307877_q3_2014_en_il0005760173

Israel Corporation Ltd.

Condensed Consolidated Interim Financial Statements

As at September 30, 2014

(UNAUDITED)

The English financial statements are a translation for the convenience of the reader.

The binding version is the original in Hebrew

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Contents

Part A Report of the Corporations Board Directors regarding the State of the Corporations

Affairs for the nine months ended September 30, 2014 Part B Condensed Interim Consolidated Financial Statements as at September 30, 2014

(unaudited) Part C Condensed Interim Separate-Company Financial Statements of the Corporation as at

September 30, 2014 (unaudited) Part D Quarterly Report regarding Effectiveness of the Internal Control over the Financial

Reporting and Disclosure in accordance with Regulation 38C(a)

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1

Report of the Corporations Board of Directors

For the Nine Months Ended September 30, 2014 Israel Corporation Ltd. (hereinafter the Corporation) is a holding company engaged in the initiation, promotion and development of businesses in and outside Israel. The Corporation, including through investee companies, has investments in companies and ventures in various activity sectors, including foreign ventures and international operations, where the focus is on entities having broad-scoped activities or with the potential for reaching such dimensions, and with any eye toward acquiring significant holdings therein. The Corporation is a public company and its shares are traded on the Tel-Aviv Stock Exchange. The Corporation is involved in management of the Group companies, by means of directors serving on the boards of directors of the Corporations subsidiary and related companies. The Group operates through an array of investee companies, mainly in the chemicals, energy and power plants sectors, and also has additional investments, including in the areas of shipping (a main area of activity up to July 16, 2014) advanced technology, vehicles and clean energy. The Corporations headquarters provides management services, through a wholly controlled subsidiary, and is also actively involved in the strategic planning and business development of the Group companies. On July 16, 2014, upon completion of the debt arrangement in ZIM, the Corporation ceased to control ZIM. Commencing from the completion date of the debt arrangement, the Corporation holds 32% of ZIMs issued share capital. See below the section Developments in the Investments Portfolio relating to ZIM. The activities of the Group companies are affected by the global economic situation. The existing uncertainties in the global market have had an impact on the results of some of the Group companies already in the period covered by this report. The uncertainties and concern of a slowdown in the growth rate in China, create uncertainty with respect to the operating results of the Group companies in the rest of the year. In December 2013, the Law for Advancing Competition and Reducing Corporate Structural Concentration, 2013, was published. The Corporation is studying the Laws provisions and will examine the impact thereof on the Corporation and its investee companies. This Directors Report is submitted as part of the interim financial statements for the period ended September 30, 2014. The report was prepared in accordance with the Securities Law (Periodic and Immediate Reports), 1970, and on the assumption that the reader is also in possession of the interim financial statements for the period ended September 30, 2013, and the Periodic Report for 2013. Examination of change in the Corporations holdings1 On June 25, 2013, the Corporations Board of Directors adopted the recommendation of the Corporations Management and decided to examine a strategic change of the structure of the Corporations holdings (hereinafter the Course of Action).

1 That stated in this Section and the Structural Change of the Corporations Holdings in the final format to be determined,

may not be realized, in whole or in part, or may be realized in a format different than that being examined, in a different time range than that projected and in a manner different than that anticipated. The factors that may have an impact on this are, among other things, non-fulfillment of various conditions, including receipt of approval of the Corporations authorities and approvals from various regulatory and other authorities, the approval of which is required.

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Examination of change in the Corporations holdings (Cont.) The Course of Action being considered and the manner of its implementation (as is presently being examined, and that may be completed, if ultimately completed, in a different manner), is a split-up of the Corporations holdings, such that the Corporations holdings in I.C. Power Ltd., Qoros Automotive Co. Ltd., ZIM Integrated Shipping Services Ltd., I.C. Green Energy Ltd. and Tower Semiconductors Ltd., will be transferred to and held by all of the Corporations shareholders through a new company, Kenon Holdings (hereinafter Kenon), the shares of which will be distributed to them as a dividend in kind, whereas the Corporation will continue to hold Israel Chemicals Ltd. (hereinafter ICL) and Oil Refineries Ltd. (hereinafter ORL) (hereinafter the Structural Change of the Corporations Holdings Transaction). The Corporations debt to financing banks and debenture holders will remain in the Corporation. In the future, the possibility of splitting off the Corporations investment in ORL may also be considered. The Corporation which will hold ICL and ORL after completion of the Structural Change of the Corporations Holdings Transaction, to the extent it is ultimately completed, intends to refrain from making investments in new companies. The intention is that after completion of the Structural Change of the Corporations Holdings Transaction, if completed, the shares of Israel Corporation will continue to be traded on the Tel-Aviv Stock Exchange. As part of the Structural Change of the Corporations Holdings Transaction, the Corporation will register Kenon for trading on a foreign stock exchange and/or on the Tel-Aviv Stock Exchange. For additional details see the Corporations Immediate Report dated June 26, 2013 (Reference No. 2013-01-073893). In the Corporations estimation, the Structural Change of the Corporations Holdings Transaction will be completed, if completed, during the second half of 2014. The Corporation is taking the necessary actions and steps in order to advance the transaction and to obtain the required approvals and/or consents, and in this framework the Corporations Board of Directors set up a committee of the Board of Directors, the members of which are Messrs. Michael Bricker (Chairman), Prof. Gideon Langholtz, Oded Dagani, Zahavit Cohen and Dan Zusskind, who will accompany execution of the transaction. In addition, as part of examination of the business transaction, the Corporation set up Kenon in Singapore, and the Corporation is taking action in contemplation of registration of Kenon for trading on the New York Stock in the United States and in Tel-Aviv. Subsequent to the date of the report, on October 13, 2014, the Corporation deposited with the Securities Authority a preliminary report, in accordance with Regulation 12(A) of the Transaction with a Controlling Shareholder Regulations, in connection with the transaction for restructuring the Corporations holdings, which was approved on October 12, 2014, by the Restructuring Committee appointed by the Corporations Board of Directors, by the Corporations Audit Committee and by the Corporations Board of Directors, after a lengthy examination period and further to a large number of meetings held. That stated above is taking into account, among other things, the positon of the staff of the Securities Authority, whereby the Corporations controlling shareholders are considered to be parties having a personal interest in the distribution transaction. After receiving the reference of the Securities Authority to the preliminary report, the Corporation will file a Transaction Report, as defined in the Transaction with a Controlling Shareholder Regulations (hereinafter the Transaction Report). In the Transaction Report, note will also be made of the date of the General Meeting to be convened in order to approve the proposed decisions that will be brought in the framework thereof and the relevant dates in connection with the voting at the General Meeting. The said approval includes execution of the distribution transaction, with all its components, the transactions, adjustments and actions deriving therefrom, including an approval of: (A) The Corporations undertaking in a separation agreement with its wholly-owned subsidiary, Kenon, which includes (among other things): (i) transfer of the holdings in the companies being transferred to Kenon, as stated above, and transfer of certain rights and liabilities in connection with the companies being transferred from the Corporation to Kenon; (ii) execution of an investment in the capital of Kenon in the amount of $100 million (subject to a possible adjustment); and (iii) issuance of shares of Kenon to the Corporation in respect of the assets and rights to be transferred from the Corporation to Kenon all as detailed in the Transaction Report; and

