UNITED STATES

SECURITIES AND EXCHANGE COMMISSION



Washington, D.C. 20549

_________________



FORM 20-F



(Mark One)



| | ☐ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ----------------------------------------------------------------------------------------------
| |  

OR



| | ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ------------------------------------------------------------------------------------
| |  

| | For the fiscal year ended December 31, 2015
| | -------------------------------------------

OR



| | ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ----------------------------------------------------------------------------------------
| |  

OR



| | ☐ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | --------------------------------------------------------------------------------------------
| |  

| | Date of event requiring this shell company report
| | -------------------------------------------------
| |                                                  

| | For the transition period from to.
| | ----------------------------------



Commission File Number: 001-13742



ISRAEL CHEMICALS LTD.

(Exact name of Registrant as specified in
its charter)



N/A

(Translation of Registrant’s name
into English)



Israel

(Jurisdiction of incorporation or organization)



Millennium Tower, 23 Aranha Street,
P.O. Box 20245 Tel Aviv, 61202 Israel

(Address of principal executive offices)





Lisa Haimovitz, Adv.
SVP Global General Counsel & Company Secretary 
Millennium Tower, 23 Aranha St. 
Tel-Aviv 6107025 Israel 
Tel: +972 (3) 6844440 
Fax: +972 (3) 6844427(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)



Securities registered or to be registered pursuant to Section
12(b) of the Act:



|Title of each class                           | Name of each exchange on which registered
|--------------------------------------------- | -----------------------------------------
|Ordinary Shares, par value NIS 1.00 per share | The New York Stock Exchange              



Securities registered or to be registered pursuant to Section
12(g) of the Act:



None



Securities for which there is a reporting obligation pursuant
to Section 15(d) of the Act:



None



Indicate the number of outstanding shares of each of the issuer’s
classes of capital or common stock as of the close of the period covered by the annual report.













The number of outstanding shares as of December 31, 2015 was:



|Title of Class  | Number of Shares Outstanding
|--------------- | ----------------------------
|Ordinary shares | 1,299,704,303               



Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act.



Yes ☒                     No
☐



If this report is an annual or transition report, indicate by
check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934.



Yes ☐                      No
☒



Note – Checking the box above will not relieve
any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.



Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.



Yes x                      No
☐



Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).



☐
Yes                        
☐ No



Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer”
in Rule 12b-2 of the Exchange Act. (Check one):



Large Accelerated Filer     ☒    	Accelerated
Filer  ☐  	Non-accelerated Filer  ☐



Indicate by check mark which basis of accounting the registrant
has used to prepare the financial statements included in this filing:



☐           U.S.
GAAP



☒           International
Financial Reporting Standards as issued by the International Accounting Standards Board



☐           Other



If “Other” has been checked in response to the previous
question, indicate by check mark which financial statement item the Registrant has elected to follow.



☐
Item 17                      ☐
Item 18



If this is an annual report, indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).



Yes ☐                      No
☒
















table
of contents






Page



|PART I                                                                                
|--------------------------------------------------------------------------------------
|Special Note Regarding Forward-Looking Statements                                     
|Introduction                                                                          
|Glossary of Selected Terms                                                            
|Item 1.  Identity of Directors, Senior Management and Advisors                        
|Item 2.  Offer Statistics and Expected Timetable                                      
|Item 3.  Key Information                                                              
|Item 4.  Information on the Company                                                   
|Item 4A.  Unresolved Staff Comments                                                   
|Item 5.  Operating and Financial Review and Prospects                                 
|Item 6.  Directors, Senior Management and Employees                                   
|Item 7.  Major Shareholders and Related Party Transactions                            
|Item 8.  Financial Information                                                        
|Item 9.  The Offer and Listing                                                        
|Item 10.  Additional Information                                                      
|Item 11.  Quantitative and Qualitative Disclosures about Market Risk                  
|Item 12.  Description of Securities Other than Equity Securities                      
|PART II                                                                               
|Item 13.  Defaults, Dividend Arrangements and Delinquencies                           
|Item 14.  Material Modifications to the Rights of Security Holders and Use of Proceeds
|Item 15.  Controls and Procedures                                                     
|Item 16A.  Audit Committee Financial Expert                                           
|Item 16B.  Code of Ethics                                                             
|Item 16C.  Principal Accountant Fees and Services                                     
|Item 16D.  Exemptions from the Listing Standards for Audit Committees                 
|Item 16E.  Purchases of Equity Securities by the Issuer and Affiliated Purchasers     
|Item 16F.  Change in Registrant’s Certifying Accountant                               
|Item 16G.  Corporate Governance                                                       
|Item 16H.  Mine Safety Disclosure                                                     
|PART
III                                                                              
|Item 17.  Financial Statements                                                        
|Item 18.  Financial Statements                                                        
|Item 19.  Exhibits                                                                    



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Special
Note Regarding Forward-Looking Statements



This Annual Report 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 this Annual Report and include, but are not limited to, statements regarding our intent, belief or current
expectations. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently
available to our 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 identified
in “Item 3. Key Information—D. Risk Factors” in this Annual Report. These risks and uncertainties include factors
relating to:



loss or impairment of business licenses
or mining permits or concessions; volatility of supply and demand and the impact of competition; the difference between actual
reserves and our reserve estimates; natural disasters; failure to raise the water level in evaporation Pond 5 in the Dead Sea;
construction of a new pumping station; disruptions at our seaport shipping facilities or regulatory restrictions affecting our
ability to export our products overseas; general market, political or economic conditions in the countries in which we operate;
price increases or shortages with respect to our principal raw materials; delays in the completion of major projects by third-party
contractors; construction of a canal between the Red Sea and Dead Sea; labor disputes, slowdowns and strikes involving our employees;
pension and health insurance liabilities; changes to governmental programs or tax benefits, creation of new fiscal or tax related
legislation; higher tax liabilities; failure to integrate or realize expected benefits from mergers and acquisitions, organizational
restructuring and joint ventures; currency rate fluctuations; rising interest rates; government examinations or investigations;
disruption of our information technology systems or breaches of our data security; failure to recruit or maintain key personnel;
inability to realize expected benefits from our cost reduction program according to the expected timetable; inability to access
capital markets on favorable terms; 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; volatility or crises in the financial markets; cost
of compliance with environmental legislative and licensing restrictions; hazards inherent to chemical manufacturing; litigation,
arbitration and regulatory proceedings; insufficiency of insurance coverage; closing of transactions, mergers and acquisitions;
war or acts of terror; and other risk factors discussed under “Item 3. Key Information—D. Risk Factors.”



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.



ii


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Introduction



This Annual Report contains forward-looking
statements that involve risks and uncertainties. Our actual results may differ significantly from future results as a result of
factors such as those set forth in “Item 3. Key Information—D. Risk Factors” and “Item 5. Operating
and Financial Review and Prospects.”



The financial information included in this
Annual Report have been prepared in accordance with the international financial reporting standards (“IFRS”), as issued
by the International Accounting Standards Board (“IASB”). None of the financial information in this Annual Report has
been prepared in accordance with accounting principles generally accepted in the United States.



This Annual Report contains translations
of certain NIS amounts into U.S. dollars at specified rates solely for your convenience. These translations should not be construed
as representations by us that the NIS amounts actually represent such U.S. dollar amounts or could, at this time, be converted
into U.S. dollars at the rate indicated. Unless otherwise indicated, we have translated NIS amounts as at December 31, 2015, into
U.S. dollars at an exchange rate of NIS 3.902 to $1.00, the daily representative exchange rate reported by the Bank of Israel for
December 31, 2015, and euro amounts into U.S. dollars at an exchange rate of €1.088 to $1.00, the noon buying rate in New
York for cable transfers payable in euros as reported by the U.S. Board of Governors of the Federal Reserve System for December
31, 2015.



Market data and certain industry data used
in this Annual Report were obtained from internal reports and studies, where appropriate, as well as estimates, market research,
publicly available information and industry publications, including publications, reports or releases of the International Monetary
Fund (“IMF”), the U.S. Census Bureau, the Food and Agriculture Organization of the United Nations (“FAO”),
the International Fertilizers Association (“IFA”), the United States Department of Agriculture (the “USDA”)
and the United States Geological Survey. Industry publications generally state that the information they include has been obtained
from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. Similarly,
internal reports and studies, estimates and market research, which we believe to be reliable and accurately extracted by us for
use in this Annual Report, have not been independently verified. However, we believe such data is accurate. There is only a limited
amount of independent data available about certain aspects of our industry, market and competitive position. As a result, certain
data and information about our market rankings in certain product areas are based on our good faith estimates, which are derived
from our review of internal data and information, information that we obtain from customers, and other third-party sources. We
believe these internal surveys and management estimates are reliable; however, no independent sources have verified such surveys
and estimates.



In presenting and discussing our financial
position, operating results and cash flows, management uses certain non-IFRS financial measures. These non-IFRS financial measures
should not be viewed in isolation or as alternatives to the equivalent IFRS measures and should be used in conjunction with the
most directly comparable IFRS measures. A discussion of non-IFRS measures included in this Annual Report and a reconciliation of
such measures to the most directly comparable IFRS measures are contained in this Annual Report under “Item 3. Key Information—A.
Selected Financial Data.”



In this Annual Report, unless otherwise
indicated or the context otherwise requires, all references to “ICL,” the “Group,” the “Company,”
“we,” “our,” “ours,” “us” or similar terms refer to Israel Chemicals Ltd., together
with its consolidated subsidiaries. When we refer to our “parent company” or to “Israel Corporation,”
we refer to our controlling shareholder, Israel Corporation. Unless otherwise indicated or the context otherwise requires, references
in this Annual Report to “NIS” are to the legal currency of Israel, “U.S. dollars,” “$” or
“dollars” are to United States dollars, “euro” or “€” are to the Euro, the legal currency
of certain countries of the European Union, and “British pound” or “£” are to the legal currency
of the United Kingdom. See “Item 4. Information on the Company—A. History and development of the company.” We
own or have rights to trademarks or trade names that we use in conjunction with the operation of our business. Solely for convenience,
trademarks and trade names referred to in this Annual Report may appear without the ® or TM symbols, but such references
are not intended to indicate, in any way, that we will not assert, to the fullest extent of the law, our rights or the rights
of the applicable licensor to these trademarks and trade names. In this Annual Report, we also refer to product names, trademarks,
and trade names that are the property of other companies. Each of the trademarks and trade names of other companies appearing
in this Annual Report belongs to its owners. Our use or display of other companies’ product names, trademarks, or trade names is not intended
to and does not imply a relationship with, or endorsement or sponsorship by us of, the product, trademark, or trade name owner,
unless we otherwise indicate.



iii


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Glossary
of Selected Terms



The following is a glossary of selected
terms used in this Annual Report.



|Bromine                  | A chemical element used as a basis for a wide variety of uses and compounds,
    and mainly as a component in flame retardants or fire prevention substances. Unless otherwise stated, the term “bromine”
    refers to elemental bromine.                                 
|------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|CFR                      | Cost and freight. In a CFR transaction, the prices of goods to the customer includes, in
    addition to FOB expenses, marine shipping costs and all other costs that arise after the goods leave the seller’s factory
    gates and up to the destination port.           
|Cleveland Potash         | Cleveland Potash Ltd., a United Kingdom company included in our Fertilizers segment.                                                                                                                                                                                       
|CPI                      | The Consumer Price Index, as published by the Israeli Central Bureau of Statistics.                                                                                                                                                                                        
|Dead Sea Bromine Company | Dead Sea Bromine Company Ltd., included in our Industrial Products segment.                                                                                                                                                                                                
|Dead Sea Magnesium       | Dead Sea Magnesium Ltd.                                                                                                                                                                                                                                                    
|EPA                      | U.S. Environmental Protection Agency.                                                                                                                                                                                                                                      
|FAO                      | The Food and Agriculture Organization of the United Nations, an international food organization.                                                                                                                                                                           
|FOB                      | Free on board expenses are expenses for overland transportation, loading costs and other
    costs, up to and including the port of origin. In an FOB transaction, the seller pays the FOB expenses and the buyer pays
    the other costs from the port of origin onwards.
|Iberpotash               | Iberpotash S.A., a Spanish company included in our Fertilizers segment.                                                                                                                                                                                                    
|ICL Dead Sea             | Dead Sea Works Ltd., included in our Fertilizers segment.                                                                                                                                                                                                                  
|ICL Rotem                | Rotem Amfert Negev Ltd., included in our Fertilizers segment.                                                                                                                                                                                                              
|IFA                      | The International Fertilizers Association, an international association of fertilizers manufacturers.                                                                                                                                                                      
|ILA                      | Israel Lands Administration.                                                                                                                                                                                                                                               
|IMF                      | International Monetary Fund.                                                                                                                                                                                                                                               
|K                        | The element potassium, one of the three main plant nutrients.                                                                                                                                                                                                              
|N                        | The element nitrogen, one of the three main plant nutrients.                                                                                                                                                                                                               



iv


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|NYSE        | The New York Stock Exchange.                                                                                                                                              
|----------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|P           | The element phosphorus, one of the three main plant nutrients, which is also used as a raw
    material in industry.                                                      
|PCS         | Potash Corporation of Saskatchewan Inc., a Canadian company with the world’s largest
    potash production capacity, which owns 13.84% of our outstanding ordinary shares.
|Phosphate   | Phosphate rock that contains the element phosphorus. Its concentration is measured in units
    of P2O5.                                                                  
|Polymer     | A chemical compound containing a long chain of repeating units linked by a chemical bond
    and created by polymerization.                                               
|Polyhalite  | A mineral whose commercial name is polysulphate, composed of potash, sulfur, calcium, and
    magnesium, used in its natural form as fertilizer for organic agriculture.  
|Potash      | Potassium chloride (KCl), used as a plant’s main source of potassium.                                                                                                     
|REACH       | Registration, Evaluation and Authorization of Chemicals, a framework within the European
    Union.                                                                       
|Salt        | Unless otherwise specified, sodium chloride (NaCl).                                                                                                                       
|Soluble NPK | Soluble fertilizer containing the three basic elements for plant development (nitrogen,
    phosphorus and potash).                                                       
|Tami        | Tami (IMI) Research and Development Institute Ltd., the central research institute of ICL,
    included in our Industrial Products segment.                               
|TASE        | Tel Aviv Stock Exchange, Ltd.                                                                                                                                             
|USDA        | United States Department of Agriculture.                                                                                                                                  



v


Table of Contents




Part I



Item 1.  Identity of Directors,
Senior Management and Advisors



Not Applicable.



Item 2.  Offer Statistics and
Expected Timetable



Not Applicable.



Item 3.  Key Information



A. 	SELECTED FINANCIAL DATA



We have derived the consolidated income
statement data for the years ended December 31, 2011, 2012, 2013, 2014 and 2015 and the consolidated balance sheet data as of December
31, 2011, 2012, 2013, 2014 and 2015 from our audited consolidated financial statements which have been prepared in accordance with
IFRS, as issued by the IASB for the years ended as of, December 31, 2011, 2012, 2013, 2014 and 2015. You should read the consolidated
financial data set forth below in conjunction with our consolidated financial statements and related notes and the information
under “Item 5. Operating and Financial Review and Prospects”, appearing elsewhere in this Annual Report. Our
reporting currency is the U.S. dollar. Our historical results are not necessarily indicative of our results to be expected in any
future period.



|                                                           |  | For the Year Ended December 31,          
|---------------------------------------------------------- |  | -----------------------------------------
|                                                           |  | 2015                                     
|                                                           |  | (US$ millions, except for the share data)
|Sales                                                      |  |                                          
|Gross profit                                               |  |                                          
|Operating income                                           |  |                                          
|Income before income taxes                                 |  |                                          
|Net income attributable to the shareholders of the Company |  |                                          
|Earnings per share (in dollars):                           |  |                                          
|Basic earnings per share                                   |  |                                          
|Diluted earnings per share                                 |  |                                          
|Weighted average number of ordinary shares outstanding:    |  |                                          
|Basic (in thousands)                                       |  |                                          
|Diluted (in thousands)                                     |  |                                          
|Dividends declared per common share (in dollars)           |  |                                          



|                                                        |  | As at December 31,
|------------------------------------------------------- |  | ------------------
|                                                        |  | 2015              
|                                                        |  | (US$ millions)    
|Balance Sheet Data:                                     |  |                   
|Cash and cash equivalents                               |  |                   
|Property, plant and equipment                           |  |                   
|Total assets                                            |  |                   
|Short-term credit and current portion of long-term debt |  |                   
|Long-term debt                                          |  |                   
|Debentures                                              |  |                   
|Total equity                                            |  |                   



We disclose in this Annual Report non-IFRS
financial measures titled adjusted operating income and adjusted net income. Our management uses adjusted operating income and
adjusted net income to facilitate operating performance comparisons from period to period. We calculate our adjusted operating
income by adjusting our operating income to add certain items, as set forth in the reconciliation table below. We calculate our
adjusted net income by adjusting our net income to add
certain items, as set forth in the reconciliation table below, excluding the total tax impact of such adjustments.



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You should not view adjusted operating
income or adjusted net income as a substitute for operating income or net income determined in accordance with IFRS, and you should
note that our definitions of adjusted operating income and adjusted net income may differ from those used by other companies. However,
we believe adjusted operating income and adjusted net income provide useful information to both management and investors by excluding
certain expenses that management believes are not indicative of our ongoing operations. Our management uses these non-IFRS measures
to evaluate the Company’s business strategies and management’s performance. We believe that these non-IFRS measures
provide useful information to investors because they improve the comparability of the financial results between periods and provide
for greater transparency of key measures used to evaluate our performance.



The table below reconciles total adjusted
operating income and total adjusted net income to the comparable IFRS measures:



|                                                                                                                                             |  | For the Year Ended December 31,
|-------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------
|                                                                                                                                             |  | 2015                           
|                                                                                                                                             |  | (US$ millions)                 
|Operating income                                                                                                                             |  |                                
|Impact of employee strike                                                                                                                    |  |                                
|Capital gain from divestitures of non-core businesses and transaction expenses in connection with acquisition and divestitures of businesses |  |                                
|Impairment of assets                                                                                                                         |  |                                
|Provision for early retirement and dismissal of employees                                                                                    |  |                                
|Income from consolidation of previous equity method investee (1)                                                                             |  |                                
|Provision in respect of prior periods resulting from an arbitration decision                                                                 |  |                                
|VAT refund                                                                                                                                   |  |                                
|Retroactive electricity charges                                                                                                              |  |                                
|Provision for legal claims                                                                                                                   |  |                                
|Provision for historical waste removal                                                                                                       |  |                                
|Other                                                                                                                                        |  |                                
|Total adjustments  to operating income                                                                                                       |  |                                
|Total adjusted operating income                                                                                                              |  |                                
|Total tax impact on the above adjustments and deferred tax adjustments (2)                                                                   |  |                                
|Total net income attributable to the shareholders of the Company                                                                             |  |                                
|Total adjusted net income attributable to the shareholders of the Company                                                                    |  |                                

____________________

| | (1) | Income from consolidation of previous equity method investee relates to Allana in 2015 and to Fosbrasil in 2014.
| | --- | ----------------------------------------------------------------------------------------------------------------



| | (2) | Deferred tax adjustments at DSM in 2015 and at ICL Spain in 2014, mainly in respect of trapped earnings in 2013.
| | --- | ----------------------------------------------------------------------------------------------------------------



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The following table reconciles adjusted
operating income for the year ended December 31, 2015 for each of our operating segments to operating income, which is the most
similar IFRS measure:





|                                                                                                                                             |  | For the Year Ended December 31,
|-------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------
|                                                                                                                                             |  | Fertilizers                    
|                                                                                                                                             |  | Potash                         
|                                                                                                                                             |  | (US$ millions)                 
|Operating income                                                                                                                             |  |                                
|Impact of employee strike                                                                                                                    |  |                                
|Capital gain from divestitures of non-core businesses and transaction expenses in connection with acquisition and divestitures of businesses |  |                                
|Impairment of assets                                                                                                                         |  |                                
|Provision for early retirement and dismissal of employees                                                                                    |  |                                
|Income from consolidation of previous equity method investee                                                                                 |  |                                
|Provision in respect of prior periods resulting from an arbitration decision                                                                 |  |                                
|Retroactive electricity charges                                                                                                              |  |                                
|Provision for legal claims                                                                                                                   |  |                                
|Provision for historical waste removal                                                                                                       |  |                                
|Total adjustments to operating income                                                                                                        |  |                                
|Total adjusted operating income                                                                                                              |  |                                





B.	CAPITALIZATION AND INDEBTEDNESS



Not Applicable.



C.	REASONS FOR THE OFFER AND USE OF PROCEEDS



Not Applicable.



D.	RISK FACTORS



Our business, financial condition and results
of operations could be materially and adversely affected if any of the risks described below occur. As a result, the market price
of our ordinary shares could decline, and you could lose all or part of your investment. This Annual Report also contains forward-looking
statements that involve risks and uncertainties. See “Special Note Regarding Forward-Looking Statements.” Our
actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of
certain factors, including the risks facing our Company described below and elsewhere in this Annual Report (including the factors
noted in “Special Note Regarding Forward-Looking Statements”).



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Risks Related to Our Business



Our mining operations are dependent on
concessions, licenses and permits granted to us by the respective governments in the countries wherein they are located.



Our mining business depends on concessions
granted to us by the respective governments in the countries in which our mining operations are located. Loss of concessions, as
well as material changes to the conditions of these concessions could materially and adversely affect our business, financial condition
and results of operations.





We extract potash and salt
in Israel, Spain and the United Kingdom and bromine, magnesium and certain other minerals in Israel pursuant to concessions and
licenses in those countries.



In Israel, the concession
that was granted by the government to utilize the resources of the Dead Sea ends on March 31, 2030. As consideration, we pay
royalties to the Israeli government. In August 2015, the Minister of Finance appointed a team for “establishment of the governmental
activities to be conducted towards the end of the concession period”. In September 2015, the team published a request for
comments of the public regarding positions and viewpoints in connection with the end of the concession, which are to be submitted
by the end of March 2016. The team is expected to submit its recommendations to the Minister of Finance by May 2016. There is no
certainty as to what the recommendations of this committee will be with regard to the procedures that the government will undertake
in connection with the existing concession and as to the manner in which future mining rights will be granted. According to the
Israeli Dead Sea Concession Law, 1961, as amended (the "Concession Law"), ICL has a right of first offer in the event
that following the expiration, of the current concession the government would offer new concession rights to a third party. The
Minister of Finance also appointed a second team designated to establish certainty regarding the manner in which according to the
current concession, the replacement value of the tangible assets of Dead Sea Works Ltd ("DSW") will be calculated at
the end of the concession period in the event such assets are to be returned to the government. The actual calculation will be
executed only in 2030. This team was expected to submit its recommendations to the Minister of Finance by March 2015. There is
no certainty as to what the recommendations of this team will be with regards to the above mentioned and as to whenever they are
expected to be submitted. See “Item 4 Information on the Company—D. Property, Plants and Equipment—Concessions
and Mining Rights,” and “—Mineral Extraction and Mining Operations”.



In Spain, the government
granted our Fertilizers segment mining rights based on legislation from 1973. Some of these licenses are valid until 2037 and the
rest are valid until 2067. In exchange for these licenses, we pay royalties to the Spanish government.



In the United Kingdom,
the mining concessions of ICL UK (formally known as CPL) are based on approximately 114 mining leases and concessions for
extracting various minerals, in addition to numerous easements and rights of way from private land owners and rights to mine in
the North Sea granted by the United Kingdom government. The terms of all of these leases, concessions, easements and rights of
way extend for periods ranging from 2020 to 2038.





In addition, in June 2015, we completed the acquisition of 100% of Allana Potash Corp., a Canadian mining company engaged
in the development of potash assets in Ethiopia ("Allana"). Allana holds a concession to mine potash at the Danakhil mine
in Ethiopia's Afar National Regional State through Allana Potash Afar Plc ("Allana Afar"), its fully own Ethiopian subsidiary.
Pursuant to the mining agreement, Allana Afar was required to complete the development stage and start the production stage
no later than October 8, 2015 (within two years from the effective date of the mining license). As at the date of this Annual
Report, we have not yet completed the development stage and, therefore, the government of Ethiopia may revoke the mining license.
We are holding discussions with the government of Ethiopia related to the application submitted by the Company for the transfer
of the mining license to a newly established company and extending the development period in light of our takeover of Allana,
which can result to additional payments. We estimate that, an arrangement will be reached with the Ethiopian authorities for
extension of the development period. Although we believe that the development period will be extended by the Ethiopian government,
there are un-certainties as to this outcome or as to the length of the extension. See "Item 4 Information on the Company-D.
Property, Plants and Equipment-Concessions and Mining Rights," and "-Mineral Extraction and Mining Operations."



Furthermore, we mine phosphate rock from
phosphate deposits in the Negev Desert in accordance with three concessions from the State of Israel that are valid up to the
end of 2021. In exchange for these concessions, we are required to pay royalties to the Israeli government. For additional information
on the concessions, see “Item 4 Information on the Company—D. Property, Plants and Equipment—Concessions and
Mining Rights”. We estimate that our existing phosphate mines in the Negev Desert have up to approximately seven years of
remaining reserve life for phosphate rock designated for phosphoric acid production.





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The company is working to promote the plan for mining phosphates in Barir field (which is part of Zohar South) in the Negev
Desert.





In December, 2015, the
National Planning and Building Council approved the Policy Document regarding Mining and Quarrying of Industrial Minerals (the
"Policy Document"), which includes, among other things, a recommendation to permit phosphate mining, including at Barir
field. The approved Policy Document will set the basis for preparation of a National Outline Plan (the” National Outline
Plan”) for mining and quarrying to also be approved by the National Planning and Building Council.



Along with the approval
of the Policy Document, the National Planning and Building Council ordered the Planning Administration to raise the matter of the
order to prepare a detailed plan for Barir field (the “Barir Plan”) at one of its upcoming meetings.



In February 2016, the municipality
of Arad, together with several other plaintiffs, including, among others, residents of the town Arad, the communities and Bedouin
villages surrounding the area, filed a motion with the Israeli High Court of Justice against the approval of the Policy Document
to authorize phosphate mining in the Zohar South area, due to their fear from environmental and health dangers. We believe that
the mining activities in Barir field do not involve any risks to the environment or to people. There is no certainty that the National
Outline Plan and the Barir Plan will be approved at all or as will be submitted, in light of the opposing position of the Health
Ministry to mine phosphates in the Barir field, among other things. Moreover, there is no certainty regarding the timelines for
submission of the Plans and the approval thereof or of further developments with respect to the Barir field. See “Item 4
Information on the Company—D. Property, Plants and Equipment—Concessions and Mining Rights,” and “—Mineral
Extraction and Mining Operations.”



Non-receipt of approval
to mine in the Barir field would significantly harm our future mining reserves in the medium and long term. If we fail to receive
such approval and cannot find alternative sources of phosphates in Israel,our business, financial condition and results
of operations may be materially and adversely affected.



On October 12, 2015, we
completed the establishment of YPH JV with Yunnan Phosphate Chemicals Group (“YPC”), China’s leading phosphate
producer. YPH JV has mining rights at the Haikou mine and the Baitacun mine pursuant to two phosphate mining licenses issued by
the Division of Land and Resources of the Yunnan district in China. The Haikou license is valid through January, 2043 and the Baitacun
license is valid through November, 2018. In consideration for these mining rights, royalties and a resource tax are paid. For further
information on this regard, see “Item 4 Information on the Company—D. Property, Plants and Equipment—Concessions
and Mining Rights.



Our ability to operate
and/or expand our production and operating facilities is dependent on our receipt of, and compliance with, permits issued by governmental
authorities, including authorities in Israel, Spain, the United Kingdom, Ethiopia and China. A decision by a government authority
to deny any of our permit applications may impair our business and operations.



Existing permits are subject
to challenges with respect to their validity, revocation, modification and non-renewal. Any successful challenges with respect
to the validity of our permits or the revocation, modification or non-renewal of our permits could materially adversely impact
our operations and financial condition. In addition, a failure to comply with the terms of our permits could result in payment
of substantial fines and subject us to criminal sanctions.



Our operations and
sales are subject to the volatility of market supply and demand and we face significant competition from some of the world’s
largest chemical and mining companies.



In addition to seasonal
and cyclical variations (mainly in our Fertilizers segment), some of our businesses are characterized by fluctuations caused, in
part, by factors on the supply side, such as entry into the market of new manufacturers and products and expansion of the production
capacity of existing manufacturers, as well as changes on the demand side. Some of our products are commodities that are available
from multiple sources. Our competitors include some of the world’s largest chemical and mining companies. Some of these companies
are state-owned or government-subsidized. The potential production capacity is currently greater than the global demand, which
has impacted pricing. The primary competitive factor with respect to our products is the price. Our products prices are impacted
by the prices prevailing in the market. For example, at the end of July 2013, Uralkali announced that it was discontinuing its
joint marketing with Belaruskali (Uralkali and Belaruskali are the leading potash producers in Russia and Belarus). In addition,
Uralkali stated that it will implement a new policy for potash sales of preferring quantity over price. We believe this announcement
led to a fall in potash prices. Prices have remained low due to higher supply and weaker demand due to several reasons including
low agricultural prices. Additional competitive factors include product quality, customer service and technical assistance. If
we are unable to compete effectively with these companies, our results of operations would almost certainly be significantly adversely
affected.







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Inaccuracies in our estimates of mineral
reserves and resource deposits could result in lower than expected sales and/or higher than expected costs.



We base our mineral reserve
and resource estimates on engineering, economic and geological data that is compiled and analyzed by our engineers and geologists.
However, reserve estimates are necessarily imprecise and depend to some extent on statistical inferences drawn from available drilling
data, which may prove unreliable/inaccurate. There are numerous uncertainties inherent in estimating quantities and qualities of
reserves and non-reserve deposits and the costs to mine recoverable reserves and economic feasibility, including many factors beyond
our control. Estimates of economically feasible commercial reserves necessarily depend on a number of factors and assumptions,
all of which may vary considerably from the actual results, such as:



| | · | Geological and mining conditions and/or effects of prior mining that may
not be fully identified/assessed by the available data or that may differ from the accumulated experience;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Assumptions concerning future prices of products, operating costs, mining
technology improvements, development costs and reclamation costs; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------



| | · | Assumptions concerning future effects of regulation, including the issuance
of required permits and taxes by governmental agencies.
| | - | -----------------------------------------------------------------------------------------------------------------------------------



If these factors and assumptions
change, we may need to revise our mineral reserves and resources estimates. For example, in 2015, we reduced our reserves estimates
for our potash mine in the United Kingdom as a result of depletion due to continuing mining activities, changes in geological interpretation
and no new conversion of resources to reserves from ongoing exploration activities.



In China, historically,
the Haikou mine and the Baitacun mine reported their reserves pursuant to the Chinese Ordinance for Estimation of Mineral Resources,
which does not fully correspond with the methodology in SEC Industry Guide 7. We have hired the services of an independent, international
company, which is engaged in mining matters, to perform a more in-depth analysis of the mineral resources in the Haikou mine and
the Baitacun mine. However, at the present time, the above-mentioned process has not been completed and, accordingly, as at December 31,
2015, the Haikou mine and the Baitacun mine do not have proven or probable reserves in accordance with SEC Industry Guide 7.



In June 2015, we completed
the acquisition of Allana, which holds a concession acquired in October 2013 for the Danakhil mine in Ethiopia’s Afar National
Regional State through Allana Afar. We are currently in process of researching the project’s feasibility and technical and
operating requirements. As the project progresses, further significant investments may be required. There are currently no mining
operations at the Danakhil site, and the exploration process is still ongoing. The proposed development at the Danakhil site is
exploratory in nature and the property is without known proven (measured) or probable (indicated) reserves. The Ethiopian government’s
provision of natural resources and infrastructure, including water, electricity and roads, is a prerequisite to our development
of a large-scale mining project in the Afar region. There are some uncertainties as to whether the results of the research will justify
the continuation of the project, in the short or long term. The materialization of the project depends on various factors, including
the results of the feasibility study of the Danakhil mining project, adherence to the project's CAPEX planning, provision of the
necessary natural resources, infrastructure and services by the Ethiopian government, actual amounts of muriate of potash and water
reserves in comparison to our expectations, market fluctuations, especially in our manufacturing locations and target markets and
changes in the demand and price environment for potash.



For additional information,
see “Item 4 Information on the Company—D. Property, Plants and Equipment—Concessions and Mining Rights.”



Any inaccuracy in our estimates
related to our mineral reserves and non-reserve mineral deposits could result in lower than expected sales and/or higher than expected
costs.









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The locations of some of our mines
and facilities expose us to various natural disasters.



We are exposed to natural
disasters, such as flooding and earthquakes which may cause material damage to our business.



In Israel, some of our
plants are located on the African-Syrian Rift, a seismically active area. Furthermore, in recent years sinkholes and underground
cavities have been discovered in the area of the Dead Sea, which could cause harm to our plants. In the area of Sodom, where many
of our plants are located, there are occasional flash floods in the stream-beds. While we have insurance coverage that covers these
types of damage, subject to payment of deductibles, the insurance may not be sufficient to cover all of these damages.



In addition, we have underground
mines in the United Kingdom and Spain. Water leakages into these mines might cause disruptions to mining or loss of the mine. We
do not have property insurance for the underground property of our mine in the United Kingdom.



The accumulation of salt at the
bottom of Pond 5, the central evaporation pond in our solar evaporation pond system used to extract minerals from the Dead Sea,
requires the water level of the pond to be constantly raised in order to maintain the production capacity of our fertilizers.



As part of the evaporation
process, salt in Pond 5 at the Dead Sea (which is the main evaporation pond in our system of solar ponds) is sinking at the rate
of about 20 million tons per year. Sinking of the salt causes a reduction of the brine volume in the pond. Our production
process requires that a fixed brine volume be preserved in the pond. For this purpose, the water level of the pond is raised by
approximately 20 centimeters annually. Failure to raise the water level by this amount will cause a reduction in our production
capacity. However, raising the water level of the pond above a certain level may cause structural damage to the foundations of
the hotel buildings situated close to the water’s edge and to other infrastructures on the western shoreline of Pond 5.



We are currently working
with the Israeli government to develop various temporary defenses and a permanent solution, which consists of full harvesting of
the salt in such a manner that raising the water level in Pond 5 will not be necessary after completion of the harvesting. The
temporary defenses are supposed to provide protection pending the implementation of a permanent solution, which is supposed to
provide protection until the end of the current concession period in 2030. In December 2015, the National Infrastructures Plan
35A (the “Plan”), which includes the statutory infrastructure of the Salt Harvesting project in the evaporation ponds
through, among other things, the construction of a new pumping station in the northern basin of the Dead Sea, was approved by the
plenary National Infrastructures Committee. Following the above approval, in March 2016, the Israeli government also approved the
Plan.



According to the Dead Sea
Protection Company Ltd., as at October 2010, the total cost of the Salt Harvesting Project was estimated to be in a nominal amount
of NIS 7 billion (a discounted amount of NIS 3.8 billion – hereinafter –the “Discounted Amount")
(a discounted amount of about $1 billion). We will bear 80% and the government will bear 20% of the cost of the Salt
Harvesting Project, however the government's share will not exceed the Discounted Amount, linked to the CPI and bearing interest
of 7%. See “Item 4. Information on the Company—D. Property, Plant and Equipment —Mineral Extraction and
Mining Operations” for more information about these temporary defenses and the proposed permanent solution.



There is no assurance that
the temporary defenses or the permanent solution will be fully implemented or, if implemented, that they will prevent damage to
the surrounding infrastructure or our operations at Pond 5. The failure to develop a solution or any such damage could materially
and adversely affect our business, financial condition and results of operations.



A new pumping station will be required
due to the receding water level in the Northern Basin of the Dead Sea.



As part of our production process in Israel, we pump water from the Dead Sea through a special pumping
station and deliver it to the salt and carnallite ponds. Due to the receding water level in the northern basin of the Dead Sea,
the water line is receding from the current pumping station and construction of a new pumping station is necessary. We expect that
a new pumping station would be able to pump water for 15 years. In order to continue to pump water from the Dead Sea after the
end of the 15 years another new pumping station would have to be constructed. Construction of the new station depends mainly on,
receipt of statutory approvals. We have set up a designated team to advance the required processes and to monitor the various developments
that could impact receipt of the statutory approvals. In December 2015, the Israeli National Committee for Building and Planning
of National Infrastructure approved, as part of its approval of the permanent salt harvesting solution, the construction of a new
pumping station (hereinafter “the plan”). The plan, including the construction of the new pumping station is subject
to and conditioned upon the Israeli government's approval. Following the approval of the Israeli National Committee for Building
and Planning of National Infrastructure, in March 2016, the Israeli government also approved the Plan. A failure to construct the
new pumping station on time may impair our ability to pump the required amount of raw material from the Dead Sea.









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In addition, as the water level of the
northern basin of the Dead Sea recedes, we may be pressured to reduce our usage of minerals from the Dead Sea, which could have
a material and adverse impact on our business, financial condition and results of operations.



Any disruption in the transportation
services we use to ship our products could have a material effect on our business, financial condition and results of operations.



Approximately one-half of our net sales
are sales of bulk products characterized by large quantities. Most of this production quantity is shipped from two seaports in
Israel and one in Spain from dedicated facilities. It is not possible to ship large quantities in bulk from other facilities. Any
significant disruption with regard to the seaport facilities, including due to strikes by port workers or regulatory restrictions,
could delay or prevent exports of our products to our customers overseas, which could materially and adversely affect our business,
financial condition and results of operations.



We are subject to risks associated with
our international sales and operations, which could negatively affect our sales to customers in foreign countries as well as our
operations and assets in foreign countries. Some of these factors may also make it less attractive to distribute cash generated
by our operations outside Israel to our shareholders, to use cash generated by our operations in one country to fund our operations
or repayments of indebtedness in another country and to support other corporate purposes.



| | · | As a multinational company, we sell in many countries that we do not produce in. In 2015, we derived approximately 96% of our
sales from customers located outside Israel. As a result, we are subject to numerous risks and uncertainties relating to international
sales and operations, including:
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Difficulties and costs associated with complying with a wide variety of complex laws, treaties and regulations, including the
U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act of 2010 and Section 291A of the Israeli Penal Law;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Unexpected changes in regulatory environments;
| | - | ----------------------------------------------



| | · | Increased government ownership and regulation of the economy in the countries in which we operate;
| | - | --------------------------------------------------------------------------------------------------



| | · | Political and economic instability, including potential civil unrest, inflation and adverse economic conditions resulting from
governmental attempts to reduce inflation, such as imposition of higher interest rates and wage and price controls; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The imposition of tariffs, exchange controls, trade barriers, new taxes or tax rates or other restrictions.
| | - | -----------------------------------------------------------------------------------------------------------



The occurrence of any of the above in the
countries in which we operate or elsewhere could jeopardize or limit our ability to transact business there and could adversely
affect our revenue and operating results and the value of our assets located outside Israel.



In addition, tax regulations, currency
exchange controls and other restrictions may also make it economically unattractive to utilize cash generated by our operations
in one country to fund our operations or repayments of indebtedness in another country or to support other corporate purposes.



We could be adversely affected by price
increases or shortages with respect to water, energy and our principal raw materials.



We use water, energy and various raw materials
as inputs and we could be affected by higher costs or shortages of these materials.



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Our phosphate facilities
use large quantities of water purchased from the Mekorot Company, Israel’s national water company, at prices set by the government.
If these prices rise significantly, our costs will rise as well. In our plants in Sodom, we obtain water from an independent system
that is not part of the national water system. A shortage of water in the water sources in proximity to the plants would force
our Fertilizers segment to seek water sources located further away at a higher cost.



Our plants consume large
amounts of energy. Furthermore, energy is a significant component of the shipping costs of a considerable share of our products.
Significant price increases for energy, or energy shortages, would affect shipping costs, production costs and/or quantities. The
production processes and facilities at our magnesium plant require a continuous supply of electricity. While our magnesium plant
has two power supply sources — our power station in Sodom and the national electricity network in Israel — there is
a risk of damage to the power supply from these two sources concurrently. Prolonged damage to the regular supply of electricity
may damage the plants and the environment.



In 2015, the Israeli Public Utilities
Authority Electricity (hereinafter –the “Electricity Authority") resolved to impose certain
electricity system management services charges also on private electricity producers as opposed to only on private consumers, this
being retroactively from June 2013. In September 2015, ICL, DSW and Rotem filed a petition against the Electricity
Authority's resolution claiming that it suffers from fundamental flaws. During December 2015, DSW and Rotem received charges
from the Electric Company relating to the said matter whereby the companies are required to pay about $35 million for the
period from June 2013 up to 2015. There is a significant disagreement between DSW, Rotem and the Electric Company with
respect to some of the elements in the demand payments provided (about $12.5 million). DSW expressed the arguments
before the Electricity Authority which responded that it is reviewing the arguments and that at this time DSW should pay the
amount that is not in contention. As at the date of this Annual Report, we recorded a provision for the full amount. See Note
23 to our audited financial statements.



In addition, the current
supply of gas to our subsidiaries in Israel is dependent on a single supplier and also on a single gas pipeline with limited transmission
capacity. While our plants are prepared for the use of alternative energy (crude oil and/or diesel fuel), an increase in our energy
costs, or energy shortages could materially and adversely affect our business, financial condition and results of operations.



