a hedging instrument were
                        deferred and recognized in the statement of income concurrently with the results
                        of the hedged item. According to IAS 39, the effective portion of the gain or loss
                        on the changes in the fair value of the hedging instrument is recognized directly
                        in equity, while any ineffective portion is recognized immediately in the
                        statement of income.

                  -     Hedge of a net investment:

                        According to Israeli GAAP, the intrinsic value of a net investment in foreign
                        operations is carried to capital reserve from translation differences in respect of
                        foreign operations. According to IAS 39, the hedge of a net investment in
                        foreign operations, including a hedge of a monetary item that is accounted for as
                        part of the net investment, are accounted for in a way similar to cash flow
                        hedges. The effective portion of the gains or losses on the changes in the fair
                        value of the hedging instrument are recognized in equity while any gains or
                        losses relating to the ineffective portion are recognized in the statement of
                        income. In cases where there is no documentation of the designation of the
                        hedge or of the test of effectiveness of the hedge, the derivative cannot be
                        recognized as a hedging instrument and, accordingly, its results are fully
                        recognized in the statement of income.

                  -     Fair value hedges:

                        The change in the fair value of the derivative (the hedging instrument) is
                        recognized in the statement of income. The change in the fair value of the
                        hedged item is also recognized in the statement of income.

                        For fair value hedges relating to items carried at amortized cost, the adjustment
                        to carrying value is amortized through the statement of income over the
                        remaining term to maturity. Any adjustment to the carrying amount of a hedged
                        financial instrument, for which the effective interest rate method is used, is
                        through the statement of income. If the hedged item is derecognized, the
                        unamortized fair value adjustment is recognized immediately in the statement of
                        income.




                                              - 29 -
                                                                                  GAZIT-GLOBE LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS


NOTE 6:- RECONCILIATIONS BETWEEN ISRAELI GAAP AND IFRS (Cont.)

                   -     In cases where the Company uses swaps which include a hedge of two risk
                         components, meaning fair value hedge and hedge of a net investment in a
                         foreign operation, the Company accounts for each component separately as a
                         hedge in accordance with the above criteria and this on condition that they meet
                         the other criteria of IAS 39 for hedge.

             9.    The presentation of the financial statements:

                   Pursuant to the provisions of IAS 1, the following principles of presentation were
                   included in the financial statements:

                   -     Liabilities and assets in respect of deferred taxes are recorded as long-term
                         balances only.

                   -     Liabilities and assets in respect of current taxes are recorded separately on the
                         face of the balance sheet.

                   -     Financial income and expenses are presented separately in the statement of
                         income.

             10.   Dividend declared after the balance sheet date:

                   According to Israeli GAAP, dividends declared after the balance sheet date and before
                   the date the financial statements were approved were presented in equity as a reduction
                   of retained earnings and an increase in dividends declared after the balance sheet date.
                   According to IFRS, the Company only provides disclosure of the dividends declared
                   after the balance sheet date.




                                               - 30 -

				
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