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Shapir Engineering and Industry Ltd.

Interim Report for the First Quarter of the Year 2026

Shapir Engineering and Industry Ltd.

Interim Report for the First Quarter of the Year 2026

Part A - Material changes and developments that occurred in the company's business

Part B - Board of Directors report on the state of the company's affairs

Part C - Condensed consolidated financial statements as of March 31, 2026 and separate interim financial information as of March 31, 2026

Part D - Report on the effectiveness of internal control over financial reporting and disclosure

Part A

Material changes and developments that occurred in the company's business

Part A

Material changes and developments that occurred in the corporation's business

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Part A

Material changes and developments that occurred in the corporation's business

Material changes and developments that occurred in the Company's business which must be described in the Periodic report

According to Regulation 39A of the Securities Regulations (Periodic and Immediate Reports), 1970 (hereinafter: the "Reports Regulations"), below is a detail of the material changes or developments that occurred in the business of Shapir Engineering and Industry Ltd. (hereinafter: the "Company"), in relation to the description in Part A of the Company's annual report for the year 2025 which was published on March 19, 2026 (reference no.: 2026-01-024401 (hereinafter: the "Annual Report")). Terms used below shall have the meaning ascribed to them in the Annual Report, unless expressly stated otherwise.

This chapter of the Periodic report is prepared under the assumption that the reader has the Company's Annual Report in front of them.

1. Franchising (Agreement with institutional entities - the Company's rights in several franchise projects) - Section 10.6.2 of Part A of the Annual Report

Further to the details in Section 10.1.16 of Part A of the Company's Annual Report for the year 2025, as published on March 19, 2026 (reference no.: 2026-01-024401), regarding the entering into a memorandum of understanding with institutional entities in connection with the Company's rights in several franchise projects, the Company updates as follows:

1.1. The Engagement - On May 20, 2026, the Company entered into an agreement with Migdal Insurance Company Ltd. and three veteran pension funds under arrangement managed by Amitim Pension Funds ("the Institutional Entities") for the sale of units in a partnership (as the terms are defined below) to which the rights and/or holdings of Shapir Civil and Marine Engineering Ltd. ("Shapir Civil and Marine Engineering"), a company fully owned and controlled by the Company, in several franchise projects where the client is an entity on behalf of the State of Israel, will be transferred. Within the framework of the transaction and on the completion date: (1) Shapir Civil and Marine Engineering will transfer its share in the equity and in the owner loans and capital notes in the franchise companies detailed below ("the Project Companies") to a designated limited partnership established by it and under its management ("the Partnership") and (2) will sell to the Institutional Entities limited partnership units ("the Units") in the Partnership, each separately and without mutual liability or guarantee between them.

1.2. The rights and/or holdings of Shapir Civil and Marine Engineering in the Project Companies (the share of Shapir Civil and Marine Engineering) which will be transferred to the Partnership are: (1) 6 - Cross North Ltd. (the franchisee in the Highway 6 North project (sections 3+7)), (2) Derech Nof - Highway 16 Ltd. (the franchisee in the Highway 16 project), and (3) The Fast Lane Ltd. (the franchisee in the Fast Lane project). For details regarding these projects and the Company's holdings in them, see Sections 10.7, 10.8, and 10.9 of Part A of the Company's Annual Report for the year 2025.

1.3.

The Consideration - According to the agreement, the Institutional Entities will purchase rights in the limited partnership at a rate of 38.5%. It was agreed between the parties that, as of the date of the agreement, the consideration for each 1% of the units sold to the Institutional Entities will stand at a sum of 9.5 million NIS, so that the total consideration to the Company is expected to stand at approximately 366 million NIS, subject to: (1) deduction of certain distributions made by the Project Companies from the end of the third quarter of 2025 until the completion date, (2) addition of interest that will be added to the consideration from the date of signing this agreement until the transaction completion date (but in any case no interest will be paid for a period exceeding 120 days), and (3) a consideration adjustment mechanism (for reduction or increase) regarding and referring to the distribution cash flow resulting from the various projects in practice compared to the forecasts for the transaction completion date.

1.4. General

1.4.1. Within the framework of the agreement for the sale of units in the partnership, standard declarations for such transactions were included regarding the business status of the franchise companies, various representations in relation to them, provisions regarding the management of the Project Companies in the interim period from the date of signing this agreement until the transaction completion date, general and specific indemnification clauses for the occurrence of various events, etc. It was also determined in the agreement that if all the conditions precedent are not met by the end of 120 days from the date of signing the agreement, subject to the possibility of each party extending the said period by two additional periods of 60 days, each party shall be entitled to cancel the agreement.

1.4.2. In addition to the aforementioned agreements, the parties will enter into a partnership agreement on the transaction completion date. This agreement includes references to the rights and obligations of the partners (the general and the limited) in the partnership, decision-making in the partnership (including a list of veto rights as customary in these transactions), as well as rules regarding the financing of the partnership and regulation of change provisions and additional ventures that will be granted to the Project Companies. Accepted principles in such engagements were also established in the partnership agreement regarding restrictions on the transfer of rights, including a lock-up period for the transfer of Shapir Civil and Marine Engineering's rights in the partnership and the rights of the purchasers as limited partners, tag-along rights, forced sale (drag-along), etc.

1.4.3. In addition, provisions were established in the partnership agreement regarding its management through the General Partner.

1.4.3.1. Management and control of the partnership and its activity shall be granted exclusively to the General Partner (which is fully owned by Shapir Civil and Marine Engineering), which will manage the partnership's assets, and shall have the authority to execute and perform all actions and enter into all agreements required for the performance of the partnership's purposes, as long as in the General Partner's opinion this is necessary and/or beneficial for achieving the partnership's goals, activity, and business.

1.4.3.2. The General Partner shall not be entitled to perform a transfer of the General Partner's rights in the partnership, in whole or in part, or to resign from its role as General Partner.

1.4.3.3. Until the end of five years from the date of signing the partnership agreement ("the end of the lock-up period"), Shapir Civil and Marine Engineering shall not transfer its holdings in the General Partner ("transfer of holdings in the General Partner") and shall not fall below 40% in holdings of a limited partner in the partnership without receiving the prior written consent of all the limited partners who are not interested parties in the General Partner.

1.4.3.4. After the end of the lock-up period, Shapir Civil and Marine Engineering shall be entitled to perform a transfer of holdings in the General Partner subject to conditions customary in such matters so that the recipient of the holdings in the General Partner shall be acceptable to the other partners in the partnership and complies with any law and agreement applicable to it.

commitments of the franchisee companies and subject to the fact that at the same time it will also sell its holdings as a limited partner in the partnership.

1.4.3.5. The limited partners shall be entitled, at any time, by a decision of limited partners holding 85% of the partnership (excluding the share of partners who breached an investment commitment to the partnership and also the share of the limited partners who are interested parties in the General Partner), to replace the General Partner and appoint a replacement for it according to the discretion of the said limited partners.

1.5. Completion of the said transaction is subject to several conditions precedent, and among others, receiving all approvals required from third parties (including the clients and the financing entities in the projects as well as the Competition Authority, as required, and the Tax Authority) for the completion of the transaction.

1.6. It should be emphasized that as of this date there is no certainty that the conditions precedent for the completion of the said transaction will be met and/or that it will be completed.

2. Projects (franchises) under construction in full consolidation - Section 10.6.2 of Part A of the Annual Report

Further to the statements in Section 10.6.2 of Part A of the Annual Report regarding holdings in subsidiaries that establish networks for natural gas distribution - on April 20, 2026, the Company (through a subsidiary) entered into a memorandum of understanding with an unrelated third party (a company operating in the infrastructure sector in Israel) ("the Purchaser") for the sale of all its rights and holdings in two companies holding a license for the construction, maintenance, and operation of a natural gas distribution network, either by way of selling all activity or by way of selling the shares in the distribution companies as detailed below:

2.1. Super N.G. Natural Gas Distribution Company Ltd., a company fully held (100%) by the Company, holding a license from the Ministry of Energy for the construction, maintenance, and operation of a natural gas distribution network in the Central region (the area bounded between Netanya in the north and Gedera in the south). The license period is 25 years which began on November 1, 2009 and ends in 2034. ("Super N.G. Central").

2.2. And - Super N.G. Hadera and the Valleys Ltd. - a natural gas distribution company fully held (100%) by the Company, holding a license for the construction, maintenance, and operation of a natural gas distribution network in the North region (the area bounded between the area north of Netanya and the area south of Haifa). The license period is 25 years which began on April 21, 2013 and ends in 2038. ("Super N.G. Hadera"). (hereinafter together - "Super N.G. companies" or "the Distribution companies").

According to the memorandum of understanding, on the transaction completion date, the Company will sell and transfer to the Purchaser all the rights, assets, liabilities, and licenses in the Super N.G. companies ("the Sold Rights").

The consideration for all the Sold Rights was set between the parties at a total of 230 million NIS which will be paid on the transaction completion date. It was agreed that the consideration is subject to a settlement mechanism between the parties in relation to the transaction price, so that the consideration agreed upon at the time of entering into binding agreements will decrease or increase according to adjustment mechanisms (relative to the date set in the memorandum of understanding) including an adjustment mechanism, commitments of the franchisee companies and subject to the fact that at the same time it will also sell its holdings as a limited partner in the partnership.

for and/or in connection with meeting the connection of future customers according to a list of customers attached to the memorandum of understanding.

In addition, the Company shall be entitled to additional consideration for additional proceeds which will be received from the State at the end of the license periods of the distribution companies (or at earlier dates), to which the distribution companies are entitled according to the provisions of their licenses (or by law or by agreement with the State), including but not limited to, for the scrap value of the Super N.G. companies' projects, and also in the event that the Purchaser reaches an agreement with the State regarding the extension of the distribution license periods, where the calculation and determination of the additional consideration to the Company shall be according to the adjustment and decision mechanisms set in the memorandum of understanding.

In addition, the Purchaser was given an option to purchase the Company's share in the scrap value of the Super N.G. Central license and in the scrap value of the Super N.G. Hadera license as an alternative to the additional consideration for the scrap value of the distribution companies as detailed above. The option shall be valid for a period of 5 years from the transaction completion date, where in case of exercising this option, the Purchaser will pay the Company a total of 130 million NIS plus 9% per year from the determining date (as set in the memorandum of understanding) until the date of exercising the option.

Exclusivity Period - Within the framework of the memorandum of understanding, the Company undertook to provide exclusivity to the Purchaser for the purchase of rights in the distribution companies during a limited period during which the Purchaser will perform due diligence and conduct negotiations regarding the transaction of purchasing the rights subject to this memorandum.

The completion of the said sale transaction, to the extent that a binding agreement is signed regarding it in the future, is subject to several conditions precedent, including the completion of due diligence by the Purchaser, additional conditions to be agreed upon by the parties, approval of the transaction by the competent organs of the parties, and receiving all approvals required from third parties according to any law for the completion of the transaction.

In addition, reporting and improvement mechanisms for the Purchaser were established in the memorandum of understanding and will be established in the detailed agreement for the interim period from the date of signing the memorandum of understanding until the transaction completion date, as customary in transactions of this nature.

The parties agreed that the principles of the memorandum of understanding do not constitute a binding offer and will serve only as a basis for negotiations towards entering into a detailed agreement. Each of the parties shall be entitled to terminate the negotiations on the detailed agreement at any time it sees fit, with or without reason, at its sole discretion, and the other party shall have no claim, demand, or suit against the party that terminated the negotiations and/or anyone on its behalf due to or in connection with the negotiations and/or their termination as stated and the termination of negotiations shall not be seen as bad faith or another cause granting any relief.