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Examination of change in the Corporations holdings (Cont.) (B) The Corporations undertaking in a loan agreement whereby, among other things, the Corporation will provide Kenon a credit framework in an aggregate amount of up to $200 million, and in the framework thereof it will be provided that in a case of realization of guarantees that the Corporation will remain responsible for with respect to Qoros, the amount for which the Corporation will be liable in a case of realization of these guarantees will be considered a debt of Kenon to the Corporation and the provisions of the loan agreement will apply to it, which certain changes; and (C) Distribution to the Corporations shareholders as a dividend in-kind, according to that detailed in the Transaction Report, of the shares of Kenon; including registration of these shares for trading, both on a stock exchange in New York (which is a foreign stock exchange) and on the Tel-Aviv Stock Exchange, under Part E3 of the Securities Law, 1968, and reporting by Kenon in English and in accordance with the reporting format of the foreign law after the registration for trading, as stated, and distribution of a dividend in cash. And including execution of the other actions, adjustments and commitments involved with execution of the distribution transaction, including all its stages, which included, completion and execution thereof, and the other accompanying arrangements (including, but not only, in connection with liabilities relating to the companies being transferred that will remain in the Corporation and agreements covering registration rights) all based on the principles detailed in the Transaction Report. In addition, the said approval includes agreement of the Restructuring Committee (and/or a party authorized by it), to take all the required actions in order to complete, perfect and execute the above-mentioned decisions based on the principles detailed in the Transaction Report, including agreement to make all the adjustments and/or changes with respect to the manner of executing the distribution transaction and/or regarding the assets being transferred in the framework thereof as a derivative of, among other things, the demands that may be raised by third parties, which do not have a significant impact on the distribution transaction taking into account all its aspects. Subsequent to the date of the report, on November 24, 2014, the Corporation gave notice of convening of General Meetings of the holders of the debentures (Series 6-9) which the Corporation issued (hereinafter the Debentures) for purpose of receiving the consent of the holders of the Debentures for the distribution transaction and revision of the trust indenture of the relevant series a special decision for each series separately. It is noted that the even though the trust indentures for all the Debenture series do not instructions and/or conditions whereby the distribution transaction will constitute a violation thereof and/or will provide grounds for calling the Debentures for immediate payment, the Corporation published this summons for convention of Meetings, for the sake of good order and in order to receive the cooperation of the holders of the Debentures and their consent for its execution. It is noted that the decisions referred to above were made after the Corporations Board of Directors determined that distribution of the dividend that is subject of the distribution transaction meets the distribution tests provided in the Companies Law, 1999, where it is the intention of the Corporation that the amount of the final dividend in the framework of the distribution transaction will be determined, subject to the approval of the Board of Directors, on the basis of the Corporations financial statements as at September 30, 2014, as approved by the Corporation. The Corporation will publish an Immediate Report at the time and subject to the distribution decision, as stated. It is noted that execution of the distribution transaction is subject to receipt of the approval and consents of third parties (including regulatory approvals), as will be detailed in the Transaction Report, which had not yet been received at the date of this report. Further to an Immediate Report dated October 13, 2014, at its meeting held on November 24, 2014, the Corporation's Board of Directors approved, after receiving the approval of the Audit Committee and the Restructuring Committee, the distribution transaction. A General Meeting of the Corporation's shareholders will be convened in order to approve the transaction.

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FINANCIAL POSITION Upon completion of the debt arrangement in ZIM (see detail and the ZIM section below), on July 16, 2014, the Corporation ceased to control ZIM and, therefore, in the third quarter of 2014 the Corporation recorded income in the amount of about $796 million as a result of loss of control of ZIM and presentation of its investment in ZIM as an associated company based on its fair value as derived from the amount of the Corporations investment in ZIMs equity in accordance with the arrangement, and also recorded a loss of $187 million due to the Corporations waiver of all of ZIMs debts. The results of ZIMs operations up to the date of completion of the debt arrangement together with the gain as a result of loss of control and the loss due to waiver of all of ZIMs debts, as stated above, were presented separately in the statement of income in the category gain (loss) from discontinued operations (after taxes). In addition, the comparative figures were retroactively adjusted in order to present the statement of income data of the discontinued operations separately. The total sales for the nine-month and the three-month periods ended September 30, 2014 amounted to

about $5,859 million and about $1,960 million, respectively, compared with about $5,647 million and about $1,757 million, respectively, for the corresponding periods ended September 30, 2013.

The total net income attributable to the owners of the Corporation for the nine-month and the

three-month periods ended September 30, 2014 amounted to about $637 million and about $719 million, respectively, compared with a net loss about $214 million and about $84 million, respectively, in the corresponding periods last year. The income for the nine-month and the three-month periods ended September 30, 2014 include income from discontinued operations (after taxes), in the amounts of about $479 million and about $609 million, respectively, compared a loss from discontinued operations (after taxes), in the amounts of about $253 million and about $43 million, respectively, in the corresponding periods last year.

The total assets, as at September 30, 2014, amounted to about $14,562 million, compared with about

$15,714 million, as at September 30, 2013, and compared with about $15,662 million, as at December 31, 2013.

The current assets net of current liabilities, as at September 30, 2014 amounted to about $2,571 million,

compared with about $9 million as at September 30, 2013, and compared with a negative about $45 million, as at December 31, 2013.

As at September 30, 2013 and December 31, 2013, loans and debentures in ZIM were reclassified to

short-term due to non-compliance with financial covenants, in the amounts of about $1,508 million and about $1,505 million, respectively.

The total non-current assets, as at September 30, 2014, amounted to about $9,060 million, compared with

about $10,474 million, as at September 30, 2013, and compared with about $10,526 million, as at December 31, 2013.

The non-current liabilities, as at September 30, 2014, amounted to about $7,467 million, compared with

about $6,441 million, as at September 30, 2013, and compared with about $6,766 million, as at December 31, 2013.

The total equity as at September 30, 2014 amounted to about $4,164 million and the total equity

attributable to the owners of the Corporation amounted to about $2,310 million, compared with equity of $4,042 million and total equity attributable to the owners of the Corporation of $2,064 million as at September 30, 2013, and compared with total equity of about $3,715 and total equity attributable to the owners of the Corporation of about $1,685 million as at December 31, 2013.

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CHANGES IN THE INVESTMENT PORTFOLIO Qoros Auto Limited (hereinafter Qoros) A. In January 2014, the Corporation invested an additional amount of about $41 million in Qoros, as part of

the joint ventures business plan. B. On September 9, 2014, the Corporation transferred to Qoros the amount of about $81 million, by means

of convertible shareholders loans, and thus completed its obligation to invest in Qoros in accordance with the business plan, except for an amount of about $4 million that has not yet been transferred. The loan will be converted into shares of Qoros after receipt of the required approvals from the authorities in China. If the above-mentioned approvals are not received, Qoros has committed to repay the loan to the Corporation plus interest.

C. On July 31, 2014, the Corporation provided an irrevocable guarantee for the benefit of Chery (hereinafter

the 2014 Guarantee), in respect of half of every amount that Chery will pay under a guarantee provided by Chery to a company in a city in the district in which the production facility of Qoros is located, which provided a guarantee for the said financing. The 2014 Guarantee is up to an aggregate amount of RMB 750 million plus accompanying expenses and interest (in the aggregate amount of about $155 million), on the basis of the terms Chery committed to (back-to-back) and subject to the terms of the guarantee.

It is clarified that the said 2014 Guarantee is in addition to the guarantee provided by the Corporation in

connection with the said financing agreement from July 2012, up to an aggregate amount of RMB 750 million plus accompanying expenses and interest (in the aggregate amount of about $145 million).

In addition, in order to secure additional financing taken out by Qoros, in the amount of about RMB 1.2

billion (about $200 million), the Corporation placed a lien on part of its shares in Qoros (including a dividend deriving therefrom), based on its proportionate share in the capital of Qoros, in favor of the Chinese bank that provided the said financing. At the same time, Cherys subsidiary (through which Cherys rights in Qoros are held) also placed a lien on a corresponding part of its rights in Qoros. This financing agreement of Qoros includes, among other things, liabilities, provisions regarding financial covenants, events giving rise to immediate repayment and/or early repayment due to violations and/or events provided in the agreement. The lien agreement includes, among other things, provisions regarding the proportion of collaterals and addition of collaterals in circumstances, including addition of shares up to pledging all of the shares of Quantum (a wholly-owned subsidiary through which the the Corporations rights in Qoros are held) in Qoros or cash, provisions regarding the events the occurrence of which will entitle the Chinese bank to realize the lien, certain representations and undertakings (covenants) and provisions regarding recording and confirmation of the lien.