Furthermore, an increase
in price or shortage of raw materials, such as sulfur (which we purchase from a third party) could reduce our margins and adversely
impact our results of operations and our business.



We can provide no assurance
that we will be able to pass on to our clients increased costs relating to water, energy or other raw materials, such as sulfur,
that are supplied from third parties. Our inability to efficiently and effectively pass on cost increases could adversely affect
our margins. In addition, shortages in our principal raw materials may disrupt production and adversely affect the performance
of our business.



Completion of certain
of our major projects may be dependent on third-party contractors



The completion of certain
of our major projects may be dependent on third-party contractors. For example, In June 2012, we entered into agreements regarding
a project to construct a new cogeneration power station in Sodom, Israel. The power station is expected to have a production capacity
of about 230 megawatt hours and about 330 tons of steam, per hour, which will supply electricity and steam requirements for the
production plants at the Sodom site. We intend to operate the new power station concurrently with the existing power station, which
will be operated on a partial basis in a "hot back-up" format, to produce electricity and steam. The total electricity
production in the short term will be 245 megawatt hours. We also intend to utilize our present gas contracts and thereafter to
enter into new gas contracts in order to run the power station.



Construction of the project
was expected to be completed in the second half of 2015. In 2015, the executing contractor (the Spanish Company "Abengoa")
reported that it has experienced difficulties and pursuant to the decision of the Spanish court delivered in November 2015, it
was granted protection from its creditors up to the end of the first quarter of 2016. We are examining the possibility of continuing
execution of the construction work of the power station and completion thereof. In light of that stated, we expect to complete
the project and to commence operation of the power station in the second half of 2016, with additional costs that are not material.
However, we can provide no assurances that the construction work will be completed according our expectations. Delay in the completion
of the construction work has had and will continue to have an adverse effect on our energy expenses and access to a reliable energy
supply at the Sodom site, which may adversely affect our business, financial condition and results of operations.







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The construction of
a canal connecting the Red Sea to the Dead Sea could negatively impact the production of our plants.



The World Bank drafted
a detailed report evaluating the feasibility of a canal from the Red Sea to the Dead Sea in order to address the receding water
level of the northern basin of the Dead Sea. Following the aforesaid report, Israel, the Palestinian Authority and Jordan signed
an agreement in principle to implement stage A of the project, involving construction of a pipeline from the Red Sea. The targets
underlying the World Bank's report on the construction of the canal are desalination of water for countries in the region (mainly
Jordan), stabilization of the level of the Dead Sea and contribution to regional peace. Such a canal could change the composition
of the Dead Sea resulting in a lower concentration of sodium chloride in the water, which could negatively impact the production
of our plants.



A detailed agreement has
been signed by Israel and Jordan, triggering the first stage of the Sea Canal. The project includes construction of a desalination
plant in Aqaba and transportation of the desalinated water to Jordan and to Israel. The brine will be pumped into the Dead Sea.
Under the agreement, water exchanges will take place, and the Jordanians will be able to receive water from Israel. The facility
will initially pump 200 million cubic meters a year from the Red Sea. 80 million cubic meters will be transformed into potable
water and the remaining 120 million cubic meters will be pumped into the Dead Sea. About 100 million cubic meters of additional
sea water will be extracted and flowed directly into the Dead Sea without desalination. The 180 km long pipeline will be laid in
Jordanian territory. Based on the evaluation performed by the World Bank, pumping up to 400 million cubic meters into the Dead
Sea will have no adverse environmental effects, as no layering effect will be caused, and the water will evaporate and/or mix with
the water of the Dead Sea. For this reason it appears that pumping on such a scale will also create no significant damage to our
plants, especially since only about 200 million cubic meters will be pumped in one pipeline in the first stage of the project (assuming
they are not discharged nearby our pumping station), although the actual impacts may be different.



We are subject to
the risk of labor disputes, slowdowns and strikes.



From time to time we experience
labor disputes, slowdowns and strikes. For example, on February 2, 2015, the Workers Council of Bromine Compounds Ltd. of
ICL's industrial Products segment started a full-scale strike at the Bromine Compounds plants in Neot Hovav. The strike at the
plants came, among other things, in response to the efficiency programs we are executing in Neot Hovav. On February 19, 2015, the
Workers Council of DSW announced a full-scale strike at DSW's facilities in Sodom. On May 28, 2015, an agreement was signed between
the parties ending the strike. For information on implementation of the efficiency programs and the strikes that were initiated
in response see “Item 6. Directors, Senior Management and Employees—D. Employees.” For information on the impact
of the strike see “Item 3. Key Information-A. Selected Financial Data – adjusted operating and net income table.



Approximately 75% of our
employees are subject to collective bargaining agreements. Lengthy slowdowns or strikes at any of our plants could disrupt production
and cause the non-delivery of products that had already been ordered, and it takes time to return to full capacity production in
all facilities. Furthermore, due to the mutual dependency between ICL plants, labor disputes or a strike in any ICL plant may affect
the manufacturing capacity and/or manufacturing costs of other ICL plants. If labor disputes, slowdowns or strikes occur, we could
incur significant shutdown and related costs, which could adversely impact our operating results and affect our ability to fully
implement future operational changes for efficiency purposes. The collective employment agreement of DSW expired in September 2015.
As at the date of this Annual Report, we are holding talks with DSW Workers Council in connection with extension of the agreement
for an additional two years. There is no certainty the existing agreement will be extended and what will be the agreements between
the parties. The collective employment agreements of Rotem are valid until June 2016 and the collective employment agreements of
bromine compounds are valid until July 2017.On January 20, 2016, the DSW Workers Council
declared a labor dispute. As at the date of the report, there are declared labor disputes at Bromine Compounds, DSW and Rotem.
During these labor disputes, the Workers Council may impose certain sanctions or block the removal of goods through the factory
gates, and the disputes may escalate into a strike.







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Some of our employees have pension and
health insurance arrangements that are our responsibility.



Some of our employees in Israel and overseas
have pension and health insurance arrangements that are our responsibility. Against some of these liabilities, we have monetary
reserves that are invested in financial assets. See Note 21 to our audited financial statements for information about our employee
benefits liabilities and composition of plan assets. Changes in life expectancy, changes in the capital market or changes in other
parameters by which undertakings to employees and retirees are calculated, and statutory amendments could increase our net liability
for these arrangements.



The termination, cancellation or expiration
of governmental programs or tax benefits; initiation of a new or amended legislation or regulations with respect to additional
and/or increased fiscal liabilities to be imposed on us; or introduction of new tax reforms; imposition of new taxes or changes
to existing tax rates, could adversely affect our business results.



Any of the following may have a material
adverse effect on our operating expenses, effective tax rate and overall business results:



| | · | Some government programs may be discontinued, expire or be cancelled;
| | - | ---------------------------------------------------------------------



| | · | The government may initiate new legislation or amend existing legislation in order to impose additional and/or increased fiscal
liabilities on our business, such as additional royalties or natural resources taxes, as has occurred recently in Israel;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The applicable tax rates may increase;
| | - | --------------------------------------



| | · | We may be unable to meet the requirements for continuing to qualify for some programs;
| | - | --------------------------------------------------------------------------------------



| | · | These programs and tax benefits may be unavailable at their current levels;
| | - | ---------------------------------------------------------------------------



| | · | Upon the expiration of a particular benefit, we may not be eligible to participate in a new program or qualify for a new tax
benefit that would offset the loss of the expiring tax benefit.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our tax liabilities may be higher than
expected.





Our tax expenses and the
resulting effective tax rate reflected in our consolidated financial statements may increase over time as a result of changes in
corporate income tax rates and other changes in tax laws in the various countries in which we operate. We are subject to taxes
in many jurisdictions, and discretion is required in determination of the provisions for our tax liability. Similarly, we are subject
to examination by the tax authorities in many different jurisdictions. As part of these examinations, the relevant tax authorities
may disagree with the amount of taxable income reported, deriving from our inter-company agreements and may also dispute our interpretation
of the applicable tax legislation. For example, in December 2013, an assessment was received from the Israeli Tax Authority (“ITA”)
whereby we are required to pay tax in addition to the amount we have already paid in respect of the years 2009-2011, in the amount
of about NIS 917 million (about $235 million). We have appealed the ITA's assessment. On January 27, 2015, an Order was
received from the ITA with respect to the amount of the additional tax demanded, as stated. We disagree with the ITA's position
and on February 25, 2015 it filed an appeal of the Order.







We intend to expand our business through
mergers and acquisitions or organizational restructuring and various initiatives to increase production and reduce costs of our
existing operations. This could result in a diversion of resources and extra expenses, a disruption of our business and an adverse
effect on our financial condition and results of operations.



One of the components of our strategy is
to pursue mergers and acquisitions of businesses or to enter into joint ventures and partnerships. Consistent with this strategy,
we regularly evaluate potential opportunities, some of which could be material .The negotiation process with respect to potential
acquisitions or joint ventures, as well as the integration of acquired or jointly developed businesses, will require management
to invest time and resources, in addition to the necessary financial investments and we may not be able to complete such opportunities.
There is no guarantee that businesses or joint ventures that have been or will be acquired will be successfully integrated with
our current products and operations and we may not realize the intended benefits of the acquisition or joint venture.



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Future acquisitions could result in:



| | · | Substantial cash expenditures;
| | - | ------------------------------



| | · | Potentially dilutive issuances of equity securities;
| | - | ----------------------------------------------------



| | · | The incurrence of debt and contingent liabilities, including liabilities for environmental damage caused by acquired businesses
before we acquired them;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | A decrease in our profit margins; and
| | - | -------------------------------------



| | · | Impairment of intangible assets and goodwill.
| | - | ---------------------------------------------



If future acquisitions disrupt our operations,
our business may be materially and adversely affected.



Some of our partners or potential partners
in these business initiatives are governments, governmental bodies or public owned companies. We may face certain risks in connection
with our investments in the joint ventures and/or partnerships including, for example, if our partners’ needs, desires or
intents change, if the government changes or if the ownership structure of our partners changes.



In addition, we are working on a number
of initiatives to improve our existing operations, including initiatives to increase production in Spain and reduce operating costs
at our facilities. These initiatives may cost more or take longer than we anticipate and they may not ultimately achieve their
goals. If we cannot do so, our competitive position could be adversely affected. See “Item 4. Information on the Company—B.
Business Overview—Our Strategy”.



As a multinational company, our sales
and profits may be adversely affected by currency fluctuations and restrictions as well as credit risks.



Our multinational activities expose us
to the impact of currency exchange rate fluctuations. Our financial statements are prepared in U.S. dollars. Our sales are made
in a variety of currencies, primarily in U.S. dollars and euros. As a result, we are currently subject to significant foreign currency
risks and may face heightened risks as we enter new markets. We may also be exposed to credit risks in some of these markets. The
imposition of price controls or restrictions on the conversion of foreign currencies could also have a material adverse effect
on our financial results. Part of our operating costs in 2015 were incurred in currencies other than U.S. dollars, particularly
in euros, NIS, GBP, BRL and RMB. As a result, fluctuations in exchange rates between the currencies in which such costs are incurred
and the U.S. dollar may have a material adverse effect on our results of operations, the value of the balance sheet items denominated
in foreign currencies and our financial condition.



We use derivative financial instruments
and “hedging” techniques to manage some of our net exposure to currency exchange rate fluctuations in the major foreign
currencies in which we operate. However, not all of our potential exposure is covered, and some elements of our consolidated financial
statements, such as our equity positions and operating profit, are not fully protected against foreign currency exposures. Therefore,
our exposure to exchange rate fluctuations could have a material adverse effect on our financial results.



See “Item 11. Quantitative and
Qualitative Disclosures About Market Risk—Exchange Rate Risk.”



Because some of our liabilities bear
interest at variable rates, we are subject to the risk of interest rate increases.



A portion of our liabilities bear interest
at variable rates. We are exposed to the cash flow risk stemming from an increase in interest rates, which would increase our financing
expenses and adversely affect our results. Such increase in interest rates may be also as a result of downgrade in our rating.
See “Item 11. Quantitative and Qualitative Disclosures About Market Risk—Interest Rate Risk.”



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We may be subject to material fines,
penalties and other sanctions and other adverse consequences arising out of FCPA investigations and related matters.



We are required to comply with the U.S. Foreign Corrupt Practices Act (the "FCPA"), the UK Bribery Act and similar anti-corruption
laws in other jurisdictions around the world where we do business. We operate and sell in countries that may be considered
to be of high risk in this regard. Compliance with these laws has been subject to increasing focus and activity by regulatory
authorities in recent years. Actions by our employees, or third party intermediaries acting on our behalf, in violation of
such laws, whether carried out in the United States or elsewhere in connection with the conduct of our business could expose
us to liability for violations of the FCPA or other anti-corruption laws and accordingly may have a material adverse effect
on our reputation and our business, financial condition and results of operations.



Significant disruptions of our information
technology systems or breaches of our data security could adversely affect our business.



A significant invasion, interruption, destruction
or breakdown of our information technology systems and/or infrastructure by persons with authorized access could negatively impact
our business and operations. We could also experience business interruption, information theft and/or reputational damage from
cyber-attacks, which may compromise our systems and lead to data leakage whether internally or at our third party providers. Our
systems have been, and are expected to continue to be, the target of malware and other cyber-attacks. Although we have invested
in measures to reduce these risks, we cannot assure that these measures will be successful in preventing compromise and/or disruption
of our information technology systems and related data.



The failure to recruit key personnel,
or to attract additional executive and managerial talent, could adversely affect our business.



Given our increasing size, complexity and the global reach of our business and multiple areas of focus,
each of which could a significant stand-alone company, we are especially reliant upon our ability to recruit and retain highly
qualified management and other employees. Much of our competitive advantage is based on the expertise, experience and know-how
of our key management personnel. Any loss of service of key members of our organization, or any diminution in our ability to continue
to attract high-quality employees may delay or prevent the achievement of major business objectives and may have a material adverse
effect on our business, financial condition and results of operations.





We may not be able
to improve our working capital, reduce capital expenditure and operating expenses to the extent and during the timeframe intended
by our cost reduction program.



In August 2013, we announced
a cost reduction program to reduce $350 million by the end of 2016. In March 15, 2016, we announced to target additional cost reduction
measures of $50 million per year, which it will implement during 2016. In addition we will target measures that are expected to
generate additional $50 million in cash flow through improved working capital and other measures and capital expenditures (excluding
acquisitions) are targeted not to exceed $650 million per year over the next several years, which will be lower than the $700 million
to $800 million previously targeted. Such targets are subject to risks and uncertainties, and actual results may differ materially
from those expressed or implied.



The business environment
may cause our sales to deteriorate by more than our ability to reduce our costs. If we are unable to achieve our efficiency initiatives
during the expected timeframes, our results of operations will be negatively affected and our ability to execute other aspects
of our strategy may be slowed or undermined.







We have significantly increased our leverage
in recent years and more frequently engage in refinancing activities, making us increasingly reliant on access to the capital markets
at favorable terms.



Our short and long term indebtedness has
significantly increased over the past five years. As a result, our principal and interest payment obligations have increased, as
well as our costs relating to finance activities. The degree to which we are leveraged could affect our liability to obtain additional
financing for acquisitions, refinancing of existing debt, working capital, or other purposes, could adversely affect our credit
rating, and could make us more vulnerable to industry downturns and competitive pressures as well as interest rate and other refinancing
risks. In addition, capital markets have been more volatile in recent years. Such volatility may adversely affect our ability to
obtain financing on favorable terms at a time when we need to access the capital markets regularly. Our ability to refinance existing
debt and meet our debt service obligations will be dependent upon our future performance and access to capital markets, which will
be subject to financial, business and other factors affecting our operations (including our long term unsecured credit ratings),
many of which are beyond our control. Our credit rating may be downgraded, inter alia, due our future performance, the degree to
which we are leveraged and deteriorating business environment.



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The instruments governing our debt contain
covenants and, in some cases, require us to meet certain financial ratios and tests. Any failure to comply with these covenants
could result in an event of default under the applicable instrument, which could result in the related debt and the debt issued
under other instruments becoming immediately due and payable. In such event, we would need to raise funds from alternative sources,
which may not be available to us on favorable terms, on a timely basis or at all. Alternatively, any such default could require
us to sell our assets or otherwise curtail operations in order to satisfy our obligations to our creditors.



Risks Related to Our Industry



Sales of our fertilizer products are
subject to the situation in the agricultural industry.





Most of our fertilizer
products are sold to producers of agricultural products. Fertilizer sales may be adversely impacted as a result of a decline in
agricultural produce prices or the availability of credit, or other events that cause farmers to plant less and consequently reduce
their use of fertilizers. For example, periods of high demand, increasing profits and high capacity utilization tend to lead to
new investment in crops and increased production. This growth increases supply until the market is over-saturated, leading to declining
prices and declining capacity utilization until the cycle repeats. As a result, the prices and quantities of fertilizer products
sold have been volatile. As potash and phosphate prices and quantities sold have a very significant influence on our business results,
low prices and/or low quantities and/or a decrease in prices may cause our results of operations to fluctuate and potentially materially
deteriorate.



The price at which we sell
our fertilizer products and our sales volumes could fall in the event of industry oversupply conditions, which could have a material
adverse effect on our business, financial condition and results of operations. Alternatively, high prices may lead our customers
to delay purchasing decisions in anticipation of lower prices in the future, thereby decreasing our sales volumes. These factors
could materially and adversely affect our business, financial condition and results of operations.









In addition, government policies, and specifically,
subsidy levels, may affect the amount of agricultural crops and, as a result, sales of our fertilizer products. Generally, reductions
in agricultural subsidies or increases in subsidies to local fertilizer manufacturers in a country where we sell our products are
likely to have a negative impact on our fertilizer business.



Finally, the agricultural industry is strongly
affected by local weather conditions. Conditions such as heavy storms, long periods of drought, floods, or extreme seasonal temperatures
are likely to affect the local crop’s quality and yield and cause a reduction in the use of fertilizers. Loss of sales in
an agricultural season in a target country as a result of weather-related events can cause a loss of sales for the whole year.



Sales of our industrial products are
affected by various factors that are not within our control, including developments in the electronics markets and legislative
changes impacting the use of our products.



Our industrial products accounted for 20.6%
of our sales (before set-offs of inter-segment sales) in 2015. Our sales of these products are dependent on various factors outside
our control. For instance, a large proportion of our industrial products are sold for use as flame retardants. This area is subject
to government regulation around the world, which can restrict certain uses of flame retardants. In addition, various “green”
organizations have been increasing their pressure to reduce the use of bromine-based flame retardants, and various countries are
assessing possible limitations on the use of bromine-based flame retardants. For example, the bromine-based flame retardant DECA
is banned for use in electrical and electronic applications in the European Union. In addition, due to the definition of DECA as
a “substance of very high concern,” the European Chemicals Agency (“ECHA”) is leading a restriction campaign
to prohibit most uses of DECA in the European Union by 2017. In 2013, DECA was proposed as a candidate for deliberations at the
Stockholm Convention in the United Nations as a substance having persistent organic pollutant (“POP”) characteristics.
The deliberations commenced in October 2013 and the decision-making process is expected to be completed in 2017. Imposition of
the prohibition against use is expected to enter into effect at the end of 2018. See “Item 4. Information on the Company—B.
Business Overview—Regulatory and Environmental, Health and Safety Matters.” Sale of oil drilling products depends
on the extent of operations in the oil drilling market, mainly in deep drillings in the high seas, which in turn is dependent on
fuel prices, and on the decisions of oil companies regarding rates of production and areas of production of oil and gas. The drop
in oil prices in 2015 may affect the scope of operations in the oil drilling market and lead to a drop in the sales of our products
in this sector.



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In addition, a large portion of our industrial
products are used as inputs for end-products. For example, a significant portion of our flame retardants are added to plastic components
in electronic devices, including personal computers and televisions. The slowdown of the global economy in recent years as well
as the increasing use of smart phones and tablets as opposed to personal computers have led to a decline in the demand for personal
computers, which in turn has caused a decline in the demand for bromine-based flame retardants sold by our Industrial Products
segment. Beginning in late 2012, there was also a slump in demand for bromine-based flame retardants for construction. Our strategy
is to attempt to increase the demand through development of new products and new applications, by introducing bromine products
such as flame retardants into new geographic areas where they are not currently used or to develop their use, as well as other
bromine derivatives, as part of new applications. A failure to increase demand for our bromine-based products could have a material
adverse effect on our business, financial condition and results of operations.



Sales of our performance products are
affected by various factors that are outside our control, including a recession or slowdown in the world economy as well as an
increase in the euro exchange rate vis-à-vis the U.S. dollar.



Sales of our performance products are affected
by various factors that are outside our control, including global economic conditions in the markets in which we operate. For example,
our sales may be affected by the slow economic recovery or any reversal thereof in Europe. We have significant manufacturing operations
in Europe and a large portion of our European sales are in euros, whereas some of our competitors are manufacturers outside Europe
whose operational currency is the U.S. dollar. As a result, a strengthening of the euro exchange rate vis-à-vis the U.S.
dollar increases the competitive advantage of these competitors.



Our operations and sales are subject
to a crisis in the financial markets.



We are a multi-national company and our
financial results are affected by global economic trends, the changes in terms of trade and financing, and fluctuations of currency
exchange rates. A crisis in the financial markets could cause a reduction in the international sources of credit available for
the purpose of financing commercial operations. The impact of such a crisis might be expressed in terms of availability of credit
to us and our customers, and of the price of credit. In addition, the volatility and uncertainty in the European Union affect our
activities in this market.



As an industrial chemicals company, we
are subject to various legislative and licensing restrictions in the areas of environmental protection and safety. Related compliance
costs may have a negative effect on our results of operations.



Because we are active in the field of industrial
chemicals, we are significantly affected by legal rulings and licensing authorities in the areas of environmental protection and
safety. In recent years, there has been a significant increase in the stringency and enforcement of legislative directives and
regulatory requirements in these areas, and the cost of conformance and compliance has risen significantly. Additionally, legislative
changes throughout the world may prohibit or restrict use of our products, due to environmental protection, health or safety considerations.
Standards that will be adopted in the future are likely to affect us and change our methods of operation. Furthermore, some of
our licenses, including business licenses and mining licenses, are for fixed periods and must be renewed from time to time. Renewal
of the licenses is not certain and the renewal may be made contingent on additional conditions. See “Item 4. Information
on the Company—B. Business Overview—Regulatory and Environmental, Health and Safety Matters.”



As an industrial chemicals company, we
are inherently subject to hazards relating to materials, processes, production and the overall nature of our business.



Although we take precautions to enhance
the safety of our operations and minimize the risk of disruptions, we are subject to hazards inherent in chemical manufacturing
and the related storage and transportation of raw materials, products and wastes. These hazards include explosions, fires, mechanical
failures, remediation complications, chemical spills and discharges or releases of toxic or hazardous substances. These and other
hazards are also inherent in our mining operations, particularly underground mining. These hazards can cause personal injury and
loss of life, severe damage to or destruction of property and equipment and environmental damage, and may result in suspension
of operations and the imposition of civil or criminal penalties. In addition, our manufacturing facilities contain sophisticated
manufacturing equipment. In the event of a major disruption in the operations of any of this equipment, we may not be able to resume
manufacturing operations for an extended period of time. The occurrence of material operating
problems at our facilities, including, but not limited to, the events described above, may have a material adverse effect on us,
during and after the period of such operational difficulties, as we are dependent on the continued operation of our production
facilities and we may become subject to substantial liabilities under these circumstances. See “Item 4. Information on
the Company—B. Business Overview—Regulatory and Environmental, Health and Safety Matters.”



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Due to the nature of our Company, we
are exposed to administrative and legal proceedings, both civil and criminal, including as a result of alleged environmental contamination
caused by certain of our facilities.



From time to time we are exposed to administrative
and legal proceedings, both civil and criminal, including as a result of alleged environmental contamination caused by certain
of our facilities. In addition, from time to time examinations and investigations are conducted by enforcement authorities. See
“Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal Proceedings.”



Furthermore, from time to time we are
exposed to claims alleging physical or property damage, which may cause us financial harm. In addition, some of the
manufacturing or marketing activities (and sometimes transportation and storage as well) entail safety risks that we attempt
to minimize but are not able to eliminate. In various countries, including Israel and the United States, legislation exists
that can impose liability on us irrespective of our actual intent or negligence. Other laws place responsibility on
defendants jointly and severally, and sometimes retroactively, and therefore can cause us to be liable for activities
executed jointly with others and at times by solely by others. We may also be found liable for claims related to land that we
mined or activities that we conducted within our premises, even after such activities have ceased.





In addition, over the past
several years, there has been an increase in the filing of claims together with a request for their certification as class actions.
Due to the nature of class actions, these claims may be for very high amounts and the costs of defending against such actions may
be significant even if the claims are without merit. In addition, our insurance policies include coverage limitations, are restricted
to certain causes of action and may not cover claims relating to certain types of damages. For example, in August 2013, a request
for certification of a claim as a class action against us, Israel Corporation Ltd., Potashcorp Cooperative Agricultural Society
Ltd., the members of our Board of Directors and CEO, was filed in the District Court in Tel-Aviv, on the grounds of a misleading
detail, deception and non-disclosure of a material detail in our reports, this allegedly being in violation of the provisions of
the Securities Law and the general laws in Israel. The aggregate amount of the damage claimed is $0.70 billion (NIS 2.75 billion)
or $0.84 billion (NIS 3.28 billion) (the amount of the claim depends on the share price used for calculating the alleged damages).
In November 2014, a hearing on the motion to certify a class action was held. In 2015, proceedings took place to advance a compromise
agreement that were later discontinued by the parties. As at the date of this Annual Report, a court decision on the request had
not yet been rendered. In our estimation, the chances that the allegations against us will be dismissed exceed the chances that
the allegations will be accepted. Accordingly, no provision was included in the financial statements. See Note 23 to our audited
financial statements and “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal
Proceedings—Securities Law Proceedings” for additional information.



We are exposed to
the risk of third-party and product liability claims.



We are also exposed to
risk of liability related to damage caused to third parties by our operations or by our products. For example, we are subject to
claims alleging liability for the impacts from the rising water level at one of our evaporation ponds at the Dead Sea. See Note 23
to our audited financial statements. We have third-party liability insurance for damages caused by our operations and for product
liability. However, there is no certainty that this insurance will fully cover all damage for such liability. Likewise, sale of
faulty products by us might give rise to a recall of products by us or by our customers, who had used the products.



Our insurance policies may not be sufficient
to cover all actual losses that we may incur in the future.



We maintain, among others, property, environmental,
business interruption and casualty insurance policies, but we are not fully insured against all potential hazards and risks incident
to our business. We are subject to various self-retentions and deductibles under these insurance policies. As a result of market
conditions, our loss experience and other factors, our premiums, self-retentions and deductibles for insurance policies can increase
substantially and, in some instances, certain insurance may become unavailable or available only for reduced amounts of coverage.
In addition, significantly increased costs could
lead us to decide to reduce, or possibly eliminate, coverage. As a result, a disruption of operations at one of our key facilities
or a significant casualty could have a material adverse effect on our financial condition and results of operations. Furthermore,
our insurance may not be sufficient to cover our expenses related to claims and law suits that may be filed against us, or expenses
related to legislation that is being enacted with adverse impact on us.



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Risks Related to Our Operations in Israel



Due to our location in Israel, our operations
may be subject to war or acts of terror.



War or acts of terror in the locations
where we operate are likely to negatively impact us. This impact may manifest itself in production delays, distribution delays,
loss of property, injury to employees, and appreciation of insurance premiums. In addition, our plants may be targets of terrorist
acts due to the chemicals they store. We do not have property insurance against war or acts of terror, other than compensation
from the State of Israel pursuant to Israeli law, which covers only physical property damage, without accounting for reinstatement
values.



Since the construction of our initial facilities
in the 1950s, we have never experienced material business interruptions as a result of war or acts of terror, but we can provide
no assurance that we will not be subject to any such interruptions in the future.



Our computer network, communications, and
production technologies constitute a basic platform for operational continuity and are also potential targets for acts of terror.
Potential cyber threats can cause damage to systems and plants, data loss, software vulnerability and external and internal access
to sensitive and confidential information. We have implemented a plan for safeguarding and backing up the information systems.
The activities include: separation of the information networks from the computerized process systems, physical safeguarding of
the computer rooms and terminals and training of employees. However, there is no assurance that our plan will successfully accomplish
its goals.



We conduct operations in Israel and therefore
our business, financial condition and results of operations may be materially and adversely affected by political, economic and
military instability in Israel and its region.



Our headquarters, some of our operations,
and some of our mining facilities are located in central Israel and many of our key employees, directors and officers are residents
of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect our
business. Since the establishment of Israel in 1948, a number of armed conflicts have taken place between Israel and its Arab neighbors,
Hamas (an Islamist militia and political group in the Gaza Strip) and Hezbollah (an Islamist militia and political group in Lebanon).
Any hostilities involving Israel or the interruption or curtailment of trade within Israel or between Israel and its trading partners
could materially and adversely affect our business, financial condition and results of operations and could also make it more difficult
for us to raise capital. Recent political uprisings, social unrest and violence in various countries in the Middle East and North
Africa, including Israel’s neighbors Egypt and Syria, are affecting the political stability of those countries. This instability
may lead to deterioration of the political relationships that exist between Israel and these countries and has raised concerns
regarding security in the region and the potential for armed conflict. In addition, Iran has threatened to attack Israel and is
widely believed to be developing nuclear weapons. In addition, the assessment is that Iran has a strong influence among parties
hostile to Israel in areas that neighbor Israel, such as the Syrian government, Hamas in Gaza and Hezbollah in Lebanon. Any armed
conflicts, terrorist activities or political instability in the region could materially and adversely affect our business, financial
condition and results of operations. In addition, the political and security situation in Israel may result in parties with whom
we have agreements involving performance in Israel claiming that they are not obligated to perform their commitments under those
agreements pursuant to force majeure provisions in such agreements. In addition, because we are an Israeli company, our sales may
be subject to economic boycotts or other sanctions on our products.



Our operations may be disrupted as a
result of the obligation of Israeli citizens to perform military service.



Many Israeli citizens are obligated to
perform one month, and in some cases more, of annual military reserve duty until they reach the age of 45 (or older, for reservists
with certain occupations) and, in the event of a military conflict, may be called to active duty. Although periods of significant
call-ups of military reservists in the past in response to terrorist activities have had
no significant impact on our operations, it is possible that there will be military reserve duty call-ups in the future, which
 might disrupt our operations.



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It may be difficult to enforce a U.S.
judgment against us and our directors and executive officers named in this Annual Report, in Israel or the United States, or to
serve process on our directors and executive officers.



We are incorporated under Israeli law.
Many of our directors and executive officers listed in this Annual Report reside outside the United States, and most of our assets
are located outside the United States. Therefore, a judgment obtained against us or many of our directors and executive officers
in the United States, including one based on the civil liability provisions of the U.S. federal securities laws, may not be collectible
in the United States and may not be enforced by an Israeli court. It also may be difficult for you to effect service of process
on these persons in the United States or to assert claims under the U.S. securities laws in original actions instituted in Israel.



Your rights and responsibilities as a
shareholder will be governed by Israeli law which may differ in some respects from the rights and responsibilities of shareholders
of U.S. companies.



We are incorporated under Israeli law.
The rights and responsibilities of the holders of our ordinary shares are governed by our Articles of Association and Israeli law.
These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders in typical U.S.
corporations. In particular, a shareholder of an Israeli company has a duty to act in good faith toward the company and other shareholders
and to refrain from abusing its power in the company, including, among other things, in voting at the general meeting of shareholders
on matters such as amendments to a company’s articles of association, increases in a company’s authorized share capital,
mergers and acquisitions and interested party transactions requiring shareholder approval. In addition, a shareholder who knows
that it possesses the power to determine the outcome of a shareholder vote or to appoint or prevent the appointment of a director
or executive officer in the company has a duty of fairness toward the company. There is limited case law available to assist us
in understanding the implications of these provisions that govern shareholders’ actions. These provisions may be interpreted
to impose additional obligations and liabilities on holders of our ordinary shares that are not typically imposed on shareholders
of U.S. corporations.



Risks Related to Our Ordinary Shares



We are controlled by one of our shareholders.
This shareholder may make decisions with which other shareholders may disagree.



As of December 31, 2015, Israel Corporation
held approximately 48.88% of our outstanding ordinary shares and approximately 46.04% of the voting rights of our shareholders.



The interests of Israel Corporation may
differ from your interests. Israel Corporation exercises control over our operations and business strategy and has sufficient voting
power to control many matters requiring approval by our shareholders, including:



| | · | The composition of our Board of Directors (other than external directors, as described under “Item 6. Directors, Senior
Management and Employees—C. Board Practices—External Directors”);
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Mergers, acquisitions or other business combinations;
| | - | -----------------------------------------------------



| | · | Certain future issuances of ordinary shares or other securities; and
| | - | --------------------------------------------------------------------



| | · | Amendments to our Articles of Association, excluding provisions of the Articles of Association that were determined by the
Special State Share.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------



In addition, this concentration of ownership
may delay, prevent or deter a change in control, or deprive you of a possible premium for your ordinary shares as part of a sale
of our Company. Israel Corporation could also sell its stake and transfer control to another party without your consent. Furthermore,
Israel Corporation may conduct material transactions in our shares, such as its existing margin loans that are secured by pledges
of ICL shares, and/or in their organizational structure that we will not be able to influence but that may have a material adverse
effect on our share price.



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The existence of a Special State Share
gives the State of Israel veto power over transfers of certain assets and shares above certain thresholds, and may have an anti-takeover
effect.



The State of Israel holds a Special State
Share in our Company and in some of our Israeli subsidiaries. The Special State Share entitles the State of Israel, among other
things, to restrict the transfer of certain assets and some acquisitions of shares by any person that would become a holder of
specified amounts of our share capital. Because the Special State Share restricts the ability of a shareholder to gain control
of our Company, the existence of the Special State Share may have an anti-takeover effect and therefore depress the price of our
ordinary shares. Furthermore, the existence of the Special State Share may prevent us from and developing business opportunities
that we may come across.



The market price of our ordinary shares
is subject to fluctuation, which could result in substantial losses for our investors.



The stock market in general, and the market
price of our ordinary shares in particular, is subject to fluctuation, and changes in our share price may be unrelated to our operating
performance. The market price of our ordinary shares on the TASE has fluctuated in the past, and we expect it will continue to
do so. The market price of our ordinary shares is and will be subject to a number of factors, including:



| | · | Expiration or terminations of licenses or concessions;
| | - | ------------------------------------------------------



| | · | General equity market conditions;
| | - | ---------------------------------



| | · | Decisions by the Israeli government that affect us;
| | - | ---------------------------------------------------



| | · | Variations in our and our competitors’ results of operations;
| | - | -------------------------------------------------------------



| | · | Changes in earnings estimates or recommendations by securities analysts; and
| | - | ----------------------------------------------------------------------------



| | · | General market conditions and other factors, including factors unrelated to our operating performance.
| | - | ------------------------------------------------------------------------------------------------------



These factors and any corresponding price
fluctuations may materially and adversely affect the market price of our ordinary shares and result in substantial losses for our
investors.



If equity research analysts issue unfavorable
commentary or downgrade our ordinary shares, the price of our ordinary shares could decline.



The trading market for our ordinary shares
relies in part on the research and reports that equity research analysts publish about us and our business. The price of our ordinary
shares could decline if one or more securities analysts downgrade our ordinary shares or if those analysts issue other unfavorable
commentary or cease publishing reports about us or our business.



You may be diluted by the future issuance
of additional ordinary shares in connection with our incentive plans, acquisitions or otherwise.





As at the date of this Annual
Report, we have approximately NIS 185 million ($47 million)par
value shares authorized but unissued. We may choose to raise substantial equity capital in the future: to acquire or invest
in businesses, products or technologies and other strategic relationships and to finance unanticipated working capital
requirements and respond to competitive pressures. The issuance of any additional ordinary shares in the future, or any
securities that are exercisable for or convertible into our ordinary shares, will have a dilutive effect on our shareholders
since by raising additional funds by issuing equity or convertible debt securities, we will reduce the percentage ownership
of our then-existing shareholders, and these securities may have rights, preferences or privileges senior to those of our
existing shareholders. For example, on June 22, 2015, we have acquired the balance of Allana’s shares (83.78%) for
a total consideration of approximately $112 million, of which approximately $96 million was in cash, and approximately $16
million was by means of issuance of 2,225,337 of our ordinary shares. In addition, 23,456,518 options for our ordinary
shares that were issued under our incentive and remuneration plans were outstanding as at March 15, 2016. See “Item
6. Directors, Senior Management and Employees—E. Share Ownership—Incentive Compensation Plans.” Any
ordinary shares that we issue, including under any options plans, would dilute the percentage ownership held by
investors.





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We may not be able to maintain our dividend
payment.





Our Board of Directors has adopted a dividend
policy to pay quarterly dividends of up to 70% of our net income. All dividends must be declared by our Board of Directors, which
will take into account various factors including our profits, our investment plan, our financial status and additional factors
they deem appropriate. Dividend payments are not guaranteed and our Board of Directors may decide, in its absolute discretion,
at any time and for any reason, not to pay dividends, to reduce the amount of dividends paid, to pay special dividend, to modify
the dividend payout policy or to adopt a share buyback program. On March 15, 2016, the Board of Directors has decided to re-examine
the Company’s current dividend policy, in its next meeting, and may make changes for future periods. Such changes could
include either a reduction in the amount or the targeted dividend, or modification of the policy to be based on other metrics.
No assurances can be provided that the Board of Directors will make any changes. In addition, dividends will only be paid when, as and if declared by the
Board of Directors, and may be discontinued at any time.







Our ordinary shares are traded on different
markets and this may result in price variations.



Our ordinary shares have been traded
on the TASE since 1992 and have been listed on the NYSE since September 2014. Trading in our ordinary shares on these markets
occurs in different currencies (U.S. dollars on the NYSE and NIS on the TASE) and takes place at different times (resulting
from different time zones, different trading days and different public holidays in the United States and Israel). The trading
prices of our ordinary shares on these two markets may differ due to these and other factors. Any decrease in the price of
our ordinary shares on one of these markets could cause a decrease in the trading price of our ordinary shares on the other
market.



As a foreign private issuer, we are permitted
to follow certain home country corporate governance practices instead of applicable SEC and NYSE requirements, which may result
in less protection than is afforded to investors under rules applicable to domestic issuers.



As a foreign private issuer, we are permitted
to follow certain home country corporate governance practices instead of those otherwise required by the NYSE for domestic issuers.
For instance, we have elected to follow home country practices in Israel with respect to, among other things, composition and function
of the Audit and Finance Committee and other committees of our Board of Directors and certain general corporate governance matters.
In addition, in certain instances we will follow our home country law, instead of NYSE rules applicable to domestic issuers, which
require that we obtain shareholder approval for certain dilutive events, such as an issuance that will result in a change of control
of our Company, certain transactions other than a public offering involving issuances of a 20% or more interest in our Company
and certain acquisitions of the stock or assets of another company. Following our home country corporate governance practices as
opposed to the requirements that would otherwise apply to a U.S. company listed on the NYSE may provide less protection than is
afforded to investors under the NYSE rules applicable to domestic issuers.



In addition, as a foreign private issuer,
we are exempt from the rules and regulations under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”),
related to the furnishing and content of proxy statements and the requirements of Regulation FD (Fair Disclosure), and our directors,
officers and principal shareholders are exempt from the reporting and short-swing profit recovery provisions of Section 16 of the
Exchange Act. In addition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial
statements with the SEC as frequently or as promptly as domestic companies whose securities are registered under the Exchange Act.



We have a history of quarterly fluctuations
in our results of operations due to the seasonal nature of the demand for some of our products. We expect these fluctuations to
continue. Fluctuations in our results of operations may disappoint investors and result in a decline in our share price.



We have experienced, and expect to continue
to experience, fluctuations in our quarterly results of operations. Our sales have historically been stronger in the second and
third quarters of each year. This is due to the mix of products we sell in those quarters, as well as the mix of sales in different
countries. If, for any reason, our revenues in the second and third quarters are below seasonal norms, we may not be able to recover
these sales in subsequent quarters and our annual results of operations may not meet expectations. If this occurs, the market price
of our ordinary shares could decline.



Item 4.  Information on
the Company



A.	HISTORY AND DEVELOPMENT OF THE COMPANY



Our legal name is Israel Chemicals Ltd.
and our commercial name is ICL. We are a public company and operate today as a limited liability company under the laws of Israel.
Our registered office and principal place of business is located at Millennium Tower, 23 Aranha Street,
P.O. Box 20245, Tel Aviv 61202, Israel. The telephone number at our registered office is +972-3-684-4400. Our website address is
www.icl-group.com. The reference to our website is intended to be an inactive textual reference and the information on, or accessible
through, our website is not intended to be part of this Annual Report.