At this early stage, in light of the due diligence process which has not yet been completed, the continued negotiation regarding the transaction terms and the conditions for transaction completion, including the complexity of the consideration components as established in principle in the memorandum of understanding and the tax implications, the Company is unable to estimate the impact (if any) of the transaction on its financial statements upon transaction completion, to the extent it is completed.

Accordingly, it should be emphasized that as of this date there is no certainty that a binding agreement will be signed following the memorandum of understanding and/or that the terms of such an agreement, to the extent signed, will not be different (even materially) from the terms of the memorandum of understanding, and/or that the conditions precedent for the completion of the transaction subject to the agreement will be met and/or that the transaction will be completed.

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3. Investment in Paz Ashdod Refinery Ltd. - Petition - Section 14.2.7 of Part A of the Annual Report

Further to what is stated in section 14.2.7 of Part A of the annual report regarding a petition to the Supreme Court and a settlement agreement reached by the parties regarding the Company's holdings in Ashdod Refinery - on April 29, 2026, the Supreme Court gave the force of a decision to the parties' agreements in the proceeding, according to which the period specified in the settlement agreement for choosing the action required by the Company in the proceeding was extended until July 30, 2026.

4. Investment in Paz Ashdod Refinery Ltd. - Section 14.2.2.4 of Part A of the Annual Report

Further to the details in section 14.2.2.2 of Part A of the annual report, regarding the purchase agreement for shares of Ashdod Refinery Ltd. ("Ashdod Refinery") including the purchase options granted to the Company within the framework of the said agreement and regarding a request for obtaining a control permit in Ashdod Refinery - in May 2026 and within the framework of preliminary proceedings to examine the possibility of exercising any of the options granted to the Company within the framework of the agreement, the Company is promoting the request for a holding permit in control means and for obtaining a control permit in Ashdod Refinery and this in accordance with the Interests Order as defined therein. It will be clarified that as of this date, the Company has not yet made any decision regarding the exercise of any of the aforementioned options.

Part B

Board of Directors' Report on the State of the Company's Affairs as of 31.03.2026

Shapir Engineering and Industry Ltd.

Board of Directors' Report on the State

of the Corporation's Affairs

as of March 31, 2026

Board of Directors' Report on the State of the Corporation's Affairs

The Board of Directors of Shapir Engineering and Industry Ltd. (hereinafter: the "Company") is honored to submit herewith the Board of Directors' report on the state of the Company's affairs as of March 31, 2026, in accordance with the Securities Regulations (Periodic reports and Immediate Reports), 1970. This Board of Directors' report was prepared on the assumption that the reader has before them the Board of Directors' report on the state of the Company's affairs as of December 31, 2025, the description of the corporation's business as included in Part A of the annual report of the Company for the year 2025, and the Company's financial statements as of December 31, 2025 (hereinafter: the "Annual Board of Directors Report", the "Annual Periodic report", and the "Annual Financial Statements", respectively).

All definitions set in Chapter A of this annual report also apply to this chapter, unless expressly stated otherwise.

A - Board of Directors' Explanations on the State of the Corporation's Business

1. The Corporation and Its Business Environment

1.1. General

The Company operates through subsidiaries (the Company and the subsidiaries hereinafter: the "Group" or the "Company") in the fields of industry, infrastructure, concessions, real estate, logistics, as well as in additional activities that interface with and/or complement the Group's fields of activity.

Except where explicitly stated otherwise, all data in the Board of Directors' report refers to the Group's consolidated data. The Group began its activities in 1968, performing complex projects in all fields of construction, development, and infrastructure.

As part of its current activity, the Group is involved in performing diverse projects for establishing infrastructure in Israel such as: establishing tracks and systems for light rails and their operation, paving roads, building interchanges, tunnels, bridges, and integrated works. As part of this activity, the Group competes in tenders for their establishment and operation for long periods, of projects of various scales, in a concession model.

Additionally, the Group operates in the industry field, in mining and quarrying to produce quarry materials, as well as in the production and transport of cement and concrete products and asphalt, construction iron, and dedicated piping.

Furthermore, the Group has activity in the real estate field, selling or leasing residential apartments and office and commercial space, and activity in the assisted living field. Starting from 2022, the Company also operates in the logistics field, primarily in providing various types of international shipping services, customs brokerage, storage services, inventory management, and distribution.

1.2. The Group's Fields of Activity

The Group operates in five main fields of activity, which are reported as reportable business segments in the Company's financial statements (for details see Note 34 to the Annual Financial Statements):

a. Industry - production, import, sale, and transport of raw materials - production and supply of various raw materials for the construction and infrastructure industry, including quarry materials, ready-mix concrete, asphalt, cement, construction iron, piping, and precast elements.

b. Infrastructure - execution of projects for establishing infrastructure and buildings in Israel, including building bridges, interchanges, paving roads, railway systems, maritime works, residential construction, public construction, commercial construction, and more.

c. Concessions - establishment and operation of large-scale projects funded by the private sector instead of public funding (PPP projects in BOT and/or PFI format) by way of concession.

d. Real Estate - activity in the field of development, planning, establishment, and sale or lease of residential apartments, commercial and office space, and activity in the assisted living field.

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Board of Directors' Report on the State of the Corporation's Affairs

E. Logistics - activity in the field of providing various types of international shipping services, customs brokerage, sensitive shipments, storage services, inventory management, and distribution.

In addition, the Group has other business activities that do not amount to reportable segments, reported under other items, including, among others, oil exploration activity. For further details regarding other activities of the Group, see section 14 of the Annual Periodic report.

1.3. "Roar of the Lion" War

For details see Note 4C in the financial statements

1.4. Material events after the date of the financial report

For details and additional material events after the date of the financial report, see Note 4 in the financial statements.

2. FINANCIAL POSITION

Below are the main data from the Group's balance sheet items:

2.1. Current Assets

Item	Balance as of March 31		Balance	Total change relative to		Company explanations for changes relative to the 2025 Annual Report
	2026	2025	As of December 31, 2025	December 31, 2025
	In NIS millions				In %
Cash and cash equivalents	361	457	613	(252)	(41%)	See section 4.2 below, analysis of cash flows
Deposits in banking and financial corporations	81	75	135	(54)	(40%)	Mainly decrease due to repayment of restricted deposits
Trade receivables and accrued income	1,708	1,614	1,648	60	4%	Mainly growth in accrued income from projects
Inventory of buildings and apartments for sale	1,048	598	1,003	45	4%	Affected by reclassification from inventory of land for construction and apartments under construction for rent according to project progress
Financial assets	535	380	490	45	9%	Mainly increase from investments in the Government Quarter project
Debtors, debit balances and others	568	728	528	40	8%	Mainly growth due to increase in prepaid expenses and advances to suppliers
Total current assets	4,301	3,852	4,417	(116)	(3%)

Board of Directors' Report on the State of the Corporation's Affairs

2.2. Non-current assets

Item	Balance as of March 31		Balance as of December 31, 2025	Total change relative to December 31, 2025		Company explanations for changes relative to the 2025 Annual Report
	2026	2025	2025		In %
	In NIS millions

Inventory of land for construction and apartments under construction for rent	1,563	1,805	1,635	(72)	(4%)	See inventory of buildings and apartments for sale section above
Financial assets	3,117	3,201	3,154	(37)	(1%)	The decrease is in accordance with the contractual payment schedules in the various projects
Financial assets at fair value through other comprehensive income	111	67	74	37	50%	Investment in Ashdod refinery shares
Right-of-use asset	342	393	360	(18)	(5%)	No material change compared to the balance as of 12/31/2025
Intangible assets	546	580	553	(7)	(1%)	For details see Note 13 to the annual financial statements
Goodwill	299	298	300	(1)	-	For details see Note 12 to the annual financial statements
Fixed assets	1,096	978	1,080	16	1%	No material change compared to the balance as of 12/31/2025
Investment property and investment property under construction	4,509	3,852	4,417	92	2%	The growth results mainly from investments for the development and construction of assisted living facilities
Investment in held companies	637	312	638	(1)	-	No material change compared to the balance as of 12/31/2025
Other non-current assets	346	473	331	15	5%	Mainly growth in deferred taxes item
Total non-current assets	12,566	11,959	12,542	24	-
Total assets	16,867	15,811	16,959	(92)	(1%)

Board of Directors' Report on the State of the Corporation's Affairs

2.3. Current liabilities

Item	Balance as of March 31		Balance as of December 31, 2025	Total change relative to December 31, 2025		Company explanations for changes relative to the 2025 Annual Report
	2026	2025			In %
	In NIS millions
Credit from financial corporations	1,051	705	991	60	6%	Main growth in credit was used to finance work progress in projects
Current maturities of non-current liabilities	1,259	623	674	585	87%	The increase is in accordance with the debt repayment schedules, mainly due to credit received for the purchase of real estate asset lands which is expected to be renewed and/or become project support credit according to the company's work plans
Liabilities for works in construction contracts	133	216	173	(40)	(23%)	The change is in accordance with progress in various projects
Deposits from tenants	841	667	817	24	(3%)	The increase results from improvement in occupancy rate and collection of new contractual deposits
Advances from apartment buyers	43	18	69	(26)	(38%)	Mainly decrease due to progress in project execution
Suppliers	807	730	885	(78)	(9%)	Mainly decrease results from repayment of debt for increased purchases made at the end of 2025
Payables and credit balances	348	391	429	(81)	(19%)	Mainly decrease in tax and VAT liabilities
Total current liabilities	4,482	3,350	4,038	444	11%

Board of Directors' Report on the State of the Corporation's Affairs

2.4. Non-current liabilities

Item	Balance as of March 31		Balance as of December 31, 2025	Total change relative to December 31, 2025	Company explanations for changes relative to the 2025 Annual Report
	2026	2025
	In NIS millions					In %
Loans from banking and financial corporations	2,673	3,128	3,251	(578)	(18%)	See current maturities section above
Loans for concession projects	3,457	3,472	3,506	(49)	(1%)	The decrease results from current repayments and on the other hand balance revaluation
BONDS	1,490	1,127	1,487	3	-	See Note 24 to the annual financial statements and section 5 below

Item	Balance as of March 31		Balance as of December 31, 2025	Total change relative to December 31, 2025	Company explanations for changes relative to the 2025 Annual Report
	2026	2025
	In NIS millions					In %
Lease liability	271	299	279	(8)	(3%)	No material change compared to the balance as of 12/31/2025
Liability for providing construction services	166	158	164	2	1%	Liability as part of land purchase in a real estate project and to tenants in urban renewal projects
Employee benefit liabilities	45	48	45	-	-
Deferred taxes	338	327	336	2	1%	No material change compared to the balance as of 12/31/2025
Other non-current liabilities	68	69	72	(4)	(6%)	No material change compared to the balance as of 12/31/2025
Total non-current liabilities	8,508	8,628	9,140	(632)	(7%)
Total liabilities	12,990	11,978	13,178	(188)	(1%)

2.5. Equity

Item	Balance as of March 31		Balance as of December 31, 2025	Total change relative to December 31, 2025	Company explanations for changes relative to the 2025 Annual Report
	2026	2025
	In NIS millions					In %
Total equity	3,877	3,833	3,781	96	3%	Increase due to current profits and margin due to increase in fair value through other comprehensive income

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Board of Directors' Report on the State of the Corporation's Affairs