D. On September 30, 2014, the Corporations Board of Directors approved a framework for provision of a

shareholders loan to Qoros, against release of the Corporation from the guarantees, as stated above, which it provided in connection with financing Qoros took out, in the amount of about RMB 1,500 million (about $300 million) (hereinafter the Guarantees). As part of the said framework, the Corporation will provide a shareholders loan to Qoros during the fourth quarter of 2014, in the amount of about $60 million, against release of half of the Guarantees, and during the first quarter of 2015, the Corporation will provide a shareholders loan to Qoros, in the amount of about $70 million, against release of most of the balance of the Guarantees. The framework for provision of the loans and release of the Guarantees, as stated, will also be made concurrently by Chery, which holds, by means of a subsidiary, 50% of Qoros, with reference to the Guarantees it provided in connection with financing of Qoros, as stated in Section C., above.

E. Up to September 30, 2014, the Corporation invested in Qoros about $596 million. The balance of the

investment in Qoros as at September 30, 2014, was about $226 million.

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CHANGES IN THE INVESTMENT PORTFOLIO (Cont.) Israel Chemicals Ltd. (hereinafter ICL) On September 24, 2014, the Corporation entered into transactions with respect to shares of ICL, in the aggregate amount of 78.4 million shares of ICL (constituting about 6.2% of ICLs issued share capital), and a pricing process was completed in connection with sale of ICL shares pursuant to ICLs prospectus in the United States. As part of the Corporations sale offer, about 36.2 million shares of ICL were sold to the public in the United States and to institutional investors in Israel. The total net proceeds received by the Corporation in respect of the sale are about US$243 million. The difference created between the proceeds, as stated, and the carrying value of the shares in the Corporations books, in the amount of about $147 million, was recorded directly to retained earnings since the Corporation has retained its control over ICL. In addition, the Corporation entered into a financial transaction with entities from the Morgan Stanley and Goldman Sachs groups (hereinafter the Financial Entities) (of the derivative variable prepaid forward on the basis of an ISDA agreement) in connection with an additional 36.2 million shares of ICL (hereinafter the Financial Transaction or the Transaction and the Transaction Shares, respectively), which were transferred into the name of the Financial Entities, as detailed below. As stated, as part of the Financial Transaction, the Financial Entities will provide the Corporation an initial amount that is essentially a loan, in the amount of about $191 million. About 24 million shares out of the Transaction Shares were offered for sale by means of underwriters in the prospectus published by ICL in New York. Accordingly, as part of the tender offer and the Financial Transaction, as stated, a total of about 60.2 million ICL shares were sold by the Financial Entities, at a price of about US$7 per ICL share. With respect to the said sale, the Corporation signed an underwriting agreement with ICL and with U.S. underwriters (hereinafter the Underwriting Agreement). In addition, as part of the Underwriting Agreement, the underwriters were granted an option (Green Shoe) to acquire up to an additional 6 million shares, which may be exercised within 30 days. Subsequent to the date of the report, on October 7, 2014, the underwriters exercised the said option at the price in the public offering. The aggregate proceeds (net) received in respect of exercise of the option are about US$40 million. The expected difference between the proceeds, as stated, and the carrying value of the shares in the Corporations books, in the amount of about $24 million, will be recorded directly to retained earnings. It is noted that the Underwriting Agreement includes, among other things, representations and indemnification arrangements between the underwriters, ICL and the Corporation. It is further noted that the Corporation made a commitment to refrain from selling ICL shares during a period of 180 days, subject to the terms agreed to. Commencing from September 24, 2014, ICLs shares are traded on the New York Stock Exchange (NYSE). After execution of the said transactions (and after full exercise of the aforesaid option to the underwriters), the rate of the Corporations in the issued capital of ICL is about 49.02% in equity and about 46.18% in the voting rights. With respect to the Financial Transaction, it is noted that on the dates provided in the financial closing, an accounting will be made between the Corporation and the Financial Entities of their liabilities with reference to the components of the Transaction all in accordance with the terms of the Financial Transaction, the principles of which are set forth below: 1. As part of the Financial Transaction, the Corporation will receive protection against a decline in the price

of an ICL share below an average of 90% of the price of an ICL share in the said tender offer of ICLs shares on the New York Stock Exchange, and the Financial Entities will profit from an increase in the price of an ICL share above an average of 130%.

2. In addition, the Corporation transferred all the transaction shares into the name of the Financial Entities

for purposes of hedging the exposure from their standpoint, which will be permitted to execute any transaction in the shares (the Financial Entities may buy and sell ICL shares from time to time during the period of the Financial Transaction and in connection therewith or at the end of it).

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CHANGES IN THE INVESTMENT PORTFOLIO (Cont.) Israel Chemicals Ltd. (hereinafter ICL) (Cont.) 3. The financial closing is expected to take place in increments, on a number of closing dates that will occur

over the course of a period of between two years and five years from the execution date of the Financial Transaction, and in an average period of three and a half years (it is noted that the period of the Transaction and the finish dates may change, due to, among other things, an early closing of the Transaction, as stated below, or as a result of changes and adjustments made during the life of the Transaction). Subject to the terms of the Financial Transaction, the Corporation will have the possibility of, among other things, choosing not to receive a return of the Transaction Shares and the Corporation will be credited with their value against the payments due from the Corporation (physical settlement) or to receive a return of the number shares and to repayment the amount of the loan, where if the Corporation did not give notice of its choice, a physical settlement will be made. The Corporation is not required to repay the loan in cash or to add collaterals or additional shares.

4. It is clarified that the Corporation will have no voting rights in respect of the Transaction Shares. It is

further clarified that as part of the Financial Transaction there are arrangements whereby in a case of distribution of a cash dividend by ICL during the period of the Financial Transaction, the Corporation will be entitled to receive the amount of the dividend in respect of part of the Transaction Shares in accordance with the calculation model of the Financial Entities.

5. In the Financial Transaction provisions were made regarding, among other things, liabilities and

representations of the Corporation (including indemnity provisions and restrictions with respect to execution of transactions in ICL shares during the closing period), and grounds were also provided in the Financial Transaction for early closing of the Transaction, as well as violation events upon the occurrence of which the Financial Entities will have the possibility, among other things, of closing the Transaction early without returning the Transaction Shares. It is further noted that the terms of the Transaction include provisions regarding making of changes in the structure of the Transaction and/or adjustments by the Financial Entities during the Transaction period, including with reference to its various components, the period and dates of the changes therein, among other things, as a result of certain events in ICL or its shares and changes in the relevant market conditions.

The Corporation views its holdings in ICL as a strategic holding. The purpose of the Transaction is to increase the flexibility of the Corporations capital structure and to create an infrastructure for reducing the Corporations net debt. ZIM Integrated Shipping Services Ltd. (hereinafter ZIM) On July 16, 2014, all the preconditions were fulfilled for execution of the Corporations part in ZIMs debt arrangement and the arrangement was completed (including approval of the arrangements with the related ship owners and the Corporations controlling shareholder as part of the arrangement with the components and transactions related thereto as approved by the Corporations Board of Directors). The Corporations part in the debt arrangement includes, among other things, the following: A. Execution of the Corporations investment in ZIMs capital, in the amount of $200 million,

Corporations such that after completion of the arrangement the Corporation will hold about 32% of ZIMs issued capital.

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CHANGES IN THE INVESTMENT PORTFOLIO (Cont.) ZIM Integrated Shipping Services Ltd. (hereinafter ZIM) (Cont.) B. Waiver by the Corporation of all of ZIMs debts to it, amounting to, as at June 30, 2014, a total of about

$244 million (in nominal values). This debt is composed of the following: ZIMs debts to the Corporation under ZIMs debt arrangement from 2009, which includes amounts deriving from reduction of the lease fees as part of the 2009 debt arrangement that were assigned to the Corporation by the related ship owners that leased ships to ZIM at that time; provision of a reserve amount pursuant to the 2009 debt arrangement and investment of amounts by the Corporation as part of the security net; a subordinated debt of ZIM to the Corporation, in the amount of about NIS 45 million under a compromise arrangement in connection with requests for approval to file a derivative claim and debt in respect of management fees. To the extent a court decides that the said waiver of the NIS 45 million in connection with the derivative claim is invalid, the validity of ZIMs debt under the said compromise arrangement will be reinstated.