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We were established in Israel in 1968 as
a government-owned and -operated company in Israel and operate today as a limited liability company under the laws of Israel. In
1992, following a decision of the Israeli government to privatize the Company, the State published a sales offer prospectus and
our shares were listed for trade on the Tel Aviv Stock Exchange. In September 2014, we listed our shares for trade on the New York
Stock Exchange, and they are currently traded in Tel Aviv and in New York. The purpose of the listing was to expand our global
base of investors, improve liquidity, increase our access to global financial markets, and improve our capital structure management
flexibility. For additional information on the Company’s history and development, see “—Business Overview—Our
History.” For information about our principal capital expenditures and divestitures during the last three fiscal years,
see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Principal Capital
Expenditures and Divestitures.”



B.	BUSINESS OVERVIEW



Company Overview



We are a leading global specialty minerals
company that operates a unique, integrated business model. We extract raw materials and utilize 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 98% of our revenue. Our operations are organized into three segments: (1) Fertilizers,
which operates the raw material extraction for us and markets potash, phosphates and specialty fertilizers; (2) Industrial Products,
which primarily extracts bromine from the Dead Sea and produces and markets bromine and phosphorus compounds for the electronics,
construction, oil and gas drilling and automotive industries and (3) Performance Products, which mainly produces, markets and sells
a broad range of downstream phosphate-based food additives and advanced industrial intermediates.



Our principal assets include:



| | · | Access to one of the world’s 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.
| | - | -------------------------------------------------------------------------------------



| | · | A unique integrated phosphate value chain, from phosphate rock mines in the Negev Desert in Israel and in China to our value-added
downstream products in Israel, Europe, the United States, Brazil and China.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | An extensive global logistics and distribution network with operations in over 30 countries.
| | - | --------------------------------------------------------------------------------------------



| | · | 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.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



For the year ended December 31,
2015, we generated total sales of approximately $5,405 million, operating income of approximately $765 million and net
income of approximately $509 million, the sales of the Fertilizers segment amounted to approximately $3,067 million and
operating income of approximately $529 million, our Industrial Products segment generated sales of approximately $1,115 million
and operating loss of approximately $24 million and our Performance Products segment generated sales of approximately $1,472
million and operating income of approximately $319 million.



For a breakdown of sales by segment and
geographic market for each of the last three fiscal years, see “Item 5. Operating and Financial Review and Prospects—A.
Operating Results.”



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Our Industry



The majority of our businesses compete
in the global fertilizer and specialty chemicals industries.



Fertilizers



Fertilizers serve an important role in
global agriculture by providing vital nutrients that help increase both the yield and the quality of crops. We supply two of the
three essential nutrients — potassium, phosphorus and nitrogen — required for plant growth. There are no artificial
substitutes for potassium and phosphorous (which are produced by the Company). Although these nutrients are naturally found in
soil, they are depleted over time by farming, which could lead to declining crop yields and land productivity. To replenish these
nutrients, farmers must apply fertilizers. The demand for fertilizers is volatile and seasonal. In our estimation, the policy of
most countries is to ensure an orderly supply of high-quality food to their residents, including by encouraging agricultural production,
which should preserve the long-term growth trend of fertilizer consumption.







Potash helps regulate a plant's physiological
functions and improves plant resilience, providing crops with protection from drought, disease, parasites and cold weather. Unlike
phosphate and nitrogen, potash does not require additional chemical conversion to be used as a fertilizer. Potash is mined either
from underground mines or, less frequently, from solutions found in nature, such as our operations in the Dead Sea. According
to estimates from the United States Geological Survey, six countries accounted for approximately 86% of the world's aggregate
potash production and the top nine producers (considering China as a single producer even though there are numerous producers
in China) accounted for approximately 85% of world production in 2015. In 2015, the quantities of potash sold worldwide were low
compared with 2014, which was a record year. The average prices in 2015 were significantly lower than the prices in 2014. Since
the beginning of 2015 there has been a trend of a decline in the potash. The main reasons for that stated above are, among others,
a decrease in the prices of agricultural commodities, weakening of the currencies of the importing countries, a shortage of rainfall
(mainly in India) and limitations on the credit granted to farmers (mainly in Brazil). The beginning of 2016 brought no signs
of economic recovery. In the global commodities market, the prices are at multi year lows, due to the high inventory levels in
China, which postponed the negotiations with respect to renewal of the contracts to 2016.







Import of potash into China in 2015 totaled
9.4 million tons – an increase of about 18% compared with the corresponding period last year. The significant quantities
of potash imported into China during the year caused an accumulation of large inventories in the country. This enabled the Chinese
importers to delay signing of contracts for the first half of 2016 and gives them a stronger bargaining position in negotiations
with reference to import prices in the new contract. In January 2016, ICL signed new framework agreements with its customers in
China for the supply of approximately 3.4 million tons of potash over the next three years, compared to 3.3 million tons in the
previous framework agreements for the years 2013 to 2015. The selling price will be determined on the basis of the accepted price
levels in the Chinese potash market. According to the framework agreements, which represent a 3% increase in the quantities supplied,
compared to the previous three-year framework agreements, the Company will supply 1.1 million tons of potash in 2016, 1.14 million
tons in 2017, and 1.16 million tons in 2018.



In the beginning of 2015, it appeared that
the imports of potash into India would increase significantly over 2014. This expectation did not materialize, mainly due to the
devaluation of the Indian currency and the shortfall of Monsoon rains. During 2015, India imported 4 million tons of potash, constituting
a decrease of 7%, compared with 4.3 million tons imported in 2014. In 2015, ICL signed contracts for supply of potash with its
customers in India, covering an aggregate quantity of 835 thousand tons, including options. In the Company’s estimation,
the customers in India will not utilize the entire quantities covered by the contracts due to the accumulation of inventories.



In the Company’s estimation, an improvement
in farmers demand for potash in India is expected in 2016, on the assumption that the price in the annual contract to be signed
will be lower than the present contract price. However, aside from the price, the demand is also impacted, to a significant extent,
by the subsidies that will be determined by the government and by the amount of the monsoon rainfall.



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The demand for potash in Brazil, which
peaked in 2014, dropped significantly in 2015 due to a fall in the prices of the agricultural commodities, weakness of the Brazilian
currency and the limitations with respect to credit to farmers. In 2015, potash imports into Brazil totaled 8.3 million tons, compared
with imports of 9.1 million tons in 2014 – constituting a decline of 8%.



According to the IFA, the aggregate global
demand for potash for agricultural and other uses is projected to grow at an average annual rate of 3%, from 35.5 million tons
of K2O in 2015 up to 38.5 million tons of K2O in 2019.





Phosphate is essential
for plant root development and is required for photosynthesis, seed germination and efficient usage of water. Phosphate fertilizers
are produced from phosphate rock and sulfuric acid and occasionally also include ammonia. The principal phosphate fertilizer producing
regions have plentiful reserves of high quality, phosphate rock that can be mined at a low cost. In 2015, the vast majority of
the world’s phosphate rock production was in China, the United States, Morocco and Russia. According to the IFA, global phosphoric
acid demand is forecast to grow at an annual rate of 2.5%, from a quantity of 43.7 million tons of phosphorous content in 2015
to a quantity of 48.2 million tons of phosphorous content up to 2019. During 2015, there was a decrease in prices of phosphate
fertilizers. These price decreases stemmed from a combination of supply and demand factors. On the demand side, imports into India
(the main importer of DAP) were lower than expected in the second half of the year, due to a shortage of rainfall and the continuing
erosion of the local currency against the dollar. Regarding demand, in addition to the decrease in demand in India, in 2015 Brazil
also imported a quantity that was 24% less than in 2014, due to the decline in the prices of agricultural commodities, weakness
of the Brazilian currency and restrictions on credit to farmers. The demand in the United States was also low, mostly due to a
fall in crop prices. On the supply side, there was a significant increase in the export of phosphate fertilizers from China, the
new Saudi producer (Ma’aden) increased its exports this year, and the Moroccan phosphate company (OCP) entered a new plant
into production (one of four in the processes of gradual construction). Based on CRU publications, due to the decline in demand,
a number of major producers implemented a policy of contracting production: the U.S. fertilizers producer, Mosaic, reduced production,
the Jordanian producer, JPMC, produced smaller quantities in the final months of the year, while the Tunisian producer suffered
from numerous interruptions due to strikes at the plants, mines and the companies shipping the rock to the plants.



The prices of phosphate
rock also fell in 2015, however more moderately than the phosphate and potash prices. CFR prices fell by about ten percent. Part
of the decline was offset by the decline in the shipping prices, such that the FOB prices were impacted to a lesser extent.



The barriers to entry of new
competitors into the potash market are significant, and a long lead time and billions of dollars of capital per operation are
required. For example, economically recoverable deposits are scarce, typically deep in the earth and geographically
concentrated. In phosphates, the need for access to competitive sources of multiple raw material feedstocks (phosphate rock,
sulfuric acid and ammonia) combined with the complexity of developing an economically feasible downstream value chain also
acts as a significant barrier to entry with respect to new competitors.



The specialty fertilizers market is growing
faster than the conventional fertilizers market. Specialty fertilizers are generally used for specialty crops (such as greenhouses
and horticulture) but are expanding into usage for larger specialty field crops. Farmers use fertilizers that are customized to
meet the needs of specific crops, soil types and specific climates, to maximize yield and quality, mainly when the crop prices
are high. The specialty fertilizers allow more precise application of the critical foundations for development of the plant (phosphorus
acid, potassium and nitrogen) and micro-nutrients. In addition to reduction of the environmental impacts, the specialty fertilizers
permit efficient and effective fertilization of different types of produce (fruits, vegetables, etc.). Increase in the demand for
healthier food is expected to give rise to an increase in the use of specialty fertilizers. These fertilizers include, among others,
“enhanced efficiency fertilizers” which permit greater fertilizing efficiency, including, controlled release fertilizers
(CRF) (which allow for the exact release of nutrients over time), delayed/slow release fertilizers (SRF) (which allow for a very
slow release of nutrients) (nitrogen and potassium only), liquid fertilizers integrated in irrigation systems as well as in herbicides
and fertilizers that are fully soluble in water (that are most commonly used for fertilization by means of drip irrigation systems
and foliar spraying).



Specialty Phosphates



Phosphate is also used in a broad
range of downstream products in the food, electronics, energy and construction industries. These phosphate-based specialty
products deliver additional value to ICL on top of the commodity phosphates. Main applications are for the food industry as
additives for improved texture, stability and shelf life of processed foods in the markets for meat, bakery, dairy products
and soft-drinks, and for additional industries for usage in road surfaces, oil and paint additives, forest fire retardants
and fire extinguishing. Demand for phosphate-based products is driven by global
economic and population growth and improved living standards, which promote the adoption of more sophisticated food products.



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Bromine



The largest commercial use of bromine is
in the area of bromine-based flame retardants, which accounts for approximately 40% of the demand for bromine. To meet fire-safety
requirements, flame retardants are used as inputs in manufacturing processes and end products such as plastic enclosures for consumer
electronics, printed circuit boards, insulation materials for construction, furniture, automobiles, and textiles. Additional commercial
uses of bromine are in the following industries: rubber production, oil and gas drilling, water purification, intermediate materials
for production of medicines and pesticides, and others. The flame retardant market has contracted in the past few years, due to
a slowdown in the demand for electronic products and in the construction sector, as well as in the market for printed circuits.
On the other hand, additional uses grew, although at a slower pace. ICL and its competitors are developing new products and
uses on an ongoing basis.



Bromine is found naturally in seawater,
underground brine deposits and other water reservoirs, such as the Dead Sea, and is extracted by evaporation. The Dead Sea is the
world’s premier source of bromine, with concentration levels significantly higher than in regular seawater, and it accounts
for about half of the global supply. Because it has the highest concentration of bromine, the Dead Sea is the most economical supply
source as the least amount of water must be extracted and evaporated to produce bromine.



The bromine industry is highly concentrated,
with three companies accounting for approximately 80% of worldwide capacity in 2015 (ICL, Albemarle and Chemtura). Lack of access
to a low-cost source of supply such as the Dead Sea constitutes a significant barrier to entry for aspiring competitors, as well
as the requirement for a logistical supply system and specialized transport vehicles (isotanks). We estimate that approximately
70% of global elemental bromine production is consumed internally by the bromine manufacturers, since there is a very small market
for elemental bromine. To increase the global use of elemental bromine, development of complex production facilities for downstream
products is required.



Over 98% of our revenue is derived from
three core end-markets: agriculture, food and engineered materials.









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Agriculture



Global fertilizer demand is driven by grain
demand and prices, which are primarily driven by population growth and dietary changes in the developing world:



| | · | Population and Income Growth per Capita. Historically, growth in world fertilizer consumption has been closely
                                                                                                               correlated with growth in world population, which is expected to increase by over 1.0 billion to reach 8.3 billion by 2030,
                                                                                                               according to the U.S. Census Bureau. Currently, developed countries use fertilizer more intensively than developing countries
                                                                                                               and therefore produce crops at much higher yields. Economic growth in emerging markets is increasing food demand and thus
                                                                                                               fertilizer use. In addition, income per capita growth in developing markets results in a shift to more protein-rich diets,
                                                                                                               and specifically, there is an increase in the consumption of meat, which requires larger quantities of grain for their
                                                                                                               growth, thus leading to an increased demand for seeds for animal feed. According to the IMF, income per capita in developing
                                                                                                               countries is expected to grow by an average rate of 6.4% annually from 2015 to 2020.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Declining Arable Land per Capita. As the world’s population grows, mainly in cities, farmland per capita
decreases and more food production is required from each acre of farmland. This, in turn, requires increased yield on existing
farms. According to data from the FAO, the amount of arable land per capita is expected to decrease from 0.218 hectares per person
to 0.197 hectares per person between 2012 and 2030. Effectively, new arable land is available only in limited quantities, and is
concentrated mainly in Brazil. Therefore, the only viable path to increase crop production is through the yield increase in existing
farms in developing countries, mainly in China, India, Russia, Africa and Central America, by optimizing the use of fertilizers
(especially improving the balance in the use of potash and phosphates versus the use of nitrogen fertilizers) together with water
availability and better seeds.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Low Grain Stock-to-Use Ratio. The pressure on food demand is expected to continue to result in relatively low
historical levels of the grain stock-to-use ratio (a metric indicating the level of carryover stock), as illustrated by the chart
below. Based on the report published by the USDA in February 2016, the grain stock-to-use ratio is expected to increase to approximately
23.3% at the end of the 2015/2016 season, compared with 22.8% at the end of the 2014/2015 season, and 21.2% at the end of the 2013/2014
season. This is higher than the very low levels of 16.6% for 2006/2007 but lower than the level of 28.9% for the 2000/2001 season.
Most of the increase that is anticipated in the 2015/2016 season stems from an increase in corn and wheat stockpiles. The inventory
of soybeans, which is not included in the grains’ inventory index, is also on the rise. An increase in the grain stock-to-use
ratios generally indicates that grain prices may decline (due to higher grain supply) and during 2015, corn, wheat and soybean
prices decreased by 9%, 29% and 15%, respectively. This generally is a negative development for fertilizers, as lower grain prices
reduce the incentive of farmers to use intensive fertilizer application.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







Food



Consumer demand for different food products
in developed countries has changed dramatically over the last several decades, driven by a number of trends and processes including
increased per capita incomes, demographic shifts and lifestyle changes. Longer working
hours, changing family structures, increased awareness of nutrition and health issues and access to a broader variety of food products
result in growing demand for more sophisticated, products with longer shelf-lives such as convenience food and processed food products.



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This changing demand includes greater demand
for more sophisticated food products and processed food products with enhanced nutritional value and balance and with improved
flavor, texture and appearance. An increasingly longer supply chain and consumer awareness of waste of foods also drives the demand
for longer shelf-life and food stability. These trends act as long-term drivers of demand for food additives such as phosphate
derivatives, phosphate and protein containing formulations and hygiene products for the processed meat, bakery, dairy and beverages
industries.



Engineered Materials



Demand for engineered materials that we
manufacture, which include solutions based on bromine and phosphorus, is driven by the demand from the construction and electronics
industries, demand for energy, including renewable energy, and the increase in the demand for potable water and pharmaceutical
products. Phosphoric acid is incorporated as a raw material into industrial grade product solutions that serve the needs of the
water, cleaning, paints and coatings, and metal treatment industries. Phosphorous Penta Sulphide (p2s5) is manufactured to serve
the lubricating oil additives and insecticide markets. Increased standards of living and expanding population in developing countries
also increase regulation and growing environmental awareness. These trends result in greater demand for flame retardants including
next generation and polymeric flame retardants, mercury emission control solutions, forest fire retardants, bromine-based biocides
for water treatment, bromine, magnesia and potassium chloride-based intermediates for the pharmaceutical industry and oil
additive solutions.



Our Competitive Strengths



We attribute our business strength to the following competitive advantages:



| | · | Unique portfolio of mineral assets. We benefit from our access to
one of the world’s resource-rich, long-life and low-cost raw materials, mainly potash and bromine. Our access to these resources
is based upon exclusive concessions and licenses from the State of Israel for extraction of minerals from the Dead Sea and mining
potash and salt from local governments in the United Kingdom and Spain. We also have access to phosphate rock in the Negev Desert
based on mining concessions from the State of Israel and we hold a concession for mining phosphates in two mines in China. Access
to these assets provides us with a consistent, reliable supply of raw materials, allowing us to produce our products on a large
scale and in a cost-effective manner.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Dead Sea
in Israel. Our potash and bromine production facilities at the Dead Sea enjoy low production costs
due to the high concentration and virtually unlimited supply of minerals contained in the Dead Sea, and the low cost of extracting
minerals from the Dead Sea, compared to mining potash from underground deposits or extracting bromine from less concentrated sources,
especially using solar evaporation to extract potash and bromine, which is a low-cost process, as compared to other energy-intensive
alternatives. Furthermore, the hot and dry climate of the Dead Sea allows us to store, at a low cost, very large amounts of potash
(exceeding one full year of production) outdoors. This advantage enables us to operate worldwide potash facilities at full production
capacity despite periodic fluctuations in demand. In addition, we benefit from the geographic proximity of our facilities in Israel
to seaports and from Israel’s geographic positioning vis-à-vis our main geographical markets (especially the fast
growing markets of India, China and Brazil), reducing transportation, logistics costs and time-to-market. While we benefit from
these advantages, we expect to incur significant infrastructure-related costs to fully harvest salt from Pond 5 at our Dead
Sea complex, which is our central evaporation pond, to avoid the need to continue to raise the water level in the pond. In addition,
while the supply in the Dead Sea is virtually unlimited, our access to this supply of potash and bromine pursuant to the concession
is subject to the need to construct a new pumping station. Moreover, we are scheduled to pay taxes and royalties in the future
at a higher rate following passage of the Law for Taxation of Profits from Natural Resources which entered into effect on January 1,
2016, except with respect to potash sales from ICL Dead Sea where the effective date is January 1, 2017. See “Item
3. Key Information—D. Risk Factors—Risks Related to Our Business”.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------









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| | · | United
Kingdom and Spain mineral assets. In addition to our operations in Israel, we mine potash in the United Kingdom and Spain.
Access to these assets provides us with production and logistics flexibility, geographical proximity to European customersand business diversification.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Our integrated
phosphate value chain.  Due to our access to the phosphate rock in the Negev Desert and in our mine in China, we are
the only sizeable downstream fully backward integrated phosphate player. We mine and process phosphate rock from three open-pit
mines in the Negev Desert under mining concessions with the State of Israel and from one open-pit mine in Haikou (China), using
conventional methods, under phosphate mining license that was issued in July, 2015 by the Division of Land and Resources of the
Yunnan district in China. Approximately three-quarters of the phosphate rock produced are used internally to manufacture phosphate
fertilizers and phosphoric acid, with the balance sold to external producers. See “Item 3. Key Information—D. Risk
Factors—Risks Related to Our Business—Our mining operations are dependent on concessions, licenses and permits granted
to us by the respective governments in the countries wherein they are located.”
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Diversification into higher value-added specialty products leveraging our integrated business model. Our integrated
production processes are based on a synergistic value chain that allows us to both efficiently convert raw materials into value-added
downstream products and utilize by-products. For example, in phosphates we utilize our backward integration to produce specialty
phosphates used in the food industry and for engineered materials applications which provides us with additional margins on top
of the commodity margin. Our food ingredients provide solutions for improved texture and shelf-life for meat, dairy and bakery
products. In addition, as a by-product of our potash production at the Dead Sea, we generate brines with the highest bromine concentration
globally. Our bromine-based products serve the electronics, construction, oil and gas and other industries. Our potash mine in
the United Kingdom also contains another mineral (polysulphate) which is mined using the same infrastructure and addresses unmet
emerging mineral needs of the global agricultural industry, like sulfur deficiency.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Leading positions in markets with high barriers to entry. We are a global leader in many of the key markets in
which we operate, including PK fertilizers, specialty fertilizers and phosphates, elemental bromine and phosphate-based food additives.
We believe we are generally ranked among the top three leaders in our markets, as shown in the table below:
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Product                                                            | Rank
in international market                                                                                                                                        | End-Markets                  
|------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------
|Potash                                                             | #2 in Western Europe and #6 Worldwide                                                                                                                               | Agriculture                  
|PK fertilizers (complex fertilizers based on potash and phosphate) | #1 in Western Europe                                                                                                                                                | Agriculture                  
|Specialty fertilizers CRF and MKP                                  | #1 Worldwide in MAP/MKP soluble fertilizers, #1 (tied) in
    Europe in controlled-release fertilizers and#2 in the United States in controlled-release fertilizers | Agriculture                  
|Phosphate-based food additives                                     | Top 3 Worldwide                                                                                                                                                     | Food                         
|Specialty phosphates                                               | Top 2 Worldwide                                                                                                                                                     | Food and Engineered Materials
|Elemental bromine                                                  | #1 Worldwide                                                                                                                                                        | Engineered Materials         
|Phosphorus-based flame retardants                                  | #1 Worldwide                                                                                                                                                        | Engineered Materials         
|Forest fire retardants                                             | #1 Worldwide                                                                                                                                                        | Engineered Materials         



| | · | Most of our businesses rely on natural resources that are scarce and concentrated in the hands of a few market participants.
Our exclusive concessions, intellectual property (unique knowledge, technologies and patents for various products and applications),
world-wide marketing and distribution network and high industry start-up costs for new market entrants further add significant
barriers to entry.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Strategically located production and logistics assets. We benefit from the proximity of our facilities, both
in Israel and Europe, to developed economies (Western Europe) and emerging markets (such as China, India and Brazil). For example,
in Israel, we ship from two seaports: the Port of Ashdod (with access to Europe and South America) and the Port of Eilat (with
access to Asia, Africa and Oceania). Access to these two ports provides us with two distinctive advantages versus our competitors:
(1) we have lower plant gate-to-port costs and ocean freight costs, and transportation costs from ports to target market, which
lowers our overall cost structure and (2) we have faster time to markets due to our proximity to end-markets, allowing us to opportunistically
fill short lead-time orders, strengthening our position with our customers. In 2015, we completed the establishment of the YPH
JV with Yunnan Phosphate Chemicals Group, China’s leading phosphate manufacturer, which strengthens our position in China.
In addition, we are the sole producer with the ability to transport potash and phosphates from the same port (which we do in Israel).
Our sales are balanced between emerging markets (approximately 35% of 2015 sales) and developed economies (approximately 65% of
2015 sales).
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | · | Operating cash flow generation. We generated operating cash flows of $893 million and $573 million in 2014
                                                                                                               and 2015, respectively. These cash flows have enabled us to maintain and expand our production facilities and take advantage
                                                                                                               of acquisition opportunities. In addition, since 2007, we have a policy of paying a quarterly dividend of up to 70% of our
                                                                                                               net income. This policy has resulted in an average dividend yield in the past five years of 6.2% (calculated based on the
                                                                                                               total dividend per share distributed from the net income in the years 2011 through 2015, including a special dividend in the
                                                                                                               amount of $500 million distributed in 2014, divided by the average price per share on the Tel-Aviv Stock Exchange during
                                                                                                               these years). See “Item 8. Dividend policy.”
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Professional expertise and culture of collaboration and determination. Our operations are managed by an international
management team with extensive industry experience. We develop leaders with strong experience in their fields and the culture to
drive change and innovation in our Company. We also bring in leaders from outside the Company to supplement our expertise. We focus
on nurturing and empowering talent through a global platform of qualification, collaboration and communication that reinforces
innovation.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our Strategy



Our “2020—Next Step Forward”
corporate strategy is targeted to fulfill essential needs in our three core markets (agriculture, food and engineered materials).
We have developed a strategic plan based on three value-creating pillars: (1) Efficiency: improvement of existing operations; (2)
Growth: organic and external expansion of our value chain, from specialty minerals to the agriculture, food and engineered materials
markets; and (3) Enablers: creating one global ICL, strengthen innovation, providing an empowering environment for our employees
and aligning management with our external and internal stakeholders to support our growth and efficiency goals.



Our key strategic initiatives include:



| | · | Continuously
improve the cost base of our distinctive mineral asset base and initiate G&A cost efficiency initiatives. We  have
identified, and have started implementing cost reduction initiatives successfully in our potash, bromine and phosphate operations.
Further to our demonstrated ability to create significant actual added value, we have expanded the activity and implemented an
accelerated 5 year plan starting in 2016. The process focused on implementing process efficiencies to maximize our utilization
rates while maintaining our production capacity to further reduce production cost per ton and help ICL lower its costs of production.
Over 2015, ICL has also established an Operational Excellence activity for implementation of the most advanced practices in the
industry. The ICL Operational excellence implementation plan covers transformation of all our operations within 3 years while
our major Potash and Phosphate sites are commenced transformations since 2014. We estimate that, the execution of our activities
which have already delivered significant contributions, will increase savings by the end of 2016 in the amount of approximately
$350 million annually compared with 2013. As at December 31 2015, we successfully achieved a $275 million savings compared
to 2013. Furthermore, ICL has initiated and already implemented certain initiatives across the Company to reduce our G&A costs,
ICL is continuing to assess additional potential areas of savings and expecting to continue to do
that during 2016. 
On March 15, 2016, we announced, in light of the significant deterioration in the
potash business environment and the continued weak outlook for the potash business, that we will adopt a
number of additional measures to strengthen the Company's financial position and results. These measures are
designed to continue ICL's tradition of sustainable shareholder value creation. Following previous cost
improvement measures and ICL's strengthening of its specialty business, it was decided that: (1) In addition to the
previously announced efficiency improvements that are targeted to generate cost reductions of $350 million by the end
of 2016 on a run-rate basis (compared to 2013 levels), the Company will target additional cost reduction measures
of $50 million per year, which it will implement during 2016; (2) the Company will target measures that are expected
to generate additional $50 million in cash flow through improved working capital and other measures; (3) Capital
expenditures (excluding acquisitions) are targeted not to exceed $650 million per year over the next several years,
which will be lower than the $700 million to $800 million previously targeted; and (4) due to the cost savings and
cash reductions specified and based on the current outlook for the business environment, the Company intends to target debt levels in an absolute amount that would not exceed current levels. If market conditions continue as currently contemplated, the Company anticipates that a moderate reduction of debt would begin in 2016.

In addition to these steps, the Board of Directors has decided to re-examine the Company's current dividend policy, in its
next meeting, and may make changes for future periods. Such changes could include either a reduction in the amount or the
targeted dividend, or modification of the policy to be based on other metrics. No assurances can be provided that the
Board of Directors will make any changes. 
Our estimates regarding the cost savings
is based on our management experience and on actual process improvements. While the cost savings and efficiencies to be generated
by our strategic plan described above are presented with numerical specificity, and we believe such targets to be
reasonable as of the date of this Annual Report, the manner of implementation of the strategic plan and the expected timing thereof
and its impact may be different, possibly even significantly different, than that forecasted. It may be difficult to reduce costs
due to various factors, including the situation prevailing in the market, competition, labor relations and strikes, regulation
and the risk factors characterizing our activities. Accordingly, our actual results may differ from these targets and the differences
may be material, particularly if actual events differ significantly, possibly adversely, from one or more of our key assumptions.
We caution investors not to place undue reliance on any of these assumptions and targets. See “Special Note Regarding
Forward-Looking Statements” for additional information regarding these forward-looking statements and risk factors.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





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| | · | Base our future expansions on our existing reserves. After expanding our production capability at the Dead
                                                                                                                                 Sea to about 4 million tonnes, the potential for future expansion relies on our reserves at ICL Iberia and ICL Africa (the
                                                                                                                                 Danakil project in Ethiopia). At ICL Iberia in Spain we are consolidating our sites into one mine with one processing
                                                                                                                                 facility, which will reduce the cost per tonne and create opportunity for additional debottlenecking and expansion. At ICL
                                                                                                                                 UK, we are planning to shift from Potash production to Polysulphate (reaching 1 million tons in 2020), and extend the mining
                                                                                                                                 area to provide additional resources. In 2015, we completed the acquisition of 100% of Allana that was formerly publicly
                                                                                                                                 traded company in Toronto, Canada at the time of the acquisition, which through Allana Afar holds a concession to develop the
                                                                                                                                 first potash mine in Ethiopia. Although our development program is still in the exploratory stage, we estimate that
                                                                                                                                 production will commence in 2020. In addition, we intend to develop the mine for production of potassium chloride (MOP) and
                                                                                                                                 potassium sulfate (SOP). In phosphates, we intend to preserve the yearly production records that were achieved during 2015 in
                                                                                                                                 ICL Rotem. Additionally the focus in the coming years would be on optimizing and improving the capacity utilization in YPH JV
                                                                                                                                 in China.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



With respect to our
phosphate reserves, in December 2015, the National Planning and Building Council approved the Policy Document regarding
Mining and Quarrying of Industrial Minerals, which includes, among other things, a recommendation to permit phosphate mining,
including at Barir field. For further information in that respect see Item 4. Information on the Company—D. Property,
Plants and Equipment—Mineral Extraction and Mining Operations”. It should be noted that the residents of Arad are
continuing to object to advancement of the mining plan and even to test mining. If mining approval is not received for the
Barir field, this will significantly impact the Group’s future mining reserves in the medium and long term. See
“Item 3. Key Information—D. Risk Factors—Risks Related to Our Business— Our mining operations are
dependent on concessions, licenses and permits granted to us by the respective governments in the countries where they are
located”.



Furthermore, we are assessing
additional phosphate reserves in emerging markets and consistent with our strategy to develop a full phosphate value chain in key
regions in the world, in October 2015 we completed the formation of a joint venture company (“YPH JV”) with Yunnan
Phosphate Chemicals Group Corporation Ltd. (“YPC”), China’s leading phosphate producer – a step that we
expect to nearly double our global phosphate market share. We invested approximately $180 million for a 50% stake in YPH JV. YPH
JV, is expected to have major global phosphate operations in China with annual capacity of nearly 1 million tons of fertilizers
and other downstream products, with backward integration into world-scale phosphate rock mines. As we transform the operations
from commodity focused to more balanced operations between commodity and specialty, we expect revenues to increase significantly
while improving profitabilityand EBITDA margins to increase to mid-teens. In the fourth quarter of 2015, ICL recorded sales of over $100 million with
respect to YPH JV.



In addition,
in January 2016 we completed an investment in 15% of the issued and outstanding share capital on a fully diluted basis of the parent
company of YPC, Yunnan Yuntianhua Co., Ltd (a public company traded on the Shanghai Stock Exchange) and China’s leading producer
of phosphate rock and fertilizers ("YTH"). This investment will grant ICL representation on several of Yunnan Yuntianhua
Co. Ltd. governing bodies and will facilitate our efficient management of YPH JV.We paidapproximately $250 million in consideration of 199 million new shares that
were issued to us in a private offering, at the price of 8.24 CNY per share. The new shares will be subject to a three-year lock
up period as required under the PRC law. This investment is expected to strengthen our strategic alliance with YTH, the parent
company of YPC, our partner in YPH JV.









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| | · | Expand market demand for our products. In potash, we will continue our investment in educating emerging market
farmers on the economic benefits of fertilization with optimal levels of potash. In particular, we are focusing on India and Africa
due to our current position in these markets, our proximity to them and the currently low use of potash fertilizers in these markets.
We launched the “Potash for Life” project in India and to date, we have set up thousands of demonstration plots in
9 states and over 42 districts, and the “Potash for Growth” project in Ethiopia, where we have set up hundreds of demonstration
plots. We now plan on expanding our program to additional several hundred plots at farmers’ fields across the country during
2016. We intend to continue to leverage our bromine assets through the development of new products and new applications by increasing
our R&D spending by utilizing our industry expertise, through collaborations with others and by advocacy, for example, advocating
for fire safety and mercury control regulations in emerging markets.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Grow
                                         our value-added downstream products. As part of our growth strategy we intend
                                         to use our cash flow to further expand our specialty and value-added products organically
                                         and through acquisitions. This will allow us to create growth in our businesses and continue
                                         to evolve from a product-based to a market-focused organization. As part of the expansion
                                         of the company’s products portfolio in the specialty fertilizers, the company announced
                                         its examining the development of potassium nitrate production plant with a capacity of
                                         about 200Kt to enable ICL to increase its production of soluble fertilizers and food-grade
                                         phosphoric acid. In food, we continue expanding our existing phosphate-based texture
                                         and stability solutions to emerging markets. In addition,
                                         we are constantly collaborating with our customers to develop new formulations. The next
                                         phase of this strategy is to leverage our expertise and technology in enhanced texture
                                         and stability solutions beyond additives based solely on phosphates, including through
                                         acquisitions, strategic partnerships and joint ventures. In March 2015, we set a key
                                         milestone in ICL’s Food strategy with the acquisition of Prolactal – a leading
                                         European producer of dairy proteins for the food and beverage industries (about $ 140
                                         million revenues, 200 employees). This acquisition has increased ICL’s ability
                                         to service its existing clients by offering them a broader selection of texture and stability
                                         ingredients, to better meet the growing demand by consumers for food and beverages with
                                         higher protein levels. Our deep understanding of the interaction of phosphates with proteins
                                         enables us to develop new products that in part fulfil unmet needs of our customers in
                                         the beverage and dairy markets andto support the formulation of meatless products that are experiencing strong growth trends
                                         for vegetarians as well as flexitarians. Finally, in engineered materials, we intend
                                         to utilize our expertise and technology to develop bromine and phosphorous-based solutions
                                         for industrial applications. In 2015, ICL completed the divestment of the aluminum, paper,
                                         and water businesses (APW), the thermoplastic products for the footwear industry (Rhenoflex),
                                         the pharmaceutical and gypsum businesses (PCG), Medentech and hygiene products for the
                                         food industry (Anti-Germ) businesses and generated over $350 million in net proceeds.
                                         In March 2016, we successfully completed the sale of Clearon (chlorine-based biocide
                                         activities in USA) in accordance with our strategy. An additional divestiture opportunity
                                         in our non-core businesses includes IDE.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Further develop and enhance our “One ICL” culture and empower our employees. In order to achieve our strategies and continue to carry out our evolution from a natural resources company to an essential
needs company, we believe we must continue to enable our employees to thrive within our organization through implementation
of our "One ICL" strategy. Under our "One ICL" strategy, we are working to harmonize our systems (for example, by moving to
a single global enterprise resource planning system). In 2015, we achieved first successful rollout of the system in ICL UK
and ICL EU. In addition, we are optimizing our internal processes in order to, among other things, share best practices across
our Company to ensure that we provide the best services in our end markets and to avoid product or divisional silos. We will
continue to identify and reward top performing employees and will promote them to the right locations within the organization
where they can be most effective, while incentivizing them through appropriate remuneration and performance assessments that
will help us achieve our goals.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our History



ICL was established in 1968 as a
government company in Israel and operate today as a limited liability company under the laws of Israel. In 1975, the shares
of various development companies (including, among others, ICL Dead Sea, the companies today consolidated as ICL Rotem, the
bromine companies and Tami) were transferred to us. In 1992, following a decision by the Israeli government to privatize our
Company, Israel published its tender prospectus, 20% of the Company’s shares were sold to the public and its shares
were registered for trading on the Tel-Aviv Stock Exchange. Prior to our public
share issuance, a Special State Share in our Company and our main Israeli subsidiaries. was issued to the State of Israel. In 1995,
the State of Israel sold its controlling interest in us (representing approximately 24.9% of our shares) to Israel Corporation,
which was controlled at that time by the Eisenberg family. A majority of the ordinary shares held by Israel were sold during the
following years. In 2000, the State of Israel ceased to be a stakeholder in terms of holding any ordinary shares in us, but it
retained the Special State Share. In 1999, the Ofer Group acquired the Eisenberg family’s shares in Israel Corporation. In
September 2014, we listed our shares on the New York Stock Exchange, and they are currently traded in Tel Aviv and in New York.



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As of December 31, 2015, Israel Corporation
holds approximately 48.88% of our outstanding ordinary shares and approximately 46.04% of the shareholders’ voting rights.



The following is a list of significant
acquisitions and joint ventures that have contributed to the growth of our business since 1968:



| | · | In October 2015, we completed the formation of YPH JV with YPC. The YPH JV, which includes a world-scale phosphate rock mine
producing approximately 2.5 million tonnes of phosphate annually and a large-scale phosphate operation, is expected to be a leading
player in China’s phosphate sector, operating an integrated, world-scale phosphate platform across the value chain. It will
include upstream mining, bulk fertilizers and downstream businesses in specialty fertilizers, as well as in specialty phosphates
for the food and engineered materials markets. In January 2016, subsequent to the date of the report, we completed the investment
in 15% of the issued and outstanding share capital on a fully diluted basis of YTH. For additional information, see “Segment
Information—Fertilizers”;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | In April 2015, AkzoNobel Industrial Chemicals and the Company signed an agreement for production of high-quality vacuum salt.
The vacuum salt will be manufactured by the Company and will be sold by AkzoNobel by means of an “offtake” agreement
for acquisition of the partnership’s products. Pursuant to the agreement, the Company will finance and construct two production
facilities on its mining site in Suria, in Catalonia, Spain;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | In February 2014, we signed a strategic agreement for acquisition of the shares of Allana Potash, a company that focuses on
acquisition and development of potash assets, the shares of which were traded on the Toronto Stock Exchange. In June 2015, the
Company acquired the balance of Allana’s shares. For additional information, see “Item 4. Information on the Company—B.
Business Overview—Segment Information —Fertilizers”;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | In 2015, we completed the acquisition of Prolactal, a leading European company that manufacturers milk proteins for the food
and beverage industry;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------



| | · | In 2014, we concluded the acquisition of 100% of Fosbrasil (increasing our holdings from 44.25% to 100%), the leading manufacturer
in Latin America of purified phosphoric acid for the food and special fertilizer markets and a manufacturer of secondary products
based on phosphates and special fertilizers;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | In 2014, we acquired AmegA Sciences, an innovative development company and industrial leader from England of products for special
agricultural markets, landscaping, grass, and convenience installations, including solutions related to water savings, water conservation,
and growth enhancement;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Our acquisition of Hagesud Group, a German producer of premium spice blends and food ingredients for meat processing, in 2014;
| | - | ------------------------------------------------------------------------------------------------------------------------------



| | · | Our acquisition in 2013 of the assets and production operations of Knapsack, a factory in Germany used for marketing and producing
P2S5 phosphates;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Our acquisition of all of the shares of the Belgian company Nu3 NV and sale of all of our shares in the Dutch company Nu3 BV,
due to the liquidation of the Nu3 partnership, at the end of 2012;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Our acquisition in 2011 of 50% of the shares of Tetrabrom Technologies Ltd., raising our shareholdings to 100% of the share
capital of Tetrabrom;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------



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| | · | Our acquisition in 2011 of 100% ownership of A. Fuentes Mendea S.A., a Spanish company engaged in the production and marketing
of specialty fertilizers in Spain;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Our acquisition in 2011 of the companies, assets and activities of business unit in the specialty fertilizers area owned by
the U.S. company, Scotts Miracle-Gro Company (subsequently renamed Everris);
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Our acquisition of shares in Nutrisi Holdings in 2011, resulting in 100% ownership of Nutrisi Holdings, a Belgian holding company
that owns 50% of Nu3, a manufacturer of soluble NPK fertilizer components;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Our acquisition of Supresta, a manufacturer of phosphorus-based flame retardants and other products with plants in the United
States and Germany, in 2007;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Our acquisition of operations and assets for our Performance Products segment from Astaris LLC, a U.S. company, in 2005;
| | - | ------------------------------------------------------------------------------------------------------------------------



| | · | Our acquisition of a 51% interest in BKGLC in China in 2004;
| | - | ------------------------------------------------------------



| | · | Our acquisition of Cleveland Potash, our mining operation in the United Kingdom, in 2002;
| | - | -----------------------------------------------------------------------------------------



| | · | Our acquisition, primarily in 2000, of the publicly-held minority interests in several of our principal subsidiaries in Israel;
| | - | -------------------------------------------------------------------------------------------------------------------------------



| | · | Our acquisition in 1998 of control of Iberpotash, our Spanish mining operation and our subsequent acquisition of the remainder
of Iberpotash;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------



| | · | The commencement in 1997 of our magnesium production operations in Israel in a joint venture with Volkswagen;
| | - | -------------------------------------------------------------------------------------------------------------



| | · | Our acquisition of BK Ladenburg, a chemical company based in Ladenburg, Germany, in 1996;
| | - | -----------------------------------------------------------------------------------------



| | · | Our acquisition of Clearon Corp., a manufacturer in the United States of biocides for water treatment, in 1995;
| | - | ---------------------------------------------------------------------------------------------------------------



| | · | Our acquisition of a fertilizer plant in Amsterdam, Holland, in 1982;
| | - | ---------------------------------------------------------------------



| | · | Our acquisition of Giulini Chemie, a specialty chemicals company based in Ludwigshafen, Germany, in 1977;
| | - | ---------------------------------------------------------------------------------------------------------



Segment Information



We are a leading multinational company
that operates mainly in the areas of fertilizers and specialty chemicals, in three segments: Fertilizers, Industrial Products and
Performance Products. In addition, we have other operations that include water desalination and magnesium manufacturing.