3. Results of Business Operations

A. Below is a summary of data regarding the business results from continuing operations:

	Note	For the 3 months ended March 31		For the year ended December 31	The change between Q1 2026 and Q1 2025
		2026	2025
		NIS millions			NIS millions	in %
		2026	2025	2025
Revenues	A	1,557	1,370	6,073	187	14%
Cost of revenues		1,339	1,184	5,163	155	13%
Gross profit	B	218	186	910	32	17%
Gross profit percentage		14.0%	13.6%	15.0%
Selling and marketing expenses	C	16	14	60	2	14%
General and administrative expenses	D	85	83	335	2	2%
Other income net		1	2	118	(1)	(50%)
Operating profit		118	91	633	27	30%
Financing expenses net	E	23	26	237	(3)	(12%)
Profit after financing		95	65	396	30	46%
Group's share in losses of held companies		(16)	(25)	(15)	9	(36%)
Profit before taxes on income		79	40	381	39	98%
Taxes on income		20	19	110	1	5%
Net profit		59	21	271	38	181%
Adjusted EBITDA
---	---	---	---
Operating profit	118	91	633
Depreciation and amortization	84	76	325
Financing income in the franchise segment	40	53	259
Total adjusted EBITDA	242	220	1,217

Board of Directors' Report on the State of the Corporation's Affairs

Report regarding activity segments (NIS millions)

Segment	Q1 Revenues		Q1 Profit		Profit Rate
	2026	2025	2026	2025	2026	2025
Industry	649	636	106	92	16%	14%
Infrastructure	682	574	36	34	5%	6%
Real Estate	194	92	45	28	23%	30%
Franchise	69	69	17	16	25%	23%
Shipping and Logistics	108	108	6	8	6%	7%
Total before adjustments	1,702	1,479	210	178	12%	12%
Less inter-segment revenues:

Segment	Q1 Revenues		Q1 Profit		Profit Rate
	2026	2025	2026	2025	2026	2025
Industry	57	46
Infrastructure	87	62
Shipping and Logistics	1	1
General
Total	1,557	1,370	210	178	13%	13%

Notes to the business results operation table:

Main changes that occurred in the first three months of 2026 compared to the corresponding period in 2025

A. Revenues

The volume of revenues in the real estate segment increased by approximately NIS 102 million compared to the corresponding quarter last year, representing a growth of about 111% due to an increase in the quantity of apartments sold with the growth in entrepreneurial activity.

In addition, the volume of revenues in the infrastructure segment increased by about 16% in the total amount of NIS 83 million compared to revenues in the corresponding quarter last year. Most of the increase results from an increased pace of project execution, primarily in the Purple Line.

There is no material change in revenues in the other activity segments.

B. Gross Profit

Gross profit for the period amounts to approximately NIS 218 million compared to approximately NIS 186 million in the corresponding period last year.

The average profitability rate in Q1 2026 stands at approximately 14.0% compared to approximately 13.6% in the corresponding quarter last year. In the industry segment, there was an increase in the gross profit rate, primarily due to improvement in production efficiency.

In the real estate segment, there is an increase in total gross profit given the progress in the pace of apartment sales but a decrease in the gross profit rate due to a change in the weight of entrepreneurial projects within the segment.

Board of Directors' Report on the State of the Corporation's Affairs

C. Selling and Marketing Expenses

In Q1 2026 totaled approximately NIS 16 million compared to approximately NIS 14 million in the corresponding quarter last year.

The moderate increase is primarily due to the growth in the number of projects that entered the marketing stage in the real estate segment.

D. General and Administrative Expenses

In Q1 2026 totaled approximately NIS 85 million without material change compared to the corresponding quarter last year in which they totaled approximately NIS 83 million.

E. Financing

Total net expense for all financing items in the current quarter amounts to approximately NIS 23 million compared to approximately NIS 26 million in the corresponding quarter last year.

The decrease in financing expenses results primarily from gains on embedded derivatives and conversely a decrease in income from revaluation of foreign currency balances due to appreciation during the quarter compared to depreciation in the corresponding quarter last year.

4. Liquidity and Financing Sources

The company finances its operations from its equity and also by means of financing from banking and financial institutions and others and from the issuance of BONDS to the public. Below is the detail of the company's financing source composition:

	March 31, 2026		December 31, 2025
	NIS millions	% of total balance sheet	NIS millions	% of total balance sheet
Short-term credit from financial institutions (including current maturities regarding loans)	1,989	12%	1,341	8%
Current maturities regarding BONDS	160	1%	152	1%
Current maturities regarding loans for franchise projects	161	1%	172	1%
Long-term loans from banking and financial institutions	2,673	16%	3,251	19%
BONDS	1,490	9%	1,487	9%
Long-term loans for franchise projects	3,457	21%	3,506	21%
Total	9,930	59%	9,909	58%

4.1. Regarding the increase in current maturities see section 2.3 above.

Board of Directors' Report on the State of the Corporation's Affairs

4.2. Analysis of the Cash Flow in the first three months of 2026 compared to the corresponding period in 2025

A. Cash flow from operating activities

Cash flow used for operating activities in Q1 2026 totaled approximately NIS 71 million compared to a total of approximately NIS 258 million in the corresponding quarter in 2025.

The negative flow this quarter resulted mainly from payments to institutions, payments to suppliers originating from the increase in activity rate at the end of 2025, and from an increase in total revenues receivable from infrastructure projects which are expected to be collected during the year.

B. Cash flow from investing activities

Cash flow used for investing activities in Q1 2026 totaled approximately NIS 73 million compared to a total of approximately NIS 164 million in Q1 2025.

In the first quarter this year, the flow was used mainly for investment in investment real estate.

C. Cash flow from financing activities

Cash flow used for financing activities in Q1 2026 totaled approximately NIS 108 million. In contrast, in the corresponding period last year, cash flow originating from financing activities in the first quarter totaled approximately NIS 201 million.

The bulk of the flow for financing activities in the first quarter this year was used for repayment of loans and interest in accordance with the various repayment schedules.

4.3. Working Capital

As of March 31, 2026, the company has a working capital deficit totaling approximately NIS 181 million.

4.4. Regulation 10

The company has a working capital deficit in the amount of approximately NIS 181 million, but the company's Board of Directors determined that publishing a cash flow forecast is not required as, in its opinion, the working capital deficit was created due to an accounting registration as a current liability of revolving credit for financing land classified as non-current project inventory. This credit is expected to be repaid from the proceeds of projects to be built on these lands, as is customary in the industry and in projects of this type. Also, according to accounting rules, a total of NIS 841 million is presented regarding deposits from assisted living residents as a current liability, although there is no economic expectation that this liability will be repaid in full within a year.

5/26/2026 | 4:42:49 AM | v1.2.5

Board of Directors' Report on the State of the Corporation's Affairs

B - Specific Disclosure for BONDS holders

The Company's debt certificates - Below are details regarding the BONDS series (NIS millions)

Subject	BONDS (Series 2)	BONDS (Series 3)
Dates of issuance and series expansion	September 18, 2017, September 19, 2019, April 1, 2020, April 16, 2020	July 12, 2021 and series expansion on July 10, 2022, August 3, 2023 and November 20, 2025
par value at issuance date	806	350, 350, 400 and 121 (Total 1,221)
The par value as of 31/03/2026	359	957
Linkage terms	Not linked	Not linked
Amount of interest accrued as of 31/03/2026	2	7
Balance of the BONDS as included in the financial statements as of 31/03/2026	361	876
Market value as of 20/05/2026 (close to the report publication date)	350	871
Rating (current and at issuance date)	iA+	iA+
Interest type and rate	Annual at a fixed rate of 2.62%	Annual at a fixed rate of 2.34%
Linkage terms	Not linked	Not linked
Repayment terms	Principal: In twelve (12) consecutive annual payments, to be paid on July 5 of each of the years 2019 to 2030, such that each of the first eleven payments will be 8.3% of the par value of the principal and the twelfth and final payment will be 8.7% of the par value of the principal.
Interest: Paid in 26 installments starting January 2018, twice a year, on January 5 and July 5 of each of the years 2018 to 2030 inclusive.
As specified in Section 9 of the terms registered overleaf in the trust deed for the BONDS (Series 2), the Company shall be entitled at its initiative to call the BONDS (Series 2) for early redemption.	Principal: Sixteen (16) equal consecutive annual payments, each at the rate of 6.25% of the principal, which will be paid on November 30 of each of the years 2022 to 2037 (inclusive).
Interest: Paid in 33 installments starting November 2021, twice a year, on May 31 and November 30 of each of the years 2021 to 2037 (inclusive), where the first interest payment will be paid on November 30, 2021 and the last interest payment will be paid on November 30, 2037.
As specified in Section 9 of the terms registered overleaf in the trust deed for the BONDS (Series 3), the Company shall be entitled at its initiative to call the BONDS (Series 3) for early redemption.
Materiality	The BONDS series is material to the company	The BONDS series is material to the company
Compliance with terms	As of the date of the report and its publication, the Company complies with all the terms and obligations according to the trust deed for the BONDS (Series 2) dated September 17, 2017, no conditions have occurred that constitute grounds for calling the BONDS (Series 2) for immediate repayment, and the Company has not received notice from the trustee for the BONDS as stated regarding non-compliance with the terms and obligations under the trust deed.	As of the date of the report and its publication, the Company complies with all the terms and obligations according to the trust deed for the BONDS (Series 3) dated July 11, 2021, no conditions have occurred that constitute grounds for calling the BONDS (Series 3) for immediate repayment, and the Company has not received notice from the trustee for the BONDS as stated regarding non-compliance with the terms and obligations under the trust deed.

Subject	BONDS (Series 2)	BONDS (Series 3)
Trustee details	Hermetic Trust (1975) Ltd., 113 HaYarkon St., Tel Aviv. Phone: 03-5544553 Fax: 03-5271451. Contact persons: Merav Ofer-Oren and/or Dan Avnon; Email address [email protected]	Hermetic Trust (1975) Ltd., 113 HaYarkon St., Tel Aviv. Phone: 03-5544553 Fax: 03-5271451. Contact persons: Merav Ofer-Oren and/or Dan Avnon; Email address [email protected]

Board of Directors' Report on the State of the Corporation's Affairs

Subject	BONDS (Series 4)
Dates of issuance and series expansion	July 30, 2025 and November 20, 2025
par value at issuance date	300 and 100 (Total 400)
The par value as of 31/03/2026	400
Linkage terms	Not linked
Amount of interest accrued as of 31/03/2026	14
Balance of the BONDS as included in the financial statements as of 31/03/2026	414
Market value as of 20/05/2026 (close to the report publication date)	422
Rating (current and at issuance date)	iIA+
Interest type and rate	Annual at a fixed rate of 5.22%
Linkage terms	Not linked
Repayment terms	Principal: Thirteen (13) consecutive annual payments, to be paid on October 3 of each of the years 2028 to 2040 such that each of the first four payments will be 7% of the par value of the principal, and each of the last nine payments will be 8% of the par value of the principal. Interest: Paid in 31 installments starting October 2025, twice a year, on October 3 and April 3 of each of the years 2025 to 2040 inclusive. As specified in Section 9 of the terms registered overleaf in the trust deed for the BONDS (Series 4), the Company shall be entitled at its initiative to call the BONDS (Series 4) for early redemption.
Materiality	The BONDS series is material to the company

Subject	BONDS (Series 4)
Compliance with terms	As of the date of the report and its publication, the Company complies with all the terms and obligations according to the trust deed for the BONDS (Series 4) dated July 30, 2025, no conditions have occurred that constitute grounds for calling the BONDS (Series 4) for immediate repayment, and the Company has not received notice from the trustee for the BONDS as stated regarding non-compliance with the terms and obligations under the trust deed.
Trustee details	Hermetic Trust (1975) Ltd., 113 HaYarkon St., Tel Aviv. Phone: 03-5544553 Fax: 03-5271451. Contact persons: Merav Ofer-Oren and/or Dan Avnon; Email address [email protected]

Subject

BONDS (Series 4)

Compliance with terms

As of the date of the report and its publication, the Company complies with all the terms and obligations according to the trust deed for the BONDS (Series 4) dated July 30, 2025, no conditions have occurred that constitute grounds for calling the BONDS (Series 4) for immediate repayment, and the Company has not received notice from the trustee for the BONDS as stated regarding non-compliance with the terms and obligations under the trust deed.