C. The Corporations commitment to provide or to see to provision to ZIM of a credit framework, in the

amount of $50 million, for a period of two years from the date of completion of the arrangement at market terms, against ZIMs customer receivables, in a coverage ratio of 2:1, and if necessary, to provide support and/or backing to the party that will provide the credit pursuant to the said compromise arrangement for purposes of securing its repayment.

On July 16, 2014, upon completion of the debt arrangement, as stated above, the Corporation ceased controlling ZIM and, accordingly, in the third quarter of 2014, the Corporation recorded income, in the amount of about $796 million, as a result of loss of control of ZIM and presentation of the investment in ZIM as an associated company based on its fair value as derived from the amount of the Corporations investment in ZIMs equity pursuant to the arrangement, and also recorded a loss, in the amount of about $187 million, due to the Corporations waiver of all of ZIMs debts to it, as stated above. The resulting amount of the income created, in the amount of about $609 million, as stated, was presented in the statement of income in the category gain (loss) from discontinued operations (after taxes). Execution of the Corporations part in the transaction was subject to fulfillment of the following preconditions: A. Receipt of all the consents required for approval of the arrangement, including: approval of the General

Meeting of the shareholders of Israel Corporation and approval of the relevant parties to the arrangement, as provided in the arrangement, including approval of the meetings of the holders of ZIMs debentures for the arrangement.

B. Update of the terms of the Special State Share such that it will not restrict transfer of ZIM shares below a

certain threshold and will not prevent completion of the arrangement pursuant to its terms due to the restrictions of maintaining a minimum fleet of ships owned by ZIM as provided in the State Share.

Set forth below is a summary of the decisions in connection with fulfillment of this precondition: (A) The decision of the District Court: On July 2, 2014, the decision of the District Court was received whereby it was provided, in brief, that the Special State Share in ZIM shall be updated such that consent of the State for transfer of ZIM shares will be required in a case where such transfer provides the owners a holding at the rate of 35% or more in ZIMs shares (hereinafter the Transfer), instead of a threshold of 24% as it was up to now. In addition, it was provided that in any case of a transfer of shares that gives the holder an interest of more than 24%, but which does not exceed 35%, advance notice will be required to be given to the State, which will be permitted to notify that it objects to the transfer, with 21 days, only on the grounds that the aforesaid transfer could constitute harm to the States security or to any of its essential interests.

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CHANGES IN THE INVESTMENT PORTFOLIO (Cont.) ZIM Integrated Shipping Services Ltd. (hereinafter ZIM) (Cont.) Set forth below is a summary of the decisions in connection with fulfillment of this precondition: (Cont.) (A) The decision of the District Court: (Cont.) In such a case, the transfer will not be made unless there is court approval (hereinafter the Security Grounds). It was further provided in this context that there will be no change in the provisions of the terms of the Special State Share with reference to acquisition of control, that is, the States consent will also be required in a case of acquisition of control in ZIM (hereinafter the Consent for Change in Control). (B) The compromise agreement: On July 7, 2014, the State filed an appeal in the Supreme Court of the District Courts decision along with a request to postpone execution. On July 14, 2014, the date set for the hearing and the Supreme Courts recommendation, the State and ZIM reached a compromise agreement that received the force of a court decision by the Supreme Court in connection with update of the terms of the Special State Share in ZIM, which in the Corporations opinion, as detailed below, is not significantly different than the operative part of the District Courts decision. The language of the compromise agreement is as follows: 1. The decision of the District Court is cancelled with the agreement of the parties. 2. In place of the currently existing situation, whereby consent of the State is required for every transfer of

shares that gives the owner an interest of 24% or more in ZIMs share capital, the following arrangement will apply (and ZIMs Articles of Association will be amended accordingly):

2.1 The States consent will be required for every transfer of shares that gives the owner an interest

of 35% or more in ZIMs share capital. 2.2 In addition, any transfer of shares that gives the owner an interest of more than 24% but not more

than 35% will require provision of advance notice to the State wherein full details of the proposed transferor and the transferee, the rate of the shares that will be held by the transferee after the transfer and relevant details with respect to the transaction, including voting agreements and agreements for appointing directors (if any). To the extent the State believes that such a share transfer poses possible harm to the States security or any of its vital interests or that it did not receive the relevant information for purposes of formulating its decision, the State will be permitted to give notice, within 30 days, that it objects to the transfer and it will be required to set forth the reasons for its objection. In such a case, the party requesting the share transfer will be permitted to take steps regarding this matter in the authorized court, which will hear and decide the matter.

3. If the State objects as stated in Section 2.2 above, clearly every party will reserve all of its contentions. 4. In order to remove doubt, the provision whereby every holding or transfer of shares at a rate that gives

the holder thereof control over ZIM, is subject to the States consent, remains intact. Moreover, in order to remove doubt, it is once again clarified that all the rest of the terms of the Special State Share will remain unchanged.

The Corporation determined, taking into account legal advice it received, that the compromise agreement significantly fulfills terms of the Transfer in connection with ZIMs shares that will be owned by the Corporation after completion of the arrangement.

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RESULTS OF OPERATIONS Upon completion of the debt arrangement, as stated above, on July 16, 2014, the Corporation ceased controlling ZIM and, accordingly, in the third quarter of 2014, the Corporation recorded income, in the amount of about $796 million, due loss of control of ZIM and presentation of its investment in ZIM as an associated company based on its fair value as deriving from the Corporations investment in ZIMs equity in accordance with the debt arrangement, net of the amount of about $187 million, resulting from waiver by the Corporation of all of ZIMs debts. The results of ZIMs operations up to the date of completion of the debt arrangement together with the gain as a result of loss of control and the loss due to waiver of all of ZIMs debts, as stated above, were presented separately in the statement of income in the category gain (loss) from discontinued operations (after taxes). In addition, the comparative figures were retroactively adjusted in order to present the statement of income data of the discontinued operations separately. The Corporation finished the third quarter of 2014 (July September 2014) with income attributable to the owners of the Corporation of about $719 million, compared with a loss of about $84 million in the corresponding quarter last year. The income attributable to the owners of the Corporation in the third quarter includes income from discontinued operations (after taxes), in the amount of about $609 million, compared with a loss from discontinued operations (after taxes) of about $43 million, in the corresponding period last year. The Corporation finished the period of the report (January September 2014) with income attributable to the owners of the Corporation of about $637 million, compared with a loss of about $214 million in the corresponding period last year. The income attributable to the owners of the Corporation in the period of the report includes income from discontinued operations (after taxes), in the amount of about $479 million, compared with a loss from discontinued operations (after taxes) of about $253 million, in the corresponding period last year. Set forth below are the factors which impacted the results of operations, attributable to the owners of the Group companies, for the period July September 2014: ICL finished the third quarter of 2014 with income of about $180 million, compared with income of

about $78 million in the corresponding quarter last year. Oil Refineries Ltd. (hereinafter ORL), which applies in its financial statements IFRS 9 (2010),

finished the third quarter of 2014 with income of about $15 million, compared with a loss of about $70 million in the corresponding quarter last year.

Without the impact of application of IFRS 9 (2010), which is not applied by the Corporation, ORL

finished the period of the report with income of about $7 million, compared with a loss of about $69 million in the corresponding quarter last year.

I.C. Power Ltd. finished the third quarter of the period of the report with income of about $130 million,

compared with income of about $15 million in the corresponding quarter last year. ZIM finished the third quarter of 2014 with a loss of about $65 million, compared with a loss of about

$44 million in the corresponding quarter last year. Tower Semiconductor Ltd. (hereinafter Tower) finished the third quarter of the period of the report

(in accordance with IFRS) with a loss of about $11 million, compared with income of about $31 million in the corresponding quarter last year.

Qoros finished the third quarter of the period of the report with a loss of about $95 million, compared

with a loss of about $48 million in the corresponding period last year.

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RESULTS OF OPERATIONS (Cont.) Set forth below are the factors which impacted the results of operations, attributable to the owners of the Group companies, for the period January September 2014: ICL finished the period of the report with income of about $378 million, compared with income of about

$699 million in the corresponding period last year. ORL which applies IFRS 9 (2010) in its financial statements, finished the period of the report with

income of about $23 million, compared with a loss of about $110 million in the corresponding period last year.