Fertilizers



Our Fertilizers segment develops, manufactures,
markets and sells fertilizers that are based primarily on potash (potassium chloride) and phosphate. In 2015, the total sales of
our Fertilizers segment were approximately $3,067 million and accounted for approximately 57% of our total sales (including sales
to other segments of the Company), while the reported operating income for the segment totaled approximately $529 million, representing
approximately 69% of ICL’s total reported operating income.



The adjusted operating income amounted
to $740 million or 74% of our total adjusted operating income. See “Item 3. Key Information—A. Selected Financial
Data” for a definition of adjusted operating income and a reconciliation to the comparable IFRS measure. Our Fertilizers
segment is also a key player in the specialty fertilizers market.



Nitrogen, phosphorus and potassium (N,
P and K) constitute the three major nutrients required for plant growth. There are currently no artificial substitutes for phosphorus
and potassium (which are supplied by the Company). These three nutrients are present in the ground,
however the continued use of the soil for agricultural crops depletes the concentration of these fundamental elements in the ground
over time, and could result in a decline in crop yields, and therefore this deficiency must be replenished from external sources
through the use of fertilizers. We sell phosphorus-based and potassium-based products.



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Each of these three nutrients plays a different
role in plant development. Potassium and phosphorus are vital for physiological processes of the plant, including strengthening
cereal stalks, stimulating root development, leaf and fruit health, and accelerating the growth rate of crops. Without these nutrients,
crops cannot achieve their growth potential. Potassium also enhances a plant’s ability to withstand drought and cold, improves
the efficient use of nitrogen and other nutrients necessary for plant development, and improves the durability of agricultural
produce in storage and transportation, thereby prolonging the shelf life of produce.



In the short term, demand for fertilizers
is volatile and seasonal, and is affected by factors such as weather in the world’s key agricultural growing regions, fluctuations
in planting main crops, agricultural input costs, agricultural product prices and developments in biotechnology. Some of these
factors are influenced by subsidies and lines of credit granted to farmers or to producers of inputs for agriculture in various
countries, and by environmental regulations. In addition, currency exchange rates, legislation and international trade policies
have an impact on the supply, demand and level of consumption of fertilizer worldwide. In spite of the volatility that may be caused
in the short term as a result of these factors, we believe that the policy of most countries is to ensure an orderly and high-quality
supply of food to the population and to this end, to encourage agricultural production. Therefore, we expect the long-term growth
trend of the fertilizers market will be maintained. Due to the existing barriers to entry and to the excess of supply over demand,
in the long term we expect a reduction in the entry of new players into the market and the expansion of production capacity, until
a new breakeven point between the supply and the demand is reached.



Our Products



The main products of our Fertilizers segment
are potash, fertilizers and phosphates, including specialty fertilizers. In 2015, potash represented approximately 46% of our Fertilizers
segment’s sales (including sales to other segments in the Company) 71% of the segment’s operating income (including
income from sales to other Company segments) and 78% of the segment’s adjusted operating income, while phosphates and specialty
fertilizers represented approximately 54% of our Fertilizers segment’s sales (including sales to other Company segments),
29% of the segment’s operating income (including income from sales to other segments in the Company) and 22% of the segment’s
adjusted operating income. See “Item 3. Key Information—A. Selected Financial Data” for a definition of
adjusted operating income and a reconciliation to the comparable IFRS measure.



Potash. Potash is the common
name for potassium chloride, which is the most common source of potassium for plants, one of the three essential nutrients for
plant development, which assists in protection of the plants from diseases and damaging agents, helps them to adapt to the different
weather conditions, regulates the water in the plant, strengthens the plant stems and strengthens the plant’s ability to
absorb nourishing substances.



ICL sells potash for direct application
as a fertilizer and to compound fertilizer manufacturers. Our Fertilizers segment also uses potash for its own production of compound
fertilizers, based mainly on phosphate and potash.



Our Fertilizers segment produces potash
from the Dead Sea and from underground mines in Spain and the United Kingdom. The potash production process in Israel is based
on extracting carnallite in a chemical process. The carnallite, which is a compound of potassium chloride and magnesium chloride,
precipitates in some of the largest solar evaporation ponds in the world, which contain brines drawn from the Dead Sea. The carnallite
containing salt is transferred to the plants where a chemical process breaks down the carnallite crystal into potash using two
distinct parallel technologies (“hot” and “cold” crystallization).



Extraction of potash from underground mines
in Spain and the United Kingdom is carried out by mining sylvinite (a mixture of potash and salt with varying potash concentrations.
The potash is separated from the salt in production plants situated near the mines.



We also produce polysulphate (also known
as polyhalite), which is a mineral used in its natural form as fertilizer for agriculture, fertilizer for organic agriculture and
a raw material for production of specialty fertilizers. Polysulphate is composed of sulfur, potash,
calcium and magnesium, which are essential components for improvement of crops and agricultural products. Our commercial sales
of polysulphate started in 2012.



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Phosphates and Specialty Fertilizers.
Phosphorus is also one of the three essential nutrients for plant development, which directly contributes to a wide range of physiological
processes in a plant, including production of sugars (including starch), photosynthesis and energy transfer. Phosphorus strengthens
plant stems, stimulates root development, promotes flower formation and accelerates crop development. Phosphorus may be found in
phosphate rock. The main products in this area are: phosphate rock, phosphoric acid and fertilizers.



The specialty fertilizers are highly-effective
fertilizers that allow more precise feeding of the essential foundations for plant development (phosphorous, potassium and nitrogen)
as well as micronutrients. These fertilizers allow efficient and effective fertilizing, among other things, through drip irrigation
systems and foliar spraying, and help growers to obtain a larger harvest of a higher-quality, despite a shortage of water sources
and a limited supply of agricultural lands. These fertilizers include, among others, controlled-release fertilizers (CRF), delayed/slow
release fertilizers (SRF), soluble fertilizers, liquid fertilizers and peat used as a bed for various crops that generally also
contain CRF and crop-protection products.



During October 2015, ICL completed establishment
of the joint venture with Yunnan Phosphate Chemicals, the leading producer of phosphates in China. The joint venture (YPH), which
has a world-scale phosphate rock mine producing about 2.5 million tons of phosphate rock per year and wide-ranging activities in
the phosphate sector, is expected to be a leading player in the phosphate market in China. The joint manufacturing platform is
of global dimensions and includes activities along the entire value chain – commencing from mining of phosphate rock and
production of fertilizers in bulk and running up to phosphate-based specialty products for applications in the food and compound
materials markets.



The principal raw material used in the
production of phosphate products is phosphate rock. Our Fertilizers segment mines phosphate rock from open-pit mines – three
of which are located in the Negev Desert in Israel while the fourth is situated in the Yunnan district in China. In 2015, 72% of
the phosphate rock produced in Israel and all the phosphate rock produced in China was used to manufacture phosphate fertilizers
and phosphoric acid. The remaining phosphate rock produced in Israel was sold to external customers who manufacture phosphoric
acid and fertilizers and as a direct application fertilizer. The policy of our Fertilizers segment is to use most of the phosphate
rock we produce to manufacture downstream products.



Our Fertilizers segment produces fertilizer-grade
phosphoric acid, phosphate fertilizers, compound fertilizers and specialty fertilizers at its facilities in Israel and in China.
Furthermore, our Fertilizers segment also has facilities for the production of phosphate fertilizers and specialty compound fertilizers
in the Netherlands, Germany, the United States, Spain, India and Belgium, as well as animal feed additives facilities in Turkey
and in Israel. Shortly before the end of 2015, the Company sold its share in the partnership in India for the production of soluble
NPK fertilizers. In addition to phosphate rock, phosphoric acid production also requires significant quantities of sulfur, which
our Fertilizers segment purchases from third parties.



Most of the compound fertilizers manufactured
by our Fertilizers segment are based on the elements phosphorus and potassium. Some of the compound fertilizers also contain nitrogen,
which our Fertilizers segment acquires from third parties and incorporates with the phosphorus and potassium. Our Fertilizers segment
is active in developing downstream products based on phosphate rock, including phosphate fertilizers and compound and specialty
fertilizers.



Specialty fertilizers allow more accurate
application of the essential nutrients for plant development (phosphorus, potassium and nitrogen). These fertilizers include:



| | · | Controlled-release fertilizers, which allow accurate release of nutrients over time, and slow-release fertilizers, which allow
very slow release of nutrients (nitrogen and potassium only). These fertilizers have a special coating that allows prolonged release
of nutrients (over several weeks to several months, compared to regular fertilizers that dissolve in the soil and are available
for up to four weeks);
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Soluble fertilizers, which are fully water-soluble, and fully-soluble NPK compound fertilizers, commonly used for fertilization
through drip irrigation systems and foliar spraying to optimize fertilizer efficiency in the root zone and to maximize yields;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | · | Liquid fertilizers, used for intensive agriculture and integrated in irrigation systems (mainly drip systems);
| | - | --------------------------------------------------------------------------------------------------------------



| | · | Peat, a growing medium for various crops, usually containing controlled-release fertilizers and crop-protection products.
| | - | -------------------------------------------------------------------------------------------------------------------------



Since 2011, we have acted to significantly
expand our specialty fertilizer operations by completing the acquisition of the following companies:



| | · | Everris (formerly Scotts Global Pro), a multinational company, whose core activity is the manufacture and sale of high-quality
specialty fertilizers, including controlled-release, slow-release and soluble fertilizers;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Fuentes Fertilizantes, a leading company in Spain that manufactures and distributes liquid and soluble fertilizers, NPK compounds
and conventional fertilizers;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Nu3, a manufacturer of soluble NPK fertilizer components;
| | - | ---------------------------------------------------------



| | · | AmegA, which develops advanced solutions for saving water, preserving water and improved absorption of the fertilizer by the
plant;
| | - | -----------------------------------------------------------------------------------------------------------------------------------



| | · | YPH partnership for production of phosphates in China, which also manufactures specialty fertilizers;
| | - | -----------------------------------------------------------------------------------------------------



Production



Our Fertilizers segment’s principal
production facilities include its plants in Israel (potash, phosphate rock, sulfuric acid, phosphoric acid, phosphate fertilizers,
special compound fertilizers, liquid fertilizers and soluble NPK fertilizers), Spain (potash, raw salt, soluble fertilizers and
NPK-based compound fertilizers), the United Kingdom (potash, polysulphate, raw salt, products for preserving water and improving
absorption of the fertilizer by the plant, and peat as growing media), China (phosphate rock, sulfuric acid, phosphoric acid, phosphate
fertilizers, compound specialty fertilizers and soluble fertilizers), the Netherlands (mainly fertilizers based on phosphate and
potash and controlled-release fertilizers), Germany (mainly fertilizers based on phosphates and potash), Belgium (soluble NPK fertilizers),
the United States (controlled-release fertilizers) and Turkey (phosphate-based products used as animal feed additives).



Our Fertilizers segment’s manufacturing
plants, distribution centers and sales offices are set forth in the map below.







Our current annual potential potash production
capacity is approximately 6.5 million tons, of polysulphate approximately 300 thousand tons, of phosphate rock approximately 7
million tons (including 2.5 million tons of YPH’s production capability), of phosphate fertilizers and compound fertilizers
approximately 2.7 million tons (including 850 thousand tons of YPH’s
production capability), of phosphoric acid approximately 1.3 million tons (including 700 thousand tons of YPH’s production
capability), 300 thousand tons of soluble fertilizers (including 110 thousand tons of the YPH J.V’s production capability),
450 thousand tons of liquid fertilizers, 110 thousand tons of controlled-release fertilizers and 300 thousand tons of peat. The
potential production capacity of our various plants is based on the hourly output of the plants, multiplied by potential hours
of operation per year. This calculation assumes continuous production over the year, 24 hours a day, with the exception of a few
days for planned maintenance and renovations. Actual production is usually lower than potential production capacity, due to unexpected
breakdowns, special maintenance operations, availability of raw materials and market conditions.



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Our production of potash increased at an
average annual growth rate of 2.1% between 1973 and 2015, and ICL Fertilizers completed a plan in 2015 for an increase of approximately
500 thousand tons per year in potash production capacity at the Sodom facilities. This investment has effectively created surplus
production capacity at our production plants in relation to the production capacity of raw materials at our evaporation ponds,
thereby adding flexibility to our production process and optimizing the timing of production and sales over time and already at
the present time it permits production of the material that was accumulated in the ponds during the strike that took place in the
first half of 2015.





In
2011, our Board of Directors approved the restructuring of ICL Iberia operations from two sites to one site, as part of an
efficiency plan. According to this plan, production at the Suria site in Spain, which includes a mine and a plant, will be
expanded gradually, and the mining and production activities at the second site will be discontinued. In the first stage of
the plan, we are building an access tunnel to the mine, expanding potash production and compaction capacity. The second stage
will include a further expansion to 1.1 million tons, higher than the production level we have today in two separate sites,
and approximately 50 thousand tons of technical-grade potash. Furthermore, the third stage of the plan in Spain will include
potential additional expansion that is expected to increase the annual potash production at Suria to approximately
1.3 million tons in the future. Concurrently, we also expect our potash compaction capacity to ultimately grow, at the end of
the process, to a level of approximately 1 million tons per year.



It
is anticipated that implementation of the first stage of the plan will reduce expenses and contribute to streamlining,
which will reduce potash production costs and contribute to conformity of production with environmental standards. The first
stage will also include establishing a production plant for vacuum salt (salt with high chemical purity) at Suria. The
Company plans to reach, in the long run, a potential production capacity of approximately 1.5 million tons of vacuum
salt.



In order to help implement these expansion
plans in Spain, in April 2015, AkzoNobel (AkzoNobel Industrial Chemicals) and ICL Iberia signed an agreement for production and
marketing of high quality vacuum salt. The production will be performed by ICL while the marketing will be performed by AkzoNobel. An additional 50 thousand tonnes per year of white potash will be produced and marketed
by ICL.



High purity vacuum salt is used in a variety
of applications by the chemicals industry, as well as the food and feed industries, and also for water treatment applications.
The vacuum salt will be produced by ICL Iberia and sold by AkzoNobel Industrial Chemicals by way of an off-take agreement for acquisition
of the partnership’s products.



Pursuant to the agreement, ICL will finance
and construct two manufacturing facilities on its mining site in Suria, which is located in Catalona in Spain. Each facility will
have a production capacity of 750 thousand tons of vacuum salt per year. Construction of the first facility is expected to be completed
in the second quarter of 2016, and construction of the second facility is expected to be completed in 2018. Construction of the
facilities, with an investment of about €150 million (about $164 million), is part of the total investment ICL announced as
part of expansion of the activities of ICL Iberia (the “Phoenix” project) for development and expansion of the production
capacity in Spain.



In January 2016, after receipt of the approval
of the Supervisor of Restrictive Business Practices in Spain, AkzoNoble acquired 51% of the shares of the joint venture for production
of specialty salt. The enterprise is expected to commence production in the second quarter of 2016 upon formulation of the final
agreement with AkzoNoble.





During the third quarter of 2015, the
Company reassessed the economic viability of the potash reserves in the mine in the United Kingdom, which resulted in a reduction
of the estimates of the reserves. The reserve estimates were calculated using the same assumptions (including cut-off grade and
average market price). This change is the result of depletion due to continuing mining activities, changes in geological interpretation
and no new conversion of resources into reserves from ongoing exploration activities. In light of the updated reserve estimates,
the potash production activities in the United Kingdom are expected to end in 2018. In the Company's mine in the United Kingdom,
there are vast resources for the purpose of the continued production of polysulphate (a mineral used in its natural form as a
fertilizer for agriculture, a fertilizer for organic agriculture and a raw material for production of specialty fertilizers),
the sale of which in commercial quantities began in 2012. In 2016, the Company plans to produce about 300 thousand tons and to
increase production of the polysulphate up to about 1 million tons in 2020. As part of these processes, the Company has commenced
implementation of an efficiency plan whereby in the first quarter of 2016 a reduction of about 330 full time positions was completed. For additional information - see "Item 4. Information on the
Company-D. Property, Plants and Equipment-Mineral Extraction and Mining Operations-United Kingdom,"and "-Reserves-United Kingdom."



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The Company is also undertaking
other initiatives to expand and diversify its potash resources. In June 2015, ICL completed the acquisition of all the shares of
Allana. The Company has paid about $112 million for the balance of 83.78% of Allana’s shares that it did not yet own, of
which approximately $96 million was in cash, and approximately $16 million was by means of issuance of 2,225,337 ordinary shares
of the Company that were issued to Liberty Metals & Mining Holdings LLC (“Liberty”) only, which held 11.77% of
Allana’s shares.



The ordinary shares issued to Liberty
constitute about 0.17% of the issued shares and voting rights therein. Allana holds a concession for mining potash through
Allana Afar as well as know how accumulated over the past several years in the Danakhil mine in the Afar region in Northeast
Ethiopia. Acquisition of the ownership of Allana provides the Company complete control over the Danakhil project and the
ability to accelerate development of the mine. The Company is re evaluating of the project's technical and operating
requirements, including the requirements in the areas of logistics, infrastructures and production, and is examining the most
efficient ways to execute the mining in the site, in order to increase the development potential and ensure the project's
financing. The Company intends to develop the mine for production of potassium chloride (MOP) and potassium sulfate (SOP).
The Company's Board of Directors approved the budget for examining the project's feasibility. To the extent the project
progresses, additional investments will be required in significant amounts. The support of the Government of Ethiopia with
respect to provision of the natural resources and to the development of the infrastructures, including water, electricity and
roads infrastructures, is essential for development of the mine on a large scale in the Afar region. Pursuant to the mining
agreement, Allana Afar was required to complete the development phase and start the production phase no later than October 8,
2015 (within two years from the effective date of the mining license). However, Allana Afar has not yet completed the
development phase and, therefore, the Government of Ethiopia may revoke the mining license. The Company is holding
discussions with the Government of Ethiopia related to the application submitted by the Company for the transfer of the
mining license  to a newly established company and extending the development period in light of the Company's takeover of
Allana, which can result to additional payments. In the Company's estimation, an arrangement will be reached with the
Ethiopian authorities for extension of the development period.



Moreover, in 2015, the
Company continued investing in educating emerging market farmers regarding the economic advantages of optimizing the use of potash-based
fertilizers. In particular, the Company is focusing on India and Ethiopia, in light of our position in those markets, our proximity
to them and the current low level of fertilization therein. The Company continued the “Potash for Life” project which
began in 2013, conducted in India approximately 2,000 presentations in nine territories, and over 42 provinces and also continued
the “Potash for Growth” project in Ethiopia, where it conducted 950 presentations since 2013.



In addition, the Company
is examining ways to increase its phosphate reserves, including by means of the Barir field in Israel, – see “Item
4. Information on the Company—B. Business Overview—Concessions and Mining Rights." Furthermore, on October 2015,
we completed the formation of YPH JV and in January 2016, we completed the investment of 15% in YTH's equity. YPH JV is expected
to transform ICL into the world’s leading specialty phosphate player and to nearly double its global phosphate market share.
The YPH JV is also expected to improve the cost competitiveness of ICL’s phosphate operations by providing ICL with access
to a low-cost phosphate rock operation with vast reserves.



In addition, the Company
is examining options to build or to buy a potassium nitrate production plant to enable an increase in the production of soluble
fertilizers and food-grade phosphoric acid. The Company’s examination is in line with its ‘Next Step Forward’
growth strategy to meet anticipated increased need for soluble specialty fertilizers, as well as for food-grade phosphoric acid.
Potassium nitrate is a major component in liquid and water soluble fertilizers, as well as in several other industrial applications.







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In December 2015, ICL signed a memorandum
of understanding with LLNP (which belongs to a group of the businessman Lev Leviev) for examination of the feasibility of establishment
of a global-scale phosphate production infrastructure in Namibia, including marine mining of phosphate and construction of factories
for production of downstream products spanning the entire value chain, including fertilizer-quality phosphoric acid, white phosphoric
acid, regular phosphate fertilizers (including MAP and DAP) and specialty fertilizers.



Competition



Potash. The potash market
is characterized by a relatively small number of manufacturers, some of which export jointly. See “Item 3. Key Information—D.
Risk Factors—Risks Related to Our Business—Our operations and sales are subject to the volatility of market supply
and demand and we face significant competition from some of the world’s largest chemical and mining companies.” The
ability to compete in the market is dependent mainly on production costs and logistics. Moreover, there are high barriers to entry
for new players. The barriers to entry in the potash market are high due to the large investments required to establish production
plants for basic minerals and the relatively long time required to establish these plants. In addition, this industry requires
appropriate concessions and proximity of production facilities to mines. The conditions stated above are likely to reduce the competition
in the potash market and to impact the potash prices.



The significant competitors of our Fertilizers
segment in international trade in the potash sector are Potash Corporation of Saskatchewan (Canada), Belaruskali (Belarus), Mosaic
(Canada and the United States), Uralkali (Russia), K+S (Germany), Agrium (Canada), APC (Jordan) and SQM (Chile).







In June 2015, PotashCorp gave notice of
its intention to submit an offer for acquisition of shares of K+S. Several months later, in October 2015, PotashCorp decided not
to submit such an offer. Reduction of the number of players in the global potash market should have an impact on the competition
and the prices therein.



Although there is currently excess
capacity in the industry, a number of companies are continuing to develop new mines and other companies are expanding the
production capacity of existing plants. There is uncertainty in respect of realization of these plans and the time required
for their achievement. In addition, a number of companies have announced that they are examining the possibility of entering
into the potash industry. As the actual production over capacity increases or if there is an expectation to increase the
production capacity (or the quantity of the potash marketed), this causes pressure on the existing players in the market, in
such a way that could lead to an increase in the competition. Despite that stated, PotashCorp announced the shutting down of
the Picadily mine in New Brunswick in Canada and the dismissal of about 420 employees which, as a result, will remove 2
million tonnes of production capability from the market. Establishment of the mine was completed in 2014 at a cost of $2
billion. A number of additional companies announced they would eliminate positions, including Mosaic, which announced that it
would lay off about 46 workers at the Colonsay mine and cutback the production by 400 thousand tonnes, BPC which
announced that it will reduce production from 11.4 million tonnes in 2015 to 10.5 million tonnes in 2016 and Intrepid Potash,
which laid off about 40 workers, and stopped producing potash at one of its mines in New Mexico, in the United States. In
addition to the production reductions, Canpotex announced it will reduce potash sales in the first  half of 2016 by 1.5
million tonnes and BPC announced it will cutoff sales by 5% in 2016 as compared to 2015.



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Fertilizers and Phosphates.
The phosphate fertilizer market is extremely competitive and competitors include international companies and government-owned companies.
Relatively, many producers operate in this market. The main competitive factor in the field of phosphate fertilizers is price.
The ability to compete in the market is dependent mainly on production costs and logistics. For this reason, companies located
in proximity to sources of raw materials, ports, and customers benefit from competitive advantages. An important factor in the
area of raw materials (in addition to phosphate rock) is the accessibility to and the price of the sulfur and ammonia required
for manufacture of the phosphate fertilizers. Additional factors that affect competition to a certain extent include product quality,
range of products, service and the capacity to develop new products that provide unique solutions.



There are phosphate mines and production
facilities in many countries, including Morocco, China, Russia, Jordan, the United States, Brazil, Saudi Arabia and Tunisia. The
main phosphate producers who compete with us are Mosaic (United States), Potash Corporation (United States), OCP (Morocco), Group
Chimique Tunisienne (Tunisia), Vale (Brazil), the Roullier Group (Europe) and various Russian and Chinese producers. We believe
a number of producers are approaching depletion of their higher-quality reserves. In 2015, China changed its export tax policy
with respect to phosphate fertilizers and the local producers significantly increased their presence in the global commerce.



We believe our Fertilizers segment benefits
from the following competitive advantages:



| | · | The relatively low average cost of potash production at the Dead Sea;
| | - | ---------------------------------------------------------------------



| | · | An integrated value chain that allows use of the phosphate rock mined in Israel and China for the production of its phosphate
fertilizers rather than purchasing phosphate rock from third party suppliers;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Logistical advantages due to its geographical location, access to nearby ports in Israel and Europe and relative proximity
to its customers;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------



| | · | Logistical synergies due to potash operations in Israel, where the hot and dry climate of the Dead Sea enables us to store,
at very low cost, a large quantity of potash in an open area thereby allowing us to consistently produce at Sodom at full capacity,
independent of fluctuations in global potash demand.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Full utilization of the value chain while creating added value for the raw materials (potash and phosphates) in the production
of specialty fertilizers.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | A professional agronomic sales team that focuses on individually-tailored agronomic consulting to customers based on an analysis
of the different growing conditions of each particular customer.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Raw Materials and Suppliers



We produce a significant portion of our
primary raw materials, including potash and phosphorus, through our mining operations in Israel, China, Spain and the United Kingdom,
as discussed further below. See “Item 4. Information on the Company—D. Property, Plants and Equipment—Mineral
Extraction and Mining Operations” for further information on the Company’s mining operations.



The primary raw materials acquired from
external sources are mainly sulfur and raw materials used to produce controlled release fertilizers, including ammonia, potassium
hydroxide and coating materials. We seek to hold inventories of sulfur, phosphate and other auxiliary materials in quantities that
take into account the projected level of production based on consumption characteristics, supply dates, distance from suppliers
and other logistical considerations. The other primary components
we use for production of potash are natural gas, electricity, industrial water and maintenance supplies.



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Sales, Marketing and Distribution



The primary markets of our Fertilizers
segment are Europe, China, Brazil and India. Our Fertilizers segment sells its fertilizer products primarily via a network of its
own sales offices as well as sales agents throughout the world.



Most of the sales of ICL’s Fertilizers
segment are not made by means of contracts or long-term orders but, rather, through current orders proximate to the supply date.
Accordingly, ICL’s Fertilizers segment does not have a significant orders’ backlog. Regarding new contracts with customers
of ICL Fertilizers in China for supply of Potash over the next three years – see below.



The prices of potash and fertilizers are
determined in negotiations between the manufacturers and the customers and are affected mainly by the relationship between the
market demand and the available supply at that date as well as the size of the customer and term of the agreement. Prices for relatively
long-term contracts are not necessarily similar to spot prices (current/casual sales transactions).



In the Indian and Chinese markets, it
is customary to negotiate framework agreements with respect to potash, some of which are with commercial entities connected
to the governments of those countries. Our Fertilizers segment has agreements in China with distributors and NPK fertilizer
producers. Under these agreements, the agreed price is usually in effect for six months to a year.



During the second half of 2015, upon completion of potash shipments, which were derived from ICL's agreement in China in the
first half of the year, potash shipments began to be based on "spot prices". In 2015, the imports of potash into China reached
a record high of more than 9.4 million tons - an increase of about 18% compared with 2014. In the Company's estimation, the
imports of potash into China in 2016 will be lower due to accumulation of large inventories at the end of 2015 along with
an increase in production by the local producers.



In January 2016, ICL signed new framework
agreements with its customers in China for supply of potash covering a quantity of about 3.4 million tons (including options) over
the next three years. The sale price will be determined based on the accepted price levels in the Chinese potash market. Pursuant
to the framework agreement, which constitutes an increase of about 3% in the quantities supplied compared with the prior three-year
framework agreement the Company signed with its customers in China whereby 3.3 million tons of potash (including options) were
supplied. According to the agreements, the Company will supply 1.1 million tons of potash in 2016, 1.14 million tons of potash
in 2017 and 1.16 million tons of potash in 2018.



In the beginning of 2015, it appeared that
the imports of potash into India would increase significantly over 2014. This expectation did not materialize, mainly due to the
continued devaluation of the Indian currency and a shortfall in the Monsoon rains. During 2015, India imported 4 million tons of
potash, constituting a decrease of 7% compared with 4.3 million tons imported in 2014. In 2015, ICL signed contracts for supply
of potash with its customers in India, covering an aggregate amount of 835 thousand tons, including options. In the Company’s
estimation, the customers in India will not utilize the entire quantities covered by the contracts due to accumulation of inventories.



In other markets, potash is usually imported
by a larger number of customers, and the potash price is determined between the suppliers and the customers for shorter periods
(quarterly, monthly or even for individual shipments). In these markets, we have trade relations with most of the major customers.



In Sodom, we benefit from being able
to store very large amounts of potash outside (exceeding one full year of production). Due to the hot and dry climate
in Sodom, potash can be stored in piles in open areas. Therefore, potash production in the production facilities in Sodom is
not necessarily dependent on the rate of sales. Output that is not sold is stored in open areas within the plant in Sodom.
This advantage generally affords our Fertilizers segment greater production flexibility in Spain and the United Kingdom as
well because we can sell from Europe while maintaining our main potash inventory in Sodom.



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Regarding phosphate fertilizers, our strategy
is to maximize profits by choosing whether to sell or store phosphate rock, fertilizer-grade phosphoric acid, phosphate fertilizers
or compound fertilizers or to produce pure phosphoric acid. The inventory policy is set accordingly.



Our Fertilizers segment ships its products
from Israel to customers overseas by ship (mainly in bulk) that it leases in the market and loads using designated facilities in
the ports of Ashdod on the Mediterranean Sea and Eilat on the Red Sea. Our Fertilizers segment also has special port facilities
for bulk loading in Barcelona (Spain), Amsterdam (the Netherlands), Ludwigshafen (Germany) and Teeside (UK). In China, the Company
is preparing to provide a logistical solution to marine shipping outside of China when it will be necessary to do so.



Our Fertilizers segment did not have any
single customer that accounted for more than 10% of the Company’s total sales in 2015.



Our Fertilizers segment grants credit terms
to its clients according to customary practices in their locations. The segment’s credit sales are generally covered by trade
credit risk insurance or by letters of credit from banks with high credit ratings.



Seasonality



The seasonal nature of demand for our Fertilizers
segment’s products gives rise generally to quarterly sales fluctuations, as sales levels in the second and third quarters
are generally higher than sales in the first and fourth quarters. In recent years, due to various influences on the timing of sales,
primarily price fluctuations and the effects of negotiations in China and India and changes in the timing of fertilizer imports
to Brazil, the effects of seasonality explained above have been reduced as compared to earlier periods. In 2015, due to the strike,
the Company postponed sales to the final quarter of the year (mainly to China) and, thus, the seasonal impact was decreased compared
with to prior years.



Industrial Products



Our Industrial Products segment develops,
manufactures, markets and sells bromine phosphorus and magnesium-based flame retardants for the electronics, automotive and construction
industries, bromine compounds for industrial and agricultural uses, clear bromine-based brine fluids for the oil and gas drilling
industry, and biocides for water treatment. These products are principally based upon bromine, magnesia, chlorine and salts from
the Dead Sea and phosphorus and chlorine purchased from third parties. In 2015, the total sales of our Industrial Products segment
were approximately $1,115 million and accounted for approximately 21% of our total sales (including sales to other segments of
the Company), while the operating loss for the segment totaled approximately $24 million. The adjusted operating income totaled
approximately $145 million or 15% of the Company’s adjusted operating income. See “Item 3. Key Information—A.
Selected Financial Data” for a definition of adjusted operating income and a reconciliation to the comparable IFRS measure.
For additional information, see “Item 5. Operating and Financial Review and Prospects.” In 2015, our Industrial
Products segment used approximately two thirds of the bromine it produced for its own production.



Our Industrial Products segment did not
have any single customer that accounted for more than 10% of the Company’s total sales in 2015.



Bromine is a member of the halogen family
that is known for its diverse uses in many industries. Bromine is used in the production of a range of bromine compounds. Bromine
is found naturally in seawater, underground brine deposits and the Dead Sea. Its concentration varies depending upon its source.
The method for extracting bromine depends on the nature of its source and its concentration. The lower the concentration of bromine
in the brines, the more difficult and expensive it is to extract.



The Dead Sea is the world’s major
source of bromine and the concentration of salts in the Dead Sea is significantly higher than the concentration in ordinary seawater.
Although there are other sources of bromine around the world, about half of the global supply comes from the Dead Sea.



The operations of our Industrial
Products segment are largely affected by the level of activity in the electronics, construction, automotive, oil drilling,
furniture, pharmaceutical, agro, textile and water treatment markets. In 2015, 41% of worldwide use of bromine was for flame
retardants, 29% was for intermediates and industrial uses, 19% was for clear brine solutions, 6% was for water treatment, and
5% was for other uses.



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Flame retardants. The trend
of pressure exerted by “green” organizations in the area of environmental protection to reduce the use of bromine-based
flame retardants is continuing. On the other hand, new sustainable bromine-based flame retardants are being developed, along with
regulation in additional countries that increases the use of flame retardants. The worldwide economic slowdown, in general, and
the slowdown in China, in particular, over the past several years triggered a slowdown in the demand for products in the electronics
and construction industries. This trend, along with the decline in sales of personal computers due to increased use of tablets
and smartphones, caused a decline in the demand for bromine-based flame retardants in the printed circuits market, and creation
of pressure on the prices of these flame-retardant products. Nonetheless, in 2015, there was a certain improvement in the demand
for bromine-based flame retardants for some uses in the electronics sector, primarily in the automotive area and price increases
were recorded.



Phosphorous-based flame retardants were
adversely impacted by the weakening of the euro against the dollar as well as by tougher competition from the Chinese manufacturers.



Elemental bromine. In 2015,
elemental bromine prices were relatively stable in the United States, Europe and India whereas in China prices increased significantly,
mainly in the second half of the year.



Clear brine solutions. Despite
the sharp drop in oil prices in 2015, the demand continued to be strong in the market for clear brine solutions for oil and gas
drilling due to work that had been started before the decrease in oil prices.



Biocides. Demand for bromine-based
biocides used for water treatment began displaying a mixed trend in 2015.



Demand for biocides used for onshore gas
and oil fracking decreased significantly, following the sharp drop in petroleum prices, which led to reduced shale gas drillings
in the United States.



The activities of ICL Industrial Products
in the area of biocides are expected to decrease commencing from 2016 as a result of the completion of Clearon’s divestiture
(chlorine-based biocide activities of Clearon in the United States) in March 2016. The Company’s activities in this area
will focus on bromine-based biocide products.



Inorganic bromides. In 2015,
the trend of increasing demand in the market for inorganic bromides for neutralizing mercury (Merquel® products) continued.
This trend stemmed mainly from demand by power stations as part of the preparations for the entry into effect in 2015 of a new
regulatory system in the U.S. that requires reduction of mercury emissions.



On the other hand, there was a decline
in demand for additional bromine-based products as a result of the weakening of the agrochemicals markets and an increase in competition
in the polyester fibers industry.



On February 2, 2015, the Workers Council
of Bromine Compounds Ltd., from ICL’s Industrial Products Segment, launched a full strike, as a response to the efficiency
programs being implemented by the Company at Neot Hovav, whereby the Company requested that workers employed under a collective
agreement will be dismissed and/or will leave on early retirement conditions. Pursuant to similar discussions at ICL Dead Sea,
the Workers Council of the ICL Dead Sea announced that it would completely shut down the facilities at the Sodom plant, including
the bromine facility and the power plant.



On May 28, 2015, an agreement was signed
between ICL Dead Sea, Ltd. and Bromine Compounds, Ltd., on the one side, and the General Federation of Labour in Israel, the Workers
Council of Dead Sea Works Ltd., and the Workers Council of Bromine Compounds Ltd., on the other side, which ended the strike, the
labor disputes and all pending legal proceedings between the parties, and allowed the workers to immediately return to full-scale
employment.



As a result, in 2015, the Company increased
the provision for employee benefits in respect of conclusion of employment by about $42 million.



For more details regarding the highlights
of the signed agreement, see “Item 6. Directors, Senior Management and Employees—D. Employees.”



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Products



The business units in the Industrial Products
segment are divided into two main groups:



Flame retardants – bromine,
phosphorus and magnesium-based products are used in electronics, building and construction, automotive, mass transportation, textile
and furnishing applications throughout the world. Flame retardants are added to plastics, textiles and other combustible material
to inhibit, suppress, or delay the production of flames and to prevent the spread of fire.



Industrial solutions – this
activity area manufactures and supplies elemental bromine products for a range of uses in the chemical industry, as well as the
bromine and phosphorous compounds used in a number of industries worldwide, such as: rubber, pharmaceuticals, agro, polyester
fibers (in production of plastic fabrics and bottles) and clear brine solutions used for balancing pressure in the oil and gas
drilling industry. In addition, this area includes bromine-based biocides used for treating industrial water, pure potash and
minerals from the Dead Sea for the food and pharmaceutical industries, industrial solutions, magnesium products used for the paper
industry, cleaning materials and oil additives, catalysts and stabilizers.



The following table sets forth the principal
products of our Industrial Products segment, as well as their primary applications and primary end-markets:



|Product                                                           | Primary
Application                                                                  | Primary
End-Markets                                                                                
|----------------------------------------------------------------- | ------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------
|Bromine, Phosphorus and Magnesium-based Flame Retardants          | Additives used in plastic production                                                 | Electronics, Automotive, Mass Transportation, Building and Construction,
    Furniture and Textiles
|Elemental Bromine                                                 | Chemical reagent, rubber component                                                   | Tire manufacturing, Pharmaceuticals and Agro                                                       
|Organic Bromine Compounds                                         | Insecticides, Solvents for chemical synthesis and Chemical intermediates             | Pharmaceuticals and Agro                                                                           
|Clear Brines                                                      | Oil and Gas drillings                                                                | Oil and Gas                                                                                        
|Merquel                                                           | Mercury emission control                                                             | Emission control in coal-fired power plants                                                        
|Bromine- and Chlorine-Based Biocides                              | Water treatment and Disinfection                                                     | Swimming Pools, Spa facilities, Cooling Towers, Paper plants and
    Oil and Gas drillings.        
|Calcined and Specialty Magnesia                                   | Magnesia derivatives, Temperature control, Antacid medication and
    Food additives | Chemicals, Rubber, Adhesives, Metallurgy, Food and Pharmaceuticals                                 
|Chlorine-Based Salts (Magnesium, Sodium Chloride and Pure Potash) | De-icing, Dust control, Salt and Electrolysis                                        | Municipal Authorities, Textiles, Cosmetics, Food, Water and Electrochemical                        



Our Industrial Products segment also develops
innovative products and new applications for existing products. In 2015, our Industrial Products segment invested approximately
$25 million in new product development and in support and improvement of existing manufacturing processes. Our new products introduced
in recent years include, among others, Merquel® (inorganic bromides for neutralization of mercury), FR122P flame retardant
(a polymeric bromine-based flame retardant), TexFRon® (a polymeric flame retardant product for textiles), FR-1410 (a bromine-based
flame retardant), Fyrol® HF-10 (a phosphorus-based flame retardant for for polyurethane foam), and SaFRon® 6605 (a phosphorus-
and bromine-based flame retardant for rigid polyurethane spray foam for insulation systems in the construction industry).



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Merquel®.
Mercury emissions in the atmosphere have been proven to be detrimental to health. In February 2009, the United States announced
a change in policy and even initiated an international treaty, which had already been signed by approximately 152 countries by
the end of 2015, with the goal of reducing mercury emissions. In December 2011, a law was passed by the U.S. Environmental Protection
Agency (“EPA”) that requires significant reduction of mercury emissions in the United States starting from 2015. The
legislation was finally completed in December 2015. Concurrently, the United States is continuing to incentivize reductions in
mercury emissions by providing tax credits. At the end of 2008, our Industrial Products segment launched a new product line, Merquel®,
based on inorganic bromides, which when integrated with certain technologies is designed to enable efficient neutralization of
mercury to the limits determined by the authorities (a 90% reduction in mercury emissions). Full application of the standards in
all of the coal-fired power stations in the United States is expected by the first half of 2016 and will require use of significant
quantities of inorganic bromides. Our Industrial Products segment has invested in an extensive logistics system in the United States
to allow continuous supply to the United States market and is making preparations to establish the production and logistics capacity
required for stable supply to this market and to other countries that will adopt similar legislation.



In 2016, sales of this product are expected
to show additional growth when application of the EPA regulation commences and additional power plants in the United States that
use Merquel® enter into service.