Trustee details

Hermetic Trust (1975) Ltd., 113 HaYarkon St., Tel Aviv. Phone: 03-5544553 Fax: 03-5271451. Contact persons: Merav Ofer-Oren and/or Dan Avnon; Email address [email protected]

Board of Directors' Report on the State of the Corporation's Affairs

C - Corporate Governance Aspects

6. Internal Auditor

Audit reports are prepared in writing. Audit reports are submitted to the Company's CEO and the Chairman of the Board of Directors and are discussed in the Audit Committee.

In March 2026, the work plan of the internal auditor for 2026 was discussed and approved. At the Audit Committee meeting held in May 2026, a discussion was held on audit reports 7/2025, 8/2025 which were submitted to the company as a final report during Q1 2026.

Beyond the above, no material changes have occurred regarding this matter in the annual Board of Directors' report, as defined above.

Yehuda Segev, Chairman of the Board

May 25, 2026

Harel Shapira, Director and CEO

Part C

Condensed Consolidated Financial Statements

As of 31.03.2026

Separate Interim Financial Information

As of 31.03.2026

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Shapir Engineering and Industry Ltd.
Condensed Consolidated Financial Statements as of March 31, 2026
(Unaudited)

Shapir Engineering and Industry Ltd.

Condensed Consolidated Financial Statements as of March 31, 2026

(Unaudited)

Page

Review report of the accountants 2

Condensed consolidated statements of financial position 3-4

Condensed consolidated statements of profit or loss 5

Condensed consolidated statements of comprehensive income 6

Consolidated statements of changes in equity 7-9

Condensed consolidated statements of cash flows 10-11

Notes to the condensed consolidated financial statements 12-18

KPMG Somekh Chaikin

KPMG Millennium Tower

17 Ha'arba'a St., P.O. Box 609

Tel Aviv 6100601

03 6840800

Review Report of the Independent Auditors to the Shareholders of Shapir Engineering and Industry Ltd.

Introduction

We have reviewed the accompanying condensed consolidated financial information of Shapir Engineering and Industry Ltd. and subsidiaries (hereinafter - the Company), which includes the condensed consolidated statement of financial position as of March 31, 2026 and the condensed consolidated statements of profit or loss, comprehensive income, changes in equity and cash flows for the three-month period then ended. The Board of Directors and Management are responsible for the preparation and presentation of financial information for this interim period in accordance with International Accounting Standard IAS 34 "Interim Financial Reporting", and they are also responsible for the preparation of financial information for this interim period according to Chapter D of the Securities Regulations (Periodic and Immediate Reports), 1970. Our responsibility is to express a conclusion on this interim financial information based on our review.

We have not reviewed the condensed interim financial information of consolidated companies whose assets included in the consolidation constitute approximately 48% of the total consolidated assets as of March 31, 2026, and whose revenues included in the consolidation constitute approximately 13% of the total consolidated revenues for the three-month period then ended. The condensed interim financial information of those companies was reviewed by other accountants whose review reports were provided to us and our conclusion, insofar as it relates to the financial information regarding those companies, is based on the review reports of the other accountants.

The annual consolidated financial statements of the Company as of December 31, 2025 and for the year then ended were audited by previous auditors whose report thereon dated March 18, 2026 included an unqualified opinion.

The interim financial information as of March 31, 2025 and for the three-month period then ended was reviewed by previous auditors whose report thereon dated May 28, 2025 included an unqualified conclusion.

Scope of Review

We conducted our review in accordance with Review Standard (Israel) 2410 of the Institute of Certified Public Accountants in Israel, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards in Israel and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review and the review reports of other accountants, nothing has come to our attention that causes us to believe that the aforementioned financial information is not prepared, in all material respects, in accordance with International Accounting Standard IAS 34.

In addition to what was stated in the previous paragraph, based on our review and the review reports of other accountants, nothing has come to our attention that causes us to believe that the aforementioned financial information does not comply, in all material respects, with the disclosure requirements under Chapter D of the Securities Regulations (Periodic and Immediate Reports), 1970.

Somekh Chaikin

Certified Public Accountants

Tel Aviv

May 25, 2026

KPMG Somekh Chaikin, a registered partnership in Israel and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee.

Shapir Engineering and Industry Ltd.

Condensed Consolidated Statements of Financial Position (in NIS millions)

ASSETS	As of March 31		As of December 31
	2026	2025	2025
Current Assets
Cash and cash equivalents	361	456	613
Designated cash held for the payment of BONDS	-	1	-
Restricted cash and deposits	81	75	135
Trade receivables and contract assets	1,708	1,614	1,648
Other receivables and debit balances	511	694	491
Inventory of buildings and apartments for sale	1,048	598	1,003
Financial assets and contract assets in respect of concession agreements	535	380	490
Derivative financial instruments	57	34	37
	4,301	3,852	4,417
Non-current Assets
Land inventory for construction and leased apartments	1,563	1,805	1,635
Financial assets and contract assets in respect of concession agreements	3,117	3,201	3,154
Right-of-use assets	342	393	360
Goodwill	299	298	300
Intangible assets, net	546	580	553
Property, plant and equipment, net	1,096	978	1,080
Investment property and investment property under construction	4,509	3,852	4,417
Investment in equity-accounted investees	637	312	638
Financial assets at fair value through other comprehensive income	111	67	74
Long-term loans and receivables	151	282	147
Derivative financial instruments	2	13	2
Deferred taxes	193	178	182
	12,566	11,959	12,542
Total Assets	16,867	15,811	16,959

The notes to the condensed consolidated financial statements form an integral part thereof

5/26/2026 | 4:42:51 AM | v1.2.5

Shapir Engineering and Industry Ltd.

Condensed Consolidated Statements of Financial Position (in millions of NIS)

Liabilities and Equity	As of March 31		As of December 31 2025
	2026	2025
	Unaudited		Audited
Current Liabilities
Credit from financial institutions	1,051	705	991
Current loans and accrued interest from financial institutions	938	265	350
Current loans and accrued interest for franchise projects	161	150	172
Current loans and accrued interest of BONDS	160	208	152
Liabilities for construction contract works	133	216	173
Deposits from tenants	841	667	817
Advances from apartment buyers	43	18	69
Suppliers	807	730	885
Payables and credit balances	329	369	409
Derivative financial instruments	19	22	20
	4,482	3,350	4,038
Non-Current Liabilities
Loans from financial institutions	2,673	3,128	3,251
Loans for franchise projects	3,457	3,472	3,506
BONDS	1,490	1,127	1,487
Lease liabilities	271	299	279
Liabilities for employee benefits	45	48	45
Derivative financial instruments	7	9	8
Liability to provide construction services	166	158	164
Deferred taxes	338	327	336
Other liabilities	61	60	64
	8,508	8,628	9,140
Equity
Equity attributable to owners of the parent company	3,329	3,087	3,231
Non-controlling rights	548	746	550
Total Equity	3,877	3,833	3,781

Total Liabilities and Equity	16,867	15,811	16,959

Moshe Sabovski

CFO

Harel Shapira

CEO and Director

Yehuda Segev

Chairman of the Board

May 25, 2026

Date of approval of the financial statements

The notes to the condensed consolidated financial statements form an integral part thereof

Shapir Engineering and Industry Ltd.
Condensed Consolidated Statements of Profit or Loss (in millions of NIS)

	For the three months ended March 31		For the year ended December 31
	2026	2025	2025
	Unaudited		Audited
Revenues	1,557	1,370	6,073
Cost of revenues	1,339	1,184	5,163
Gross profit	218	186	910
Selling and marketing expenses	16	14	60
General and administrative expenses	85	83	335
Other income, net	(1)	(2)	(118)
Operating profit	118	91	633
Financing expenses	113	111	562
Financing income from derivative financial instruments	(34)	(9)	(3)
Financing income	(56)	(76)	(322)
	95	65	396
Group's share in losses of held companies	16	25	15
Profit before taxes on income	79	40	381
Taxes on income	20	19	110
Profit for the period	59	21	271
Net profit for the period attributable to:
Company shareholders	56	17	235

	For the three months ended March 31		For the year ended December 31
	2026	2025	2025
	Unaudited		Audited
Non-controlling rights holders	3	4	36
	59	21	271
Net profit per share attributable to ordinary shareholders of the company:
	NIS
Basic earnings per share	0.16	0.05	0.66
Diluted earnings per share	0.15	0.05	0.65

The notes to the condensed consolidated financial statements form an integral part thereof

Shapir Engineering and Industry Ltd.

Condensed Consolidated Statements of Comprehensive Income (in millions of NIS)

	For the three months ended March 31		For the year ended December 31 2025
	2026	2025	2025
	Unaudited		Audited
Profit for the period	59	21	271
Other comprehensive income (loss)
Amounts that will not be reclassified subsequently to profit or loss, net of tax:
Remeasurements of net liability for defined benefit plan, net of tax	-	2	8
Gain from investments in equity instruments designated at fair value through other comprehensive income (loss)	37	-	7
Other comprehensive income (loss)	37	-	15
Amounts that will be reclassified subsequently to profit or loss, net of tax:
Gain (loss) for cash flow hedging, net of tax	2	18	(24)

	For the three months ended March 31		For the year ended December 31 2025
	2026	2025	2025
	Unaudited		Audited
Adjustments arising from translation of financial statements of foreign operations	(1)	4	2
Total comprehensive income for the period	97	45	264
Comprehensive income for the period attributable to:
Company shareholders	94	41	228
Non-controlling rights holders	3	4	3
	97	45	264

The notes to the condensed consolidated financial statements form an integral part thereof

Shapir Engineering and Industry Ltd.

Condensed Consolidated Statements of Changes in Equity (in millions of NIS)

For the three-month period ended March 31, 2026 (Unaudited)

	Share capital	Share premium	Capital reserve for share-based payment	Capital reserve for cash flow hedging	Capital reserve for changes in fair value of equity investments at FVTOC and others	Retained earnings	Treasury shares	Total attributable to shareholders of the Company	Non-controlling rights	Total equity
Balance as of January 1, 2026	-	474	102	25	(60)	2,692	(2)	3,231	550	3,781
Exercise of warrants for shares	-	16	(16)	-	-	-	-	-	-	-
Dividend paid	-	-	-	-	-	-	-	-	(5)	(5)
Share-based payment	-	-	4	-	-	-	-	4	-	4

	Share capital	Share premium	Capital reserve for share-based payment	Capital reserve for cash flow hedging	Capital reserve for changes in fair value of equity investments at FVTOCI and others	Retained earnings	Treasury shares	Total attributable to shareholders of the Company	Non-controlling rights	Total equity
Net profit for the period	-	-	-	-	-	56	-	56	3	59
Other comprehensive income for the period	-	-	-	2	36	-	-	38	-	38
Total comprehensive income for the period	-	-	-	2	36	56	-	94	3	97
Balance as of March 31, 2026	-	490	90	27	(24)	2,748	(2)	3,329	548	3,877

The notes to the condensed consolidated financial statements form an integral part thereof

5/26/2026 | 4:42:52 AM | v1.2.5

Shapir Engineering and Industry Ltd.

