June 2020

Dear Investors,

Several months have passed since Migdal Capital Markets has embraced ESG index-tracking investment products, one of the most popular and fastest growing investment approaches in the world. This included, among others, launching ESG index-tracking Mutual Funds (the first of their kind in Israel), creating a dedicated ESG investment track in our portfolio management company, as well as implementing ESG oriented organizational improvements.

ESG investments merge traditional financial considerations with Environmental, Social, Governance considerations. In our view, these additional considerations raise the quality of investments by potentially increasing their return and reducing their risk. The appeal of this type of investing stems from the notion that it is possible to create investor value by identifying Environmental, Social and Governance risks.

The Coronavirus outbreak has led to a market financial crisis and heavy outflows in the global ETF and Mutual Fund industry, however contrary to this trend, ESG funds (ETFs in particular) actually experienced billions of dollars of inflows during the crisis. They also outperformed the market in terms of returns while maintaining lower risk.

Our decision to create ESG index-tracking funds is no coincidence, it is part of a long-term process we believe in and consider as part of our responsibility as a financial institution in Israel. In recent years we have become one of the largest and leading asset managers in the Israeli index-tracking investment industry, thanks to the inception of a diverse line of high quality and innovative investment products. At the same time, we have been integrating numerous operational ESG components within the organization. At present, we employ an ESG Manager and include an ESG stock-ranking process in Migdal Capital Markets’ research division, which allows us to incorporate ESG considerations alongside traditional financial parameters. Furthermore, we offer managed portfolios with an ESG investment strategy and two mutual funds that were the first of their kind in Israel (MTF 4A SP500 ESG Tracker Financial Currency Hedged, and a MTF 4D SP500 ESG) and we are working to expand our offerings. These investment products, similar to all of Migdal Capital Markets’ products, are carefully picked in order to enable investors to benefit from the many advantages of ESG and to take part in the global trend through local currency (ILS).

In parallel to these professional changes, we have completed a number of environmental improvements to efficiency in our organization, such as converting to solar-panel electricity to power our offices, as well as smart lighting and hybrid-electric vehicles.

With respect to Social Responsibility, Migdal Capital Markets has appointed a Social Responsibility Director who constantly provides financial education activities, supports our hosted in-house non-profit organization (“Beit Ha’amutot”), works to improve the well-being of our employees and encourages them to volunteer in the community. Because Social Responsibility and contribution to our community are an inseparable part of our organizational culture, during the Coronavirus outbreak our employees continued to volunteer, to donate and to demonstrate mutual responsibility in a broad range of activities: the distribution of hot-meals to senior citizens; the collection and donation of computers to NGO’s; the donation of clothes, toys and books to an NGO supporting endangered children; the waver of rental obligations to all our hosted NGO’s; the participation in the Industrial Union’s Social-Economic Forum’s leadership team; as well as many other activities.

Migdal Capital Markets holds behavioral values in the highest regard, and as inseparable from its identity and fortitude, alongside values such as responsibility, professionalism, innovation and creativity. We believe that this approach, which includes the importance of treating employees fairly, has a robust connection to financial performance and added-value to our investors and clients. All of these factors have led us, on the eve of the pandemic outbreak, to come to the significant decision to stand by our employees: not to discharge, not to impose unpaid leave, and not to deduct vacation time. These same guidelines were offered to our contractors, some of whom have been with us for many years.

This decision also quickly proved itself in business terms, across all of our operations. As an example, during the months of April and May we led the entire Mutual Fund Industry (which absorbed heavy outflows in March) in terms of inflows, and we raised 2.2 billion ILS.

Alongside our responsibility to our environment and society, Migdal Capital Markets and its subsidiaries maintain first and foremost our commitment to you, our clients, to offer high-quality, professional, fair and transparent investment management services – and we find that ESG compliments and assists us in this important commitment. We invite you to browse Migdal Capital Markets’ website, where you can enjoy a wide variety of information and professional articles about ESG investments as well as other cutting-edge investment themes.

We are proud to lead an innovative investment house, which is both ground-breaking and ethical, a leader of the local Mutual Fund revolution and a pioneer in the domain of Hi-Tech index-trackers in Israel. We will continue to offer you advanced, creative and transparent financial investment products, tailored to the modern investment era and the rapidly evolving market conditions.

Israel Eliahu, Chairman of the Board                 Sagi Stein, CEO

(4A)= 4 – up to 120% exposure to equity, A – up to 10% exposure to foreign currency. The fund’s manager is Migdal Mutual Funds Ltd. The fund’s manager does not commit to any yield, including excess yield. The information provided is not a substitute for consultation that takes into consideration the data or the needs of each person. The information on this page does not constitute an offer to purchase units in the fund. Units will be purchased according to valid prospectus and immediate reports only. Tax Status: EF – Tax Exempt for Foreign Investments. The Information for Investment Consultant Only. The financial information contained in this letter was obtained from ESG’s Director of the Migdal Capital Markets.

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