FR-122P Flame Retardant.
In January 2012, we signed a licensing agreement with the Dow Global Technologies LLC a subsidiary of The Dow Chemical Company
to use certain of its patents and know-how to produce an innovative polymeric bromine-based flame retardant for expanded (EPS)
and extruded (XPS) polystyrene foams. The FR122P flame retardant will be a substitute for the HBCD bromine-based flame retardant
that is currently used in the construction insulation industry. The HBCD flame retardant is on the list of materials requiring
authorization in accordance with the REACH law, after it was defined as a “Substance of Very High Concern” by the European
Union. In November 2015, a decision was made by the European authorities regarding authorization of the continued use of HBCD in
the European Union up to August 2017. The use will be limited to polystyrene insulation panels of the EPS type and only to companies
that submitted a request for continued use. The companies that continue to use HBCD will be bound by an environmental monitoring
plan with respect to HBCD and will be required to file a quarterly report regarding the quantities of the polymer substitute (FR-122P)
available in the market and the progress with reference to transition to use of this flame retardant. The other uses of HBCD have
been prohibited in Europe since August 2015 (including polystyrene insulation panels of the XPS type). Our Industrial Products
segment has initiated production of FR122P at its plants in the Netherlands and in Israel. The plant in Israel has the capacity
to produce approximately 10,000 tons and the Netherlands facility currently has the capacity to produce approximately 2,400 tons,
or a total of approximately 12,400 tons per year. In February 2016, the Company and Albemarle Corporation signed a long-term agreement
for the supply of polymeric flame retardants to Albemarle from ICL plants in Israel and the Netherland. This innovative product
is manufactured at ICL’s facilities in the Netherlands and in Israel using technology licensed by Dow Global Technologies
LLC, a subsidiary of the Dow Chemical Company. Under the agreement, Albemarle will supply ICL with the bromine required for the
production of GreenCrest®, the next generation of flame retardants, which will be marketed by ICL under the brand name FR122P,
and by Albemarle under the brand name GreenCrest®. The product is a sustainable alternative that will help customers in the
transition from hexabromocyclododecane (HBCD)-based flame retardants, which is currently being used by the building industry as
a flame retardant in extruded polystyrene insulation materials (EPS/XPS). The agreement is subject to certain conditions precedent,
including approval by Israel’s Antitrust Authority.



TexFRon®.
In 2015, we began to sell TexFRon®  4002, a polymeric flame retardant product for textiles developed as part of the R&D
activities of our Industrial Products segment. TexFRon® 4002, which is designed to provide high-level fire retardant solutions
for textile and adhesive products, is an effective substitute for DECA (which is likely to be prohibited for use in Europe in 2017)
and offers enhanced stability compared to other existing products. During 2015, a decision was made by Company management to discontinue
the activities in the DECA facility. In December 2014, the TexFRon® 4002 polymeric product was recognized by Oekotex, a European
standard for textile products. This product is the first bromine-based flame retardant that has received such recognition.



FR-1410. In the past few
years, we began selling FR-1410, which is a bromine-based flame retardant. This flame retardant is primarily used in the electronics,
construction and home appliance markets.



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New Products for Polyurethane.
Our new products for polyurethane include the following:



| | · | Fyrol® HF-5, which was developed and commercialized specifically in response to IKEA’s most recent update to
                                                                                                             their finished furniture specifications that imposed bans on specific flame retardants and substantially reduced VOC
                                                                                                             emissions from the flexible polyurethane components of their furniture products. IKEA  has expressly approved Fyrol® HF-5
                                                                                                             for use in its upholstered furniture products.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Fyrol® HF-9, a Phosphorus-based Flame Retardant, which was developed and commercialized in response to
                                                                                                             California’s addition of TDCP to the Proposition 65 list of substances designated by the State of California as known
                                                                                                             carcinogens. Fyrol® HF-9 represents improved resistance of flexible polyurethane foam to open flames compared to the
                                                                                                             technology currently used in the upholstered furniture industry. Additionally, Fyrol® HF-9 performs well in flexible
                                                                                                             polyurethane foam upholstered furniture applications from a cost performance and foam discoloration perspective.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Fyrol® HF-10, which was recently developed and commercialized to represent an even greater step forward in terms of volatile
organic compounds for flexible polyurethane foam automotive applications. It has been developed specifically to support the global
automotive industry’s gradual shift away from TDCP.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



SaFRon 6605. SaFRon®
6605 is a phosphorus- and bromine-containing product specifically targeting flame retarding rigid polyurethane spray foam insulation
systems aimed to meet flammability standards and building codes that promote the safe use in the use of foam in insulation systems.



Production



Our Industrial Products segment’s
major manufacturing facilities are located in Israel (production of bromine, Dead Sea salts, bromine compounds and magnesia), the
Netherlands (bromine compounds), Germany (phosphorus compounds), France (specialty magnesia products and calcium compounds used
as raw materials in health foods and food additives), the United States (chlorine-based biocides for water treatment and production
of phosphorus compounds) and China (bromine compounds).



Our Industrial Products segment’s
principal manufacturing plants, distribution centers and sales offices are set forth in the map below.









____________________

* Clearon – In March
2016 the company completed the sale of Clearon (chlorine-based biocide activities in USA).



In 2015, we produced 116 thousand tons of bromine and 156 thousand tons of bromine compounds. Production
of chlorine-based biocides reached 22 thousand tons, production of phosphorus compounds reached 78 thousand tons and production
of magnesia products reached 38 thousand tons in 2015. Our maximum annual capacity is approximately 280 thousand tons of elemental
bromine, 410 thousand tons of bromine compounds, 37 thousand tons of chlorine-based biocides, 150 thousand tons of phosphorous
compounds, 53 thousand tons of magnesia, and 430 thousand tons of Dead Sea salts. In 2015, the quantities produced by the Company
declined, mainly as a result of the strike in the Company's facilities in Israel in the first half of the year





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Competition



ICL Industrial Products is the world’s
largest manufacturer of elemental bromine, and based on internal estimates, it produces about one-third of the total amount of
bromine produced worldwide. In 2015, the quantities produced by the Company declined, mainly as a result of the strike that took
place in its facilities in Israel during the first half of the year. Our Industrial Products segment estimates that it and its
two main competitors, Albemarle and Chemtura, accounted for approximately 77% of the worldwide consumption of bromine in 2015.
Chinese production accounts for most of the remainder of the global consumption from various different sources, including, from
brine produced from wells, sea water and desalinization plants. Chemtura and Albemarle produce bromine primarily from underground
brine sources in the United States. Albemarle also has a joint venture with a Jordanian company to produce bromine and bromine
compounds which began its operations in November 2002 and is located on the Jordanian side of the Dead Sea with access to the same
source of raw materials that we have. In the beginning of 2013, Albemarle doubled the production capacity of bromine produced by
the JV, and expanded its production capacity of the bromine compounds it produces on the Jordanian site. Chemtura purchases bromine
and some other bromine compounds from our Industrial Products segment under long-term contracts. In January 2010, Chemtura and
Albemarle signed a long-term strategic agreement. Under the agreement, Albemarle will supply Chemtura with a number of principal
products, including flame retardants, and organic and inorganic bromine-based compounds.



The main barrier to entry into the bromine
and bromine compound market is access to an economically viable source of bromine at a sufficiently high concentration. In addition,
the bromine business requires a complex logistics system based on special containers (isotanks) for transporting the bromine. The
need for the logistics system is a barrier to entry of competitors into the global trade in bromine.



The main competitors of our Industrial
Products segment in the bromine-based flame retardant market are Albemarle and Chemtura, as well as a number of producers in China.
The relatively low production cost of elemental bromine affords our Industrial Products segment a competitive advantage. Bromine
production requires a complex logistical system based on a fleet of special containers (isotanks) specifically designed to transport
bromine. One of the advantages of our Industrial Products segment is having the largest fleet of isotanks globally, which enables
it to transport relatively large quantities of bromine around the world. In addition, our Industrial Products segment has a widespread
worldwide marketing network and a range of high-quality products, combined with a technical support system that works closely with
customers, providing a good competitive position in its target markets. In China, for example, our Industrial Products segment’s
network includes three production facilities, a sales network, a bromine containers farm, and technical support. In the Netherlands,
our Industrial Products segment has a bromine compound production facility, which gives it a competitive advantage in Europe. The
phosphorus-based flame retardant and functional fluids production plants in the United States and Europe are situated in close
proximity to our Industrial Products segment’s principal customers. This set-up helped in reducing the harm caused to the
Company’s customers during the months of the strike in 2015.



In the phosphorus-based flame retardants
market, competition is mainly from Chinese manufacturers operating in the local market and in markets outside China, mainly Europe
and the United States. The Chinese manufacturers have access to a source of high-quality, low-cost phosphorus which improves their
capacity to compete in this market.



There are many competitors in the market
for biocides for water treatment, and the barriers to entry are mainly related to the process for obtaining a license to sell which
was manifest in the past year upon entry into effect of new regulations effective in Europe permitting only holders of a biocide
license to sell, which acted to remove Chinese producers from the market.



There are several competitors in the magnesium
chloride industry. The barriers to entry in this market are low, as any company with access to magnesium chloride can produce the
solution. Nevertheless, the investment in solidification facilities is not negligible.



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There are a small number of competitors
in the pure potash market. Pure potash is high-quality potash used mainly in the food and pharmaceutical industries. The main barriers
to entry are access to potash and the technological knowledge required for its re-crystallization, as well as the ability to manufacture
under GMP (Good Manufacturing Practice) conditions – both from the standpoint of the manufacturing processes and with respect
to the investment.



In part of the biocide industry and the
industry for other salts, ICL’s Industrial Products segment has a leading position in certain niche products.



In the magnesium area, there is competition
from Chinese manufacturers.



Raw Materials and Suppliers



The principal raw materials used by our
Industrial Products segment for manufacture of the end products are bromine, magnesium, chlorine, Dead Sea salts and phosphorus.
We produce a significant portion of our raw materials through our Dead Sea minerals extraction operations from the Dead Sea. See
“Item 4. Information on the Company—D. Property, Plants and Equipment—Mineral Extraction and Mining Operations”
for further information on our extraction operations.



The bromine is produced from the end brines
(salt solutions) that result as a byproduct from the processes carried out to produce potash from carnallite. The brine is pumped
into our Industrial Products segment’s plant in Sodom, where bromine is produced in an oxidation process using chlorine.



Chlorine is produced by electrolysis of
sodium chloride and as a by-product of metal magnesium production process of Dead Sea Magnesium Ltd. (“Dead Sea Magnesium”).
The electrolysis facility and the magnesium plant are located next to the bromine facility in Sodom. The sodium chloride used in
the electrolysis process is a by-product of the potash production in Sodom.



ICL’s Industrial Products segment
uses elemental bromine to manufacture bromine compounds at its facilities in Israel, the Netherlands, and China. The rest of the
bromine is sold to third parties. Most bromine compounds are manufactured by a chemical process involving bromine together with
a range of other raw materials, of which the largest are Bisphenol A, which is used to manufacture the bromine-based flame retardant
TBBA, and phosphorus, which is used to manufacture phosphorus-based flame retardants. Furthermore, our Industrial Products segment
purchases many other raw materials required for production of the various products.



The following is a graphic representation
of the production process.







One type of brine that remains after the
production of potash is rich in magnesium chloride. This brine is pumped to our Industrial Products segment’s facilities
at Mishor Rotem. In a process utilizing magnesium chloride and other materials, magnesia (magnesium oxide)
is produced. The magnesia is further processed into several grades of magnesia.



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Our Industrial Products segment produces
chlorine derivatives in the United States for production of chlorine-based disinfectant products (biocides), our Industrial Products
segment purchases chlorine, urea and caustic soda from local manufacturers and cyanuric acid from Chinese manufacturers. In March
2016 the Company completed the sale of Clearon (chlorine-based biocide activities in USA).



Dead Sea salts are manufactured at a facility
in Sodom. The production starts from materials and brines produced as by-products of potash production. For example, magnesium
chloride flakes are derived from brines rich in magnesium chloride that remain after potash is separated from carnallite. Various
types of sodium chloride are also extracted from the salt that remains after potash is separated from carnallite.



Elemental phosphorus (P4) is produced in
a roasting process from ores originating in Central Asia (Kazakhstan), the United States or China. Phosphorus-based products are
produced in our Industrial Products segment’s factories in the United States and Germany. Our Industrial Products segment
uses elemental phosphorus to produce phosphorus compounds at its factories. The basic phosphorus compound (POCl3) is manufactured
in a chemical process that combines phosphorus, chlorine and oxygen. The reaction of this compound with a variety of other raw
materials (such as propylene oxide or epichlorohydrin) creates the commercial phosphorus compounds.



The following is a graphic representation
of the production process.





Our Industrial Products segment maintains
raw material inventories in quantities that take into account the projected level of production based on consumption, supply dates,
distance from the supplier, and other operational and logistical considerations.



Sales, Marketing and Distribution



Our Industrial Products segment’s
principal markets are the United States, Western Europe, China, Japan, and Taiwan. Our Industrial Products segment sells its products
primarily through a network of marketing companies, agents and distributors throughout the world. Commissions are paid to agents
as is customary in the sector. Most of our Industrial Products segment’s sales are not transacted by means of long-term contracts
or orders, but rather via current orders close to the date of supply. Consequently, the concept of a backlog has no significance
for our Industrial Products segment.



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In addition, our Industrial Products segment
has framework agreements with specific customers, under which the customer can purchase up to previously agreed maximum quantities
of a product during the term, on the basis of which the customer issues purchase orders to our Industrial Products segment from
time to time. In some of the agreements, sales prices have been fixed, at times with an update mechanism as well. The price determination
mechanism has no significant adverse effect on our results.



ICL’s Industrial Products segment’s
policy is to seek to maintain adequate inventory, which varies from product to product, to ensure orderly supply to customers in
light of the customers’ distance from production centers and their demand for inventory availability, and in conjunction
with optimization of the inventory storage costs. Therefore, portions of finished product inventories are held in storage facilities
in the destination countries.



Our Industrial Products segment extends
credit terms to its customers according to customary practices in their locations. The segment’s sales are generally covered
by trade credit risk insurance or by letters of credit from banks with high credit ratings.



Seasonality



Our Industrial Products segment’s
operations are not characterized by regular seasonal fluctuations. However, amounts sold of some of its products fluctuate between
the various seasons. Agricultural products are characterized by relatively high sales in the second and third quarters. Biocides
for swimming pools are characterized by relatively lower sales in the fourth quarter. Salts for de-icing are characterized by relatively
higher sales in the first and fourth quarters. The aggregate impact of these diverse seasonal differences on our Industrial Products
segment is not significant. The Company’s sales in 2015 were affected by the strike in Israel during the first half of the
year.



Performance Products



Our Performance Products segment primarily
develops, produces, markets and sells a broad range of specialty phosphates for different applications as well as whey proteins
for the food ingredient industry. This is part of our strategy of increasing our production of downstream products with higher
added value.



In 2015, the total sales of our Performance
Products segment were approximately $1,472 million and accounted for approximately 27% of our total sales (including sales to other
segments of the Company), while the segment’s operating income totaled approximately $319 million, representing approximately
42% of our total operating income. During 2015, the segment divested its non-core businesses and recorded a gain of $180 million
(net of an impairment charge related to a decline in the value of assets in Germany of $34 million). The adjusted operating income
amounted to $139M or 14% of our total adjusted operating income. See “Item 3. Key Information—A. Selected Financial
Data” for a definition of adjusted operating income and a reconciliation to the comparable IFRS measure.



Approximately 83% of our Performance Products
segment’s external sales in 2015 were of phosphoric acid of various grades (technical, food, electronics and polyphosphoric
acid) and its downstream products compared to 71% in 2014. The increase from 2014 derives mainly from the non-core divestitures.
Downstream phosphates are produced in part using phosphate rock that is mined by our Fertilizers segment and phosphoric acid manufactured
from that phosphate rock, and in part using elemental phosphorus (P4) and phosphoric acid, which are purchased from third parties.



Our Performance Products segment did not
have any single customer that accounted for more than 10% of the Company’s total revenue in 2015.



Most of the products of our Performance
Products segment are affected by the global economic situation, competition in our target markets, and price fluctuations in the
fertilizer market, which affect the price of the main raw materials of our Performance Products segment, and by fluctuations in
energy prices, which mainly affect production costs of thermal phosphoric acid.



Overall demand for our products grew in
both Food Specialties and Advanced Additives mainly on the strength of acquisitions in both product lines. Food Specialties was
favorably impacted by the acquisition of Prolactal, a whey protein company which balanced the portfolio’s demand by offsetting
the decline in South America, Asia and Russia. Food Specialty markets continue to be receptive to innovative product concepts which
offer better health and convenience characteristics while still maintaining favorable texture and stability features. The financial
crisis in Russia and weak demand in the CIS region moderated
the Company’s growth opportunities in this business. Advanced Additives benefited from an acquisition in Brazil and a joint
venture investment in China.



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During 2014 and 2015, we expanded our Performance
Products Segment’s operations by means of acquisition of the following activities and companies:



In January 2014, acquisition was completed
of the Hagesud Group, a German producer of premium spice blends and food additives for meat processing. This transaction includes
the acquisition of all the operating assets of the Germany-based Hemmingen company, including Hagesud’s production sites,
existing businesses, state-of-the-art production technology and warehouse facilities located in Hemmingen, Dortmund and Ottensoos,
Germany with approximately 200 employees. The acquisition is being integrated with our legacy spice business with moderate success
as the anticipated synergies are still being realized. The profitability of the acquisition has been in line with the expectations.



In April 2014, the Company acquired
Auxquimia S.A., a Spanish company that produces firefighting foams and fire extinguishment additives. Auxquimia serves
markets from its production facility in Asturias, Spain. The acquisition marks the Company’s entry into the Class B
foam business. Auxquimia’s Class B foam products, incorporating the latest surfactant technology, are used to fight
flammable liquid fires, such as refinery or jet fuel fires, and they are among the world’s safest, most effective and
environmentally friendly firefighting products. They are complementing ICL’s Class A foam products which are used to
fight structural fires. The acquisition expands our market presence in Southern Europe and also delivers new products to our
North American portfolio. Sales growth is ahead of plan. Expected synergies related to the production of Class A foam for the
European and Australian markets are proceeding better than expected by reducing costs associated with third party  production
tolling. The qualification of Class B foam products in North America is on schedule and production is expected to begin in the third
quarter of 2016.



During the fourth quarter of 2014, the
Company completed acquisition of 100% of Fosbrasil (increase in the rate of holdings from 44.25% to 100%), the leading manufacturer
in Latin America of purified phosphoric acid for the food and specialty fertilizer market, and a producer of phosphate-based downstream
products and specialty fertilizers. The acquisition expanded our global WPA portfolio into South America and we realized operational
efficiencies from the overall integration. The profitability of the product portfolio has proven to be incremental to our base
margin. Despite the difficult economic environment in Brazil and the competitive nature of imports into Brazil, WPA domestic sales
experienced favorable growth.



In March 2015, the Company completed the
acquisition of Prolactal GmbH and its subsidiary, Rovita, GmbH (collectively “Prolactal”). Prolactal, whose plants
are based in Hartberg, Austria and in Engelsberg, Germany, is a leading European producer of whey proteins and other ingredients
for the food and beverage industry. Prolactal has approximately 200 employees. The acquisition complements the long term strategy
of ICL Food Specialties by contributing whey protein products to the portfolio. Sales grew by 26% over 2014 and profitability has
grown by 60% through improved product mix and operational efficiencies.



In October 2015, ICL completed the formation
of a joint venture company (“YPH JV”) with Yunnnan Phosphate Chemicals Group Corporation Ltd (“YPC”), China’s
leading phosphate producer. The YPH JV, which includes a world scale phosphate rock mine and large scale phosphate operation, is
expected to be a leading player in China’s phosphate sector, operating an integrated, world scale phosphate platform across
the value chain.





Pursuant to the Company’s
strategy, in connection with the divestment of non-core businesses activities, the Company completed during 2015 the sale of number
of its non-core businesses: the alumina, paper and water industry (APW), the thermoplastic products for the footwear industry (Rhenoflex),
the hygiene products for the food industry (Anti-Germ) and the pharmaceutical and gypsum businesses (PCG).



In total, sales in 2015 decreased by $355
million (net of revenue from services in a subsidiary in Germany which is not part of the Company’s core businesses), due
to the divestitures, and the operating profit decreased by $42 million.



Our Products



Our Performance Products segment’s
products are designed for a wide range of uses and industries. The main markets of our Performance Products segment include food,
metallurgy, paints and coatings, electronics, concrete, oil additives and firefighting. The Performance
Products segment is part of our strategy to manufacture downstream products with higher added value based on phosphate rock.



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The segment operates two
business units: Advanced Additives and Food Specialties with primary production locations in Israel, Germany, the United States,
Brazil and China, which are primarily based on phosphoric acid. Our Performance Products segment uses much of the phosphate salts
that it produces as raw material to manufacture food additives in many countries in the world.



Advanced Additives
– this business line supplies mainly phosphate salts and phosphoric acid, which are used as a raw material in the metals
treatment and paints and coatings industries. In addition, the Performance Products segment manufactures and markets phosphoric
acid of varying grades, primarily for the food industry. The unit supplies P2S5, a key ingredient in lubricating
oil additives and insecticides. In addition we are one of the world’s leading manufacturers of phosphate-based fire retardant
products, which are used primarily to fight forest fires by releasing the product from an aircraft. Advanced Additives sales in
2015 totaled $780 million, an increase of $127 million compared to 2014. The increase stemmed mainly from additional acid sales
associated with the Fosbrasil acquisition and increasedforest
fire retardant demand from U.S. government agencies. Demand for Industrial Specialty products declined primarily in the European
market related to the ban on use of phosphates in ADW (Auto Dish Wash) detergents.



Food Specialties –
ICL Food Specialties is a leader in creative food ingredients and phosphate additives which provide texture and stability solutions
to the processed meat, fish, dairy, baked goods and processed food markets. In addition, the business unit produces whey proteins
for the food ingredient industry. Sales in 2015 totaled $614 million an increase of $89 million compared to 2014. The increase
stemmed mainly from the Prolactal acquisition and was partially offset by lower demand from Russia and the CIS countries and the
weak Brazil economy.



A significant portion of our Performance
Products segment products are based on its intellectual property and have well-known brand names in their relevant markets, including
Fibrisol, Brifisol, Joha, Tari, Py-Ran, Nutrifos, Levn-Lite and Phos-chek.



Our Performance Product segment’s
highly sophisticated technology platform for the development of food texture and stability solutions has allowed it to develop
expertise in phosphate based food additives. In addition, our ability to provide a high level of service and expand into new markets
in the firefighting sector has enabled us to achieve a leadership position in these market segments.



Production



The Performance Products segment manufactures
its products in its facilities in Germany, the United States, Israel, Brazil, France, Spain, China, the United Kingdom, Argentina,
Austria, Australia and Mexico. In Mishor Rotem in Israel, our Performance Products segment manufactures purified phosphoric acid
by purifying fertilizer-grade phosphoric acid produced by our Fertilizers segment. Our Performance Products segment also manufactures
thermal phosphoric acid in the United States and China by utilizing elemental phosphorous and purchases of purified phosphoric
acid from third parties.



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Our Performance Products segment’s
principal manufacturing plants, distribution centers and sales offices are set forth in the map below:







In 2015, we produced 206,960 tons of purified
phosphoric acid (as Phosphorus Pentoxide), 312,415 tons of phosphate salts, 112,908 of food additives and milk derivatives, and
64,905 tons of other phosphate-based products (P2S5 and Firesafety). Our maximum annual capacity is approximately 267,000 tons
of purified phosphoric acid (as Phosphorus Pentoxide), 395,755 tons of phosphate salts, 175,620 of food additives and milk derivatives,
and 122,000 tons of other phosphate-based products (P2S5 and Firesafety) at our Performance Products segment. Production and capacity
of purified phosphoric acid increased from the prior year due to the acquisition of Fosbrasil. Production and capacity of food
additives and milk derivatives increased from the prior year due to the acquisitions of Prolactal and Rovita. Production and capacity
of Other Products decreased from the prior year due to the divestitures of the noncore businesses.



Competition



Our Performance Products segment has a
leading position in the field of purified phosphoric acid and its downstream products. Our Performance Products segment’s
competitors are large and mid-size international chemical companies, which have manufacturing and marketing presences in various
countries, as well as local companies that reap the benefits of being local manufacturers in a regional market. In every field,
many companies compete with our Performance Products segment by offering similar products or substitutes.



Competition in our Performance Products
segment centers on product features, price, quality, service and the ability to address customers’ needs.



| | · | The primary competitors of our Performance Products segment are Chemische Fabrik Budenheim KG, Innophos Inc., Prayon, PCS,
Adithya Birla, Haifa Chemicals Ltd. ChemTrade Logistics Company in North America, Italmatch Chemicals in Brazil and Singapore and
various Chinese producers.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Raw Materials and Suppliers



The primary raw material for manufacture
of phosphate salts and food additives is purified phosphoric acid, which is produced by purifying fertilizer-grade phosphoric acid
as well as via a thermal process from elemental phosphorus (P4). Our Performance Products segment obtains fertilizer-grade phosphoric
acid from our Fertilizers segment and also purchases (P4) and purified phosphoric acid from external manufacturers.



Our Performance Products segment has a
long-term supply contract with a supplier of phosphoric acid that guarantees regular supply of this raw material through 2018.
In addition, we have a long-term supply agreement for (P4) with another supplier through 2022.



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In addition to purified phosphoric acid,
our Performance Products segment uses hundreds of other raw materials, which it purchases from many suppliers. Of these, the raw
material with the greatest total cost is caustic soda.



Our Performance Products segment maintains
raw material inventories in quantities that take into account the expected level of production based on consumption characteristics,
supply times, distance from suppliers, and other logistical considerations.



Sales, Marketing and Distribution



Our Performance Products segment sells
its products mainly to industrial and commercial customers in Europe, North America, South America and Asia. Our Performance Products
segment’s marketing network is based primarily on an extensive internal marketing organization and, to a lesser extent, on
external distributors and selling agents.



To market and sell many of its performance
products effectively, our Performance Products segment’s marketing personnel work closely with customers in order to tailor
the products to the customers’ needs. Our Performance Products segment is not dependent on external marketing agents.



Most of our Performance Products segment
sales are made under agreements with terms of less than one year or through spot orders placed close to the date of supply. In
addition, our Performance Products segment has framework agreements with specific customers, through which the customer can purchase
up to previously agreed maximum quantities of product during the term, on the basis of which the customer issues purchase orders
to our Performance Products segment from time to time.



Most sales of Performance Products do not
take place according to long-term orders or contracts, but are regularly ordered close to the time of supply. Consequently, the
concept of a backlog is of no significance for our Performance Products segment.



Our Performance Products segment’s
strategy is to maintain adequate inventories to ensure orderly supply to customers in light of the customers’ distance from
the manufacturing locations and their demand for inventory availability, and in conjunction with optimization of inventory’s
storage costs. Therefore, portions of finished product inventories are held in storage facilities in the destination countries.



Our Performance Products segment extends
credit terms to its clients according to customary practices in their locations. The segment’s sales are generally covered
by trade credit risk insurance or by letters of credit from banks with high credit ratings.



Seasonality



The target markets of most our Performance
Products segment’s products are not characterized by seasonality, except for flame retardants, which have a higher sales
volume in the spring and summer due to the many fires in North America during this hot and dry period. First quarter and fourth
quarter are weaker due to the lack of fire activity during the cold winter months.



Other Activities





IDE – ICL holds 50% of IDE Technology
Ltd. IDE operates in the following fields: constructing and selling water desalination plants and treatment of industrial waste
water, selling water, operating and maintaining water treatment and desalination plants and developing and producing industrial
evaporators. IDE has deployed approximately 400 water desalination plants in more than 40 countries worldwide and seeks to address
a wide range of the world’s water challenges. IDE’s core competencies are in membrane and thermal desalination and/or
treatment of industrial waste water.



DSM – DSM produces, markets and sells
pure magnesium and magnesium alloys. It also produces dry carnallite and related by-products, including chlorine and sylvinite.
DSM is the second largest magnesium producer in the Western world after US Magnesium.



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Sustainable Development Policy



The Company applies an overall policy of sustainable development that integrates social, economic and environmental considerations
into all of our business activities. The policy stresses social responsibility, which includes taking responsibility for the
safety and well being of our employees, reducing environmental impacts, and creating a dialogue and transparent communication
channel with the authorities, community service, as well as other matters in the area of sustainability. This policy includes,
among other things, the following items: responsible use of natural and land resources; rehabilitation of streams, restoration
and preservation of mining and quarrying regions and return thereof to the State after completion of the activities the land
was designated for by the State and in accordance with the provisions of law governing the matter. Reduction at the source
(in terms of the flow) of the quantity of waste produced in ICL companies and increased recycling of treatable waste. These
activities are performed in ongoing cooperation with manufacturers, suppliers, research institutes, customers and other users
for purposes of development and application of methods for the safe production and use of products, while reducing or eliminating
injury to users and the environment; safe transport - selection and instruction of responsible transporters, use of an emergency
system for handling transport problems, strict care with respect to safe and correct packaging and assurance that only proper
and orderly means of shipment are used.



ICL has a policy of involvement and investment
in the society and the community, which was formulated and approved by our Board of Directors in 2001 and amended in 2014. Pursuant
to this policy, an annual budget for community service is approved. Each investment or donation is executed as required by the
policy and is reviewed by the relevant parties who have been authorized according to the type and amount of the donation, including
the Environment, Safety and Public Affairs Committee and the Board of Directors.



ICL focuses on its cooperation with the
community and its involvement in the communities in and outside of Israel from which its employees come and in which it operates.
ICL’s main activities are in the communities in Israel’s southern region, namely: Dimona, Yerucham, Arad, Beer Sheva,
and the Bedouin settlements in the South. ICL focuses its activities on children and youths with handicaps, women and children
at risk, education and excellence of students in the areas of chemistry, computers, young entrepreneurs and assistance to populations
in harsh socio-economic conditions, and populations in need and with special medical needs.



Our charitable contributions in 2015 totaled
approximately $6 million (approximately 24 million NIS). This amount does not include the numerous hours of work that our employees
devoted as volunteers, partly at the expense of their work hours.



Regulatory and Environmental, Health and Safety Matters



Some of our products are potentially harmful
to the environment and the health and safety of the public as a result of the effluents, air emissions and waste that are generated
during the production of our products. These substances can cause pollution that necessitates remediation, clean up or other response
actions. In addition, some of our products may be hazardous to those who are exposed to them during their production, transportation,
storage or use. Consequently, some of our operations and products are subject to environmental, health and safety regulation. There
is also a risk of claims in respect of bodily injury or property damage.



The Company routinely invests in projects
in the areas of environmental protection, health and safety, and also bears current costs in connection with these matters. In
2015, we spent approximately $101 million on environmental matters in 2015, of which approximately $20 million relating to investments
in property, plant and equipment and approximately $81 million as a current expense. The Company estimates that in 2016, it will
spend approximately $120 million on environment protection matters, of which approximately $39 million on investments in property,
plant and equipment and approximately $81 million will be a current expense. We are continuing our investments in the environment
while making improvements and reducing our impact on the environment.



On December 11, 2013, the Law for Encouragement
of Competition and Reduction of Business Concentration, 2013 (“the Business Concentration Law”), was published, which
includes, among other things, provisions requiring regulators having authority to issue rights in areas defined as an essential
infrastructure in Israel, to take into account considerations for encouraging industry-wide competition and reducing business concentration
in the economy prior to issuing rights in public assets to private entities defined as high-concentration entities. The Business
Concentration Law sets forth a list of “rights”, including, an authorization, license, concession or permit and a contract,
and also includes a list of matters defined as an essential infrastructure, including areas in which the Company is engaged, such as, quarrying, mining,
water and etc. A list of the high-concentration entities was published in accordance with the criteria provided in the Business
Concentration Law and ICL and its main subsidiaries in Israel are included in the list, as stated. In the Company’s estimation,
inclusion of the Company and its main subsidiaries in Israel in the list of high-concentration entities is not expected to have
a significant adverse impact on the Company and its monetary results. However, in light of the frequent changes in the regulatory
environment in Israel and the existing uncertainty regarding the manner of granting rights in natural resources in a way that is
different than that provided in the law, among other things, in relation to how the concession for extracting minerals from the
Dead Sea will be granted in 2030, and in relation to the granting of licenses for mining phosphates, in accordance with the provisions
of the Israeli Mining Ordinance, it is possible that the Company’s estimation will prove to be inaccurate.



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A number of government regulations addressing
environmental and other issues, which have a significant impact on our activities, are described below:



Limits on Cadmium in Phosphate Fertilizers



Phosphate rock, which our Fertilizers segment
mines, contains cadmium in various concentrations. Cadmium is considered to have a harmful effect on the environment. Most countries
to which our Fertilizers segment sells phosphate fertilizers do not presently restrict quantities of cadmium in fertilizer. The
European Union has been conducting a series of public hearings prior to enacting regulations limiting the maximum concentration
of cadmium permitted in phosphate fertilizers anywhere within the European Union. The regulations are expected to be published
in 2016 with a transition period of several years, and at the end of the transition period the producers will be required to abide
by the restrictions. The cadmium content in the phosphate fertilizer products of our Fertilizers segment does not exceed the permissible
quantity compared with the anticipated future restrictions in the European Union. A number of European countries in Scandinavia
(Finland, Denmark and Sweden) have already instituted local limitations with respect to the cadmium content in fertilizers; however,
these restrictions are not binding on the entire European Union.



Salt Accumulation at Mines in Spain



Our Fertilizers segment has two potash
production centers in Spain, in the towns of Suria and Sallent. As a by-product of the potash production process, salt is produced
and heaps up in piles, most of which, at the present time, is not usable.



Pursuant to the license covering the first
site (Suria), salt may be piled up on the site up to 2026 at the current production level; with respect to the second site in the
town of Sallent, regarding which the Company intends to discontinue the mining activities by the middle of 2017, it was decided
by the local planning board (CUCC), that it is permissible to continue piling up salt at the current production level until the
earlier of June 30, 2017, or when the pile reaches the height of 538 meters. As at the date of this Annual Report, the height of
the salt pile is 509 meters. This decision, which relates to the Company’s municipal permit, was approved by the Supreme
Court in November 2015.



In November 2015, ICL Iberia and the Government
of Catalonia signed a cooperation agreement memorandum of understanding that defines ICL Iberia’s activities in the country
as preferential activities and the potash industry as a public strategic interest. The purpose of the agreement is to arrange all
the mining activities, including environmental protection and support for the matter of regulation, transportation and infrastructures.
Furthermore, the agreement relates to the matter of ICL Iberia’s obligation to remove the salt pile on the Sallent site,
including completion of the restoration plan of the site, all of which is to be completed no later than 2070 (the removal of the
salt pile should be completed by 2065). This agreement foresees transitory measures constituting an interim solution to allow ICL
Iberia to continue its activities at the Sallent site during the transition period. ICL Iberia’s estimation, when negotiations
on the detailed agreement are concluded, the agreement should advance the procurement of the environmental permit to allow pile
up salt after June 30, 2017, which is currently invalid, and will settle ICL Iberia’s obligations to subsequently restore
the site. For more information, see “Item 4. Information on the Company—D. Property, Plants and Equipment—Business
Licenses and Other Permits—Spain” and “Item 8. Financial Information—A. Consolidated Statements
and Other Financial Information—Legal Proceedings.”



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Product Regulation and Registration



Water Treatment (Biocides).
In a number of countries, this substance and any product containing it, must be licensed prior to import or sale in that country.
Sale is limited to those commercial uses for which the permit is received in a given country. The licensing is generally for a
limited time and needs to be renewed in order to continue selling. Beginning in 2013, the Biocide Law in the European Union, which
replaced the Biocide Directive, entered into effect. The Biocide Directive also implemented a process of re-licensing every existing
biocide on the market. Our Industrial Products segment submitted files for renewing licenses for existing biocides for various
uses, according to the timetable set in the Law. Under the Directive, during the course of the licensing process, it is permitted
to continue selling the products for the uses sold to date, on the condition that a licensing file is submitted for the use and
the active substance in the product. The new Biocide Law continues the Biocide Directive with respect to the completion of the
licensing process of the substances; however, the responsibility was transferred to European Chemicals Agency (ECHA). In addition,
the Biocide Law introduced changes regarding the continued approval of products containing active biocides in the various countries,
along with additional changes. Enforcement of the law is being executed piecemeal and during 2015 a new regulation entered into
effect in Europe permitting only holders of a biocide license to sell, which acted to remove Chinese producers from the market.



Chemicals. In some areas
of the world (such as the European Union, the United States, Canada, Japan, South Korea and China), chemicals may be sold only
after registration and approval by the authorities. Trade restrictions for use also apply to some of the products of ICL stemming
from the requirements of international treaties. Our Industrial Products segment registers the products that it develops and sells
as required under local laws.



Chemical Registration in Europe (REACH)



A statute covering the framework for licensing
and evaluation of chemicals in the European Union (known as “REACH”) became effective as of June 1, 2007. The statute
applies to chemicals already on the market, as well as to new chemicals. Pursuant to this legislation, manufacturers in the European
union and importers of chemicals or importers of certain products containing chemicals are required to submit dossiers containing
detailed information of every substance or chemical compound manufactured or imported into Europe, in quantities of more than one
ton per year (the amount and content of the information depends on the volume of production and/or sales in Europe, and the nature
of the product in terms of its effect on health and the environment). Some of the products will undergo risk evaluation based on
the information that is submitted, and others will only be able to be sold in the future under an appropriate permit. Such a permit
will only be granted on the basis of quantified evidence relating to management of the product with regard to health and environmental
aspects, the lack of appropriate alternatives, and a socio-economic evaluation. Certain persistent, environmentally toxic substances
will require permits based only on a socio-economic evaluation and on the condition that an alternative development plan be submitted,
in order to encourage a transition to use of less hazardous substances.



The statute is being implemented gradually,
between 2008 and 2018, under the supervision of ECHA (European Chemicals Agency).



Apart from higher production and raw material
costs following implementation of REACH, under the law our subsidiaries incur costs in the field of licensing, control and implementation
of product stewardship programs with customers. Another possible risk caused by REACH legislation is reduction in usage of a product
or material, or removal of certain products from the European market. Likewise, there will be products and compounds that require
investment in alternative research and development due to the need to remove certain components from use in the European market.



All of our segments are implementing REACH
and are registering their chemicals as required by law.



Likewise, all the chemicals have been reclassified
in line with the CLP regulations (classification, labeling and packaging of substances and mixtures), that took effect in Europe
in December 2010.



All of our segments submitted applications
for permits for all the chemicals relevant for their businesses in Europe (production and sale) within the timetables set in the
law (2010 and 2013). We have also volunteered to lead and prepare a number of leading files for the entire industry (lead registrant).



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Under the law, ECHA publishes, and regularly
adds to, a list of substances defined as “substances of very high concern.” As of the date of this Annual Report, this
list includes several products of our Industrial Products segment, as discussed in this report.



Limitations on the Use of Certain of
Our Products



Various countries are assessing possible
limitations on the use of chemicals, and this assessment includes flame retardants. Below are details regarding the main proceedings
known to us as of the date of this Annual Report.



| | · | The HBCD flame retardant is on the list of materials requiring authorization in accordance with the REACH law, after it was
defined as a “Substance of Very High Concern” by the European Union. The decision with respect to the “authorization”
was made and, accordingly, the continued use of HBCD in the European Union is permissible up to August 2017. The use is limited
to polystyrene insulation panels of the EPS type and to companies that filed a request for the continued use. The companies that
will continue using HBCD are bound by an environmental monitoring plan with respect to HBCD and are required to file a quarterly
report regarding the quantities of the polymer substitute (FR-122P) available on the market and with reference to the progress
of transition to use of this flame retardant. The other uses of HBCD have been prohibited in Europe since August 2015 (including
XPS-type polystyrene panels). In addition, HBCD was classified by two United Nations conventions (Stockholm Convention UNEP and
UNECE) as a persistent organic pollutant (“POP”).
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Nonetheless, in light of the fact that there was no
HBCD substitute available in commercial quantities that would fulfill the global requirements, in May 2013 a decision was made
by the Stockholm Convention to permit an exemption from the prohibition and to permit use only in polystyrene insulation panels
in buildings for an additional period of up to five years. This approval will apply only to countries that are members of the Convention
that demonstrate a need in the additional period and that are recorded in the request for exemption from the prohibition. The implications
of the classification is that the phasing out of the material from the European market may occur more rapidly unless Europe requests
to postpone implementation of the law, and in fact, Europe has applied to postpone implementation for one year so that the implementation
schedule will correspond to the European REACH process. In light of the decision recently made in Europe regarding the “authorization”
of HBCD, during 2016 the European Union is expected to implement the decision made at United Nations convention. The countries
that have registered a request for a temporary exemption from the prohibition against the use of HBCD include Brazil, Saudi Arabia,
Turkey, Switzerland (up to March 2016) and the Czech Republic. In Japan and Norway, there has been a prohibition against the use
of HBCD since November 2014. In Canada there is approval for use of HBCD in polystyrene insulation panels up to the end of 2016.
In the United States there is no prohibition against use. However HBCD is presently being evaluated by the EPA. These events do
not have a significant impact on the Company.



| | · | In Europe an evaluation process is underway with respect to Tetrabromobisophenol A (TBBPA) flame retardant, as part of the
Chemicals Law in Europe (REACH), which is expected to be completed in March 2016. In the United States, an evaluation process of
TBBPA has been started by the authorities (EPA) that is expected to continue for several years. In October 2015, it was published
in the US Code of Federal Regulation (CFR) that TBBPA is one of the possible candidates for evaluation, which examines inclusion
of the material in the Report of Carcinogens (ROC). In February 2016, the International Agency for Research and Cancer (IARC) classified
TBBPA as probably carcinogenic to humans. The above-mentioned classification has no regulatory significance in the short run. In
addition, the Company currently is not able to estimate the impact, if any, on ICL Industrial Products.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The bromine-based flame retardant DECA is banned for use in electrical and electronic applications in the European Union. In
addition, due to the definition of DECA as a “substance of very high concern”, ECHA is leading a restriction campaign
to prohibit most uses of DECA in the European Union by 2017. In 2013, DECA was proposed as a candidate for deliberations at the
Stockholm Convention in the United Nations as a substance having POP characteristics. The deliberations commenced in October 2013
and the decision-making process is expected to be completed in 2017. Imposition of the prohibition against use is expected to enter
into effect at the end of 2018. In North America, the three largest manufacturers of bromine-based flame retardants (Albemarle,
Chemtura and our Industrial Products segment) gradually phased out their distribution of DECA in 2013. Furthermore, in 2012, we
commenced selling TexFRon, a substitute for DECA in the textile industry. During
2015, a decision was made by Company management to discontinue the production activities of DECA.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | · | Propyl bromide, produced by our Industrial Products segment, was defined as a substance of very high concern in the European
Union in December 2012. Nonetheless, Propyl bromide’s use as degradable raw material will not be affected (since it is not
included in this process). On July 1, 2015, the European Chemicals Agency (ECHA) published a recommendation to include propyl bromide
in Appendix 14 (XIV) under REACH. If the Commission in Europe adopts this recommendation, the use of propyl bromide will be limited
to uses approved in the “authorization” process, and for the period of time of the “authorization” until
appropriate substitutes are found. This process, even if it ultimately comes about, does not have a significant impact on ICL.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | TXP (Tri Xylyl Phosphate), a product used as a softening substance in the plastics industry, has also been defined as a “substance
of very high concern” as part of the Chemicals Law in Europe (ECHA). The Company has discontinued selling the product as
a softening substance in the plastics industry. An additional use of the product is as a functional fluid in various industries.
The Company is in the process of introducing a substitute for this use. That stated above does not have a significant impact on
ICL.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The TDCP flame retardant was prohibited for use in furniture and children’s products in a number of states in the United
States. In California, the substance is included in the list of materials requiring a warning notice (Proposition 65). In 2013,
the Company discontinued sale of the product for use in furniture.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Air Quality



During the Company’s production processes,
pollutants are emitted, which could be harmful to people or to the environment if they were to be emitted into the environment
in concentrations or amounts exceeding the permitted levels. The materials emitted are volatile organic compounds, inorganic compounds
and particles. The Company regularly and continuously measures the emission of these pollutants in order to monitor and locate
uncontrolled emissions, in accordance with the provisions of the law and the conditions set forth in our business licenses, through
the use of accepted technologies.