Without the impact of application of IFRS 9 (2010), which is not applied by the Corporation, ORL

finished the period of the report with income of about $14 million, compared with a loss of about $116 million in the corresponding period last year.

I.C. Power finished the period of the report with income of about $189 million, compared with income of

about $46 million in the corresponding period last year. ZIM finished the period of the report, with a loss of about $197 million, compared with a loss of about

$252 million in the corresponding period last year. Tower finished the period of the report (in accordance with IFRS) with income of about $9 million,

compared with a loss of about $78 million in the corresponding period last year. Qoros finished the period of the report with a loss of about $232 million, compared with a loss of about

$111 million in the corresponding period last year. As an investment company, the Corporations financial results are affected by the results of its investee companies. Presented below is detail of the Corporations results: Three months ended Nine months ended September 30 September 30 2014 2013 2014 2013 $ Millions ICL 94 41 198 366 ORL 3 (26) 5 (43) I.C. Power 131 20 206 57 ZIM (after the debt arrangement based on 32%) (17) (17) Tower (3) (10) (24) Better Place **(48) Qoros (48) (24) (116) (56) Other (7) (4) (18) (14) Gain (loss) from discontinued operations (after taxes)* 609 (43) 479 (253) Administrative, general and financing expenses of the Corporations headquarters (35) (61) (89) (134) Tax income (expenses) of the Corporations headquarters (8) 23 (11) (65) 719 (84) 637 (214) * Commencing from July 16, 2014, ZIMs results up to the completion date of the debt arrangement together with the

gain from loss of control and the loss from waiver of all of ZIMs debts, as stated above, are presented separately in the statement of income in the category gain (loss) from discontinued operations (after taxes). In addition, the comparative figures have adjusted retroactively in order to present the income (loss) from the discontinued operations separately.

** Includes a provision for decline in value of the investment in Better Place, in the amount of about $29 million, recorded by Israel Corporation.

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Following is a brief summary of the financial results of the Corporation and the principal investees: ISRAEL CHEMICALS LTD. Results of operations for the period JulySeptember 2014 ICL finished the third quarter of 2014 with net income of about $180 million, compared with net income of about $78 million in the corresponding quarter last year an increase of about $102 million. The sales of the ICL group in the third quarter amounted to about $1,559 million, compared with $1,445 million in the corresponding period last year. This increase stems mainly from an increase in the quantities sold, including due to the first-time consolidation of companies acquired during the period of the report, which led to an increase in sales of about $186 million, and from the impact of the change in the rate of exchange, in the amount of about $4 million. This increase was partly offset by a decrease in the selling prices, which led to a decrease in the sales of about $76 million. The sales' breakdown indicates an increase in sales in Asia, mainly as a result of an increase in the quantities of potash sold to China and India, an increase in sales in North America, as a result of an increase in the quantities of potash sold and an increase in the quantities sold of bromine-based and phosphorous-based flame retardants, bromine-based clear brine fluids, bromine-based and chlorine-based biocides for treating water and magnesium chloride, as well as an increase in sales in Europe, stemming from an increase in sales in the Performance Products segment, mainly as a result of acquisition of Hagesud and an increase in the sales of P2S5. On the other hand, there was a decline in sales in South America stemming mainly from a decline in the quantities of potash sold due to a lack of availability of granulated potash and a drop in its price. The cost of sales in the third quarter amounted to about $982 million compared with about $939 million in the corresponding period last year an increase of about $43 million. The increase in the cost of sales derives, primarily, from an increase in the quantities produced and sold, including due to the first-time consolidation of companies acquired during the period of the report, in the amount of about $73 million, the impact of the change in currency exchange rate, in the amount of about $12 million, an increase in the royalties expenses in the current period as a result of the arbitration decision, in the amount of about $2 million and an increase in the cost of raw materials due to the impact of the strike in Rotem, in the amount of about $3 million. This increase was partly offset by a decline in the raw-material and energy prices, in the amount of about $16 million, and a decrease in other operating expenses, in the amount of about $31 million, which stems mainly from a decrease in the salaries' expenses, including as a result of the retirement of Rotem employees. The gross profit amounted to $577 million, compared with gross profit of $506 million in the corresponding period last year, an increase of about $71 million. The gross profit margin as a percentage of sales was about 37%, compared with about 35% in the corresponding period last year. The selling and marketing expenses amounted to about $216 million, compared with about $197 million in the corresponding period last year. The operating income amounted to approximately $262 million, an increase of about $40 million compared with the corresponding period last year. The rate of the operating income out of the total sales was about 16.8%, compared with about 15.4% in the corresponding period last year.

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ISRAEL CHEMICALS LTD. (Cont.) Results of operations for the period JulySeptember 2014 (Cont.) The net financing expenses in the third quarter amounted to about $21 million, compared with net financing expenses of about $3 million in the corresponding period last year, an increase of about $18 million compared with the corresponding period last year. The increase in the financing expenses in the quarter compared with the corresponding period last year stems mainly from an increase in the interest expenses, in the amount of about $6 million, expenses in the period due to a change in the fair value of financial derivatives and revaluation of net, short-term financial liabilities, in the amount of about $22 million, compared with revenues of about $20 million in the corresponding period last year, and an increase in the interest expenses in respect of provisions for employee benefits, in the amount of about $1 million. On the other hand, there was a decrease in the financing expenses due to the impact of the exchange rates on provisions for employee benefits, in the amount of about $32 million, as a result of devaluation of the shekel against the dollar at the rate of about 7.5%, compared with an appreciation at the rate of about 2.2% in the corresponding period last year. The tax expenses in the quarter amounted to about $67 million, compared with tax expenses of about $152 million in the corresponding quarter last year. The tax rate on the pre-tax income is about 27.1%, compared with about 66.0% in the corresponding period last year. In the corresponding period last year non-recurring tax expenses were recognized in connection with the release of trapped earnings, in the amount of about $107 million. The rate of the tax expenses in the period of the report derives mainly from the change in the exchange rate of the dollar against the shekel, which caused an increase in the tax rate of the companies operating in Israel, the source of which is differences in respect of the measurement basis along with an increase in the Companies Tax rate in Israel to 26.5%. Results of operations for the period JanuarySeptember 2014 ICL finished the period of the report with net income of about $378 million, compared with net income of about $699 million in the corresponding period last year a decrease of about $321 million. The net income after eliminating certain impacts, mainly a provision in respect of prior periods resulting from the arbitration decision regarding the royalties matter, costs in connection with the strike at Rotem, and assessment agreements of ICL subsidiaries in Europe, amounted to about $581 million a decrease of about $236 million compared with the corresponding period last year. ICL's sales in the period of the report amounted to about $4,708 million, compared with $4,855 million in the corresponding period last year. This decrease stems mainly from a decrease in the selling prices, which led to a decrease in the sales of about $456 million. This decrease was partly offset by an increase in the quantities sold, including the first-time consolidation of companies acquired during the period of the report, which contributed about $246 million, and from the impact of the change in the currency exchange rates, in the amount of about $63 million. The sales' breakdown indicates an increase in sales in North America, primarily as a result of an increase in the quantities of potash sold, along with an increase in bromine-based and phosphorous-based flame retardants, bromine-based clear brine fluids, bromine-based and chlorine-based biocides for treatment of water, and magnesium chloride, as well as an increase in sales in Europe deriving from an increase in sales in the Performance Products segment, mainly as a result of the acquisition of Hagesued and an increase in the sales of P2S5. On the other hand, there was a decrease in the sales in Asia mainly due to a decrease in the prices of potash and a decrease in the quantities of potash sold in Asia, except for China. The decline in South America stems mainly from a decline in the quantities sold and selling prices of fertilizers and potash sold, compared with the corresponding period last year. The decline in the fertilizer quantities in South America, derives, mainly, from the impact of the strike in Rotem.