Consolidated Condensed Statements of Changes in Equity (in NIS millions)

For the three-month period ended March 31, 2025 (Unaudited)

	Share capital	Share premium	Capital reserve for share-based payment	Capital reserve for cash flow hedging	Capital reserve for changes in fair value of investments in equity instruments designated at fair value through other comprehensive income and others	Retained earnings	Company shares held by the company	Total attributable to the shareholders of the company	Non-controlling interests	Total equity
Balance as of January 1, 2025	-	464	92	49	(69)	2,587	(2)	3,121	742	3,863
Dividend declared	-	-	-	-	-	(80)	-	(80)	-	(80)
Share-based payment	-	-	5	-	-	-	-	5	-	5
Net profit for the period	-	-	-	-	-	17	-	17	4	21
Other comprehensive income for the period	-	-	-	18	4	2	-	24	-	24
Total comprehensive income for the period	-	-	-	18	4	19	-	41	4	45
Balance as of March 31, 2025	-	464	97	67	(65)	2,526	(2)	3,087	746	3,833

The notes to the consolidated condensed financial statements form an integral part thereof

Shapir Engineering and Industry Ltd.

Consolidated Condensed Statements of Changes in Equity (in NIS millions)

For the year ended December 31, 2025 (Audited)

	Share capital	Share premium	Capital reserve for share-based payment	Capital reserve for cash flow hedging	Capital reserve for changes in fair value of investments in equity instruments designated at fair value through other comprehensive income and others	Retained earnings	Company shares held by the company	Total attributable to the shareholders of the company	Non-controlling interests	Total equity
Balance as of January 1, 2025	-	464	92	49	(69)	2,587	(2)	3,121	742	3,863
Purchase of shares in a consolidated company	-	-	-	-	-	(58)	-	(58)	(227)	(285)
Exercise of warrants for shares	-	10	(10)	-	-	-	-	-	-	-
Dividend paid	-	-	-	-	-	(80)	-	(80)	(1)	(81)
Share-based payment	-	-	20	-	-	-	-	20	-	20
Net profit for the year	-	-	-	-	-	235	-	235	36	271
Other comprehensive income (loss) for the year	-	-	-	(24)	9	8	-	(7)	-	(7)
Total comprehensive income (loss) for the year	-	-	-	(24)	9	243	-	228	36	264
Balance as of December 31, 2025	-	474	102	25	(60)	2,692	(2)	3,231	550	3,781

The notes to the consolidated condensed financial statements form an integral part thereof

Shapir Engineering and Industry Ltd.

Consolidated Condensed Statements of Cash Flows (in NIS millions)

	For the three months ended March 31		For the year ended December 31 2025
	2026	2025	2025
	Unaudited		Audited
Cash flows from operating activities
Net profit for the period	59	21	271
Adjustments required to present cash flows from operating activities:
Adjustments for profit and loss items:
Depreciation and amortization	84	76	325
Company's share in losses of held companies	16	25	15
Share-based payment	4	5	20
Change in liabilities for employee benefits, net	-	1	4
Decrease (increase) in fair value of investment property	2	1	(107)
Profit from disposal of fixed assets and other income, net	(3)	(3)	(11)
Financing expenses, net	23	26	237
Income taxes	20	19	110
	146	150	593
Changes in asset and liability items:
Change in trade receivables and contract assets	(59)	5	(42)
Change in other receivables and debit balances	(38)	(120)	70
Change in inventory of buildings, apartments for sale and land for construction	34	(281)	(554)
Change in tenants' deposits	27	2	51
Change in trade payables	(89)	(14)	106
Change in derivative financial instruments	18	22	22
Change in other payables and credit balances and other liabilities	(60)	(26)	58
Change in liabilities for works under construction contracts	(40)	24	(19)
Change in advances from apartment buyers	(26)	(3)	47
	(233)	(391)	(261)
Cash paid and received during the period for:
Taxes received	-	-	3

	For the three months ended March 31		For the year ended December 31 2025
	2026	2025	2025
	Unaudited		Audited
Taxes paid	(43)	(38)	(108)
	(43)	(38)	(105)
Net cash provided by (used in) operating activities	(71)	(258)	498

The notes to the consolidated condensed financial statements form an integral part thereof

Shapir Engineering and Industry Ltd.

Consolidated Condensed Statements of Cash Flows (in NIS millions)

	For the three months ended March 31		For the year ended December 31
	2026	2025	2025
	Unaudited	Unaudited	Audited
Cash flows from investing activities
Repayment of long-term loans granted and redemption of deposits	54	37	58
Granting of long-term loans and making of deposits	(7)	(59)	(63)
Investment in financial asset	(47)	-	(93)
Receipts from financial assets	72	70	308
Investments and granting of loans to held companies	(4)	(65)	(272)
Investment in investment property and investment property under construction	(92)	(91)	(372)
Purchase of fixed assets	(54)	(63)	(295)
Proceeds from disposal of fixed assets	11	8	47
Change in cash, net, from acquisition of a consolidated company	-	-	(94)
Investment in intangible assets	(8)	(12)	(23)
Interest received	2	11	9
Net cash used in investing activities	(73)	(164)	(790)

	For the three months ended March 31		For the year ended December 31
	2026	2025	2025
	Unaudited	Unaudited	Audited
Cash flows from financing activities
Dividend paid to shareholders	-	-	(80)
Dividend paid to non-controlling interests	(5)	-	(1)
Receipt of loans from financial institutions	21	291	1,318
Repayment of loans received from financial institutions	(13)	(8)	(525)
Receipt of loans for franchise projects	17	-	54
Repayment of loans received for franchise projects	(54)	(49)	(142)
Short-term credit from financial institutions, net	62	106	38
Repayment of lease liability	(24)	(22)	(103)
Net proceeds from issuance of BONDS	-	-	297
Repayment of BONDS	-	-	(219)
Interest paid	(112)	(117)	(410)
Net cash provided by (used in) financing activities	(108)	201	227
Decrease in balance of cash and cash equivalents and restricted cash	(252)	(221)	(65)
Balance of cash and cash equivalents and restricted cash at the beginning of the period	613	678	678
Balance of cash and cash equivalents and restricted cash at the end of the period	361	457	613
Significant non-cash activity
Investment in fixed assets and investment property on credit	34	56	57
Investment in right-of-use assets against lease liabilities	13	22	13
Reclassification of a loan as a loan to a held company	-	-	105
Acquisition of non-controlling interests	-	-	285
Dividend declared	-	80	-

The notes to the consolidated condensed financial statements form an integral part thereof

5/26/2026 (4:42:54 AM) v1.2.5

Shapir Engineering and Industry Ltd.

Notes to the Condensed Consolidated Financial Statements (in NIS millions)

Note 1 - General

General description of the Company and its activities

Shapir Engineering and Industry Ltd. (hereinafter - "the Company") was incorporated in Israel on March 14, 2013.

On December 9, 2014, the Company first issued its shares on the Tel Aviv Stock Exchange. and its shares began trading on the exchange on this day. The Company, through held companies (hereinafter - "the Group"), is engaged in performing engineering, civil and marine works, in construction, sale or rental of residential apartments and office and commercial space, in initiation, construction and operation of assisted living homes for the third age population, in operation of parking lots and a toll lane, in a natural gas distribution network, in construction of commercial and public buildings and their operation, in production, sale and transport of gravel, aggregates, cement, iron, ready-mix concrete and asphalt, in performing asphalt works in industrial activity in the field of production, coating and wrapping of metal pipes and pipe fittings, activity for providing various services in the fields of international shipping and logistics and supply chain management solutions.

The Company's shares and the BONDS it issued are traded on the Tel Aviv Stock Exchange. These condensed consolidated reports should be read in the context of the Company's annual financial statements as of December 31, 2025 and for the year then ended, and the notes accompanying them (hereinafter - "the Annual Financial Statements").

Note 2 - Significant Accounting Policies

Basis for preparation of the financial statements

The condensed consolidated financial statements of the Group as of March 31, 2026 and for the three-month period then ended (hereinafter - "Interim Financial Statements") were prepared in accordance with International Accounting Standard 34 IAS, "Interim Financial Reporting". In preparing these interim financial statements, the Group applied accounting policies, presentation rules and calculation methods identical to those applied in preparing the annual financial statements. The interim financial statements were prepared in accordance with the disclosure instructions in Chapter D of the Securities Regulations (Periodic reports and Immediate reports), 1970.

Shapir Engineering and Industry Ltd.

Notes to the Condensed Consolidated Financial Statements (in NIS millions)

Note 3 - Operating Segments

Following is reporting regarding operating segments:

For the three months ended March 31, 2026

	Industry	Infrastructure	Real Estate	Concessions Unaudited	Logistics	Adjustments	Total

External revenues	592	595	194	69	107	-	1,557

	Industry	Infrastructure	Real Estate	Concessions Unaudited	Logistics	Adjustments	Total
Inter-segment revenues	57	87	-	-	1	(145)	-
Total revenues	649	682	194	69	108	(145)	1,557

Segment profit	106	36	45	17	6	-	210
Unallocated corporate expenses							(93)
Other income, net							1
Finance expenses, net							(23)
Group's share in losses of companies accounted for using the equity method, net							(16)
Profit before income taxes							79

For the three months ended March 31, 2025

	Industry	Infrastructure	Real Estate	Concessions Unaudited	Logistics	Adjustments	Total

External revenues	590	512	92	69	107	-	1,370
Inter-segment revenues	46	62	-	-	1	(109)	-
Total revenues	636	574	92	69	108	(109)	1,370

Segment profit	92	34	28	16	8	-	178
Unallocated corporate expenses							(89)
Other income, net							2
Finance expenses, net							(26)
Group's share in losses of companies accounted for using the equity method, net							(25)
Profit before income taxes							40

For the year ended December 31, 2025

	Industry	Infrastructure	Real Estate	Concessions Audited	Logistics	Adjustments	Total

External revenues	2,476	2,378	461	341	417	-	6,073
Inter-segment revenues	203	238	-	-	5	(446)	-
Total revenues	2,679	2,616	461	341	422	(446)	6,073

Segment profit	420	211	103	108	28	-	870
Unallocated corporate expenses							(355)
Other income, net							118
Finance expenses, net							(237)

	Industry	Infrastructure	Real Estate	Concessions Audited	Logistics	Adjustments	Total
Group's share in losses of companies accounted for using the equity method, net							(15)
Profit before income taxes							381

Shapir Engineering and Industry Ltd.

Notes to the Condensed Consolidated Financial Statements (in NIS millions)

Note 4 - Material events during and after the reporting period

A. Share-based payment

Further to Note 32 to the Annual Financial Statements, during the reporting period approximately 2.1 million series 2 warrants for Company shares were exercised. The adjusted exercise price for March 31, 2026 for series 1 warrants is approximately NIS 3.609 and for series B warrants, granted in 2021 and 2024, the exercise price is approximately NIS 23.209 and NIS 21.566, respectively.