A master plan is in place at our Fertilizers
segment’s facilities in Israel to reduce point source and fugitive emissions into the atmosphere. After a project was completed
for installation of two large extraction and filtering systems to reduce emission of particle materials in Zin’s factories,
the Company moved into the second stage, for treatment of two additional sites, by means of installing an additional pumping and
filtering system and through connection to the existing pumping and filtering system. In addition, there is a new absorption system
in the fertilizers’ factory at Mishor Rotem in place of the system that was damaged in the fire that occurred in June 2015.
In ICL Dead Sea’s facilities, dust extraction and filtering systems were installed in the potash production facility, a central
dust extraction and filtering system was installed in the facility for production of granulated potash, and a system was purchased
and installed for piling up potash, equipped with dust containment systems. At the fertilizer plants at Mishor Rotem, an array
of air-quality detection stations is now being set up. In 2015, a project was successfully completed at the Fertilizers and Chemical
Substances (ICL Haifa) facility for reduction of ammonia emissions through installation of a demister in the stack of the nitrate
ammonia manufacturing facility. The main facilities of ICL Fertilizers in Sodom and in Mishor Rotem have been fully converted to
run on natural gas and are connected to the gas pipeline. Conversion of the rock facilities in Zin is underway, and when the process
is completed, the factory will be connected to the distribution network. Furthermore, ICL Haifa factory in the North is presently
undergoing conversion and connection to the distribution contractor in the North. This connection is contingent on, among other
things, receipt of a building permit from the City of Kiryat Atta and compliance by the distribution contractor with the timetables.
The transition to the use of gas significantly reduces the amount of emissions released into the atmosphere.



Our Industrial Products segment operates
advanced monitoring and detection methods to identify malfunctions in the plants’ operation and emissions’ treatment
systems, such that before a malfunction occurs the facility’s manufacturing activities are halted, and thus steps are taken
to prevent uncontrolled emissions according to the laws and the conditions set out in its business license, its toxins permit,
and its emissions permit. In addition, integrated pollution prevention and control (IPPC) and leak detection and repair (LDAR)
methodologies are also applied, which provide guidance for monitoring components to detect diffused emissions in order to prevent
leakage of hazardous substances into the air. Set forth below is a list of the main actions
taken by ICL Industrial Products in the area of air quality:



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| | · | Investments were made in the production facilities in order to improve recycling and recovery of solvents and other organic
materials emitted into the air via activated charcoal systems, in order to achieve reduction of the amount of these materials emitted
into the air;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | In addition, investments were made in reducing volatile organic compound emissions and compliance with advanced values in accordance
with the BAT catalytic oxidizing technology.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Investments were made in the absorption stack systems and sealing of diffused emissions in the loading and unloading areas.
| | - | ---------------------------------------------------------------------------------------------------------------------------



| | · | Ongoing work is executed for the control and treatment of diffused emissions with the assistance of a European company;
| | - | -----------------------------------------------------------------------------------------------------------------------



| | · | Continuing joint work by the Mishor Rotem factories, including Periclase, in cooperation with the Ministry of Environmental
Protection and the Environmental Unit of the Eastern Negev Council to set up a regional air monitoring system.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Israeli Clean Air Law—Air Emission
Permit



On July 31, 2008, the Clean Air Law was
enacted to regulate the treatment and control of air pollution in Israel. The law is effective as of 2011.



The Clean Air Law addresses, inter alia,
fixed sources (including our plants) and is intended to serve as a platform for implementing the IPPC directive that was adopted
by the European Union in 1996.



The Clean Air Law differentiates between
plants defined in the IPPC directive as having significant environmental impact (IPPC plants), which include our plants in Israel,
and the other plants. In accordance with the Clean Air Law, operations of IPPC plants are subject to a valid emission permit. The
emission permit is expected to include specific instructions based on best available technology (“BAT”).



On June 22, 2010, the Ministry of Environmental
Protection enacted the Clean Air Regulations (Emission Permits), 2010, which set requirements for applying for and obtaining an
emission permit. To determine the BAT, these regulations refer to the European BAT Reference Documents (“BREF”) and
require selection of the BAT from known technologies (except in special circumstances that require specific explanations).



As of the date of this Annual Report, our
magnesium company, Industrial Products plant in Neot Hovav (Bromine Compounds Ltd.) and a bromine chloride plant have received
air emission permits. The air emission permits include provisions regarding application of the BAT, as well as provisions with
respect to monitoring, control and reporting to the Ministry of Environmental Protection. We are taking steps to implement an improvement
plan to address the requirements of the air emission permits in coordination with the Ministry of Environmental Protection.



The estimated capital investment
required in order to comply with the requirements of the Neot Hovav plant’s new air emissions permit, which was
received in August 2013, is approximately $9 million, until the end of 2017. Our plant in Neot Hovav (Bromine Compounds Ltd.)
meets the material conditions in the air emission permit. In January 2015, the Neot Hovav plant submitted a request for
update of the emissions permit, including: a request for less stringent emission values in a number of the treatment
facilities and update of the emission processes and sources.



Our other plants in Israel have submitted
applications for air emission permits, as required by law.



Report of Pollutant Release to the Environment



In accordance with the law regarding the
duty to report polluting releases into the atmosphere (Pollutant Release and Transfer Register—PRTR), since 2013, our plants
in Israel report on an annual basis with respect to the quantities of pollutants released into the environment according to the
provisions of the law. This law is based on generally accepted legislation in Europe. Under the law, the data reported is published
to the public on the Ministry’s website. The Ministry of Environmental Protection publishes on an annual basis a list of
emissions and transfers to the environment in accordance
with the reports received from all of the reporting factories, including us. Beginning in 2014, the PRTR report is required to
be submitted by March 31 of each year.



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Greenhouse Gas Issues



Climate change is of increasing concern
to governments, non-governmental organizations, and the general public. Increasing regulation of greenhouse gases (“GHGs”)
could impact our operations by requiring changes to our production processes or increasing raw material, energy, production or
transportation costs. We are striving to become a leader in reduction of emissions in general and GHG emissions in particular.
Our efforts include reduction of GHG emissions in production processes (including conversion to natural gas, replacement of shielding
gas in magnesium production, and energy efficiency improvements) and development of new products that contribute to GHG emissions
reductions. We annually measure the balance of GHG emission in all the production facilities that we operate, and have until now
measured the carbon footprint of over 60 of our products. We report our GHG emissions annually to the voluntary mechanism of the
Ministry of Environmental Protection, and submit to the Carbon Disclosure Project (CDP) a comprehensive report of our GHG emissions
and corporate strategy on climate change.



The high level of the transparency ICL
showed in the 2015 report to the CDP (which also describes the operations in 2014), achieved a score of 99 (out of 100), which
constitutes a further improvement over the score of 98 ICL received in 2013-2014. The transparency score for 2015 is among the
120 (or 6%) of the best scores for all the reporting companies and is the second best score among the worldwide potash producers.
In addition, thanks to our efforts to reduce the emissions of the Company’s greenhouse gases, in 2015 ICL received a mark
of “B” (in a declining scale of A-E) in the performance index.



European Plan for Trade in GHG Emissions



The European Union as a party that signed
the Kyoto Protocol, the framework treaty of the United Nations for dealing with climate changes, agreed on a mandatory target for
reducing the emission of greenhouse gases. The main tool for achieving the reduction targets is the EU Emissions Trading Scheme
(“ETS”), which was launched on January 1, 2005. In the first and second phases of the ETS, the European countries agreed
that every industrial company that emits GHGs above the agreed minimum threshold is required to report its emissions and to limit
the emissions to the gradually decreasing periodic quota. In addition, companies were allowed to realize a monetary gain or benefit
by trading and selling unused emission permits (or “carbon credits”). The third phase of the ETS commenced on January
1, 2013 and will run up to December 31, 2020. This phase has included a further decrease in the free allocation of carbon credits
to all industrial companies. Some of ICL’s sites in Europe are obligated to participate in the EU-ETS, and are therefore
obligated to reduce their emissions and/or purchase carbon credits. ICL is continuously following the developments and the emission
allocation policies of the EU-ETS, and is taking it into considerations in establishing/purchasing new sites in Europe and in potential
significant expansions of existing sites.



The European Energy Efficiency Directive
(EED)



The new Energy Efficiency Directive of
the European Union entered into effect on December 4, 2012. Most of the requirements in the Energy Efficiency Directive must be
implemented by companies in the European Union in the future. The Energy Efficiency Directive provides a joint framework to advance
energy efficiency in the European Union, in order to achieve the European Union’s energy goals by 2020. These goals include
the reduction of GHG emissions by 20% compared with the levels in 1990, an increase in the rate of consumption of renewable energy
sources to 20% of total energy consumption and an improvement in energy efficiency by 20%. Accordingly, all countries that are
members of the European Union are required to increase the efficiency of their energy consumption in all stages of the energy chain
— conversion, transportation and final use. The impact of the implementation of this Directive on the regulatory regime in
European countries wherein ICL is active is not yet finalized. However, ICL is developing strategies and procedures at all of its
European plants designed to comply with the local interpretations of the Directive.



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Israeli Bill for Prevention of Land Contamination
and Restoration of Contaminated Lands



In August 2011, the Bill for Prevention
of Land Contamination and Restoration of Contaminated Lands, 2012 passed in the first of three calls by the Israeli parliament
(“the Bill”). In May 2013, a hearing with respect to the Bill commenced. The highlights of the Bill in its present
version are set forth below.



The Bill defines land contamination and
contaminated land, among other things, as all that exceeds a concentration of contaminating materials in the land above certain
preliminary or specific thresholds. This means that there is no quantitative criterion for defining contamination and there is
no exception for negligible contamination. Moreover, the Bill imposes a comprehensive prohibition against land contamination, both
in public and private areas. Accordingly, the Bill is expected to apply to industrial plants and to infrastructure facilities.



The Bill requires the conduct of an historical
survey of plants and sites where there is a risk of land contamination. The Ministry of Environmental Protection will be permitted
to order submission of risk surveys and land surveys and may demand filing of a plan for treating the land, provide instructions
with reference to the manner of treating contamination events and the way for restoring suspect lands or lands found to be contaminated,
cancel or intensify the specific threshold values provided in the risk survey, approve or reject treatment plans, add or change
provisions, etc. The Bill will require the owners or possessors of contaminated land to conduct surveys even if they did not cause
the contamination. However, the owners or possessors will be entitled to receive indemnification, as part of a civil proceeding,
from the contaminators if their identity is known. It also proposes the establishment of assistance fund for a party that is required
to treat land contaminated by another party in circumstances where it is not possible to receive indemnification from the contaminating
party. The Bill proposes that the financing for the fund shall come from, among other things, a levy imposed on industrial plants
and parties in possession of hazardous materials. At this stage, it is not possible to know what will be the rate of the levy if
imposed.



It is unclear what will be the final version
of the law and when it will be approved. If the Bill is passed in its present version, it will apply to our manufacturing sites.
At every such site, an historical land survey will be conducted and according to the decision of the Ministry of Environmental
Protection, there may be further requirements and land surveys as a result thereof or instructions to clean up the land, to the
extent contamination is found in the land, as defined in the law. At this juncture, since a land survey has not yet been conducted,
it is not possible to know the extent of the exposure to obligations under the Bill if adopted and the cost thereof. For the past
two years, no action has been taken to update the proposed law and, at this stage, it is not possible to know if the Ministry intends
to continue with the legislative processes of the law or to be content with application of its policies in connection with restoration
of contaminated lands by means of the policy documents described below, on the basis of the existing legal situation.



In April 2014, the Ministry of Environmental
Protection published for public comments a draft of policy principles regarding land contamination, which reflects the policy practiced
by the Ministry, as expressed both in the business licenses and toxic permits issued by the Ministry. In this context, the policy
will make no material change in the current legal situation. The pertinent change that results from the proposed policy in regard
to the Company is that all major industrial facilities (including all of our manufacturing sites) will be required by their business
licenses to conduct historical surveys.



Notwithstanding that the law does not so
require, all of the Company’s plants in Israel conducted historical land surveys during 2014–2015, based on a demand
received as part of the conditions for receipt of a business license regarding an integrated arrangement.



The land surveys are being conducted in
coordination with the Ministry of Environmental Protection.



At the Sodom site, historical crude oil
contamination has been found near the operational salt reservoir. Our ICL Dead Sea subsidiary submitted a plan to the Ministry
of Environmental Protection for treatment at the site and is awaiting the Ministry’s instructions. The Bill for Prevention
of Land Contamination and Restoration of Contaminated Lands, which is in the legislative process, as mentioned above may affect
the treatment and the solution that is selected.



In addition, a groundwater study in ICL
Dead Sea’s power stations’ contaminated oil tank farm showed no contamination in groundwater; however, soil rehabilitation
is expected in the future. At the old gas station, boreholes were drilled and oil is being pumped from the contaminated soil and
groundwater.



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Furthermore, there is an ongoing implementation
of a multi-year master plan to prevent ground pollution by fuels or oils at our Rotem sites.



Liquid and Solid Waste



During the production processes at ICL’s
facilities, industrial solid waste and wastewater are produced. According to the discharge permit, wastewater is channeled into
water sources or evaporation ponds.



In Spain, a multi-year program is underway
to restore salt piles while paying close attention to the issue of wastewater drainage and sludge treatment. In late 2015, the
Company submitted a restoration plan to the government of Catalonia, which also addressed the restoration of the salt piles at
the two sites, which are currently being assessed by the government authorities.



At ICL Dead Sea’s, a project was
completed for restoring 100% of the runoff of the facility for the treatment of sanitary waste for the production facility. In
addition, a detailed plan was approved for restoration of the bulky waste at the plant site.



At the ICL Rotem site, a master plan for
treating waste is being implemented with the principal aims of reducing effluent quantities, turning part of the effluents into
products, recycling wastewater, reducing water consumption, treatment of wastewater at the start of the flow and neutralization
and restoration of wastewater reservoirs.



At the ICL Haifa facility, a number of
biological pilots were conducted to find a solution for compliance by the plant with standards covering treatment of the plant’s
wastewater flowing into the Kishon River, as directed by the Inbar Committee. The solutions were presented to and discussed with
the Ministry of Environmental Protection. During discussions with the Ministry of Environmental Protection, it was agreed that
ICL Haifa will not make an investment in construction of a biological facility but, rather, will take other steps to improve the
quality of the wastewater and the matter will be examined by the parties later on.



The phosphate plant in China is located
in a rural area. The Company must comply with local regulations and regulatory schemes, the purpose of which is strict supervision
and control over production and emission of waste, environmental protection and prevention of release of wastewater. The Company
has adapted its plants by means of installation of systems monitoring gas emissions, and systems for removal of wastewater and
diversion thereof from clean water sources. The Company’s plants in China are tested once every six months by the Center
for Environmental Protection regarding gas emissions and gathering of solid waste and hazardous waste. The plant has received a
license for unloading contaminating materials and strict environmental licenses and it is in compliance with all the laws and regulations.



Our Industrial Products segment operates
a special authorized laboratory for monitoring and analyzing wastewater quality.



At the Bromine Compounds plant, a sanitary
facility for the independent treatment of the sanitary effluents is being operated. The treated wastewater is flowed as input fluid
into the cooling towers. In addition, in the Bromine Compounds plant, a facility was constructed for treating industrial waste
and an independent system for wastewater removal, which includes a piping system and the plant’s own evaporation ponds. The
system was built according to a U.S standard, which includes leakage monitoring and air monitoring. In 2013, the construction was
completed and beginning in late 2013, all the plant’s wastewater is presently being pumped into the new evaporation ponds.



Our Industrial Products segment established
a thickening and filtration facility to treat solid waste at the Periclase plant.



At our manufacturing facility at Neot Hovav, Israel, there is solid waste. Pursuant to the requirements
of the Ministry of Environmental Protection, we are required to treat the existing waste (historical), which is stored on a special
site on the facility's premises in coordination with the Ministry of Environmental Protection, as well as the ongoing waste that
is produced in the facility's present manufacturing processes. The treatment will be partly through a restoration facility of hydro-bromine
acid, operated by the subsidiary, while part of the waste will be sent outside for treatment. As part of the treatment processes
of the historical waste that began in 2015, it was found that additional costs are required to be incurred, due to, among other
things, the need to use higher-cost raw materials. In light of that stated, we recorded an additional provision, in the amount
of about $20 million. As at December 31, 2015, the total provision for treatment of waste amounts to about $65 million. We estimate that based on the
information it has as at the approval date our annual financial statements, the provision covers the estimated cost of treating
the historical waste.





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Hazardous Substances



As part of our operations, we produce,
store, transport, and use materials that are defined as hazardous materials according to the Israeli Hazardous Substances Law,
1993. Handling such substances requires a special permit (“toxins permit”) that is renewed annually. All our companies
have toxin permits as required by law and they operate according to the special conditions defined in these permits, based on the
requirements of the toxins permit issued by Ministry of Environmental Protection. These materials include fuels, acids, sulfur,
bromine, chlorine, ammonia and various organic compounds. Leakage or loss of control of these materials could cause an environmental
incident and cause damage to people and to the environment. We take measures to prevent such occurrences, and, at the same time,
prepare for such occurrences by means of emergency teams and appropriate equipment to deal with these types of events.



Regulation of Concessions and Mining
Activities



For information about laws and legal arrangements
related to our concessions and mining rights and other related licenses and permits, see “Item 4. Information on the Company—D.
Property, Plants and Equipment—Mineral Extraction and Mining Operations” and “Item 4. Information on the
Company —D. Property, Plants and Equipment —Other Leases, Licenses and Permits,” respectively.



Price Monitoring



The prices of fertilizer-grade phosphoric
acid for local Israeli customers are regulated under the Supervision of Prices for Commodities and Services Law 1996. The quantity
of these products sold in Israel by our Fertilizers segment is not material to us.



ICL and some of its subsidiaries have been
declared a monopoly in Israel in the following areas: potash, phosphoric acid, sulfuric acid, ammonia, chemical fertilizers, phosphates,
bromine and bromine compounds. Due to their having been declared monopolies, ICL is subject to limitations set forth in Chapter
4 of the Restrictive Business Practices Law, 1988, most significantly its prohibition on monopolies against abusing their positions
as monopolies. In 2014 approximately 5% and in 2015 approximately 4% of our revenue derived from Israeli sales and, therefore,
in our estimation, the abovementioned declaration does not have a material impact on us. We also have an internal antitrust compliance
program.



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C.	ORGANIZATIONAL STRUCTURE









A list of our subsidiaries,
including name and country of incorporation or residence is provided in an exhibit to our Form 20-F filed with the U.S. Securities
Exchange Commission, which can be found at www.sec.gov.







D.	PROPERTY, PLANT AND EQUIPMENT



Under the Israeli Dead Sea Concession Law,
1961, as amended in 1986 (the “Concession Law”), we have lease rights until 2030 for the salt and carnallite ponds,
pumping facilities and productions plants at Sodom. We have other production facilities in Israel, situated on land with a long-term
lease, including the plants at Mishor Rotem (mainly leased until 2028 to 2041), the Oron and Zin sites of our Fertilizers segment
(leased until 2017 to 2024), production and transportation facilities at Naot Hovav of our Industrial Products segment (leased
until 2024 to 2048), as well as production, storage and transportation facilities and chemicals and research laboratories at Kiryat
Ata (leased until 2046 to 2049) that belong to our Fertilizers segment and our Industrial Products segment. We also use warehouses
and loading and unloading sites at the Ashdod (leased until 2030) and Eilat ports (negotiations are underway to extend the agreement).



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We have additional production facilities
outside Israel, the main ones being:



| | · | Germany: production plants of our Performance Products segment at Ludwigshafen, Ladenburg, Hemmingen, Dortmund (Hagesüd)
and Engelsberg (Rovita). These plants are owned by the ICL Group.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The Netherlands: production plants of our Industrial Products segment at Terneuzen that are owned, a facility of our Fertilizers
segment in Amsterdam held under a lease until 2034 (or under certain conditions up to 2044) and a production facility in the southern
Netherlands on land that is partly owned and partly held under a long-term lease.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Spain: the concessions at the potash and salt mines are held under the concession agreements described below. The potash and
salt production plant, and the warehouses, as well as the loading and unloading facilities of our Fertilizers segment at Catalonia,
are owned by the ICL Group. Our Fertilizers segment also has a liquid fertilizer and soluble fertilizer production plant in Totana,
another plant for mixing solid fertilizers in Cartagena and a concession on two ports in Cartagena and Almeria until 2024 and 2017,
respectively.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The United Kingdom: the rights to the potash and salt mines are held under the concession agreements described below. The potash
and salt and production plants and the warehouses of our Fertilizers segment in Cleveland are owned by the ICL Group. The warehouses
and bulk loading and unloading facilities at the port are leased until March 2034. The Company owns three mines and one plant for
producing peat of our Fertilizers segment at Everris in the United Kingdom.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The United States: the production plant of our Industrial Products segment in West Virginia is mainly owned by the ICL Group,
the packaging facility of that location is leased through 2017, and the production plants of our Performance Products segment in
Lawrence, Kansas and St. Louis, Missouri are owned by the ICL Group. The production plants of our Fertilizers segment in South
Carolina are operated under leases ending in 2025 and 2017 (with an option to extend through 2022).
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







| | · | China – phosphate rock mining rights in Haikou Mine and Baitacun Mine
are derived from mining licenses that are described below. The scrubbing plant is owned by the company and situated on leased land.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | · | Brazil: production plants of our Performance Products segment at Sao Jose dos Campos and Cajati are leased by the ICL Group.
| | - | ----------------------------------------------------------------------------------------------------------------------------



| | · | Austria: the whey protein production plant of our Performance Products segment at Hartberg (Prolactal) is owned by ICL Group.
| | - | -----------------------------------------------------------------------------------------------------------------------------



The following table sets forth certain
information regarding our principal properties as at  December 31, 2015.



|Property
Type | Location             | Size
(square feet)                                | Products                                       | Owned/Leased        
|------------- | -------------------- | ------------------------------------------------- | ---------------------------------------------- | --------------------
|Plant         | Mishor Rotem, Israel | 27,524,194                                        | Fertilizers segment products                   | Owned on leased land
|Plant         | Sodom, Israel        | 13,099,679 
    (not including ponds and factory) | Fertilizers segment products and power station | Owned on leased land
|Plant         | Mishor Rotem, Israel | 10,763,910                                        | Industrial Products segment products           | Owned on leased land
|Plant         | Neot Hovav, Israel   | 9,601,591                                         | Industrial Products segment products           | Owned on leased land
|Plant         | Zin, Israel          | 8,483,916                                         | Fertilizers segment products                   | Owned on leased land
|Plant         | Kiryat Ata, Israel   | 6,888,903                                         | Fertilizers segment products                   | Leased              



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|Property
Type                  | Location           | Size
(square feet)                               | Products                                                                            | Owned/Leased        
|------------------------------ | ------------------ | ------------------------------------------------ | ----------------------------------------------------------------------------------- | --------------------
|Plant                          | Oron, Israel       | 4,413,240 
    (not including phosphate reserve) | Fertilizers segment products                                                        | Owned on leased land
|Plant                          | Sodom, Israel      | 4,088,800                                        | Magnesium Plant                                                                     | Owned on Leased Land
|Plant                          | Sodom, Israel      | 2,326,060                                        | Industrial Products segment products                                                | Owned on leased land
|Conveyor belt                  | Sodom, Israel      | 1,970,333                                        | Transportation facility                                                             | Owned on leased land
|Pumping station                | Sodom, Israel      | 920,314                                          | Pumping station for Fertilizers segment                                             | Owned on leased land
|Warehouse and loading facility | Ashdod, Israel     | 664,133                                          | Warehouse for Fertilizers segment products                                          | Leased              
|Power plant                    | Sodom, Israel      | 645,856                                          | Power and steam production                                                          | Owned on leased land
|Office                         | Beer Sheva, Israel | 495,883                                          | Industrial Products segment products                                                | Owned               
|Warehouse and loading facility | Eilat, Israel      | 152,557                                          | Warehouse for Fertilizers segment products                                          | Leased              
|Headquarters                   | Tel Aviv, Israel   | 17,222                                           | Company headquarters                                                                | Leased              
|Plant                          | Catalonia, Spain   | 48,491,416                                       | Mines, manufacturing facilities and warehouses for Fertilizers
    segment products | Owned               
|Plant                          | Totana, Spain      | 2,210,261                                        | Fertilizers segment products                                                        | Owned               
|Plant                          | Cartagena, Spain   | 209,853                                          | Warehouse for Fertilizers segment products                                          | Owned               
|Port                           | Cartagena, Spain   | 184,342                                          | Storage for Fertilizers segment products                                            | Leased              
|Port                           | Almeria, Spain     | 28,761                                           | Storage for Fertilizers segment products                                            | Leased              



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|Property
Type         | Location                                       | Size
(square feet) | Products                                          | Owned/Leased              
|--------------------- | ---------------------------------------------- | ------------------ | ------------------------------------------------- | --------------------------
|Plant                 | Jiaxing, China                                 | 828,017            | Industrial Products segment products              | Owned                     
|Plant                 | Shan Dong, China                               | 691,771            | Industrial Products segment products              | Owned                     
|Plant                 | Kunming, Yunnan, China                         | 458,394            | Production Plant of the fertilizer sector         | Owned on Leased Land      
|Plant                 | Lian Yungang, China                            | 358,665            | Industrial Products segment products              | Owned                     
|Pumping station       | Kunming, Yunnan, China                         | 2,231              | A pumping station for the fertilizer sector       | Owned on Leased Land      
|Peat Moor             | Nutberry and Douglas Water, United Kingdom     | 17,760,451         | Peat mine                                         | Owned                     
|Plant                 | Cleveland, United Kingdom                      | 13,239,609         | Fertilizers segment products                      | Owned                     
|Peat Moor             | Cerca, United Kingdom                          | 4,305,564          | Peat mine                                         | Leased                    
|Plant                 | Nutberry, United Kingdom                       | 322,917            | Fertilizers segment products                      | Owned                     
|Plant                 | Terneuzen, the Netherlands                     | 1,206,527          | Industrial Products segment products              | Owned                     
|Plant                 | Heerlen, the Netherlands                       | 481,802            | Fertilizers segment products                      | Owned and Leased          
|Plant                 | Amsterdam, the Netherlands                     | 349,827            | Fertilizers segment products and logistics center | Owned plant on leased land
|European Headquarters | Amsterdam, The Netherlands                     | 24,220             | European Company headquarters                     | Leased                    
|Plant                 | Gallipolis Ferry, West Virginia, United States | 1,742,400          | Industrial Products segment products              | Owned                     
|Plant                 | South Charleston, West Virginia, United States | 871,200            | Industrial Products segment products              | Owned                     
|Plant                 | South Charleston, West Virginia, United States | 475,000            | Industrial Products segment products              | Leased                    
|Plant                 | Lawrence, Kansas, United States                | 179,689            | Performance Products segment products             | Owned                     



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|Property
Type | Location                                    | Size
(square feet)                               | Products                                               | Owned/Leased
|------------- | ------------------------------------------- | ------------------------------------------------ | ------------------------------------------------------ | ------------
|Plant         | Carondelet, Missouri, United States         | 172,361                                          | Performance Products segment products                  | Owned       
|Plant         | Rancho Cucamonga, California, United States | 103,600                                          | Performance Products segment products                  | Leased      
|Office        | St. Louis, Missouri, United States          | 45,595                                           | US headquarters                                        | Leased      
|Plant         | Ludwigshafen, Germany                       | 6,996,541                                        | Performance Products and Fertilizers segments products | Owned       
|Plant         | Ladenburg, Germany                          | 1,614,587                                        | Performance Products segment products                  | Owned       
|Plant         | Bitterfeld, Germany                         | 514,031                                          | Industrial Products segment products                   | Owned       
|Plant         | Hemmingen, Germany                          | 175,042                                          | Performance Products segment products                  | Owned       
|Plant         | Cajati, Brazil                              | 413,959                                          | Performance Products  Segment                          | Owned       
|Plant         | Sao Jose dos Campos, Brazil                 | Phosphate plant: 108,729 Blending plant: 107,639 | Performance Products segment products                  | Leased      
|Plant         | Belgium                                     | 128,693                                          | Fertilizers segment products                           | Owned       
|Plant         | Calais, France                              | 538,196                                          | Industrial Products segment products                   | Owned       
|Plant         | Nuevo Leon, Mexico                          | 103,420                                          | Performance Products segment products                  | Owned       
|Plant         | Bandırma, Turkey                            | 375,187                                          | Fertilizers segment products                           | Owned       



Other Leases, Licenses and Permits



Well Production Permits





The supply of water to
ICL Dead Sea plants, at the Dead Sea, is via a series of wells that we operate, both within and outside the concession area. The
Company has lease agreements and production permits for these wells. ICL Dead Sea has permits from the Water Authority to draw
water from the wells at Ein Ofarim (which is located outside the area of the concession). The lease period from Israel Lands Authority
(ILA) for these wells expired in 2009. An application to extend the lease period was submitted to ILA, but after a lengthy procedure,
it was rejected. The Company filed a request with ILA’s Exemptions Committee, which approved the application. Recently, approval
of the Minister of Finance was received and contracts were sent to the Company for signing.







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Business Licenses and Other Permits



In November 2013, a reform in the Business
Licensing Law, 1968, came into effect which determines, among other things, that business licenses in Israel will no longer be
perpetual, but rather each business license will be valid for a term of between one to fifteen years, depending on the type of
activity the license covers. In addition, some of the activities requiring a license in accordance with the Business License Ordinance,
2013, will be subject to unified specifications which will be published by the authorities as specified in the Ordinance, including
the Ministry of Environmental Protection.



Up to now, we have been issued valid business
licenses for our sites in Israel in perpetuity, in accordance with the law. Under the abovementioned reform, all of our businesses
licenses will expire and will require renewal three years after the applicable “Unified Specifications” are published,
except power stations and storage of fertilizers, which will remain in perpetuity.



In addition, our Fertilizers segment and
our Industrial Products segment have valid toxic substance permits under the Israeli Hazardous Materials Law (1993), issued by
the Ministry of Environmental Protection. The term of the toxic substance permits is one year. Renewal of permits is performed
on an ongoing basis. Additional conditions were set out in the toxic substances permit received by Bromine Compounds, including
requirements for risk management and seismic surveys Bromine Compounds is required to perform in accordance with the Ministry’s
guidelines.



Our Industrial Products plants at Sodom
and Mishor Rotem have valid permits for discharging industrial wastewater into the Dead Sea which require renewal from time to
time. The Industrial Products plant in Neot Hovav discharges industrial wastewater into the evaporation ponds in accordance with
the plant’s business license requirements. The costs of renewal of these licenses are not material.



ICL Dead Sea has a valid permit for discharging
industrial wastewater into the Dead Sea and into the Mediterranean Sea (ICL Haifa), under the Israeli Prevention of Sea Pollution
from Land-Based Sources Law (1988), which requires renewal from time to time. The costs of renewal of these licenses are not material.



The segment companies operate in accordance
with conditions set out in the licenses and permits. If there is any discrepancy in respect of the requirements of these conditions,
the companies take immediate action to remedy the discrepancy in coordination with the Ministry of Environmental Protection.



The Ministry of Environmental Protection
has commenced implementation of the integrated licensing methodology, which is based on the Integrated Pollution Prevention and
Control (“IPPC”) directive that was adopted by the European Union in 1996. Pursuant to this directive, large factories
are required to make use of the best available techniques (“BAT”) in every environmental aspect on which they have
an impact, while addressing all these aspects in an integrated manner. The BAT is provided in reference documents, which are published
by the European Union and detail every type of industry to which BAT is relevant for elimination or reduction of environmental
damage. However, the Israeli Clean Air Law, 2008 (the “Clean Air Law”) adopted this methodology only partially since
it addresses only emissions into the atmosphere. In order to enable integration as required by the directive, the Ministry of Environmental
Protection has added requirements for implementation of the IPPC methodology in the business licenses of factories considered to
be “emission sources requiring a permit” under the Clean Air Law. The conditions are stipulated by the Ministry prior
to submission of the request for an emission permit so that the permit request (concerning emissions into the atmosphere) will
be filed together with the information required for determination of the conditions in other areas under the integrated licensing
methodology, including, among other things, runoff, waste, treatment of hazardous substances and energy savings. A factory is first
required to perform a survey of these differences and to submit such survey to the Ministry. It is anticipated that concurrent
with the issuance of an air emission permit, or shortly thereafter, the factory will receive additional conditions, including requirements
for implementation of the BAT in these areas. The Ministry of Environmental Protection issued a request for additional information
under the integrated methodology for most our plants that are required to obtain an air emissions permit under the Clean Air Law.
As at the date of this Annual Report, the plant of the Magnesium Company, a plant of a company from the Industrial Products segment
in Neot Hovav (Bromine Compounds Ltd.) have received an emissions permit. The Company’s other plants in Israel have filed applications for emissions permits as
required by law.



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The Ministry of Environmental Protection
has issued additional conditions for the business licenses of some of ICL’s companies in Israel that require submission of
additional information, including a historical land survey. The historical surveys for the plants have been prepared and filed
with the Ministry of Environmental Protection.



As of the date of this Annual Report, the
Ministry of Environmental Protection has not yet formulated legislation regarding the matter of the consequences of the historical
land surveys, and as at the date of this Annual Report it is not possible to know what costs will be triggered by implementation
of these requirements, if any.



In March 2016, a draft emissions permit pursuant to the Clean Air Act was received. Application of the requirements of the
emissions permit as it is presently worded will impose additional costs on the Company. Nonetheless, at this stage the discussions
with the Ministry of Environmental Protection regarding the final language of the permit's requirements have not yet been
completed and, accordingly, it is not possible to estimate the actual cost of application of the said requirements.



Mineral Extraction and Mining Operations



The following is a description of the material
properties where we extract minerals and conduct mining. For additional information about the total cost of our property plant
and equipment and our intangible assets (including concession and mining rights) see Note 13 and Note 14, respectively, to the
Company’s financial statements.



The Dead Sea



Approximately 33% of our sales in 2015
derived from products that were based on minerals that we extracted from the Dead Sea, including potash, bromine, sodium, magnesia,
magnesium chloride and metal magnesium. The concentration of these minerals in the Dead Sea has generally remained steady in recent
years with a trend of an increase in the concentration of the potash component, as a result of the diversion of the channel for
the brines that are redirected into the Northern Basin. In addition, the salt concentration in the Dead Sea tends to rise in periods
wherein the quantity of water flowing into the Sea is less than the quantity of water evaporating from it (which is what has happened
in the last fifty years). The Dead Sea contains a supply of these raw materials that is, for all practical purposes, unlimited.



Our extraction of minerals from the Dead
Sea begins with an evaporation process facilitated by the hot and dry climate of the Dead Sea region. This area is located approximately
430 meters below sea level. The Dead Sea is presently about 430 meters below sea level due to a fixed decline of the level of about
1 meter per year. The Dead Sea is divided into two parts: the Northern Basin and the Southern Basin that consists of artificial
evaporation ponds.



The production process begins with the
flowing of water from the Northern Basin to our adjacent evaporation ponds. Our pumping station P-88 has a pumping capacity of
100,000 cubic meters per hour. In 2015, we flowed approximately 375 million cubic meters of water from the Northern Basin to the
evaporation ponds. Of this quantity, approximately 225 million cubic meters of brine were rechanneled into the Northern Basin of
the Dead Sea at the end of the process. In 2015, the Company produced from the Dead Sea approximately 2.4 million metric tons of
potash, 116 thousand metric tons of bromine, 19 thousand metric tons of metal magnesium, 166 thousand metric tons of salt and 95
thousand metric tons of magnesium chloride solids. The Company plans to build a new pumping station from the Northern Basin to
the evaporation ponds, as part of our preparations for the receding level of the Dead Sea in the Northern Basin and the retirement
of pumping station P-88 from service. However, we are experiencing a delay in receiving approvals from the various government agencies
that must approve our statutory plans for our new pumping station. In light of the delay in approval of the statutory plans, the
Company is making an additional investment to extend the life of pumping station P-88 for an additional three years.



Regarding the pumping of water from the
Dead Sea, in June 2015 a petition was filed with the Court for Water Matters in Haifa wherein the Government Water and Sewage Authority
(‘the Water Authority’) was requested to take action to regulate and supervise the Company’s use of the water
sources. For additional details – see “Item 4. Information on the Company-D. Property, Plant and Equipment-Leases,
Licenses and Permits-Well Production Permits.”



The evaporation ponds extend over an area
of approximately 150 square kilometers. They include a subsystem of 35 ponds for salt precipitation and ponds for the precipitation
of carnallite.



The salt pond known as Pond 5 is the
largest pond in the complex. It has an area of approximately 80 square kilometers. It was built during the 1960s by
construction of a large dam, sealed by a clay core, in the area that was then the southern basin of the Dead Sea on the
Israeli side, and permits the continued existence of the Southern Basin due to the system of pumping stations and flowing
channels that are operated as part of the industrial operational system of the evaporation ponds.
The evaporation processes give rise to concentration of the brines and the sinking of the table salt to the floor of the pond.
The remaining brines are rich in potash, magnesium and bromine. These brines are pumped into the systems of other ponds, and as
a result of the continued evaporation the “carnallite” precipitates. Carnallite is the raw material used for production
of potash, magnesium, chlorine and magnesium chloride. The carnallite is harvested by floating barges and pumped as slurry to our
production plants. The brine from the edge of the carnallite ponds is used as a raw material in the production of bromine.



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The precipitated table salt precipitates
and creates a layer on Pond 5 bed of approximately 20 million tons annually. Precipitation of the salt causes a reduction in the
volume of the solutions in the pond. As the production process requires maintaining a fixed volume of solutions (brines) in the
pond, the water level of the pond is accordingly raised by approximately 20 centimeters annually.



The Ein Boqeq and Hamei Zohar hotels, the
town of Neve Zohar and other facilities and infrastructures are located on the western shoreline of this pond. Raising the water
level of the pond above a certain level is likely to cause structural damage to the foundations and the hotel buildings situated
close to the water’s edge, to the village of Neve Zohar and to other infrastructure on the western shoreline of the pond.
This situation requires establishment of defenses for the facilities and infrastructures of the hotels located on the shores of
Pond 5.



The temporary defenses have been underway
for a number of years and are characterized by elevating the height of the dike along the west coast of the pond, opposite the
relevant hotels, including in some of the places a system to lower the ground water. This defensive dike is raised from time to
time, depending on water level of the pond. As of the date of this Annual Report, there is an agreement between ICL Dead Sea and
the government of Israel regarding financing of the costs of the temporary defenses: ICL Dead Sea will bear 39.5% of the financing
and the government of Israel will bear the remaining cost.



