Acquisition of Union Bank

Capital Market Presentation

2017נובמבר

General Legal Disclaimer

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• This presentation was prepared by Mizrahi Tefahot Bank Ltd (“the Bank”) for the convenient and concise presenting of a transaction under whichthe Bank will acquire the entire share capital of the Union Bank of Israel Ltd (“Union”), inter alia for the purpose of conversation with certainentities in the capital markets, in Israel and abroad (“the Presentation”).

• The information included in the Presentation is not exhaustive and is not complete and does not include the full information that may be relevantregarding the transaction and/or the full data regarding the transaction and/or about Union. Accordingly, the information included in thePresentation does not replace the need to peruse the periodic or immediate reports published until this date, and which shall be published in thefuture by the Bank and/or by Union.

• In order to receive the full picture regarding the activities of Union and the Bank, and the risks involved in their operations, the periodic andimmediate reports should be perused fully, as submitted to the Securities Authority and to the Tel-Aviv Stock Exchange Ltd, which also includewarnings regarding information found therein which constitutes forward-looking information, per its definition in the Securities Law 5728-1968(“Securities Law”).

• The information included in the Presentation is based, inter alia, upon the information known to the Bank’s management at the time of thePresentation’s editing, including data published by Union.

• The Bank did not review or scrutinize the aforesaid information about Union, and bears no responsibility thereto.

• It is hereby clarified that the information and data in the Presentation, which refer to some future date, constitute targets and goals which theBank had set for itself as part of the transaction and the merger anticipated therefrom, and as such they might not be realized.

• Without derogating from the generality of the aforesaid, insofar as the Presentation includes forward-looking information, as defined in theSecurities Law, 5728-1968, then the information is based on assumptions, facts and data which the Bank’s management has at this time, includingthe information that the Bank has about Union (collectively: “the Assumptions"). These Assumptions might not be realized, all or some; and/ormay be realized in a manner materially different from that anticipated above, as a result of events which are not necessarily under the Bank’scontrol and/or due to a change in circumstances, as they are known to the Bank at this time, including with respect to Union, including regulatoryand legislative changes, directives from supervisory elements, changes in work assumptions in light of information that may be received regardingUnion and its business after the purchase, geo-political changes and other changes that might cause assessments to not be realized and/or achange in the Bank's plans, as they are at this time.

• To remove doubt, it is clarified that the Bank does not undertake to update the information included in the Presentation.

• The information included in the Presentation does not constitute an advice, a recommendation, an opinion or a proposal regarding an investmentin any securities whatsoever, nor does it constitute grounds for making a decision to invest in securities as aforesaid.

• The Presentation does not constitute an offer for the purchase or sale of the Bank's securities, or an invitation to receive such offers.

• It is to be clarified that the accomplishment of the transaction is subject, inter alia, to the non-fulfillment of a terminating condition, establishedper the transaction’s engagement conditions, as well as the fulfillment of various conditions, including such that are not under the Bank’s control,among them the receipt of authorizations from third parties and regulatory elements. Accordingly, there can be no certainty that the transactionwill be accomplished.

Acquisition of Union Bank ("Union") - Transaction Rationale

Mizrahi Tefahot Group becoming even more competitive against the large

banks, without raising more capital

The merger embodies potential to achieve operational synergy

The merger fits with the group's strategic plan and targets, and has the

potential to increase market shares with a leap forward in the business sectors,

as well as the potential to increase the ROE targets with respect to the strategic

plan

A financial transaction which, to the Bank's assessment, is expected to gross

up adequate profitability

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A merger which is not highly complex

Union's acquisition is expected to allow the group to increase the distributed

dividend sum, without hurting the distribution rate

Union – Fundamental Data

Business profile: half of Union’s credit portfolio is in the business sectors, and half is in the households

sector and in housing loans

Source: Union’s financial reports(1) Debts, according to industry sectors appendix, as of 30.6.2017

(2) For the period between December 31, 2012 and June 30, 2017

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Union – Fundamental Data

Union shows volatility in profit and low ROEs over

the years

Source: Union’s financial reports.

Union continuously suffers from low

operational efficiency

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The Acquisition Transaction• Acquisition of 100% of Union and its merger with Mizrahi Tefahot by share exchange(1). The share

exchange will be done according to 60% of Union’s accounting equity on June 30, 2017 (a dividend

sum of up to NIS 100 million will be deducted from the equity, if it is distributed) and per the

market value of Mizrahi Tefahot’s shares(2).

(1) A mechanism has been determined to adjust the amount of the consideration shares during distributions (per the definition of the term “distribution” in Article 1 of the Companies Law) or changes to Union's capital, and with respect to distributions or changes to the capital as aforesaid in the bank, which were executed and/or announced (in which the sellers shall not participate) during the period beginning on June 30, 2017 and until the time of the transaction's accomplishment..

(2) Based on the average of the closing price of Mizrahi Tefahot's shares in the last 90 trade days prior to June 30, 2017, after adjustments made as of June 30, 2017, and subject to the adjustments that may occur until the time of the transaction's accomplishment.

(3) Subject to references for the value appraisal to be produced for Mizrahi Tefahot’s board of directors.(4) 60% of Union Bank’s capital, net of a dividend sum to Union’s shareholders at a total of NIS 100 million.

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The Acquisition Transaction – Cont.

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(1) 60% of Union Bank’s capital, net of a dividend sum to Union’s shareholders at a total of NIS 100 million, subject to references for the value appraisal to be produced for Mizrahi Tefahot’s board of directors.

Achievement of Operational Synergy

Expenses are expected to be saved, as similar functions at the two banks will be merged.

Acting to take advantage of the merged bank could reduce operational expenses.

Synergy is expected in computer expenses, after Union disconnects from its current computer

systems and transfers its data to Mizrahi Tefahot’s systems.

The bank estimates that merging Union with Mizrahi Tefahot could create operational synergy,

which would increase the group’s competitiveness.

Understandings will be reached on an efficiency outline, so that some of Union’s employees would

be absorbed into the merged bank, supporting its activity, including as a result of its organic

growth.

The merger will be accompanied by an investment of financial resources in efficiency measures,

including: adjustments to the labor force, adjustments to the branch network and headquarter units

and a transfer of data from Union’s systems to Mizrahi Tefahot’s systems.

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Union’s branch network includes 36 branches. The acquisition transaction may allow achieving

synergy through the merger of Mizrahi Tefahot’s branches with Union’s branches.

Union’s size allows for a merger which is not highly complex

Union constitutes less than 20% of Mizrahi Tefahot Group’s size. In light of this, the merger process

can be done without disrupting the advancement of Mizrahi Tefahot’s strategic plan, while preserving

Mizrahi Tefahot’s unique organizational culture.

Source: The financial reports of Union and the Mizrahi Tefahot Group

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Challenges in Union’s merger

Maintaining Mizrahi Tefahot’s status in the banking system – maintaining a high

growth rate, despite the merger

Maintaining Mizrahi Tefahot’s organizational culture within the merged bank

IT systems: transferring data from Union’s systems into Mizrahi Tefahot’s systems

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Preserving and enhancing the consolidated customer base, while paying specific

attention to unique risk centers