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ISRAEL CHEMICALS LTD. (Cont.) Results of operations for the period JanuarySeptember 2014 (Cont.) The cost of sales in the period of the report amounted to about $3,025 million compared with about $2,972 million in the corresponding period last year an increase of about $53 million. The increase in the cost of sales derives, primarily, from an increase in the quantities manufactured and sold, including the first-time consolidation of companies acquired during the period of the report, in the amount of about $111 million, the impact of the change in the currency exchange rates, in the amount of about $76 million, from the impact of the strike in Rotem, in the amount of about $ 26 million and an increase in the royalties expense in the current period due to the arbitration decision regarding this matter, in the amount of about $8 million. This increase was partly offset by a decline in the raw-material and energy prices, in the amount of about $72 million, a decrease in royalties, mainly due to the drop in sales, in the amount of about $39 million, and a decrease in other operating expenses, in the amount of about $57 million, stemming mostly from the decrease in the salaries' expenses, including the impact of retirement of Rotem employees. The gross profit amounted to $1,683 million, compared with gross profit of $1,883 million in the corresponding period last year, a decrease of about $200 million. The gross profit margin as a percentage of sales was about 36%, compared with about 39% in the corresponding period last year. The selling and marketing expenses amounted to about $645 million, compared with about $630 million in the corresponding period last year. The other expenses, net, amounted to about $162 million an increase of about $156 million compared with the corresponding period last year. The increase in the other expenses stems mainly from a non-recurring expense, in the amount of about $149 million (before interest expenses and the tax impact) relating to prior periods, due to the arbitration decision regarding the royalties' issue. For additional details see Note 5.B to the financial statements. The operating income amounted to approximately $583 million, a decrease of about $395 million compared with the corresponding period last year. The rate of the operating income out of the total sales was about 12%, compared with about 20% in the corresponding period last year. The operating income after eliminating non-recurring impacts, primarily a provision in respect of prior periods stemming from the arbitration decision regarding the royalties and costs in connection with the strike at Rotem, amounted to about $ 757 million, a decrease of $ 221 million compared with the corresponding period last year. The rate of the adjusted operating income out of the total sales is about 16%, compared with about 20% in the corresponding period last year. The net financing expenses amounted to about $90 million, compared with net financing expenses of about $21 million in the corresponding period last year. The financing expenses include non-recurring expenses, in the amount of about $32 million, mainly in connection with the arbitration decision dated May 19, 2014 regarding the royalties issue (for additional details see Note 5.B to the financial statements), where after elimination of non-recurring expenses, the financing expenses amounted to about $58 million an increase of about $37 million, compared with the corresponding period last year. The increase derives mainly from an increase in the interest expenses, in the amount of about $15 million, expenses in the period due to a change in the fair value of financial derivatives and revaluation of net short-term financial liabilities, in the amount of about $11 million, compared with revenues of about $42 million in the corresponding period last year, and an increase in the interest expenses in respect of provisions for employee benefits, in the amount of about $3 million. On the other hand, there was a decrease in the financing expenses in respect of the impact of exchange rate differences on provisions for employee benefits, in the amount of about $37 million, as a result of devaluation of the shekel against the dollar, at the rate of about 6.5%, compared with an appreciation, at the rate of about 5.3%, in the corresponding period last year.

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ISRAEL CHEMICALS LTD. (Cont.) Results of operations for the period JanuarySeptember 2014 (Cont.) The tax expenses amounted to about $131 million, compared with tax expenses of about $275 million in the corresponding period last year. The tax rate on the pre-tax income is about 25.5% compared to about 28.2% last year. The high rate of the tax expenses in the period of the report stems, mainly, from a non-recurring tax expense as a result of an assessment agreement in subsidiaries in Europe, after offsetting a tax income derived from an additional deduction for tax purposes in respect of investments made by a subsidiary in Europe, in the amount of about $27 million, a change in the shekel/dollar exchange rate that gave rise to an increase in the tax rate of the companies operating in Israel the source of which is differences in the measurement basis, and an increase in the Companies Tax rate in Israel to 26.5%. On the other hand, the difference in the tax rates in connection with recognition of a deferred tax asset with respect to the provision for the arbitration reduced the tax rate. In the corresponding period last year, the tax expenses included non-recurring tax expenses recognized in respect of the release of trapped earnings, in the amount of about $107 million. Forward-Looking Statements ICL Section The ICL Section contains statements that constitute forward-looking statements, many of which can be identified by the use of forward-looking words such as anticipate, believe, could, expect, should, plan, intend, estimate and potential, among others. Forward-looking statements appear in a number of places in the ICL Section and include, but are not limited to, statements regarding ICLs intent, belief or current expectations. Forward-looking statements are based on ICLs managements beliefs and assumptions and on information currently available to management. Such statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors, including, but not limited to, those noted in the Risk Factors in the prospectus (F-1). These risks and uncertainties include factors relating to: Loss or impairment of business licenses or mining permits or concessions; Natural disasters; Failure to raise the water level in evaporation Pond 5 in the Dead Sea; Accidents or disruptions at our seaport shipping facilities or regulatory restrictions affecting our ability to

export our products overseas; Labor disputes, slowdowns and strikes involving our employees; Currency rate fluctuations; Rising interest rates; General market, political or economic conditions in the countries in which we operate; Pension and health insurance liabilities; Price increases or shortages with respect to our principal raw materials; Volatility of supply and demand and the impact of competition; Changes to laws or regulations (including environmental protection and safety and tax laws or regulations),

or the application or interpretation of such laws or regulations; Government examinations or investigations; The difference between actual reserves and our reserve estimates; Failure to integrate or realize expected benefits from acquisitions and joint ventures; Volatility or crises in the financial markets; Cyclicality of our businesses; Changes in demand for our fertilizer products due to a decline in agricultural product prices, lack of

available credit, weather conditions, government policies or other factors beyond our control; Decreases in demand for bromine-based products and other industrial products; Litigation, arbitration and regulatory proceedings; War or acts of terror; and Other risk factors discussed under Risk factors in the F-1.

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ISRAEL CHEMICALS LTD. (Cont.) Forward-Looking Statements ICL Section (Cont.) Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information or future developments or to release publicly any revisions to these statements in order to reflect later events or circumstances or to reflect the occurrence of unanticipated events. The business environment ICL is a leading specialty minerals company that operates a unique, integrated business model. ICL extracts and processes raw materials and utilizes sophisticated processing and product formulation technologies to add value to customers in three attractive end-markets: agriculture, food and engineered materials. These three end markets constitute over 90% of ICLs present revenues. ICL operates in three operating segments Fertilizers (wherein production processes are executed with respect to production of raw materials and production and marketing of potash, phosphate and specialty fertilizers), Industrial Products (mainly production of bromine from the Dead Sea and production and marketing of bromine and phosphorous compounds for the electronics, construction, oil and gas and vehicle industries), and Performance Products (mainly production, marketing and sale of a wide range of phosphate-based downstream products as food additives and intermediary materials for industry). ICLs principal assets include: access to one of the worlds richest, longest-life and lowest-cost sources of potash and bromine (the Dead Sea); access to potash mines in the United Kingdom and Spain; bromine compounds processing facilities located in Israel, the Netherlands and China; and a unique integrated phosphate value chain, from phosphate rock mines in the Negev Desert in Israel to our value-added products in Israel, Europe, US, Brazil and China. ICL has an extensive global logistics and distribution network with operations in over 30 countries and a focused and highly experienced group of technical experts developing production processes, new applications, formulations and products for our three key end markets agriculture, food and engineered materials. ICLs production facilities are based in Israel and throughout the world. ICLs operations outside of Israel are primarily in the production of products that are complimentary to or are based on ICLs operations in Israel or related fields. The activities of ICLs facilities are integrated with one another to a significant extent, in terms of both supply of raw materials and such that one facility frequently utilizes the by-products of another facility to produce additional products. This synergistic value chain allows us to efficiently convert raw materials into downstream high value-added products in a cost-efficient manner. About 5% of ICLs total sales are made in Israel. Regarding these sales, for some specific products, ICL and some of the ICL companies have been declared a monopoly in Israel. About 53% of ICLs sales' revenues were derived from production activities taking place outside of Israel. About 9% of the cost of sales of the products produced outside of Israel is attributable to raw materials supplied from Israel. ICL is examining various possibilities in connection with activities that do not constitute the core businesses and is preparing to divest activities that are not synergetic with the Company's activities. Accordingly, on October 26, 2014, ICL and its subsidiary, BK Giulini GmbH entered into an agreement with Kurita Water Industries Ltd. (Kurita) for sale of business units in ICLs Performance Products segment, which operate in a number of areas: solutions for treatment of water and chemicals for paper, as well as aluminum compounds. The said business units are primarily located in Germany, and in other locations elsewhere in Europe and in China. The acquiring company is a leading Japanese company active in the water treatment field, and its shares are traded on the Tokyo Stock Exchange. The transaction will be for a consideration of approximately 250 million.