In July, 2012, an agreement was signed
with the Government of Israel, regarding “Execution and Funding of the Dead Sea Protection Project and Increase of the Royalties
Paid to the State” (hereinafter – “the Salt Harvesting Project”). The purpose of the Salt Harvesting Project
is to constitute a solution for the raising of the water level in the Pond and stabilizing of the water therein at a fixed level
by harvesting of the salt from this pond and transferring it to the Northern Basin of the Dead Sea.



The planning and execution of the salt
harvesting is to be performed by ICL Dead Sea. The Salt Harvesting Project constitutes an Israeli national infrastructure project
that is being promoted by the Israeli Committee for National Infrastructures. (Transfer of the pumping station from P-88 to P-9
constitutes part of the project recognized as a national infrastructure project). Our agreement with the government requires that,
starting January 1, 2017, the water level in Pond 5 will not rise above a level of 15.1 meters in the ICL Dead Sea system (about
390 meters below sea level).



ICL Dead Sea will be required to pay compensation
in respect of any damages caused as a result of a rise of the water level beyond the level determined. If there is a material deviation
from the timetables for construction of the Salt Harvesting Project as a result of a requirement for changes by the planning institutions,
as a result of which the Plan is not approved on time, or due a decision of a judicial tribunal that caused a delay of at least
one year in provision of effect to the Salt Harvesting Project by the planning institutions, without the Company having violated
its obligations, the Company will be permitted to request raising of the water level above that stated above.



According to the Dead Sea Protection Company
Ltd., the total cost of the Salt Harvesting Project was estimated, as of October 2010, to be in an undiscounted amount of NIS 7
billion (a discounted amount of NIS 3.8 billion – hereinafter – “the Discounted Amount”) (a discounted
amount of about $1 billion). The Company will bear 80% and the Government will bear 20% of the cost of the Salt Harvesting Project,
however the Government’s share will not exceed 20% of the Discounted Amount, linked to the CPI and bearing interest of 7%.





The agreement also stipulates
an increase in the rate of the royalties from 5% to 10% of sales, for quantities of chloride potash ICL Dead Sea sells in excess
of 1.5 million tons annually. This increase applies to sales starting January 1, 2012. In addition, in respect of the period January
1, 2010 through January 1, 2012, the Company agreed to an additional royalty charge, at the rate of 5%, only on annual sales
exceeding 3.0 million tons. The agreement further provides that if legislation is enacted that changes the specific fiscal policy
in connection with profits or royalties deriving from mining of quarries from the Dead Sea, the Company’s consent will not
apply regarding an increase in the rate of royalties on the surplus quantities referred to above, commencing from the date on which
additional tax is collected as stated in the legislation. On November 30, 2015, the Economic Efficiency Law was published,
including the implementation of the Sheshinski recommendations, which address royalties and taxation of excess profits from Dead
Sea minerals. The law entered into effect on January 1, 2016.See Note 23 to our audited financial.











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Approval of each of the stages of the plan
by the relevant dates set out in the project schedule is essential for continuation of ICL Dead Sea’ production process and
delays could have an unfavorable impact on the process and, accordingly, could give rise to damage or losses.



In December 2015, National Infrastructures
Plan 35A (“the Plan”), which includes the statutory infrastructure of the Salt Harvesting project in the evaporation
ponds through, among other things, the construction of a new pumping station in the northern basin of the Dead Sea, was approved
by the plenary National Infrastructures Committee. Following the above approval, in March 2016, the Government also approved the
Plan.



Construction of the new partition in the
middle of the dike surrounding Pond 5 was completed in 2014. The objective of this project is to minimize seepage from the dike.
This project includes raising the dike by an additional meter.



The appearance of sinkholes, which is attributed
mainly to the lowering of the water level of the Dead Sea, is increasing in the Dead Sea area. The receding level of the Dead Sea
is not to be confused with the rise of the water level in Pond 5 discussed above, and the two seemingly contradictory phenomena
are occurring simultaneously, as Pond 5 is located in the Southern Basin on a different plane than the main body of the sea lying
to its north, necessitating a special pumping station to constantly feed the pond with water. See “Item 3. Key Information—D.
Risk Factors—Risks Related to Our Business-A new pumping station will be required due to the receding water level in the
Northern Basin of the Dead Sea.” While the water level of Pond 5 is rising due to the accumulation of salt on its floor and
the continuous pumping of water from the Northern Basin of the Dead Sea, the water level of the Northern Basin is receding. Most
of the sinkholes caused by the receding level of the Dead Sea develop near the Northern Basin of the Sea, where there is little
operation by our Fertilizers segment. Nonetheless, most of the sinkholes have appeared near the evaporation ponds and in other
places in the ICL Dead Sea area. Development of a sinkhole under a dike could cause the dike to burst, causing loss of the solutions
in the pond. Our Fertilizers segment is working to identify the development of these sinkholes in the area of the plant and along
the dikes, and to fill them when they appear.



We own and operate a power station with
a capacity of 110 megawatt, presently limited to about 60 megawatt due to environmental protection restrictions, which
provides a significant part of the power used in our production plants at the Dead Sea. The balance is purchased from Israel Electric
Company, a state-owned utility, and from OPC, a private producer of electricity that is a related party.



In June 2012, the Company entered into
agreements regarding a project to construct a new cogeneration power station in Sodom, Israel (hereinafter—‘‘the
Project’’). The power station is expected to have a production capacity of about 230 megawatt and about 330 tons of steam per
hour, which will supply electricity and steam requirements for the production plants at Sodom site. The Company intends to operate
the new power station concurrently with the existing power station, which will be operated on a partial basis in a “hot
back-up” format to produce electricity and steam. The total electricity production in the short term will be 245 megawatt.
The Company also intends to utilize its present gas contracts and thereafter to enter into new gas contracts in order to run the
power station.







Construction of the project was expected
to be completed in the second half of 2015. In 2015, the executing contractor (the Spanish Company “Abengoa”) experienced
difficulties and pursuant to the decision of the Spanish court delivered in November 2015, it was granted protection from its creditors
up to the end of the first quarter of 2016. The Company is examining the possibility of continuing execution of the construction
work of the power station and completion thereof. In light of that stated, the Company expects to complete the project and to commence
operation of the power station in the second half of 2016, with additional costs that are not material.



For details regarding the said contracts
– see Note 23 to our audited financial statements.



Transport from the Company’s plant
in the Dead Sea is by means of a conveyor belt from the plant to the railway in the direction of Ashdod port and from Highway 90
in the direction of Eilat port.



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The Negev Desert





We currently operate large
surface phosphate mining sites at Oron, Rotem and Zin in the Negev Desert. The Israeli Minister of National Infrastructures under
the Israeli Mines Ordinance, through the Supervisor of Mines in his Office (the “Supervisor”), has decided to extend
the area of the Rotem field concession (valid until the end of the 2021) so that it covers the Hatrurim field. The area of the
Rotem concession has been so extended, and the matter has been transferred to the Israel Lands Authority (“ILA”) to
deal with the extension of the area of the mining permit for the Rotem field, in line with the extension of the concession area.



The company is working to promote
the plan for mining phosphates in Barir field (which is part of South Zohar) in the Negev Desert.





In December, 2015, the
National Planning and Building Council approved the Policy Document Regarding Mining and Quarrying of Industrial Minerals (the
"Policy Document"), which includes, among other things, a recommendation to permit phosphate mining, including at Barir
field. The Policy Document that was approved will set the basis for preparation of a national outline plan (“the National
Outline Plan”) for mining and quarrying by the National Planning and Building Council. Along with the approval of the Policy
Document, the National Planning and Building Council ordered the Planning Administration to raise the matter of the order to prepare
a detailed plan for Barir field (“the Barir Plan”) at one of its upcoming meetings. For a description of certain risks
relating to receipt of a license for mining in the Barir Field – see ”Item 3. Key Information-D– Risk Factors”.



ICL’s mining activities are dependent
on concessions, authorizations and permits granted by the governments of the countries in which the mines are located.



Each of these fields has a similar layered
structure and geological composition, with the phosphate preserved as relatively narrow elongated bodies along the margins and
within the axes of two northeast to southwest trending asymmetrical synclines (basins or trough-shaped folds in the rock layer
whose upper components are younger than those below) or monoclines (step-like folds in the rock layer). Oron and Rotem lie within
a single syncline to the northwest of the Zin syncline. The three deposits have been proved over extensive distances in terms of
length (Rotem 10 kilometers, Oron 16 kilometers and Zin 22 kilometers) and width (4 kilometers each). They are all known to extend
further in terms of length but are limited in operational size. The Campanian (Upper Cretaceous period) phosphate rock deposits
of Israel are part of the Mediterranean phosphate belt extending from Turkey, through Jordan and Israel, and westward through Egypt,
Tunisia and Morocco. We began operations at Oron in the 1950s, and at Rotem and Zin in the 1970s. These sites are accessible by
road and rail. We have long-term leases to all the land on which our Israeli facilities are located and we operate under mining
concessions and licenses granted to us by the Israeli Minister of National Infrastructures and by the ILA. See “Item 4.
Information on the Company-B. Business Overview- “Concessions and Mining Rights” below.



If the National Planning
and Building Council will approve the mining in the Barir Field, progress is expected with respect to the process of receipt of a mining license.
If this situation does not come about, the future of the activities of the ICL Rotem Company will depend on its ability to mine
and manufacture the downstream products from alternative phosphate sources, namely, brown phosphates and bituminous phosphates,
which are essentially the only phosphate sources that are expected to become reserves in the near future. Currently, the reserve
of bituminous phosphate (approximately 4.0 million tons at Zin) is being mined and used in a blending process with other phosphates
having lower organic concentrations to produce fertilizer products. Over the past several years, the Company has been developing,
and has even run a pilot and a manufacturing test, a process wherein after the improvement process (removal of the phosphorous
from the material combined with it), there is an improvement of the phosphoric acid content from 25%–26% to 31%–32%,
and a 50% reduction of the organic content, and now it may be used for production of high-quality phosphoric acid. Significant
progress has also been made in adapting brown phosphates (the adaptation of which for manufacture of acid has been proven in the
past by means of a thermal process) for manufacture of phosphoric acid: a successful pilot was held and as a result a facility
test is planned.



The method of mining in the Negev is by
conventional open pit or quarrying methods, using drilling and blasting, hydraulic excavators and rigid dump trucks or dozers with
rippers for overburden removal and front-end loaders and trucks for mining phosphate. Each mine site has varying numbers and thicknesses
of overburden, inter-burden and phosphate rock layers, so that
the size of mining equipment is conformed to the sites. At Rotem, the mining of phosphate and stripping of waste is entirely conventional
and consists of 190-metric ton trucks and 18 cubic meter bucket shovel operations. Oron and Zin sites use contractors for all operations,
and equipment at these sites is smaller. Typically, the excavator bucket capacities are in the range of 3 to 7 cubic meters and
the trucks have capacity of 45 to 65 metric tons.



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Phosphate rock from the Rotem mine is transported
by truck to a nearby beneficiation plant at Mishor Rotem. At that plant, we also operate two sulfuric acid plants, three green
phosphoric acid plants, one white phosphoric acid plant, three superphosphate plants, two granular fertilizer plants, one MKP plant and one oil shale burning plant and production of electricity and steam. We also have beneficiation plants at
both Oron and Zin. The product of the process is a high-grade, multi-purpose phosphate product, most of which is used to produce
phosphoric acid and fertilizers. The rest of this material is sold to other phosphoric acid and fertilizer producers and some is
sold for direct application as fertilizer.



The plant at Mishor Rotem is powered primarily
by electricity that we generate at our sulfuric acid plants and by oil shale that we mine in Mishor Rotem. Any surplus power is
sold to Israel Electric Company. All of the power utilized by the Oron and Zin beneficiation plants is purchased from OPC, a private,
related-party producer of electricity.



The following table sets forth for the
periods indicated the amount of our total mine production of raw ore in our mines in the Negev (and the relevant grade) supplied
to our beneficiation plants:



|                                          |  | Year Ended December 31,
|----------------------------------------- |  | -----------------------
|                                          |  | 2015                   
|Millions of metric tons produced          |  |                        
|Grade (% P2O5 before/after beneficiation) |  |                        





The following table sets forth (for the
three years ended December 31, 2015, 2014, and 2013) the approximate amounts of product produced after processing by our operations
in the Negev Desert:



|                      |  | Year Ended December 31,   
|--------------------- |  | --------------------------
|                      |  | 2015                      
|                      |  | (thousands of metric tons)
|Phosphate Rock        |  |                           
|Green Phosphoric Acid |  |                           
|Fertilizers           |  |                           
|White Phosphoric Acid |  |                           
|MKP                   |  |                           



Spain



The Company’s potash mining operations
in Spain are carried out by ICL Iberia (IBP) (a wholly-owned subsidiary of the Company) through Trafico de Mercancias (a wholly-owned
subsidiary of ICL Iberia). As at the date of this Annual Report, there are three underground potash mines that make up ICL Iberia’s
complex: Suria, Cabanasas and Vilafruns. The Company operates two mines, the Cabanasas mine, which is located in the town of Suria,
approximately 12 kilometers north of the district capital of Manresa in the Cardoner river valley, and the Vilafruns mine, which
is located in the town of Sallent, approximately 13 kilometers east of Suria in the Llobregat river valley. The third mine in Suria
is inactive. In addition, the Vilafruns mine is expected to be closed by the middle of 2017. In November 2015, ICL Iberia and the
Government of Catalonia signed a cooperation agreement memorandum of understanding that defines ICL Iberia’s activities in
the country as preferential activities and the potash industry as a public strategic interest. The purpose of the agreement is
to arrange all the mining activities, including environmental protection and support for the matter of regulation, transportation
and infrastructures. Furthermore, the agreement relates to the matter of ICL Iberia’s obligation to remove the salt pile
on the Sallent site, including completion of the restoration plan of the site, all of which is to be completed no later than 2070
(the removal of the salt pile should be completed by 2065). See “Item 8. Financial Information—A. Consolidated Statements
and Other Financial Information—Legal Proceedings—Spain Mining License Matters.” As part of the expansion
plan in Spain on the Suria site, production of potash at the Cabanasas mine is expected to increase up to approximately 0.8 million tons per annum when
production at the Vilafruns mine ceases and is expected to reach approximately 1.1 million tons per annum (double current levels
produced in the Cabanasas mine) two years after production at Vilafruns ceases, and in the third stage mining of the potash is
expected to increase up to about 1.3 million tons per year in the future. We own all of the land on which our Spanish surface facilities
are located. See Item 4. Information on the Company—B. Business Overview—Segment Information—Fertilizers—Production.”
The Spanish government owns all of the underground mining rights and has granted to us concessions to conduct mining operations
under our land. See “– Concessions and Mining Rights — Spain” below.



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The Cabanasas and Vilafruns mines are both
in the province of Barcelona and are located approximately 530 to 900 meters below ground. Each mine has two access points and
mining is by a modified room and pillar method. All of the mine sites are served by roads and are near major highways.



Extraction of potash from underground mines
in Spain is carried out by mining sylvinite (a mixture of potash and salt found in varying potash concentrations). The potash is
separated from the salt in production plants near the mines. For a description of our efficiency plan at ICL Iberia (IBP), see
“Item 4. Information on the Company—B. Business Overview—Segment Information—Fertilizers—Production.”



Potash was first discovered in 1912 at
Suria and commercial development was started in 1920. We purchased our three Spanish mines in 1998. Potash of late Eocene age occurs
in the northeast corner of the Ebro Evaporite Basin which lies along the southern flank of the Pyrenees. Sylvinite and carnallite
occurs towards the top of the Cardona Halite at depths which vary considerably as a result of deformations associated with the
Pyrenean fold and thrust belt. The potash layers (when seen underground) can, in places, be contorted on a local scale due to this
deformation of the area. Two main potash seams are mined in the deposit Capa A and Capa B at both the Vilafruns and Cabanasas mines.
Within these seams, sylvinite occurs in the joining of thin layers of halite in each of the seams. The sylvinite is high grade
and with very low levels of insolubles.



We own and operate two processing plants,
one in Suria and one in Sallent. The operations at these plants include crushing, grinding, desliming, froth flotation and drying.
All of the power utilized by our Spanish mining operations is purchased from third-party electric companies.



The following table sets forth, the quantities
and grades of the potash ore extracted from the mines and processed in the plants in Spain, for the three years ended December
31, 2015, 2014 and 2013:



|                                             |  | Year Ended December 31,
|-------------------------------------------- |  | -----------------------
|                                             |  | 2015                   
|Sallent                                      |  |                        
|Ore processed (in millions of metric tons)   |  |                        
|Grade (% KCl)                                |  |                        
|Suria                                        |  |                        
|Ore processed (in millions of metric tons)	) |  |                        
|Grade (% KCl)                                |  |                        
|Total                                        |  |                        
|Ore processed (in millions of metric tons)   |  |                        



United Kingdom



Our mining operations in the United Kingdom
are conducted by our wholly owned subsidiary, ICL UK. Our mine and processing plant is located approximately 340 kilometers north
of London and approximately 40 kilometers east of Middlesbrough, England in the North York Moors National Park. The mine was originally
designed, developed and operated by Imperial Chemical Industries and Charter Consolidated and the first potash was extracted in
1973. We purchased the mine, including mining leases and mineral extraction licenses, in 2002 from the then-owner, Anglo American
Corporation.



Our mining operations in the United Kingdom
are conducted both under land and under the North Sea. Mining operations are conducted at depths of as much as 1,300 meters below
ground onshore and 850 meters below the surface of the North Sea. The operations under the North Sea are currently conducted as
far as 14.5 kilometers offshore. Although we own the land on which our minehead and related surface operations are conducted, substantially
all of our United Kingdom subsurface operations are conducted either under land that we do not own or under the North Sea, which we also do not
own. We have the right to conduct our mining operations pursuant to the mining leases and mineral extraction licenses described
below. See “Item 4 Information on the Company—D. Property, Plants and Equipment—Concessions and Mining Rights”
below. Extraction of potash from underground mines in the United Kingdom is carried out by mining sylvinite (a mixture of potash
and salt found in varying potash concentrations). The potash is separated from the salt and from insoluble materials in processing
plants located near the mines.



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Our United Kingdom mining operations are
situated close to the western limits of potash and salt deposition in the Zechstein Basin extending inland in the United Kingdom
and below the North Sea to Germany. The potash seam is of the Permian Evaporite Series and is overlain by some 800 meters to 1,300
meters of younger sedimentary rocks. The potash seam averages 7 meters in thickness but varies from zero to more than 20 meters
in thickness. An approximately 11-meter-thick polysulphate layer exists approximately 150 meters below the potash deposits. ICL
UK has evaluated the potential of this polysulphate as a separate resource, and completed an access decline into the polysulphate
bed in 2010 from one of their main salt roadways. Commencing from 2012, the Company sells the product in commercial quantities.



Our United Kingdom mine has been extensively
explored using a combination of surface (sparse) and underground drilling. The underground long hole (horizontal) drilling and
3 D seismic (offshore) surveys are used to delinate areas of minerals well in advance of mining. The mine is accessed by two vertical
shafts. One shaft hoists potash and salt and the other provides service access. Mining currently takes place in two discrete areas.
Mining is by continuous miners with shuttle cars and by a modified room and pillar method. The mine has been designated as a “gassy”
mine, containing methane gas. Supply of the electricity to the Company’s mining operations in the United Kingdom is powered
primarily by electricity purchased by the local electricity company. There is also a power plant on the site that converts gas
into electricity and supplements the electricity supply required for execution of the mining operations.



Our raw material processing operations
include crushing, desliming, grinding, froth flotation and drying. The plant was built in 1971 and is properly maintained on an
ongoing basis in order to preserve the existing production capacity.



The following table sets forth, the quantities
and grades of the potash ore extracted from the mine in the United Kingdom and the insoluble clay minerals, for the three years
ended December 31, 2015, 2014 and 2013.



|                                     |  | Year Ended December 31,
|------------------------------------ |  | -----------------------
|                                     |  | 2015                   
|Potash Ore (millions of metric tons) |  |                        
|Grade (% KCl)                        |  |                        
|Grade (% insoluble)                  |  |                        



China



YPH JV operates a mining site named Haikou
(the “Haikou Mine”) that is located alongside the Haikou Town, in the Xishan district, proximate to Kunming. YPH JV
also holds a concession for mining phosphates in an additional mine named Baitacun (the “Baitacun Mine”), which is
located several kilometers from the Haikou Mine, wherein the mining activities have not yet commenced. As of the date hereof, the
access to these mines by means of a network of roads. The production capability of YPH JV is approximately 2.5 million tonnes per
year.



The Haikou Mine is spread over 9.6 square
kilometers and the Baitacun Mine is spread over 3.08 square kilometers.



The Haikou Mine is split into 4 areas.
The phosphate sources in areas 1 and 2 have been almost fully depleted. The mining in area 3 began in 2015 and the mining activities
in area 4 are scheduled to start in 2018.



The phosphates are situated in two layers
– an upper layer and a lower layer. The thickness of the upper layer is about 7 meters while the thickness of the lower layer
is about 4 meters on average. The mining is executed based on layers, in accordance with the quality thereof. In every layer, 3
quality categories are defined, which requires precision mining that is accomplished through use of relatively small mining tools.
The phosphate is covered by hard rock layers that require blasting, except
for the upper ground level, which is removed and used for restoration of the mined areas. The phosphate layers are also hard and
require blasting.



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The mining in the Haikou Mine is via open
mining using conventional methods by means of drilling and blasting, hydraulic cranes, mining trucks and tractors for mining phosphates.



In the first stage: mining of the upper
ground level is performed, which is then stored or spread out over mined areas for purposes of restoration. In the second stage:
the upper overburden level is removed. In the third stage: mining of the phosphate is performed by drilling and blasting of every
layer separately (between which an intermediary overburden layer exists having a thickness of 11 meters) and it is loaded on trucks.



Based on the topography of the region,
the mining is performed through use of small mining tools, trucks with a capacity of 40 tons and cranes have a shovel volume of
3 to 6 cubic meters. Use of large trucks will only be possible if a modern transport road is built.



Close to the Haikou Mine there are 2 enrichment
plants. These facilities are accessible by road. The output of these facilities is designated for the acid production plants of
Yunnan Three Circles Chemical Co. Ltd., a fully owned subsidiary of YPH JV (“3C”). 3C has a production site for acids
and fertilizers, including five sulfuric acid factories, three green phosphoric acid factories, one factory for manufacture of
technical grade white phosphoric acid and six fertilizer factories of different types. The site is located several kilometers from
the Haikou Mine. Access to the site is also by road.



Mining activities have not yet commenced
on the Baitacun Mine. The geological survey was conducted by the Chinese government and the area is ready for planning of the mining
operations. However, since the ratio of the overburden material to the phosphates in this area is high, the mining operations,
to the extent they are ultimately commenced, will be postponed to later stages.





Ethiopia



The Company holds a potash
mining license for the Danakhil mine in the Afar region in Northeast Ethiopia, held by Allana Afar through the acquisition of Allana,
which was granted on October 8, 2013 by the Ministry of Mines in Ethiopia. The mining license is valid for a period of 20 years
and may be renewed for an additional period of 10 years each.





Pursuant to the mining agreement, Allana Afar was required to complete the development stage and start the production stage
no later than October 8, 2015 (within two years from the effective date of the mining license). As at the date of the report,
Allana Afar had not yet completed the development stage and, therefore, the Government of Ethiopia related to the application
submitted by the Company for the transfer of the mining license. The Company is holding discussions with the Government of
Ethiopia for purposes of transferring the mining license to a newly established company and extending the development period
in light of the Company's takeover of Allana, which can result to additional payments. In the Company's estimation, an arrangement
will be reached with the Ethiopian authorities for extension of the development period.



The Company is currently
in the early stages of researching the project’s feasibility and technical and operating requirements. There are currently
no mining operations at the Danakhil site, and the exploration process is still ongoing. The proposed development at the Danakhil
site is exploratory in nature and the property is without known proven (measured) or probably (indicated) reserves. See “Item
4 Information on the Company—B. Business Overview—Segment Information—Production”.





Concessions and Mining Rights



Israel



ICL Dead Sea Ltd. Concession.
Pursuant to the Dead Sea Concession Law, 1961 (hereinafter – “the Concession Law”), as amended in 1986, and the
Concession Deed attached as an addendum to the concession law, ICL Dead Sea was granted a concession to utilize the resources of
the Dead Sea and to lease the land required for its plants in Sodom for a period that is expected to end on March 31, 2030, accompanied
by a priority right to receive the concession after its expiration, should the Government wish to offer a new concession. In exchange
for the concession, ICL Dead Sea pays royalties to the Israeli government, calculated at the rate of about 5% of the value of the
products at the factory gate, less certain expenses. In addition, ICL Dead Sea pays the Israel Lands Authority (ILA) lease fees for the leased land as such
land is defined in the Concession Deed. The amount of the payment and its updating mechanism were stipulated in an agreement signed
by the ILA (formerly – the Israel Lands Administration) in 1975.



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As for the royalties payment by ICL Dead
Sea, the State of Israel was permitted to demand a re-evaluation of royalties rate relating to the quantity in excess of three
million tons of potash manufactured in any year from 2010 and thereafter, provided the rate of the royalties with respect to such
excess does not exceed 10% of the value of the product at the factory gate, less certain expenses. As part of the agreement with
the State of Israel signed in July 2012, regarding performance of a harvest of the salt, it was also agreed with the Government
to increase the rate of the royalties to 10% (in place of 5%) in respect of sales of potash from the dead sea in excess of 1.5 million
tons per year. In addition, according to the Salt Harvesting agreement, if legislation is enacted that changes the specific fiscal
policy in connection with profits or royalties deriving from mining of quarries from the Dead Sea, the Company’s consent
will not apply regarding an increase in the rate of royalties on the surplus quantities referred to above, commencing from the
date on which additional tax is collected as stated in the legislation. On November 30, 2015, the Economic Efficiency Law
was published, including the implementation of the Sheshinski recommendations, which address royalties and taxation of excess
profits from Dead Sea minerals. The law entered into effect on January 1, 2016. For further details see Note 23 to the
Company’s financial statements.





ICL Dead Sea grants a sub-concession to
Dead Sea Bromine Company Ltd. (“Dead Sea Bromine Company”) to produce bromine and its compounds from the Dead Sea,
the expiration date of which is concurrent with ICL Dead Sea’ concession. We pay royalties to the Israeli government on products
manufactured by the Dead Sea Bromine Company. In addition, there is an arrangement relating to payment of royalties by Dead Sea
Magnesium for production of magnesium metals by virtue of a specific arrangement with the State of Israel provided in the Israeli
government’s decision dated September 5, 1993. Pursuant to the arrangement, royalties are paid by Dead Sea Magnesium on the
basis of carnallite used for production of magnesium. The arrangement with Dead Sea Magnesium provides that during 2006 the State
may demand a reconsideration in connection with the amount of the royalties and the method or their calculation for 2007 and thereafter.
The State’s demand for reconsideration, as stated, was first received at the end of 2010, and the matter is presently in
an arbitration proceeding, as described below. In 2006, a letter was received from the then Accountant General of the Israeli Ministry
of Finance, claiming an underpayment of royalties amounting to hundreds of millions of shekels. Pursuant to the concession, disputes
between the parties relating to the concession, including royalties are to be decided by an arbitration panel of three arbitrators
(each side appoints an arbitrator and these two appoint the third arbitrator). For additional details regarding the arbitration
proceeding and the provision recorded by the Company in 2014 and 2015 stemming from the partial arbitration decision – see
“Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal Proceedings.”



In 2013, 2014 and 2015, ICL Dead Sea paid
royalties to the Israeli government in the amount of approximately $110 million, $84 million, and $97 million, respectively. In
addition, during 2015, the Company paid the provision, in the amount of approximately $152 million, in respect of royalties relating
to prior periods.



Rotem Concession. ICL Rotem
has been mining phosphates in the Negev in Israel for over fifty years. The mining is conducted in accordance with phosphate mining
concessions, which are granted from time to time by the Minister for National Infrastructures under the Israeli Mines Ordinance
by the Supervisor of Mines in the Ministry, accompanied by mining authorizations issued by the ILA. The Oron concession was first
granted in 1952. The Zin concession was first granted in 1970 as part of the Oron concession and the joint concession was subsequently
renamed Zafir. The Zafir concession (consisting of both the Oron and Zin concessions) was renewed every 3 years and in 1995, it
was renewed for 10 years and in 2002, it was renewed until 2021. The Rotem concession was first granted in 1970 and it was also
renewed in 1995 for 10 years and in 2002, it was renewed until 2021. There is no express tender process under the Mines Ordinance
for every reserve certificate, and up to now no phosphate mining rights have been provided for a competitive process, however a
legislative change from the end of 2015 regarding royalties mentions the possibility of providing a mining right for a competitive
process. Given the high cost of constructing downstream processing facilities (which any other bidder would need to construct near
the fields), we have not faced competition for these concessions in the past. The concessions relate to the quarry (phosphate rock)
whereas the other authorizations relate to use of land as active mine sites.



Under the terms of these concessions, ICL
Rotem is required to pay the State of Israel royalties based on a formula stipulated in the Israeli Mines Ordinance. The formula
for the royalties was updated in February 2010 as part of a compromise agreement that settled all the disputes regarding past royalties
and formulas for future royalties. On January 1, 2016, a legislative
amendment entered into effect that changed  the format for calculating the royalties, increased the rates from 2% to 5%
of the value of the mineral, and left the Supervisor of Mines the possibility of collecting royalties in a higher amount, if he
decided to grant a mining right in a competitive process wherein one of the selection indices is the amount of the royalties.



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ICL Rotem has the following three mining
concessions, which cover a total area of approximately 55,327 acres:



1.	Rotem Field — valid up to the
end of 2021;



2.	Zafir Field — (Oron-Zin) —
valid up to the end of 2021;



3.	Hatrurim Field — as noted,
the Supervisor of mines has decided to extend the area of the Rotem field concession so that it covers the Hatrurim Field. The
matter has been transferred to the ILA to deal with the extension of the area of the mining permit for the Rotem Field, in line
with the extension of the concession area.



In September 2012, a committee was set
up by the Director General of the Israeli Ministry of Energy and Water, to examine the phosphates sector in order to look into
the use of the phosphate resource in Israel.



The committee published its recommendations
and, among other things, recommended to examine the possibility of imposing certain restrictions on the manner of the mining and
utilization of the phosphates, and also recommended to approve mining in additional fields, such as, the Barir field.



As at the date of this Annual Report, no
operative decisions had been made based on the committee’s recommendations.



The mining and quarrying activities require
zoning approval for the area based on a plan in accordance with the Planning and Building Law, 1965. These plans are updated, as
necessary, from time to time. As at the date of Annual Report, various requests are in different stages of deliberation before
the planning authorities.



At the end of 2009, according to the recommendation
of a team accompanying preparation of a new site plan for the Zin-Oron area in Israel, the Local District Board approved extension
of the execution stages of the site plan from 1991, which zones the Zafir site (Zin-Oron) for mining up to the end of 2013. In
September 2013, the Local District Board approved extension of additional stages up to the end of 2015.



In August 2015, the District Committee
decided to deposit a new mining plan for the Zin-Oron area, and also decided to further extend the stages for the plan in effect
up to the end of 2016, in order to provide a plan framework for the work being performed on the area for a period of time intended
for completion of the required processes for deposit of the new plan and its actual approval.



In terms of particular conditions that
our ICL Rotem subsidiary must meet in order to retain the concessions, we must comply with various reporting requirements in addition
to the payment of royalties.



The company is working to promote the
plan for mining phosphates in Barir field (which is part of Zohar South) in the Negev Desert.





In December 2015, the National
Planning and Building Council approved the Policy Document Regarding Mining and Quarrying of Industrial Minerals (the "Policy
Document"), which includes, among other things, a recommendation to permit phosphate mining, including at Barir field. The
Policy Document that was approved will set the basis for preparation of a national outline plan (“the National Outline Plan”)
for mining and quarrying to also be approved by the National Planning and Building Council. Along with the approval of the Policy
Document, the National Planning and Building Council ordered the Planning Administration to raise the matter of the order to prepare
a detailed plan for Barir field (“the Barir Plan”) at one of its upcoming meetings.



The National Planning and
Building Council instructed the Planning Administration to bring up for discussion, at one of its upcoming meetings, the detailed
National Site Plan for the Barir field mining site.





In addition, in February
2016 the municipality of Arad, together with several other plaintiffs, including, among others, residents of the town Arad, the
communities and Bedouin villages surrounding the area, filed a motion with the Israeli High Court of Justice against the approval
of the Policy Document to authorize phosphate mining in the South Zohar area due to their fear from environmental and health dangers.
The Company believes that the mining activities in Barir field do not involve any risks to the environment or to people. There
is no certainty that the National Outline Plan and the Barir Plan will be approved at all or as will be submitted, in light of
the opposing position of the Health Ministry, among others. Moreover, there is no certainty regarding the timelines for the submission
of the Plans, the approval thereof or of further developments with respect to Barir field.







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If mining approval is not received for
the Barir field, this will significantly impact the Group’s future mining reserves in the medium and long term.





In 2015, 2014 and 2013,
Rotem paid royalties to Israeli government in the amounts of approximately $3.5 million, $3 million and $4 million, respectively.





The Law for Taxation of Profits from
Natural Resources (Israel)





On November 30, 2015,
the Knesset passed the Law for Taxation of Profits from Natural Resources (hereinafter – "the Law"), which entered
into effect on January 1, 2016, except with respect to ICL Dead Sea where the effective date is January 1, 2017. For
the highlights of the Law, see “Item 10. Additional Information—E. Taxation.”









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The net impact of the legislation on the
Company’s annual profits in future years will depend to a significant extent on the prices of potash that will prevail at
the time and their impact on the profitability.



In August 2015, the Minister of Finance
appointed a team for “the establishment of the governmental activities to be conducted towards the end of the concession
period”. In September 2015, the team published a request for comments of the public regarding positions and viewpoints in
connection with the end of the concession, which are to be submitted by the end of March 2016.



The team is expected to submit its recommendations
to the Minister of Finance by May 2016. There is no certainty as to what the recommendations of this committee will be with regard
to the procedures that the government will undertake in connection with the existing concession and as to the manner in which future
mining rights will be granted.



According to the Concession Law, ICL has
a right of first offer in the event that following the expiration of the current concession, the government would offer new concession
rights to a third party.



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The Minister of Finance also appointed
a second team designated to establish certainty regarding the manner in which, according to the current Concession, the replacement
value of ICL Dead Sea’s tangible assets will be calculated at the end of the concession period in the event such assets are
to be returned to the government. The actual calculation will be executed only in 2030. This team was expected to submit its recommendations
to the Minister of Finance by March 2015.



There is no certainty as to what the recommendations
of this team will be with regards to the above mentioned and as to whenever they are expected to be submitted.



In August 2014, after publication of the
interim conclusions of the Committee, the Company’s Board of Directors examined the economic viability of continuation and
expansion of the production of certain products, including potash, metal magnesium, bromine compounds and downstream phosphate
products. In light of the Committee’s final recommendations, and their approval by the Social-Economic Cabinet in November
2014, the Company’s Board of Directors adopted the following decisions, further to decisions it had adopted in August 2014
– briefly:



Cancellation and reconsideration of
investments – to cancel the Company’s investments in Israel, mainly for the increase of the production capacity
of potash, which had been approved as part the long term plan, in the amount of approximately $750 million, and to reexamine the
economic expediency of additional investments in the amount of approximately $1 billion;



Bromine Compounds – to formulate
and implement an efficiency plan designed to significantly improve the profitability of Bromine Compounds Company, which belongs
to the Industrial Products segment. This plan is required due to the continuing erosion of profits on bromine compounds as a result
of the decline in demand for flame retardants, slow structural growth in the world market, a drop in prices, and strengthening
of the shekel, compounded by the significant recent developments related to the partial arbitration decision with respect to royalties
on sales of downstream products, including bromine compounds, and the possibility that the Committee’s final recommendations
will be adopted and enacted into legislation (which eventually occurred). Company management formulated a plan, as stated, and
has already commenced its implementation. The plan includes reduction of labor and other costs in the Bromine Compounds Company.
There is no certainty that the plan will achieve its goals, due to various factors, including the situation of the market, competition,
regulation, labor relations and/or any of the risk factors characterizing the Company’s activities, as noted in the “Risk
Factors” section of this report. For additional details – see “Item 6. Directors, Senior Management and Employees—D.
Employees.”



The Magnesium Plant – to make
preparations for closure of our magnesium plant at the Dead Sea, commencing January 1, 2017, to the extent the discussions with
the State of Israel regarding the tax and royalties issues will not support the continuation of the activities of the magnesium
plant. The main economic justification for continuation of the activities of the magnesium plant at the Dead Sea stems from the
plant’s synergies with our other facilities in Sodom, which provide it with, and receive from it, raw materials (the “Synergies”).
The net value of the Synergies has declined due to the increase in the tax burden on production from natural resources in Israel
that have already been implemented. As a result of the increased tax burden, as noted above, the Company stopped all investments
in the magnesium plant (that are not investments required by law). On November 11, 2015, the Company’s Board of Directors
decided to postpone for one year the decision with respect to the continued operation of the magnesium plant until final clarification
of the tax effects, royalties, and cost of participation in the management services of the electricity system that are expected
to be imposed on the plant. The sales of magnesium in 2015 amounted to approximately $121 million, the magnesium company incurred
an operating loss in this year of approximately $8 million, the net property, plant and equipment of the magnesium company as at
December 31, 2015 was approximately $40 million and the depreciation expenses in 2015 amounted to approximately $7 million.



Spain





The Spanish government
owns all of the underground mining rights and has granted us concessions to conduct mining operations under our land pursuant to
mining legislation enacted in 1973 and related regulations. The mining permits (or concessions) in Spain are administrated by the
regional governments (in Catalonia, the Generalitat), except those special reserved areas that are still administered by the Spanish
central government. There are several such areas in Spain, including Reserva Catalana. ICL Iberia (IBP) owns 126 mining concessions.
Two separate and independent processes of paying fees and renewals are thus involved.







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Originally, the concessions were divided
among several mining companies in the area. However, as companies were acquired or relinquished their concessions, ICL Iberia (IBP)
obtained these concessions. As a result, ICL Iberia (IBP) now holds mining concessions for each of 126 different relevant sites
for our current and potential future mining activities. As part of the renewal process, we must prepare and present a basic technical
report describing the intended use of the mines. The concessions cover a total area of 42,489 hectares in the province of Barcelona
and 26,809 hectares in the province of Lerida. The mining royalties in 2015 amounted to approximately €170 thousand.



Regarding “Reserva Catalana”,
an additional site wherein mining has not yet been commenced, it was clarified that in 2007 a process was commenced for extension
of the concession period, which ended in 2012, for an additional 30 years. In light of the changeover of the governments in Spain,
the administrative processes of the National Mining Authority with respect to extending the concession period have not yet been
completed. As at the date of this Annual Report, ICL Iberia is in the process of renewing the rights. According to the Spanish
authorities, the concession period is valid until a final decision is made regarding renewal of the concession period.





ICL Iberia (IBP) has applied
well in advance for concessions for the mining areas. As at the date of this Annual Report, ICL Iberia (IBP) has not had any serious
difficulties in renewing those leases in the past. The earliest renewal required for any of the 126 existing relevant concessions
will be in 2037, and most of the concessions are effective up to 2067. The length of the planned life of the Cabanasas mine, given
the first stage and the second stage of the expansion plan, is 23 years. As is required by law, the concessions must be renewed
prior to the expiration date. If a concession were to expire for some reason, a bidding process would start.







United Kingdom





United Kingdom Mining
Concession. ICL UK’s (CPL) mining concession in the United Kingdom is based on approximately 114 mining
leases and licenses for extracting various minerals, in addition to numerous easements and rights of way from private owners of
land under which ICL UK operates or, in the case of mining underneath the North Sea, granted by the United Kingdom (Crown
Estates). These mining rights total approximately 92,340 acres. Most of the terms of all of these leases, licenses, easements
and rights of way are valid up to 2038, with a small part being valid up to 2020. In 2015, mining royalties amounted to about
£3 million ($5 million).



All of ICL UK's older
lease agreements (about 74 agreements) were signed for a period of 50 years in the 1970s of the 20th century, so
most of these run until the early to mid-2020s, except for the leases with the Crown Commissioners (Crown Estates) for the offshore
rights in the North Sea, which were recently renewed and expire in 2035. The lease with the Crown Commissioners includes provisions
to explore and exploit the polysulphate mineral. Our recently acquired leases (about 40 agreements) were obtained in the late 1990s
and early 2000s, and they all have a 35-year lease period with a 35-year option to extend the lease. For purposes of signing the
lease agreements, ICL UK used local solicitors and contacted the individual landowners. Renewal of the onshore lease currently
covering about 18% of reserves area at our mine in the United Kingdom was extended to the end of 2020 (one large lease is involved).
Historically, the renewal of leases has not been problematic and we believe that we have or will receive all government approvals
and permits necessary for our reserves in the United Kingdom. In the Company’s estimation, there is no competition for mineral
leases because ICL UK has already secured the planning permission (“Planning Permission”) for potash and rock-salt
extraction in the area and has all the necessary government approvals and permits for mineral extraction. Planning permission,
which is granted by local authorities in the United Kingdom, is the permission required in order to be allowed to build on land
or change the use of land or buildings. In the past, when leases expired, there has been no interest from other companies and there
is no competitive bidding. ICL UK has a preferential right to renew the leases as it has the Planning Permission to extract
potash-bearing minerals. The entities involved in renewing or obtaining new leases are ICL UK, local solicitors and individual
landowners who own the mineral rights, as described above. The particular conditions that must be met in order to retain the leases
are payment of annual fees and a royalty payment for minerals extracted from the property to the landowner.