B. Compliance with financial covenants

Further to Note 25 to the Annual Financial Statements, the Company and subsidiaries committed to comply with financial covenants in connection with loans and credit facilities from financial institutions and in connection with BONDS series B, C and D issued by the Company. As of the date of the report on financial position, the Company and Group companies comply with all financial covenants applicable to them, except for current credit totaling approximately NIS 67 million in a consolidated company for which a WAIVER was received from the institutions stating they will not exercise their right to call the debt for immediate repayment.

C. Operation "Lion's Roar"

On February 28, 2026, Operation "Lion's Roar" began, in which Israel and the US launched a combined attack in Iran against various targets of the regime, following which Iran responded by launching missiles and UAVs toward the State of Israel, other countries in the region and US assets in the region. Shortly thereafter, the campaign was also expanded to Lebanon following missile launches toward Israel by the Hezbollah organization (hereinafter: "the Operation"). With the start of the Operation, the Israeli government declared a special situation on the home front throughout the country, under which restrictions were imposed on conduct and contraction of economic activity, except for essential enterprises, and reserve mobilization was significantly expanded. During April 2026, a temporary ceasefire was declared. During the Operation period, the Company continued its activities with required adjustments in accordance with directives (the Company is defined as an "essential enterprise"). Operating results during the first quarter were affected to some extent by the security situation as stated, including delays in project execution, a decrease in shipping activity, a decrease in road traffic, and in demand for the Company's products. Should the fighting be renewed, there could be significant macro-economic consequences. Furthermore, this could cause specific impacts on the sectors in which the Company operates such as a shortage of skilled manpower, delay in the arrival of imported inputs, partial operation of government and municipal institutions, movement and work restrictions at sites and more.

D. For details regarding the Company's winning of the tender for financing, planning, construction, operation and maintenance of a facility for energy recovery from waste in Ne'ot Hovav, see Note 16A 9 to the Annual Financial Statements.

E. Signing of a Memorandum of Understanding for the sale of all Company rights in Super N.G. Natural Gas Distribution Company Ltd. and Super N.G. Hadera and HaAmakim Natural Gas Distribution Company Ltd.

On April 20, 2026, the Company entered, through a subsidiary, into a Memorandum of Understanding with an unrelated third party operating in the infrastructure field in Israel, for the sale of its full rights and holdings in two natural gas distribution companies - Super N.G. Center and Super N.G. Hadera (hereinafter: "the Distribution Companies"), either by way of selling activity or by way of selling shares. The Distribution Companies are wholly owned by the Company and hold licenses for construction, maintenance and operation of natural gas distribution networks in the area bounded between Netanya in the north to Gedera in the south (until 2034) and in the area bounded between the area north of Netanya to the area south of Haifa (until 2038). According to the Memorandum of Understanding, at the completion date of the transaction, full rights, assets, liabilities and licenses of the Distribution Companies will be transferred to the purchaser. The consideration includes a payment of NIS 230 million, subject to adjustment mechanisms in non-material amounts, including in connection with connection of future customers. Additionally, the Company is entitled to additional consideration, inter alia, due to change in tariffs and the value of project grants (in case of extension of license periods instead of payment for grant value, in accordance with the established mechanisms).

The purchaser was given an option, for a period of 5 years from the transaction completion date, to purchase the Company's rights in the grant value for a total of NIS 130 million plus 9% annual interest. The Company committed to a limited exclusivity period for the purpose of due diligence and negotiation. Completion of the transaction is subject, inter alia, to completion of due diligence, signing of a binding agreement, required approvals and additional suspensory conditions. The Memorandum of Understanding is non-binding, and each party may terminate negotiations at any time.

At this early stage, in light of the due diligence process not yet completed, the continuation of negotiations regarding transaction terms and the conditions for transaction completion, including the complexity of the consideration components as fundamentally established in the Memorandum of Understanding and the tax implications, the Company is unable to estimate the impact (if any) of the transaction on its financial statements upon completion of the transaction, if completed.

Shapir Engineering and Industry Ltd.

Notes to the Condensed Consolidated Financial Statements (in NIS millions)

Note 4 - Material events during and after the reporting period (continued)

F. Investment in Paz Ashdod Refinery Ltd.

Further to what is detailed in Note 17 to the Annual Financial Statements, in connection with the purchase agreement for shares of Ashdod Refinery Ltd. (hereinafter "Ashdod Refinery") including purchase warrants given to the Company within the framework of said agreement and regarding an application for a control permit in Ashdod Refinery, in May 2026 and within the framework of preliminary proceedings for examining the possibility of exercising any of the warrants granted to the Company within the framework of the agreement, the Company is promoting the application for a permit to hold control means and to receive a control permit in Ashdod Refinery in accordance with the Interest Order as defined therein. It is clarified that as of this date, the Company has not yet reached any decision regarding the exercise of any of the aforementioned warrants.

Further to Note 2C2 to the Annual Financial Statements regarding a petition to the Supreme Court and a settlement agreement reached by the parties regarding the Company's holdings in Ashdod Refinery - on April 29, 2026, the Supreme Court gave the effect of a decision to the parties' agreements in the proceeding, according to which the period detailed in the settlement agreement for choosing the action required by the Company in the proceeding was extended until July 30, 2026.

G. Further to what is detailed in Note 31F to the Annual Financial Statements, regarding entry into a Memorandum of Understanding with institutional bodies in connection with the Company's rights in several infrastructure projects, the Company updates as follows: On May 20, 2026, the Company entered with two institutional bodies (hereinafter: "the Institutional Bodies") into an agreement for the sale of Participating units (as defined below) to which the rights and/or holdings of Shapir Civil and Marine Engineering Ltd. (hereinafter: "Shapir Civil and Marine Engineering"), a company fully owned and controlled by the Company, in several franchise projects in which the client is an entity on behalf of the State of Israel, will be transferred. Within the framework of the transaction and at its completion date: (1) Shapir Civil and Marine Engineering will transfer its share in the equity and in owner loans and capital notes in the franchise companies detailed below (hereinafter: "the Project Companies") to a designated limited partnership established by it and under its management (hereinafter: "the Partnership") and (2) will sell to the Institutional Bodies limited partnership units (hereinafter: "the Units") in the Partnership, each individually and without mutual liability or guarantee between them.

The rights and/or holdings of Shapir Civil and Marine Engineering in the Project Companies (Shapir Civil and Marine Engineering's share) which will be transferred to the Partnership are: (1) 6 - Cross North Ltd. (the franchisee in the Highway 6 North project (Sections 3+7)), (2) Derech Nof - Highway 16 Ltd. (the franchisee in the Highway 16 project), and (3) The Fast Lane Ltd. (the franchisee in the Fast Lane project). For details about these projects, see Note 10(D), Note 10(F) and Note 10(G) to the Annual Financial Statements.

According to the agreement, the Institutional Bodies will purchase rights in the Partnership at a rate of 38.5%. It was determined between the parties that, as of the agreement date, the consideration for each 1% of the Units sold to the Institutional Bodies will stand at a total of NIS 9.5 million, so that the total consideration to the Company is expected to stand at approximately NIS 366 million subject to: (1) deduction of certain distributions made by the Project Companies from the end of the third quarter of 2025 until the completion date, (2) addition of interest that will be added to the consideration from the signing date of this agreement until the transaction completion date (but in any case no interest shall be paid for a period exceeding 120 days), and (3) a consideration adjustment mechanism (for reduction or increase) regarding and referring to distribution cash flows arising from the various projects in practice versus the forecast for the transaction completion date.

Within the framework of the agreement for the sale of Units in the Partnership, standard declarations in such transactions were included regarding the business status of the franchise companies, various representations regarding them, provisions regarding the management of the Project Companies in the interim period from the date of signing this agreement until the transaction completion date, general and specific indemnity clauses for the occurrence of various events, etc.

It was also determined in the agreement that should all suspensory conditions not be met by the end of 120 days from the signing date of the agreement, subject to each party's option to extend said period by two additional periods of 60 days, each party shall be entitled to cancel the agreement.

In addition to said agreements, the parties will enter into a partnership agreement at the transaction completion date. This agreement includes reference to the rights and obligations of the partners (general and limited) in the Partnership, decision-making in the Partnership (including a list of veto rights standard in these transactions) as well as rules regarding the financing of the Partnership and regulation of change provisions and additional ventures that will be given to the Project Companies. Furthermore, standard principles in such engagements were established in the partnership agreement regarding restrictions on the transfer of rights including lock-up periods for the transfer of Shapir Civil and Marine Engineering's rights in the Partnership and the rights of the purchasers as limited partners, tag-along rights, forced sale, etc.

Additionally, provisions were established in the partnership agreement regarding its management through the General Partner. Management and control in the Partnership and its actions will be granted exclusively to the General Partner (which is fully owned by Shapir Civil and Marine Engineering), which will manage the Partnership's assets, and will have the authority to execute and perform all actions and enter into all agreements required for performing the Partnership's purposes, as long as in the General Partner's opinion this is necessary and/or useful for achieving the Partnership's goals, activities and business. The General Partner shall not be entitled to perform a transfer of the General Partner's rights in the Partnership, in whole or in part, or resign from its role as General Partner.

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Shapir Engineering and Industry Ltd.

Notes to the Condensed Consolidated Financial Statements (in NIS millions)

Note 4 - Material Events During and After the Reporting Period (Cont.)

G. (Cont.)

Until the end of five years from the date of signing the partnership agreement (hereinafter: the "End of the Lock-up Period"), Shapir Civil and Marine Engineering Ltd. shall not transfer its holdings in the general partner (hereinafter: "Transfer of Holdings in the General Partner") and shall not decrease below $40\%$ in its holdings as a limited partner in the partnership, without obtaining the prior written consent of all limited partners who are not interested parties in the general partner. After the end of the lock-up period, Shapir Civil and Marine Engineering Ltd. shall be entitled to perform a Transfer of Holdings in the General Partner subject to the customary conditions in such matters so that the recipient of the holdings in the general partner shall be acceptable to the other partners in the partnership and complies with any law and agreement to which the concessionaire companies are bound, and provided that at the same date it also sells its holdings as a limited partner in the partnership.

In addition, the limited partners shall be entitled, at any time, by a decision of limited partners holding $85\%$ of the partnership (neutralizing the share of partners who breached investment obligations in the partnership as well as the share of limited partners who are interested parties in the general partner), to replace the general partner and appoint a replacement for it at the discretion of said limited partners.

The completion of the transaction as stated is subject to several suspending conditions, and among others, receiving all approvals required from third parties (including the clients and the financing bodies in the projects as well as the Competition Authority and the Tax Authority) for the completion of the transaction. It should be emphasized that as of this date there is no certainty that the suspending conditions for the completion of the transaction as stated will be met and/or that it will be completed.

Note 5 - Financial Instruments

Financial instruments which are not measured at fair value

The following table compares the book balance and the fair value of the group's financial instruments, which are presented in the financial statements not according to fair value (except for those whose amortized cost constitutes a reasonable approximation of their fair value):

	Balance in the financial statements			Fair value
	March 31 2026	March 31 2025	December 31 2025	March 31 2026	March 31 2025	December 31 2025
Financial Assets
Financial assets in BOT projects	3,652	3,580	3,644	4,061	4,041	3,970
Financial Liabilities
Interest-bearing loans	4,328	4,347	4,393	3,926	3,988	3,928
BONDS	1,650	1,335	1,639	1,614	1,251	1,627

Shapir Engineering and Industry Ltd.

Notes to the Condensed Consolidated Financial Statements (in NIS millions)

Note 5 - Financial Instruments (Cont.)