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ISRAEL CHEMICALS LTD. (Cont.) The business environment (Cont.) Closing of the transaction is expected to take place towards the end of 2014, subject to the completion of certain preconditions set forth in the sale agreement, including receipt of approvals from competent authorities, as well as approval of a minimum number of employees for transfer to employment by the purchasing company. In addition, the Company is examining growth possibilities as part of the implementation of its strategic plan by means of participation in and acquisition of activities that are in line with the Company's value chain starting from specialty minerals and running up to the end markets. On September 12, 2014, the Company disclosed that it is carrying on negotiations with a third party in connection with a joint venture relating to existing and future activities involving the mining and sale of phosphate rock in developing markets, as well as production, marketing and distribution of phosphate-rock products in these markets. As at the date of the report, these negotiations had not yet ripened into in-principle commercial agreements, and the parties had not reached agreement regarding the structure of the transaction and the consideration to be paid by the Company. Accordingly, binding agreements have not yet been signed, and there is no certainty that these negotiations will ultimately mature into binding agreements and/or that a transaction as referred to will be completed. To the extent the negotiations do finally ripen into binding agreements, the Company estimates the consideration at several hundred million dollars. Regarding the plan for efficiency and integration of the global processes into the Company, as well as the plan for reducing the production cost of ICL's specialty minerals pursuant to the strategic plan, ICL expects that these activities, the execution of which the Company has already commenced, will give rise to savings, in 2016 (year end run-rate), in the amount of about $350 million, in annual terms, compared with 2013. There is an interdependency between the amount of available arable land, the amount of food needed for the population, and the use of fertilizers. The natural population growth, change in food consumption habits (a shift to richer nutrition, largely based on animal protein, which increases grain consumption) resulting from the rising standard of living, mainly in the developing countries, and environmental-quality considerations along with the aspiration of western countries to reduce dependence on oil imports, which have strengthened the trend of shifting to production of fuel from agricultural products (bio-fuels), affect the increase in global consumption of grains (cereals, rice, soya, corn, etc.). These trends already led to significantly lower grain inventories a few years ago, and consequently, higher prices of agricultural produce, increased planting of grain crops worldwide, and also a trend of higher yield per unit of agricultural land, mainly by increased application of fertilizers. One of the main considerations with respect to the purchase of fertilizers by the farmers is the selling price of the agricultural produce. Following the stability in the first half of 2014, prices of crop commodities in the third quarter of the year dropped sharply in response to expectations for a record harvest as a result of an increase in the planted areas along with favorable weather conditions in the primary growing areas. In October 2014, the grain prices dropped to their lowest level in the past four years. Based on the monthly report published by the US Department of Agriculture (USDA) in October 2014, an increase is expected in the grain stock-to-use ratio, to a level of 21.47% at the end of the 2014/2015 agricultural year, compared with 20.97% at the end of the 2013/2014 agricultural year, and 19.91% in the 2012/2013 agricultural year. Most of the increase in the 2014/2015 agricultural year stems mainly from an increase in the inventory of corn. In addition, the inventory of soybeans, which is not included in the grains' inventory index, is also rising. Production of ethanol from corn in the U.S. in 2013 was somewhat higher than in the prior year and an additional increase is expected in 2014 as well. Nonetheless, the sharp rise that had continued up to 2010 came to a halt due to moderation of the fuel prices, the decision not to increase the percentage of ethanol in gasoline (the blending rate) from 10% to 15%, and the decline in fuel consumption in the United States.

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ISRAEL CHEMICALS LTD. (Cont.) The business environment (Cont.) As part of framework agreements with customers in China, in JanuaryFebruary 2014 ICL Fertilizers signed contracts for the supply of a comparable amount of potash in the first half of 2014 as compared to contracts signed with its customers for the first half of 2013. The contracts were signed at a price of $305 per ton CFR, constituting a price reduction of about $95 per ton CFR compared with the contracts signed in 2013. In the third quarter, the potash shipments to the Company's customers in China continued at the current sale prices (spot prices). The imports into China in the first nine months of 2014 were 5.6 million tons, an increase of about 17.4% compared with the corresponding period last year. In the Company's estimation, the trend of increasing imports in 2015 is expected to continue to grow due to an increase in consumption, as well as logistics problems of the local producers. In the Indian market, a change in the subsidy policies for fertilizers and the devaluation of the local currency against the U.S dollar, led to a significant increase in the retail price of potash and phosphates for the farmer and a drop in demand. Imports of potash into India fell from 4.5 million tons in 2011 to 3.4 million tons in 2012 and to 3.1 million tons in 2013. In the first quarter of 2014, the potash manufacturers signed contracts for the agricultural year beginning on April 1, 2014 and ending on March 31, 2015 at a price that reflects a decline of $105 per ton compared with the price in the annual supply contracts in India which were signed in the beginning of 2013. Even though there were no changes in the market conditions, there was a recovery in the consumption of potash in the first nine months of 2014, and the imports into India increased by 43% compared with the corresponding period last year and totaled about 3.07 million tons. The demand for potash increased mainly as a result of an understanding on the part of the farmers that under-fertilization in the past two years unfavorably impacted the crop production. In April and up to the date of ICLs report, ICL also agreed with its customers in India to supply potash for the 2014/2015 year in an aggregate quantity of about 825 thousand tons (including optional quantities). The selling price agreed to is about the same as the price set in transactions with other producers supplying potash to the Indian market. In the Company's estimation, the improvement in the demand for potash in India is expected to continue in 2015 as the farmers have adapted to the higher level of prices, which is expected to support the increased demand in the upcoming years as well. The strong demand for potash in Brazil continued in the first nine months of 2014, where the total imports in the first nine months of 2014 were about 6.9 million tons reflecting an increase of about 16% compared with the corresponding period last year. Nonetheless, imports into Brazil in the fourth quarter of the year are expected to be lower than they were in prior quarters due to the seasonal factor along with the sharp drop in the grain prices, as noted. The recovery of the demand for phosphate fertilizers that started at the end of 2013 and the resulting price recovery came to a halt in the beginning of the fourth quarter of 2014. The end of the fertilizing season in India coupled with a weaker demand in South America, where the fertilizing season has not yet commenced, are exerting pressure on the fertilizer prices. In addition, the high ammonia prices, which unfavorably impact the profits of the fertilizer producers, caused the U.S. fertilizer producer Mosaic, to announce a curtailment of the production. In addition OCP, the Moroccan phosphate producer, has also given notice of its intention to concentrate on production of phosphoric acid and TSP (phosphoric fertilizers that do not contain ammonia). The producers of the phosphate fertilizers are awaiting the start of the fertilizing season in Brazil, which together with the conclusion of the period of tax preferences on exports from China should support the trend of increasing demand for phosphate fertilizers.