Financial instruments measured at fair value - Fair value level

As of March 31, 2026

Financial assets at fair value	Level 1	Level 2	Level 3	Total
Shares	111	-	-	111
Share warrants	-	-	45	45
Forward transactions	-	7	-	7
Embedded derivatives	-	-	7	7
Total financial assets	111	7	52	170
Financial liabilities at fair value
Embedded derivatives	-	-	(26)	(26)
Total financial liabilities	-	-	(26)	(26)
Total financial assets (liabilities) at fair value, net	111	7	26	144

As of March 31, 2025

Financial assets at fair value	Level 1	Level 2	Level 3	Total
Shares	67	-	-	67
Share warrants	-	-	15	15
Forward transactions	-	2	-	2
Embedded derivatives	-	-	30	30
Total financial assets	67	2	45	114
Financial liabilities at fair value
Embedded derivatives	-	-	(16)	(16)
Forward transactions	-	(15)	-	(15)
Total financial liabilities	-	(15)	(16)	(31)
Total financial assets (liabilities) at fair value, net	67	(13)	29	83

As of December 31, 2025

Financial assets at fair value	Level 1	Level 2	Level 3	Total
Shares	74	-	-	74
Share warrants	-	-	16	16

Financial assets at fair value	Level 1	Level 2	Level 3	Total
Forward transactions	-	14	-	14
Embedded derivatives	-	-	9	9
Total financial assets	74	14	25	113
Financial liabilities at fair value
Embedded derivatives	-	-	(28)	(28)
Total financial liabilities	-	-	(28)	(28)
Total financial assets (liabilities) at fair value, net	74	14	(3)	85

Shapir Engineering and Industry Ltd.

Notes to the Condensed Consolidated Financial Statements (in NIS millions)

Movement in financial instruments measured at fair value

Note 5 - Financial Instruments (Cont.)

For the three months ended March 31, 2026

	Shares	Derivatives and embedded derivatives	Forward transactions	Total
Balance as of January 1, 2026	74	(3)	14	85
Attribution to comprehensive income for revaluation to fair value through other comprehensive income	37	-	-	37
Finance income (expenses) regarding derivative financial instruments	-	41	(7)	34
Realization of losses	-	(12)	-	(12)
Balance as of March 31, 2026	111	26	7	144

For the three months ended March 31, 2025

	Shares	Derivatives and embedded derivatives	Forward transactions	Total
Balance as of January 1, 2025	67	2	27	96
Attribution to comprehensive income for revaluation to fair value through other comprehensive income	-	-	-	-

	Shares	Derivatives and embedded derivatives	Forward transactions	Total
Finance income (expenses) regarding derivative financial instruments	-	28	(19)	9
Realization of losses	-	(1)	(21)	(22)
Balance as of March 31, 2025	67	29	(13)	83

For the year ended December 31, 2025

	Shares	Derivatives and embedded derivatives	Forward transactions	Total
Balance as of January 1, 2025	67	1	28	96
Attribution to comprehensive income for revaluation to fair value through other comprehensive income	7	-	-	7
Finance income (expenses) regarding derivative financial instruments	-	(5)	8	3
Realization of gains (losses)	-	1	(22)	(21)
Balance as of December 31, 2025	74	(3)	14	85

The fair value of derivatives and embedded derivatives is determined by external valuators on a quarterly basis.

Shapir Engineering and Industry Ltd.
Separate Interim Financial Information as of March 31, 2026
(Unaudited)

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Shapir Engineering and Industry Ltd.

Separate interim financial information as of March 31, 2026

(Unaudited)

Page

Special report of the independent accountants 2

Separate interim financial information (unaudited):

Data on financial position 3

Data on profit or loss 4

Data on comprehensive income 5

Data on cash flows 6

Additional information 7

KPMG Somekh Chaikin

KPMG Millennium Tower

17 Ha'arba'a St., P.O. Box 609

Tel Aviv 6100601

03 684 8000

The Shareholders of Shapir Engineering and Industry Ltd.

Dear Sirs/Madams,

Subject: Special report of the independent accountants on separate interim financial information according to Regulation 38D of the Securities Regulations (Periodic and Immediate Reports), 1970

Introduction

We have reviewed the separate interim financial information presented according to Regulation 38D of the Securities Regulations (Periodic and Immediate Reports), 1970 of Shapir Engineering and Industry Ltd. (hereinafter – the Company), as of March 31, 2026 and for the three-month period then ended. The separate interim financial information is the responsibility of the Company's Board of Directors and Management. Our responsibility is to express a conclusion on the separate interim financial information for this interim period based on our review.

We did not review the separate interim financial information from the financial statements of investee companies, the total investment in which amounted to approximately NIS 58 million as of March 31, 2026, and the loss from these investee companies amounted to approximately NIS 21 million for the three-month period then ended. The separate interim financial information of those companies was reviewed by other accountants whose reports were provided to us, and our conclusion, insofar as it relates to the financial information regarding those companies, is based on the review reports of the other accountants.

The separate financial information of the Company as of December 31, 2025 and for the year then ended was audited by previous independent accountants whose reports thereon dated March 18, 2026 included an unqualified opinion.

The separate interim financial information as of March 31, 2025 and for the three-month period then ended was reviewed by previous independent accountants whose reports thereon dated May 28, 2025 included an unqualified conclusion.

Scope of Review

We conducted our review in accordance with Review Standard (Israel) 2410 of the Institute of Certified Public Accountants in Israel, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity." A review of separate interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards in Israel and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review and the review reports of other accountants, nothing has come to our attention that causes us to believe that the above separate interim financial information is not prepared, in all material respects, in accordance with the provisions of Regulation 38D of the Securities Regulations (Periodic and Immediate Reports), 1970.

Somekh Chaikin

Certified Public Accountants

Tel Aviv

May 25, 2026

KPMG Somekh Chaikin, a partnership registered in Israel and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee.

Shapir Engineering and Industry Ltd. Data on financial position (in NIS millions)

	As of March 31		As of December 31 2025
	2026	2025
	Unaudited		Audited
Current assets
Cash and cash equivalents	1	1	6
Designated cash held for payment of BONDS	-	1	-
Debtors and debit balances	-	1	1
Related parties	185	324	162
	186	327	169
Non-current assets
Related parties	1,539	1,298	1,542
Deferred taxes	2	2	2
Investment in investee companies	3,547	3,090	3,448
	5,088	4,390	4,992
	5,274	4,717	5,161
Current liabilities
Current maturities and accrued interest of BONDS	160	208	152
Creditors and credit balances	13	88	9
	173	296	161
Non-current liabilities
BONDS	1,490	1,127	1,487
Loans from financial institution	275	200	275
Employee benefit liabilities	7	7	7
	1,772	1,334	1,769
Equity attributable to the shareholders of the Company	3,329	3,087	3,231
	5,274	4,717	5,161

Moshe Sabouski
CFO

Harel Shapira
CEO and Director

Yehuda Segev
Chairman of the Board

May 25, 2026
Date of approval of the financial statements

The attached additional information constitutes an integral part of the financial data and the separate financial information.

Shapir Engineering and Industry Ltd. Data on profit or loss (in NIS millions)

	For the three months ended March 31		For the year ended December 31
	2026	2025	2025
	Unaudited		Audited
Management fee income from investee companies	7	7	35
Income from providing services to controlling shareholders	-	(*)-	1
General and administrative expenses	(6)	(6)	(32)
Finance income	19	17	70
Finance expenses	(20)	(14)	(68)
	-	4	6
Company's share in profits of investee companies	56	14	230
Profit before income taxes	56	18	236
Income tax expenses	-	(1)	(1)
Profit for the period attributable to the owners of the Company	56	17	235

(*) Amount less than NIS 0.5 million.

The attached additional information constitutes an integral part of the financial data and the separate financial information.

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Shapir Engineering and Industry Ltd.

Data on total profit (in NIS millions)

	For the three months ended March 31		For the year ended December 31
	2026	2025	2025
	Unaudited		Audited
Profit for the period attributable to owners of the company	56	17	235
Amounts that will not be reclassified subsequently to profit or loss, net of tax:
Share of other comprehensive income of investee companies, net of tax	-	2	8
Profit (loss) from investments in equity instruments designated at fair value through other comprehensive income, net of tax	37	-	7
Amounts that will be reclassified subsequently to profit or loss, net of tax:
Share of other comprehensive income (loss) of investee companies, net of tax	1	22	(22)
Total comprehensive profit for the period	94	41	228

The accompanying additional information constitutes an integral part of the financial data and the separate financial information.

Shapir Engineering and Industry Ltd.

Data on cash flows (in NIS millions)

	For the three months ended March 31		For the year ended December 31
	2026	2025	2025
	Unaudited		Audited
Cash flows from operating activities
Net profit for the period	56	17	235
Company's share in profits of investee companies, net	(56)	(14)	(230)
Financing income, net	1	(3)	(2)
Income tax expenses	-	1	1
Dividend received from investee companies	-	1	1
Changes in asset and liability items
Change in debtors and debit balances	-	(1)	(1)
Change in related parties and controlling shareholders	(1)	(1)	14
Change in creditors, credit balances and related parties	1	-	4
Cash paid during the period for:
Taxes paid	-	-	(2)
Total cash flows - operating activities	1	-	20
Cash flows from investing activities
Investments and granting of loans to investee companies, net	-	(2)	(46)
Total cash flows - investing activities	-	(2)	(46)
Cash flows from financing activities
Receipt of loan from a financial corporation	-	-	75
Dividend paid to shareholders	-	-	(80)
Net proceeds from issuance of BONDS	-	-	297
Repayment of BONDS	-	-	(219)
Interest paid	(6)	(6)	(51)
Total cash flows - financing activities	(6)	(6)	22
Total change in cash and designated cash	(5)	(8)	(4)

	For the three months ended March 31		For the year ended December 31
	2026	2025	2025
	Unaudited		Audited
Cash and cash equivalents and designated cash at beginning of period	6	10	10
Cash and cash equivalents and designated cash at end of period	1	2	6
Significant non-cash activities
Dividend declared and not yet paid	-	80	-
Investment in a subsidiary against issuance of BONDS	-	-	215

The accompanying additional information constitutes an integral part of the financial data and the separate financial information.

Shapir Engineering and Industry Ltd.

Additional Information

Note 1 - General

A. General description of the Company and its activities

Shapir Engineering and Industry Ltd. (hereinafter - "the Company") was incorporated in Israel on March 14, 2013.

On December 9, 2014, the Company first issued its shares on the Tel Aviv Stock Exchange. Its shares began trading on the stock exchange on this date.

The Company, through investee companies (hereinafter - "the Group"), is engaged in the execution of engineering, civil, and marine works, in construction, sale or rental of residential apartments and office and commercial space, in initiation, establishment, and operation of assisted living homes for the elderly population, in operation of parking lots and a toll lane, in a natural gas distribution network, in establishment of commercial and public buildings and their operation, in production, sale, and transport of gravel, aggregates, cement, iron, ready-mix concrete and asphalt, in execution of asphalt works in infrastructure activity in the field of production, coating and wrapping of metal pipes and pipe fittings, activity for providing various services in the fields of international shipping and logistics and supply chain management solutions.

The Company's shares and the BONDS it issued are traded on the Tel Aviv Stock Exchange.

B. Separate financial statements

The separate financial information of the Company is prepared in accordance with the provisions of Regulation 38D of the Securities Regulations (Periodic and Immediate Reports), 1970. This separate interim financial information should be read in the context of the Company's separate financial information as of December 31, 2025, and for the year then ended, and the additional data accompanying them.