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ISRAEL CHEMICALS LTD. (Cont.) The business environment (Cont.) The operations of ICL-IP are largely affected by the level of activities in the electronics, construction, automotive, oil drilling, furniture, pharmaceuticals, agriculture, textile and water treatment markets. Pressure is increasingly being exerted by green organizations in the area of environmental protection to reduce the use of bromine-based flame retardants. On the other hand, additional and new uses for bromine and its related compounds are being developed, along with regulation in additional countries leading to increased use of bromine and bromine compounds. The economic slowdown in the world over the past several years, triggered a slowdown in the demand for electronic products and in the construction area. This trend, along with the decline in sales of personal computers due to increased use of tablets and smart phones, led to a decline in the demand for flame retardants, mainly bromine-based, in these markets. Nonetheless, during the period of the report, and particularly in the third quarter of 2014, there was a certain improvement in demand for bromine-based flame retardants for some of the uses in the electronics sector. Subsequent to the period of the report, there has been a trend of stability in demand and mild pressure on prices. In the area of bromine-based flame retardants in the market for printed circuits, there was no change in the demand in 2014. In the period of the report, the elemental bromine prices were relatively stable in the United States, whereas there were price declines in Europe, China and India. Despite the decline in the price of fuel in the period of the report, demand for clear brine fluids for oil and gas drilling, continued to be strong in the period of the report, due to a relatively high number of drillings in the Gulf of Mexico. In 2013, the market for biocides used in swimming pools was impacted by falling prices as a result competitors strategy to increase their market share. In the beginning of 2013, the U.S. Department of Commerce decided to impose an anti-dumping tax on manufacturers of chlorine-based biocides from China, at the rate of about 30%38%. In the beginning of 2014, the anti-dumping tax on the Chinese was increased by a further 20%, and at the beginning of April 2014 the authorities in the United States gave notice of imposition of anti-dumping taxes on the Japanese manufacturers, at the rate of 59%109%, However, in the beginning of October 2014, taxation of the Japanese producers in 2015 was cancelled. The Company estimates that the anti-dumping tax on the biocide prices in the U.S. market will permit the Company a better position in the market, even though this impact had not yet been expressed due to the fact that most of the transactions in this market are based on annual contracts. In the field of bromine-based biocides used for water treatment, the trend of an increase in demand continued in the period of the report. After stability in 2013, the market for in-organic bromides for neutralizing mercury (Merquel products) showed an increase in demand in the period of the report due to the cold weather conditions and high gas prices. In addition, the increase also stems from the entry of new customers as part of the preparations for the entry into effect of a new regulatory system in the United States which requires the reduction of mercury emissions in 2015. The technological development that permits production of shale gas and application thereof in the United States creates additional business opportunities for the Company, and among other things, an increase in demand for bromine-based biocides. ICL-PP is affected by the global economic situation, competition in the target markets, volatility of prices in the fertilizers' market, which affect the prices of ICL-PPs principal raw materials and availability of the raw materials, as well as by fluctuations in the energy prices. These market conditions create a competitive market for ICL-PP's products.

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ISRAEL CHEMICALS LTD. (Cont.) The business environment (Cont.) In addition, some of ICL-PP's target markets are characterized by a seasonal factor, mainly in the area of wildfire flame retardants (fire safety). In the third quarter, the demand for the Company's downstream phosphate-based products in the European and U.S. markets declined compared with the corresponding period last year mainly as a result of competition with the exporters of phosphoric acid to the United States, along with a decline in the demand for phosphate salt deriving from the continuing economic slowdown in Europe. Furthermore, the behavior of the competitors who implemented a sales' strategy that gives preference to market share over prices, continued to have an impact in the third quarter. Nonetheless, in the period of the report, there was a moderate increase in prices and quantities sold of the P2S5 products as well as in the area of products for the prevention and retarding of fires, as a result of multi-sector seasonal demand with respect to the said products for the prevention and retarding of fires in the western part of the United States and in Canada compared with a low level of activities in this area in the corresponding quarter last year, and as a result of the acquisition of Auxquimia in Spain and the acquisition of the German company Hagesued, which also contributed to the segment's results. Reduction of the impact of the crisis in the Ukraine during the third quarter restored the demand in the Commonwealth of Independent States (CIS) to a normal level. The fourth quarter is usually weaker in the phosphate-based downstream product lines due to, among other things, performance of annual maintenance work at the customers' sites, and customer preference to end the year with low inventory levels. Marine transportation expenses amount to about 7% of ICLs total operating costs in the period of the report. The marine transportation expenses of the Company in the period of the report totaled about $283 million. After several years of falling marine bulk transportation prices, commencing from mid-2013, there has been increase in the shipping prices, which reached a record high of the last 3 years, and stood at 2,337 points in the middle of last December (the BDI (Baltic Dry Index) marine shipping index). Commencing from the first quarter of 2014, the prices fell to their level prior to the increase and the average index for the third quarter was 950 points, about 27% less than the average index for the third quarter of 2013. The energy costs account for about 6% of ICL's total operating costs in the period of the report. The energy costs in the quarter decreased compared with the corresponding quarter last year due to supply of gas from the Tamar field, which led to a savings as a result of the switch from use of expensive fuels, and from the undertaking to purchase electricity from the OPC company, at low costs compared with the price of the electricity purchased from Israeli Electric Company. Other developments in the period of account and thereafter 1. On September 12, 2014, ICL gave notice that it is carrying on negotiations with a third party in

connection with entering into joint ventures relating to existing and future mining activities of phosphate rock and the sale thereof in developing markets, as well as the manufacture, marketing and distribution of downstream phosphate-rock products in the said markets.

As at the date of the report, the negotiations had not yet ripened into in-principle commercial agreements,

the parties had not yet reached essential agreement with respect to the structure of the transaction and/or the consideration to be paid by the Company. Accordingly, binding agreements have not yet been signed and there is no certainty that the negotiations will mature into binding agreements and/or that a transaction, as stated, will ultimately be closed. To the extent the negotiations reach the stage of binding agreements, the Company estimates that the consideration will amount to several hundred million dollars.

2. For additional details regarding decisions of ICLs Board of Directors on August 27, 2014, in connection

with Bromine Compounds and the magnesium plant see Note 5.B to the financial statements.

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ISRAEL CHEMICALS LTD. (Cont.) Other developments in the period of account and thereafter (Cont.) 3. On September 21, 2014, ICL received a request that was filed in the District Court for certification of a

class action against the subsidiary, Dead Sea Works Ltd. (DSW), in the amount of about $26 million. In the request for certification of the class action claim it is contended that DSW prejudicially exploited its monopolistic power while violating the Restrictive Business Practices Law, 1988 (hereinafter the Restrictive Business Practices Law), in that it collected an inflated and unfair price for potash, contrary to the Restrictive Business Practices Law.

4. On September 23, 2014, ICL submitted a final prospectus for registration for trading (F-1) on the NYSE

in New York (hereinafter the Prospectus). On November 1, 2014, ICL commenced reporting in accordance with the provisions of Part E3 of the Securities Law, 1968, which govern the reporting applicable to dual-listed companies. Pursuant to Part E3, the Companys reporting requirements in Israel will be satisfied by compliance with the reporting requirements in the United States.

5. Further to the statement on page 180 of ICLs Registration Statement (F-1), on September 29, 2014 the

Israeli Supreme Court rejected the appeal filed by the plaintiffs in the proceedings against the State of Israel, the Local Industrial Council of Neot Hovav and the factories of ICL Industrial Products, contending that various pollutions in the area of Neot Hovav had caused a number of diseases from which the plaintiffs suffered.

6. Further to the statement on page 177 of the Registration Statement (F-1), on September 30, 2014, the

District Court in Jerusalem rejected the request filed by DSW for appointment of an arbitrator on behalf of the State for the purpose of conducting arbitration proceedings between DSW and the Government of Israel, pursuant to the binding arbitration clause included in the Concession Agreement between the parties, and determined that after completion of the legislative processes for adoption of the recommendations of the Sheshinski Committee, ICL may raise its contentions before the High Court of Justice and challenge the constitutional validity of the law.

7. Further to the statement on pages 180-181 of the Registration Statement (F-1) in connection with the

planned closing of the potash production site in Sallent, in Spain, ICL has decided to continue the operations of the site until mid 2016. The decision was taken, among others, following the new provisions that were published on October 2, 2014, by the competent authorities in Spain which permit to continue operating the site until June 2017.

8. On October 6, 2014, the rating company, Standard & Poor's Maalot, downgraded ICL's credit rating to

'ilAA' from a rating of 'ilAA+', wi

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