C. Accounting policy

The separate financial information was prepared in accordance with the accounting policy detailed in Note 2 to the Company's separate financial information as of December 31, 2025, and for the year then ended.

Note 2 - Material events during and after the reporting period

See Note 4 to the Company's condensed consolidated financial statements as of March 31, 2026.

KPMG Somekh Chaikin

KPMG Millennium Tower

17 Ha'arba'a St., P.O.B. 609

Tel Aviv 6100601

03 684 8000

May 25, 2026

To:

Shapir Engineering and Industry Ltd. ("the Company")

12 Bareket, Petah Tikva

Dear Sir/Madam,

Subject: Letter of consent regarding the shelf prospectus of "Shapir Engineering and Industry Ltd." (hereinafter - the Company) dated May 30, 2025

We hereby inform you that we consent to the inclusion (including by way of reference) in the subject shelf prospectus of our reports detailed below:

Review report of the accountant/accountants from May 25, 2026, on the condensed consolidated interim financial statements as of March 31, 2026, and for the three-month period ended on that date.
Review report of the accountant/accountants from May 25, 2026, on the separate interim financial information of the Company as of March 31, 2026, and for the three-month period ended on that date.

Sincerely,

Somekh Chaikin

accountant/accountants

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Part D

Report on the Effectiveness of Internal Control over Financial Reporting and Disclosure

Shapir Engineering and Industry Ltd.

Quarterly report regarding the effectiveness of internal control over financial reporting and disclosure according to Regulation 38C(a):

Management, under the supervision of the Board of Directors of Shapir Engineering and Industry Ltd. (hereinafter - the Corporation), is responsible for the determination and maintenance of adequate internal control over financial reporting and disclosure in the corporation. In this regard, the members of management are:

Harel Shapira, General Manager;
Moshe Sabouski, CFO;

Internal control over financial reporting and disclosure includes controls and procedures existing in the corporation, which were designed by the General Manager and the most senior officer in the field of finance or under their supervision, or by those who actually perform the said functions, under the supervision of the corporation's Board of Directors, which are intended to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the reports in accordance with the provisions of the law, and to ensure that information that the corporation is required to disclose in the reports it publishes according to the provisions of the law is collected, processed, summarized, and reported at the time and in the format prescribed by law.

Internal control includes, among other things, controls and procedures designed to ensure that information that the corporation is required to disclose as stated is accumulated and transferred to the corporation's management, including the General Manager and the most senior officer in the field of finance or to those who actually perform the said functions, in order to enable decision-making at the appropriate time, with reference to the disclosure requirement.

Due to its structural limitations, internal control over financial reporting and disclosure is not intended to provide absolute assurance that a misstatement or omission of information in the reports will be prevented or detected.

In the annual report regarding the effectiveness of internal control over financial reporting and disclosure which was attached to the Periodic report for the period ended December 31, 2025 (hereinafter - the Last Annual Report on Internal Control), the Board of Directors and management evaluated the internal control in the corporation; based on this evaluation, the Board of Directors and the corporation's management reached the conclusion that the internal control as stated, as of December 31, 2025, is effective.

Until the date of the report, no event or matter was brought to the attention of the Board of Directors and management that would change the evaluation of the effectiveness of internal control, as presented in the Last Annual Report on Internal Control;

As of the date of the report, based on the evaluation of the effectiveness of the internal control in the Last Annual Report on Internal Control, and based on information brought to the attention of the management and the Board of Directors as stated above, the internal control is effective;

Executive Declaration

Declaration of General Manager according to Regulation 38C(d)(1):

I, Harel Shapira, declare that:

I have examined the quarterly report of Shapir Engineering and Industry Ltd. (hereinafter - the Corporation) for the first quarter of 2026 (hereinafter - the reports);

To my knowledge, the reports do not include any misrepresentation of a material fact and do not lack a representation of a material fact necessary so that the representations included in them, in light of the circumstances in which those representations were included, will not be misleading with respect to the period of the reports;
To my knowledge, the financial statements and other financial information included in the reports fairly reflect, in all material respects, the financial position, results of operations, and cash flows of the corporation for the dates and periods to which the reports refer;
I have disclosed to the corporation's auditor, to the Board of Directors and to the Audit and Financial Statements Committee of the corporation, based on my most recent evaluation of the internal control over financial reporting and disclosure:

A. All significant deficiencies and material weaknesses in the determination or operation of the internal control over financial reporting and disclosure that could reasonably adversely affect the corporation's ability to collect, process, summarize, or report financial information in a manner that casts doubt on the reliability of the financial reporting and the preparation of the financial statements in accordance with the provisions of the law; and also -

B. Any fraud, whether material or not material, involving the General Manager or those directly subordinate to him or other employees who have a significant role in the internal control over financial reporting and disclosure;

I, alone or together with others in the corporation:

B. Have established controls and procedures, or ensured the determination and existence under my supervision of controls and procedures, designed to provide reasonable assurance as to the reliability of financial reporting and the preparation of financial statements in accordance with the provisions of the law, including in accordance with accepted accounting principles.

C. No event or matter that occurred during the period between the date of the last report (quarterly or periodic, as the case may be) and the date of this report has been brought to my attention, which would change the conclusion of the Board of Directors and management regarding the effectiveness of the internal control over financial reporting and disclosure of the corporation.

The above does not derogate from my responsibility or the responsibility of any other person, under any law.

May 25, 2026

Harel Shapira, CEO

Executive Declaration

Declaration of the most senior officer in the field of finance according to Regulation 38C(d) (2):

I, Moshe Sabouski, declare that:

I have examined the interim financial statements and other financial information included in the reports for the interim period of Shapir Engineering and Industry Ltd. (hereinafter - the Corporation) for the first quarter of 2026 (hereinafter - "the Reports" or "the Interim Reports");
To my knowledge, the interim financial statements and other financial information included in the reports for the interim period do not include any misrepresentation of a material fact and do not lack a representation of a material fact necessary so that the representations included in them, in light of the circumstances in which those representations were included, will not be misleading with respect to the period of the reports;
To my knowledge, the interim financial statements and other financial information included in the reports for the interim period fairly reflect, in all material respects, the financial position, results of operations, and cash flows of the corporation for the dates and periods to which the reports refer;
I have disclosed to the corporation's auditor, to the Board of Directors and to the Audit and Financial Statements Committee of the corporation, based on my most recent evaluation of the internal control over financial reporting and disclosure :

A. All significant deficiencies and material weaknesses in the determination or operation of the internal control over financial reporting and disclosure as it relates to the interim financial statements and other financial information included in the reports for the interim period, which could reasonably adversely affect the corporation's ability to collect, process, summarize, or report financial information in a manner that casts doubt on the reliability of the financial reporting and the preparation of the financial statements in accordance with the provisions of the law; and also -
B. Any fraud, whether material or not material, involving the General Manager or those directly subordinate to him or other employees who have a significant role in the internal control over financial reporting and disclosure.

I, alone or together with others in the corporation -

A. Have established controls and procedures, or ensured the determination and existence under my supervision of controls and procedures, designed to ensure that material information relating to the corporation, including its consolidated companies as defined in the Securities Regulations (Annual Financial Statements), 2010, is brought to my attention by others in the corporation and in the consolidated companies, particularly during the period of preparation of the reports; and also -
B. Have established controls and procedures, or ensured the determination and existence under my supervision of controls and procedures, designed to provide reasonable assurance as to the reliability of financial reporting and the preparation of financial statements in accordance with the provisions of the law, including in accordance with accepted accounting principles;
C. No event or matter that occurred during the period between the date of the last report (quarterly or periodic, as the case may be) and the date of this report, relating to the interim financial statements and any other financial information included in the reports for the interim period, has been brought to my attention, which would change, in my evaluation, the conclusions of the Board of Directors and management regarding the effectiveness of the internal control over financial reporting and disclosure of the corporation.

The above does not derogate from my responsibility or the responsibility of any other person, under any law.

May 25, 2026

Moshe Sabouski, CFO

5/26/2026 | 4:43:00 AM | v1.2.5

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Shapir Engineering — Interim / Quarterly Report 2026

7044_rns_2026-05-26_8255d09f-920a-4f52-9325-6f3c13670d2b.pdf

Shapir Engineering and Industry Ltd.

Shapir Engineering and Industry Ltd.

Interim Report for the First Quarter of the Year 2026

Part A

Part A

Material changes and developments that occurred in the corporation's business

Part A

Material changes and developments that occurred in the corporation's business

Material changes and developments that occurred in the Company's business which must be described in the Periodic report

1. Franchising (Agreement with institutional entities - the Company's rights in several franchise projects) - Section 10.6.2 of Part A of the Annual Report

1.4. General

2. Projects (franchises) under construction in full consolidation - Section 10.6.2 of Part A of the Annual Report

3. Investment in Paz Ashdod Refinery Ltd. - Petition - Section 14.2.7 of Part A of the Annual Report

4. Investment in Paz Ashdod Refinery Ltd. - Section 14.2.2.4 of Part A of the Annual Report

Board of Directors' Report on the State of the Company's Affairs as of 31.03.2026

of the Corporation's Affairs

Board of Directors' Report on the State of the Corporation's Affairs

A - Board of Directors' Explanations on the State of the Corporation's Business

1. The Corporation and Its Business Environment

1.1. General

1.2. The Group's Fields of Activity

1.3. "Roar of the Lion" War

1.4. Material events after the date of the financial report

2. FINANCIAL POSITION

2.1. Current Assets

2.2. Non-current assets

2.3. Current liabilities

2.4. Non-current liabilities

2.5. Equity

3. Results of Business Operations

Board of Directors' Report on the State of the Corporation's Affairs

Notes to the business results operation table:

A. Revenues

B. Gross Profit

C. Selling and Marketing Expenses

D. General and Administrative Expenses

E. Financing

4. Liquidity and Financing Sources

4.2. Analysis of the Cash Flow in the first three months of 2026 compared to the corresponding period in 2025

A. Cash flow from operating activities

B. Cash flow from investing activities

C. Cash flow from financing activities

4.3. Working Capital

4.4. Regulation 10

B - Specific Disclosure for BONDS holders

C - Corporate Governance Aspects

6. Internal Auditor

Part C

Condensed Consolidated Financial Statements

Separate Interim Financial Information

Shapir Engineering and Industry Ltd.

Condensed Consolidated Financial Statements as of March 31, 2026

(Unaudited)

Table of Contents

Review Report of the Independent Auditors to the Shareholders of Shapir Engineering and Industry Ltd.

Introduction

Scope of Review

Conclusion

Somekh Chaikin

Shapir Engineering and Industry Ltd.

Condensed Consolidated Statements of Financial Position (in millions of NIS)

Shapir Engineering and Industry Ltd.

Condensed Consolidated Statements of Comprehensive Income (in millions of NIS)

Shapir Engineering and Industry Ltd.

Condensed Consolidated Statements of Changes in Equity (in millions of NIS)

Shapir Engineering and Industry Ltd.

Consolidated Condensed Statements of Changes in Equity (in NIS millions)

Shapir Engineering and Industry Ltd.

Consolidated Condensed Statements of Changes in Equity (in NIS millions)

Shapir Engineering and Industry Ltd.

Consolidated Condensed Statements of Cash Flows (in NIS millions)

Shapir Engineering and Industry Ltd.

Notes to the Condensed Consolidated Financial Statements (in NIS millions)

Note 1 - General

General description of the Company and its activities

Note 2 - Significant Accounting Policies

Basis for preparation of the financial statements

Shapir Engineering Interim / Quarterly Report 2026