Several small areas remain with no mining
lease as these are areas where either the mineral owners have refused to grant a lease or mineral ownership is in many small patches
having a number of different owners. However, none of these has a significant impact on exploration
or development and at the date of the report, there are no plans to pursue them in the future.



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ICL UK currently has long-term mineral
lease agreements covering more than 70% of the area. Based on past experience, we are confident that we will be able to obtain
the remainder of the resource and reserve leases, if necessary. In addition, historically no competition is anticipated in obtaining
mineral lease agreements for potash mineral leases and our few failures to obtain leases in the past have been limited to very
small leases that can easily be circumvented during mining. The small area of leases that ICL UK does not have involve situations
where the individual landowners have refused to sign mineral leases and no other party has been granted a lease.



United Kingdom Concession.
A subsidiary in the United Kingdom, in our Fertilizers segment, mines peat, which constitutes a raw material for production of
professional grade growing media. Our mines in the United Kingdom (Nutberry and Douglas Water) are owned
by the Company, whereas Creca is held under a long-term lease. The mining permits were granted through the year 2024. The mining
permits are granted by the local authorities and are renewed after a review by the local authorities. The last time the mining
permit at Creca was renewed was in 2010 (for a period of 14 years up to the end of 2024) while the mining permits in Nutberry and
Douglas Water were recently renewed in 2014 (for a period of 10 years up to the end of 2024).



China



YPH JV holds two phosphate mining licenses
that were issued in July 2015 by the Division of Land and Resources of the Yunnan district in China, with reference to the Haikou
Mine, which is valid up to January 2043 and the Baitacun Mine, which is valid up to November 2018 (the “Haikou License”
and the “Baitacun License”, respectively).



Acquisition of the Mining Rights



The mining right of Haikou Mine was previously
owned by YPC. According to the Mining Concession Grant Contract of Haikou Mine entered into by and between YPC and the Land and
Resources Department of Yunnan Province (together with its local equivalents, “Resources Department”) in November 2012,
the total price to be paid to the Resources Department in consideration for the mining concession of Haikou mine was RMB 163,378,400
which has been paid in full (not including mineral resources compensation fees and other charges required by applicable PRC laws).



The mining right of Baitacun Mine was previously
owned by YPC as well. However, YPC did not enter into a concession agreement with respect to the mining concession of Baitacun
Mine since the Baitacun mining right was obtained by YPC before the relevant PRC laws requiring the Resources Department to sign
such agreements were published.



As part of the formation of YPH JV, in
October 2015, the mining rights related to Haikou Mine and Baitacun Mine were transferred to YPH JV.



Renewal of Mining License



To retain the Haikou Mine and Baitacun
Mine licenses, YPH JV has to comply with the provisions of the relevant Chinese laws and regulations regarding mining activities.
In particular, YPH JV has to conduct annual check with regard to its mining licenses. The items to be examined in the annual check
mainly include: whether the taxes, fees, premiums relating to the mining license and mining activities conducted by a company have
been paid in full; whether the annual reserve report (as applicable) have been submitted; whether various mining parameters have
met the standards required by law; whether land reclamation has been conducted, whether there are any penalties imposed on the
company or violation of laws by the company, etc.



To renew the Haikou Mine and Baitacun Mine,
YPH JV has to submit the renewal application to the Resources Department 30 days prior to the expiry of the applicable mining license.
The Resources Department will consider the following factors when reviewing a renewal application: (i) whether YPH JV needs to
continue to develop in the area; (ii) whether there is a dispute over the relevant mining right; (iii) whether proper fees and
taxes have been paid in full, and whether YPH JV has conducted mining in violation of the law; (iv) whether the original mining
right is legally defective; and (v) other conditions as the authorities require.



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To renew a mining license, among other
application documents, it is important to provide two written documents for the Resources Department to approve the renewal application:
(i) annual check report for the mining license; (ii) mineral resources reserves verification report or other reports of similar
nature to indicate that there are still reserves in the mine.



Additional Payments



In respect of the mining rights, YPH JV
is required to pay the authorities a “Mineral Resources Compensation Fee” at the rate of 2% of YPH JV’s sales
revenue of rock phosphate mined from Haikou Mine and the Baitacun Mine. In addition, YPH JV is required to pay a “Resource
Tax”, which at the present time stands as 15 yuan per tonne of YPH JV’s sale volume of rock phosphate mined from the
Haikou Mine and the Baitacun Mine.



Grant of Mining Rights to Lindu





According to a statement
issued by YPC on February 29 ,2016, YPC entered in 2010 into agreements with the local authority of Jinning County, Yunnan Province
and Jinning Lindu Mining Development and Construction Co., Ltd. (“Lindu”), according to which, Lindu can mine up to
two million tons of phosphate rock from a certain area of 621 mǔ
(equivalent to 0.414 square kilometer), within the area of the Haikou Mine (the “Daqing Area”) and sell such phosphate
rock to any third party at its own discretion. However, as of the date of such statement, YPC believes that Lindu has not conducted
any mining or sale according to such agreements. Prior to the formation of YPH JV, YPC proposed to the relevant local authority
of Jinning County and Lindu Company to swap the rights granted to Lindu in the Daqing Area with another area which is not a part
of the Haikou Mine and have Lindu Company mine in that area, so as to ensure that the interest of YPH JV would not be affected
by the mining and sale conducted by Lindu Company. However, due to personnel changes in the relevant local authority of Jinning
County and Lindu Company, the negotiation is still on-going. YPC undertakes to continue to promote the negotiation, so as to ensure
that YPH JV’s mining right in the Haikou Mine will not be adversely affected by the above-mentioned arrangements regarding
Lindu’s mining rights within the Daqing Area.



Ethiopia



The Company holds a potash
mining license for the Danakhil mine in the Afar region in Northeast Ethiopia, held by Allana Afar through the acquisition of Allana,
which was granted on October 8, 2013 by the Ministry of Mines in Ethiopia. The mining license is valid for a period of 20 years
and may be renewed for an additional period of 10 years each.



Pursuant to the mining agreement, Allana Afar was required to complete the development stage and start the production stage
no later than October 8, 2015 (within two years from the effective date of the mining license). As at the date of this Annual
Report, the development stage had not yet been completed and, therefore, the Government of Ethiopia may revoke the mining
license. The Company is holding discussions with the Government of Ethiopia related to the application submitted by the Company
for the transfer of the mining license to a newly established company and extending the development period in light of the
Company's takeover of Allana, which can result to additional payments. In the Company's estimation, an arrangement will be
reached with the Ethiopian authorities for extension of the development period.



Allana commenced exploration activities
in the Danakhil Depression in 2008, having acquired exploration licenses for Potash and Related Salt Minerals from the Ministry
of Mines. Based on historical data, available at the archives of the Ministry of Mines in Addis Ababa, a Preliminary Resource
Assessment Study (PRAS) was completed. The Company is currently researching the project’s feasibility and technical and
operating requirements, and initial work has begun on preparing the site for further construction. Although our development program
is still in the exploratory stage, we estimate that production will commence in 2020, and we may focus on SOP with a small amount
of MOP. However, there are currently no mining operations at the Danakhil site, and the exploration process and finalization of
the development program are still ongoing. The proposed development at the Danakhil site is still in its early stages, and is
planned to consist of a potash mining operation and related processing and support facilities. The property is without known proven
(measured) or probably (indicated) reserves. See “Item 4. Information on the Company—B. Business Overview Segment
Information—Production.”, ”Item 4 Information on the Company—B. Business Overview—Mineral Extraction
and Mining Operations” above and “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business.”



Reserves



We believe we have a broad and high-quality
mineral reserves base due to our strategically located mines and facilities. “Reserves” are defined by SEC Industry
Guide 7 as that part of a mineral deposit that could be economically and legally extracted or produced
at the time of the reserves determination. Industry Guide 7 divides reserves between “proven (measured) reserves” and
“probable (indicated) reserves,” which are defined as follows:



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| | · | Proven (measured) reserves. Reserves for which (1) quantity is computed from information received from explorations, channels,
wells and drillings; grade and/or quality are computed from the results of detailed sampling and (2) the sites for inspection,
sampling and measurement are spaced so closely to each other so that the geologic character is well defined that size, shape, depth
and mineral content of reserves can be reliably determined.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Probable (indicated) reserves. Reserves for which quantity and grade and/or quality are computed from information similar to
that used for proven (measured) reserves, but the sites for survey, sampling, and measurement are farther apart or are otherwise
less efficiently spaced. The degree of assurance, although lower than that for proven (measured) reserves, is high enough to assume
continuity between points of observation.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We categorize our reserves in accordance
with these SEC “Guide 7” definitions, as stated above. The quantity, nature of the mineral reserves and estimate of
the reserves at each of our properties are estimated by our internal geologists and mining engineers.



Israel



The following table sets forth information
regarding our estimates of our phosphate reserves in Israel (all of which are wholly owned by us) as of December 31, 2015:



|                |  | Category |        | White Phosphate           |  | Low Organic Phosphate |    | High Organic Phosphate |  | Bituminous Phosphate |    | Recoverable Reserves |  | Average Grade
|--------------- |  | -------- | ------ | ------------------------- |  | --------------------- | -- | ---------------------- |  | -------------------- | -- | -------------------- |  | -------------
|                |  |          |        | (millions of metric tons) |  | (% P2O5)             
|Rotem           |  |          | Proven |                           |  |                       | —  |                        |  |                      | 14 |                      |  |              
|Zin             |  |          | Proven |                           |  |                       | —  |                        |  |                      | 17 |                      |  |              
|Oron            |  |          | Proven |                           |  |                       | 19 |                        |  |                      | 6  |                      |  |              
|Total (Proven	) |  |          |        |                           |  |                       | 19 |                        |  |                      | 37 |                      |  |              



In determining these reserves, a cut-off
grade of 20% to 25% P2O5 was applied, depending on the processing characteristics of the phosphate rock and
the existing process. The cut-off grade differs for each mine in accordance with the beneficiation process: a cut-off grade of
20% P2O5 was applied at Oron, a cut-off grade of 23% P2O5 was applied at Zin, and a
cut-off grade of 25% P2O5 was applied at Rotem. The cut-off grade for Oron is lower because ICL Rotem has
the appropriate beneficiation process for chalk phosphate, which characterizes the white phosphate and therefore, the flotation
process is extremely efficient. The cut-off grade for the Rotem mine is higher because the beneficiation process there has a limited
grinding and flotation system, and only medium to high grade phosphate can be fed (which is appropriate for the existing reserves
at Rotem). The cut-off grade for Zin is slightly higher than that of Oron because of the presence of marl and clay that reduces
the efficiency of the flotation system at that mine. The parameters used in determining the cut-off grade took into account the
geology (continuity, structure), mining method, mining dilution, plant utilization / metallurgical processing factors, technical
feasibility, operating costs, and historical and current product prices. The parameters employed in the calculation are as follows:
on-site tons (multiplying area by layer thickness and phosphate density); recoverable tons (tons of mineral which can be mined,
taking into account mining dilution); mineable tons (recoverable tons from which the tons produced are deducted); stripping ratio
(the quantity of waste removed per ton of phosphate rock mined); planned dilution; cost per ton for mining (typically related to
transport distance to beneficiation/process plant); cost per ton including reclamation; and unplanned dilution (5% unplanned dilution
is taken into account based on the data from the mining in and the data from the problematic areas). Our ICL Rotem
yearly mining plan is not determined by the minimum cut-off grade, and fluctuations in commodity prices rarely affect its cut-off
grade.





The cut-off grade calculations
come from historical yield data and our ICL Rotem historical experience with mining, adequately calculated and modelled by its
geologists, operation engineers and economists. The calculation takes the ore grade in-site, converts it into extracted ore with
our ICL Rotem mining method and estimates the plant yield depending on the grade. Economic modelling then gives the cut-off figures
currently used by our ICL Rotem.







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The proven reserves above
the cut-off grade were obtained from the calculated on-site resources taking into account the mining method, the rate of mining
dilution, and in-plant recovery, based on our ICL Rotem historical data. In order to convert the resources into reserves, account
is taken, separately, of the mining dilution rate, mining method and the geological conditions, including, historical yield data
and are based on the previous five years’ experience. The mining dilution rate in the Company's mines in Israel’s southern
region is 2.5% and takes into account the continuity of the layers and the geological structure. The quantity and grade of the
calculated reserves are those that are expected to be transferred to the processing plant and are subject to recovery indices in
the utilization plant. The updated utilization in the plant varies between the sites as it consists of historical yield data, and
it is currently between 46% (at Oron and Rotem) and 48% (at Zin).These differences in metallurgical recovery rates are due to differences in the beneficiation process at the different
mines. Proven reserves have been explored by borehole intersections typically at 50 to 70 meters intervals. Each of the three plants
at the mines has been developed over the past few decades for the optimum upgrading of the phosphate rock to concentrate ore containing
typically 31% to 32% P2O5.The conversion ratio for most of the phosphate layers is 1.8 tons for every 1 cubic meter, where a conversion
ratio of 2.0 tons per cubic meter is used for hard, calcareous beds. These factors are used on the basis of long experience and
are considered to be reasonable.



In calculating the cut-off grade and reserves,
an average of the previous three years’ market prices and operating costs was used as part of the calculations to ensure
economic feasibility.





The three-year average
market prices used to calculate our reserves in the Negev as of December 31, 2015 are as follows: $709 per ton for green phosphoric
acid, $1,374 per ton for WPA, $1,428 per ton for MKP, $1,083 per ton for soluble MAP, $364 per ton for GTSP, $193 per ton for GSSP,
and $104 per ton for phosphate rock.







In calculating the reserves, an average
of the previous three years’ currency conversion rates were used to ensure economic feasibility. The three-year average currency
conversation rates used to calculate our reserves in the South as of December 31, 2015 are as follows NIS 3.694 per $1.00, $1.26
per €1.00 and $1.58 per £1.00.



The life of the mine at Rotem is approximately
7 years based on reserves of 14 million metric tons of low organic/low magnesium phosphate. The low-organic, low-magnesium phosphates
are suitable for phosphoric acid production. The annual production (mining) rate for the low-organic/low-magnesium phosphate at
Rotem is 1.9 million metric tons per year.



The life of the mine at Oron is approximately
6 years based on a reserve of 19 million metric tons and an average production of 3.0 million metric tons per year of white phosphate.
After proof of the feasibility made during the past year, the Company recognized an additional 6 million raw tons of low-organic
phosphates were added to the report that may be sold or used to produce acids.



The life of the mine at Zin is approximately
11 years based on reserves of 35.5 million metric tons and a production of 3.1 million metric tons per year as follows:



| | · | Low-organic phosphate—1.7 million metric tons per year
| | - | ------------------------------------------------------



| | · | High-organic phosphate—1.1 million metric tons per year
| | - | -------------------------------------------------------



| | · | Bituminous phosphate—0.3 million metric tons per year
| | - | -----------------------------------------------------



Due to the process improvements the Company
made and that were completed in 2015, the balances of the reserves were increased by 9 million tons of high-organic phosphates
at the Zin plant. These phosphates were defined as reserves, after conducting an assessment and proving that the phosphates can
be enriched using the same processes currently in use at the Zin plant.



As described under “Item 4. Information
on the Company—D. Property, Plants and Equipment—Mineral Extraction and Mining Operations —The Negev Desert”,
we primarily use white/low organic phosphate rock in our operations, and we blend in bituminous phosphate. To utilize additional
resources after our reserves are utilized, we would be required to modify our processes and add costly technologies.





The Company believes that we have all the
government approvals and permits necessary for our reserves in Israel.



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Spain



The following table sets forth our estimated
potash reserves for our Spanish mining operations (all of which are wholly-owned by us) as of December 31, 2015 (latest date for
which information is available):



|Mine      |  | Reserve Category |                           | Millions of metric tons |  | Average Grade (% KCl)
|--------- |  | ---------------- | ------------------------- | ----------------------- |  | ---------------------
|Cabanasas |  |                  | Proven                    |                         |  |                      
|          |  |                  | Probable                  |                         |  |                      
|          |  |                  | Total Proven and Probable |                         |  |                      
|Vilafruns |  |                  | Proven                    |                         |  |                      
|          |  |                  | Probable                  |                         |  |                      
|          |  |                  | Total Proven and Probable |                         |  |                      
|Total(1)  |  |                  | Proven and Probable       |                         |  |                      

____________________

| | (1) | Amounts may not add up due to rounding.
| | --- | ---------------------------------------



In determining these reserves, a cut-off
grade of potash ore containing 19% KCl was applied at the Cabanasas mine and a cut-off grade of potash ore containing a concentration
of 18% KCl was applied at the Vilafruns mine.





The parameters used in
determining the cut-off grade took into account the geology (continuity, structure), mining method, mining dilution, plant utilization,
technical feasibility, operating costs and historical and current product prices. The parameters employed in the calculation are
as follows: on-site tons (multiplying area by layer thickness and mineral density); recovery (takes into account the values obtained
historically during the mining of the Cabanasas and Vilafruns mines); recoverable tons (tons of mineral which can be mined, in
terms of the recovery factor); mineable tons (recoverable tons from which the tons produced are discounted); planned dilution;
unplanned dilution (5% unplanned dilution is taken into account based on the mining data and data from problematic areas); and
selective mining of target layers where possible (separation of the salt within the layer in areas wherein this is possible). ICL Iberia's
(IBP) annual mining program is not defined according to minimum cut-off grades.



The cut-off grade calculations
come from historical yield data and ICL Iberia’s (IBP) historical experience with mining, adequately calculated and
modelled by its geologists, operation engineers and economists. The calculation takes the ore grade in-site, converts it into extracted
ore based on ICL Iberia’s (IBP) mining method and estimates the plant yield depending on the grade. Later on, economic
models give the cut-off figures currently in use.



The proven and probable
reserves above the cut-off grade were obtained taking into account the mining method, mining recovery, mining dilution, selective
mining, striation, geological conditions and in-plant recovery, based on ICL Iberia’s (IBP) historical data. The mining
recovery and dilution factors, which are required in the conversion of resources to reserves and take into account the particular
mining method and the geological conditions at the respective mine, consist of historical yield data and are based on 17 years
of historical data at our Cabanasas and Vilafruns mines and the mining recovery ranges from approximately 65% to 75% by ICL Iberia’s
(IBP) “room and pillar” modified layout. Reserve quantity (in tons) and grade are quoted as those that are expected
to be delivered to the treatment plant and are subject to metallurgical recovery factors. Metallurgical recovery factors consist
of historical yield data and are based on the previous five years’ experience and current recoveries are 89.0% KCl for the
Suria plant (which is adjacent to the Cabanasas mine) and 85.0% KCl for the Sallent plant (which is adjacent to the Vilafruns mine).
Information from drillings, mostly at distances of 100 to 200 meter intervals while probable reserves have been explored by boreholes
at intervals of up to 1,600 meter. The final product is well over 95% KCl to avoid quality losses.



In calculating the cut-off grade and reserves,
an average of the previous three years’ market prices and operating costs was used as part of the calculations to ensure
economic feasibility. The three-year average market price used to calculate our reserves for potash per ton of product in Spain
as of December 31, 2015 is €249.4 per ton.



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In calculating the reserves, an average
of the previous three years’ currency conversion rates were used as part of the calculations to ensure economic feasibility.
The three-year average currency conversation rate used to calculate our reserves as at December 31, 2015 is €0.796 per dollar.





The Suria plant utilizes
ore mined from Cabanasas and has a current capacity to produce approximately 530,000 tons per annum of potash. The Sallent
plant utilizes ore mined from Vilafruns and has a current capacity to produce approximately 500,000 tons per annum of product;
this plant is planned to be gradually shutdown as Suria is upgraded.





The Company believes that it has all government
approvals and permits necessary for our reserves in Spain.



United Kingdom



The following table sets forth our estimated
potash reserves for our United Kingdom mining operations (all of which are wholly-owned by us) as of December 31, 2015:



|Reserve Category          |  | Millions of metric tons |   | Average Grade (% KCl)
|------------------------- |  | ----------------------- | - | ---------------------
|Proven                    |  |                         | 5 |                      
|Probable                  |  |                         | 1 |                      
|Total Proven and Probable |  |                         | 6 |                      



In determining these reserves, a cut-off
grade of ore containing 30% KCl was applied in both the south (onshore) and the north (offshore), for a seam having a height of
3.8 meters (though thinner sections of potash can be taken, with the inclusion of salt dilution in the floor of the seam) and the
maximum distance from the shafts is 15 kilometers.



In calculating the cut-off grade and reserves,
an average of the previous three years’ market prices and operating costs was used as part of the calculations to ensure
economic feasibility. The three-year average market price used to calculate our reserves for potash per ton of product as of December
31, 2015 is £201 per ton.



The cut-off grade calculations were made
on the basis of historical yield data and ICL UK’s (CPL) historical experience with mining, adequately calculated and modeled
by its geologists, operation engineers and economists. The calculation takes the ore grade in-site, converts it into extracted
ore with ICL UK’s mining method and estimates the plant yield depending on the grade. Economic modeling further gives the
cut-off figures currently used by ICL UK.



Operating costs and historical and current
product prices are taken into account, but the cut-off grade determination is largely influenced by optimization of the beneficiation
process, in particular the flotation process, as our calculation is largely based on introducing the right grade of ore into the
treatment plant.



ICL UK’s yearly mining plan is not
determined by the cut-off grade. Over the last three years, the cut-off grade has remained at 30% and has not changed as a result
of market price or operating cost fluctuations or as a result of currency conversion factor changes.



The parameters used in determining the
cut-off grade took into account the geology (continuity, structure), mining method, mining dilution, and plant utilization. The
parameters employed in the calculation are as follows: in-site tons (area multiplied by layer thickness and mineral density); mining
recovery (based on values obtained historically during mining potash ore); mineable tons (recoverable tons of mineral less produced
tons); and mining dilution (based on values obtained historically during mining potash).



The proven reserves above the cut-off grade
were obtained taking into account losses for mining recovery, mining dilution, mining method and geological conditions based on
ICL UK’s historical data. The mining recovery and dilution factors, which are required in the conversion of resources to
reserves and take into account the particular mining method and the geological conditions, consist of historical yield data and
are based on the previous five years’ experience and generally, the mining dilution factor reduces KCI by 10% to 17% and
causes a small increase in the percentage of insoluble material. The reserve quantity and grade are quoted as those that are expected
to be delivered to the treatment plant and are subject to metallurgical recovery factors. Metallurgical recovery factors consist of historical yield data and
are based on the previous five years’ experience and current recovery is 81%. Proven reserves have been explored by borehole
intersections typically at 150 meters intervals or less while probable reserves have been explored by boreholes at 150 to 500 meters
intervals.



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During the third quarter
of 2015, the Company made a re-examination of its estimates with respect to the economic viability of the potash reserves in the
mine in the United Kingdom, which resulted in a reduction in the ore reserve estimates from 16.9 million tons of ore as at December 31,
2014 to 6 million tons as at December 31, 2015.



This change is the result of depletion
due to continuing mining activities, changes in geological interpretation and no new conversion of resources to reserves from ongoing
exploration activities. In light of the updated reserve estimates and assuming annual potash production of about 600 thousand tons
and no conversion of resources into reserves, the potash production activities in the United Kingdom are expected to end in 2018.



In the Company’s mine in the United
Kingdom, there are vast resources for the purpose of increased production of polysulphate (a mineral used in its natural form as
a fertilizer for agriculture, a fertilizer for organic agriculture and a raw material for production of specialty fertilizers),
the sale of which in commercial quantities began in 2012. The Company plans to improve the production capabilities and sales to
the level of one million tons by 2020.



In calculating the reserves, no currency
conversion factors were used as ICL UK works only with the British pound.



The potash mined at Boulby has, over the
past 15 years, declined in potash grade from about 40% to just over 30% KCl. The NaCl content has risen from 47% to approximately
55%, while the content of insoluble impurities has also risen from approximately 12% to about 15% over this time. The plant capacity
at Boulby is approximately 3 million tons of ore per annum. The final product is potash at an average grade of 95.5% KCl. Annual
potash production capacity of the production facilities is approximately 800 thousand tons.



The Company believes that it will obtain
renewal of all the government leases and licenses necessary for our reserves in the United Kingdom.



China



Historically, the Haikou Mine and the Baitacun
Mine reported their reserves pursuant to the Chinese Ordinance for Estimation of Mineral Resources. In principle, the classification
and coding system of China corresponds, to a large extent, to the method used by United Nations Framework Classification or UNFC
(2009) – a three dimensional method that takes into account the geological knowledge regarding the reserve, the socio-economic
feasibility and the worthwhileness of the project, and that provides increasing confidence levels until reaching a definition of
a commercial project. However, the measurement in China does not fully correspond with the measurement methodology in SEC Industry
Guide 7. Specifically, the reported resources of the Haikou Mine and the Baitacun Mine were derived mainly from historical data
that was produced in the past at the time when a trench sampling was made and drilling plans were executed in the 1960s and 1970s,
when the phosphate reserves were described and defined. ICL completed acquisition of these properties in October 2015. ICL has
hired the services of an independent, international company, which is engaged in mining matters, to perform a more in-depth analysis
of the mineral resources in the Haikou Mine and the Baitacun Mine, for purposes of obtaining a full calculation of the existing
database and building a three dimensional geological model and mining plan that will permit verification and confirmation of the
reserves in accordance with SEC Industry Guide 7. As at the date of this Annual Report, the above-mentioned process had not been
completed and, accordingly, as at December 31, 2015, the Haikou Mine and the Baitacun Mine do not have proven or probable reserves
in accordance with SEC Industry Guide 7.



Ethiopia



In June 2015 the Company completed the
acquisition of Allana Corporation, which holds Allana Potash Afar Plc, which holds a concession granted in October 2013 for the
Danakhil mine in Ethiopia’s Afar National Regional State. The Company is currently in the stage of researching the project’s
feasibility and technical and operating requirements. There are currently no mining operations at the Danakhil site, and the exploration
process and completion of the development program are still ongoing. The proposed development at the Danakhil site is exploratory
in nature and the property is without known proven (measured) or probably (indicated) reserves.



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Logistics



Israel



Most of the output of our Dead Sea facilities
is transported by a conveyor belt that extends for 18.1 kilometers to the railhead located at Tzefa in Mishor Rotem. The Company
transports the output from Mishor Rotem to the port of Ashdod, mainly by train. We built, own and operate the conveyor belt. We
also transport some of the output from our Dead Sea facilities by truck, mainly to the port of Eilat.



Most of our products, whether in solid
or liquid state, are transported in bulk from Rotem, Oron and Zin by road or rail to either the port of Ashdod or Eilat. From Eilat,
our products are transported by ship to markets in the Far East, and from Ashdod, they are transported by ship to Europe and South
America.



Within the Rotem site, there is a rail
loading facility that typically loads up to 30 wagons for each delivery. Approximately two million tons of products per year are
transported by rail from the Rotem site to Ashdod. About a half a million tons of products are transported by road from Rotem to
the port of Eilat, since there are no rail links between the Rotem site and Eilat.



Our wholly owned subsidiary ICL Tovala
is responsible for transporting phosphate rock from the Oron and Zin processing facilities in road-going rigid trucks and trailers.
Each trailer has a payload of 40 tons. Approximately 200 thousand tons of rock leave Zin by truck for delivery to the port of Eilat.
In addition, 300 thousand tons are transported from Zin to Rotem for further processing. About 1 million tons are transported from
the Oron mine by truck for additional processing.



From Ashdod port, approximately 650 thousand
tons of sulfur are transported to Rotem each year. In addition, sulfur arrives at the port of Ashdod from overseas, where it is
loaded into road-going trucks and transported to our sulfur dispatch 5 kilometers away. At the depot, it is loaded into rail cars
and then transported to Rotem.



The port of Ashdod is located on the Mediterranean
coast, approximately 40 kilometers south of Tel Aviv and approximately 120 kilometers northwest of the Rotem site and the Tzefa
site.



The port of Eilat is located in the far
south of Israel on the Red Sea coast. It is approximately 180 kilometers due south of Rotem and about 200 kilometers from Sodom
and is accessible by road. Shipments exiting the Eilat port are to the Far East, whereas the sales to Europe and the U.S. exit
from the Ashdod and Haifa ports. Sales of fertilizers and potash from Rotem and the Dead Sea are not shipped from the Haifa port
since there is no infrastructure there for loading bulk products and the cost of overland transport is more expensive compared
with Ashdod.



Spain





ICL Iberia
(IBP) transports the minerals it mines from the Company’s mines to the production plants as well as potash and salt from
the factories and the mines to the port.



Ore is taken by 25-ton
road haulage trucks and conveyor belt from the Cabanasas and Vilafruns mines to the Suria and Sallent plants, respectively. The
salt product is transported by articulated truck to an ICL Iberia-owned (IBP) terminus in the port of Barcelona. A truck fleet
comprises 25-27 ton capacity articulated road trucks is used to transport the salt from the mine. Up to 40 trucks of salt per day
are dispatched from the mine road to the port. The mine also uses the port of Tarragona to export specific products. A dedicated
railway line is used for the transport of potash from the mines to the Barcelona port.



ICL Iberia (IBP) owns
and maintains 1.5 kilometers and 3 kilometers of standard gauge railway at Suria and Sallent plants, respectively, that link to
the national rail network. Each train set comprises of 850 ton payload comprising approximately 20 freight cars with two trains
per working day. The rail route for potash transport from Cabanasas to the terminal in the port of Barcelona comprises an 82 kilometer
rail route from Suria to Manresa to the port of Barcelona and 88 kilometers from Vilafruns to the same destination. ICL Iberia
(IBP) owns and operates its own port facilities, which comprise bulk salt and potash storage facilities comprised of freight car
and rail truck conveyor unloading facilities and product storage warehouses.







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The Cabanasas/Suria and
Vilafruns/Sallent complexes have one rail load out system each for the rail to port transport systems. The train traction engine
and part of the bulk freight car rolling stock is operated by the owner and operator FFCC (Ferrocarrilsde la Generalitat
de Cataluña).



The port of Barcelona installations
are managed by ICL Iberia subsidiary TRAMER and comprises an area of 13 thousands square meters divided into three zones. As part
of the plan for increasing ICL Iberia's (IBP) production capacity, an upgrade is being made of the logistical infrastructure
at the mine (entrance ramps into the mine), the factories and the Company's berth in the Barcelona port, in such a manner that
will permit production, transport and export of about 2.3 million tons of potash per year.



United Kingdom



The Boulby mine in the United Kingdom is
connected by a network of roads running over 11 kilometers from the mine entrance as well as a network of underground roads extending
15.5 kilometers from the mine entrance in the direction of the North Sea. The total length of this network of roads is more than
1,000 kilometers. The mine has easy access to the national road and train transportation routes. The mine receives good quality
drinking water and a stable supply of electricity.



Pursuant to agreements with the North Yorkshire
National Parks Authority, the total transport movements by means of the network of roads from site to site are limited to a maximum
of 150 thousand tons per year and a maximum of 66 road wagons per day (no road movements are allowed on Sundays or bank holidays).
This limitation is not expected to interfere with the future production of ICL UK in light of its commitment to maintain the rail
link to Teesdock. ICL UK’s roads and trains are in full compliance with all the requirements.



The mine has three separate integrated
conveyor load-out systems, one for each product.



The rail load-out products are transported
on an ICL UK-owned rail line which extends approximately eight kilometers from the mine entrance to a junction with the national
rail network, from where the products continue to Teesport, Middlesbrough, via the Network Rail Company, the owner and operator
of the main rail line.



ICL UK leases and operates three principal
storage and loading facilities: the Teesdock facility, which is located on the Tees River, and two additional storage facilities
that are connected to the iron rail – Cobra and Ayrton Works in Middlesbrough.



Eight trains per day transport rock-salt,
potash and polysulphate to the Teesdock. Most of the output is used as a component of agricultural fertilizers: a large quantity
of the output (about 50%) is exported by sea from the Teesdock seaport to European Union countries and other customers overseas.



Rock-salt is taken by train to Teesdock,
and transported by ship to English and Scottish east coast ports for sale to local authorities for de-icing roads.



In addition, the Company has storage and
logistics facilities in Ludwigshafen, the Netherlands, Amsterdam and Rouen in France.



China



The YPH JV includes the Haikou Mine, 3C
which is a factory for production of various types of fertilizers located close to the Haikou Mine, two plants for production of
performance products – one located close to the Haikou Mine and the fertilizers factory and the other situated in the Kumming
airport.



The raw materials from the Haikou Mine
are currently transported by train to the 3C factory, while in the future they are expected to be transported via pipeline (slurry).



Most of the output sold to the local market
is transported from 3C directly to the customers by train, as well as through marine shipment, mainly from two exit ports (Beihai
and Fangchengang) to customers in North China. These ports are also used for import of sulfur, in the amount of 600 thousand tonnes
per year. A small part of the output sold is transported by truck to customers in the Yunnan region (the trucks are owned by the
customers).



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According to the agreements between the
parties, the logistic services provided to YPH JV will be provided in the first year by YPC, in light of its experience and central
position in the Yunnan district. The YPH JV has an option to continue to utilize the services of YPC in the upcoming years.



Item 4A.  Unresolved Staff
Comments



Not Applicable.



Item 5.  Operating and
Financial Review and Prospects



A.	OPERATING RESULTS



Principal Factors Affecting Our Results of Operations and
Financial Condition



We are a multinational company, the financial
results of which are affected by the demand for basic agricultural products, global economic trends, changes in terms of trade
and financing, and fluctuations in currency exchange rates. Together with and as part of our business strategy, we are taking steps
to adapt our marketing and production policies to global market conditions. We are also focusing on improving our cash flows and
diversifying our financing sources, and we are committed to taking continuous actions to improve efficiency and reduce costs.



We are an Israeli corporation, and we have
significant production facilities in Israel. Accordingly, we are affected by the political, economic and security conditions prevalent
in Israel. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Operations in Israel. We conduct
operations in Israel and therefore our business, financial condition and results of operations may be materially and adversely
affected by political, economic and military instability in Israel and its region.” In particular, we have been adversely
affected by several recent regulatory and legal developments in Israel that could lead to materially higher costs and lower profitability
and cash generation.



In 2015, approximately 55% of our sales
revenue was derived from production activities taking place outside Israel and approximately 7% of the cost of sales of products
produced outside Israel was attributable to raw materials supplied from Israel. In 2014, approximately 52% of our sales revenue
was derived from production activities taking place outside Israel and approximately 7% of the cost of sales of products produced
outside Israel was attributable to raw materials supplied from Israel. There is no single customer on which we are materially dependent.



Energy expenses accounted for approximately
7% of our total operating costs in 2015 and 2014. Of these energy expenses, the cost of oil and oil products, electricity and natural
gas represented approximately 7% ($21 million), approximately 50% ($153 million) and approximately 26% ($79 million), respectively,
in 2015 and approximately 9% ($30 million), approximately 49% ($170 million) and approximately 29% ($101 million), respectively,
in 2014. Energy costs decreased in 2015 compared with the prior year by approximately 13%. The said decrease stems mainly from
a decrease in production due to the strike at ICL Dead Sea and ICL Neot Hovav, a change in tariffs of Israel Electric Company commencing
from February 2015 and of OPC and a decline in the gas prices.



On April 1, 2013, the supply of gas from the Tamar Field commenced as a substitute for the quantity previously supplied by the Yam Tethys partnership.
Supply of the gas from the Tamar Field fulfills all of our gas needs for the facilities for which we have completed the conversions.
In 2012, the Council for Natural Gas Matters published a decision regarding arrangement of use of the natural gas pipeline capacity.
The Council for Natural Gas Matters decision stipulates that the gas pipeline capacity is limited and it is not able to supply
the entire amount of the anticipated demand in the upcoming years, therefore, the Council for Gas Matters has provided a pro rata
mechanism that should, to the best of the Company's knowledge, increase the quantity of gas supplied to the Company at a time
when there is a shortage in capacity in the gas pipeline. Increased use of natural gas in our facilities is expected to significantly
reduce emissions of pollutants in the area surrounding our facilities, improve the quality of the output, reduce maintenance expenses
and lead to a significant monetary savings due to the transition from the use of more expensive fuels.





Marine transportation expenses were approximately
6% in 2015 and approximately 7% in 2014 of our total operating costs. In 2015 and 2014, our marine transportation expenses amounted
to approximately $282 million and approximately $369 million, respectively. 2014 was characterized mainly by a general trend of
falling bulk shipping prices, whereas 2015 was characterized by
stable prices in the first half of the year and a sharp increase in prices in the third quarter, however in the fourth quarter
the marine transportation price index (Baltic Dry Index – “BDI”) resumed its downward trend and fell below 500
points at the end of December 2015. The trend continued into 2016. The average index (BDI) for 2015 was 35% less than the average
index for 2014 and the average index for the fourth quarter of 2015 was 43% less than the average index for the fourth quarter
2014. The decline in the marine transportation expenses stems primarily from the decline in fuel prices owing to the drop in the
oil prices that started at the end of 2014 and continued throughout all of 2015, as well as due to a decrease in the quantities
sold, as a result of the strike at ICL Dead Sea and ICL Neot Hovav.



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Our financial statements are prepared in
U.S. dollars. Most of our sales are in U.S. dollars, even though a portion of our sales is in other currencies, mainly euros. Part
of our operating expenses in Israel are denominated in NIS; therefore, devaluation of the average NIS exchange rate against the
U.S. dollar has a positive impact on our profitability, while appreciation has the opposite effect. Devaluation of the average
exchange rate of the euro against the U.S. dollar has a negative impact on our profitability, while appreciation has the opposite
impact. On the other hand, devaluation of the euro against the U.S. dollar improves the competitive ability of our subsidiaries
whose functional currency is the euro, compared with competitors whose functional currency is the U.S. dollar.



We hedge against our exposure to the risks
described above, in respect of the exposure to sales and operating expenses that are not denominated in our functional currency,
mainly operating expenses denominated in NIS and other currencies that are not the functional currency of our subsidiaries, and
exposure to marine transportation prices and energy prices. Since all of these hedging transactions are treated as economic (non-accounting)
hedges, they are not reflected in our operating costs but instead are recorded as finance income or expenses in our statements
of income. Our management determines the extent of our hedging activities based on their estimation of our sales and operating
expenses, as well as their expectations of developments in the markets in which we operate. See “Item 11. Quantitative
and Qualitative Disclosures About Market Risk—Risk Management.”



Trends Affecting Our Fertilizers Segment





There is mutual dependency among the amount
of available arable land, the amount of food needed for the population, and the use of fertilizers. Natural population growth,
changes 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 developing countries, and environmental-quality considerations along with
the aspirations of certain 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,
soybean, corn, etc.). These trends led to increased planting of grain crops worldwide and higher yields per unit of agricultural
land, mainly through the increased application of fertilizers. In 2015, the increase in cheap alternative energy sources continued,
such as the production of shale gas in the United States. The impact of these alternative energy sources on overall energy prices
also impacts the economic feasibility of the production of bio-fuels and the rate of growth of their use. The global expansion
of production of bio-fuels is expected to continue during the next decade, albeit at a slower rate compared with the last half
decade. This slowdown partly reflects lower crude oil prices. Nonetheless, the slowdown is also attributable to technical limitations
and some withdrawal of government support for bio- fuels. As a result, demand for bio- fuels feedstock also continues to grow
more slowly. It is noted that, the steep rise in ethanol production, which had persisted to 2010, was halted due to moderation
of fuel prices, the decision of the U.S. Environmental Protection Agency (“EPA”) not to increase the percentage of
ethanol in gasoline (the blending rate) from 10% to 15%, and the decline in gasoline consumption in the U.S. The production of
ethanol remained stable.



In 2015, prices of crop commodities dropped
sharply in response to the expectation of the US Department of Agriculture (USDA) of a record harvest as a result of an increase
in planted areas, along with favorable weather conditions in the primary growing areas. During January–February 2016, the
grain prices hit their lowest level in the last 6 years.



Based on the new report published by the
USDA in January 2016, an increase is expected in the ratio of the inventories of grains to annual consumption, to 23.0% at the
end of the agricultural 2015/2016 year, compared with 22.8% at the end of the 2014/2015 agricultural year, and with 20.8% in the
2013/2014 agricultural year.



In the short term, the demand for fertilizers
is volatile and seasonal and is affected by factors such as the weather in the world’s major agricultural growing regions,
fluctuations in the scope of the planting of the main crops, agricultural input costs, agricultural
product prices and developments in biotechnology. Some of these factors are influenced by subsidies and credit lines granted to
farmers or to producers of agricultural inputs in various countries, and by environmental regulation. Changes in currency exchange
rates, legislation and international trade policy also affect the supply, demand and level of consumption of fertilizers worldwide.
Notwithstanding the fluctuations that may be caused in the short term as a result of these factors, we estimate that the policy
of most countries in the world is to ensure an orderly supply of high-quality food to their residents, including by encouraging
agricultural production, which should preserve the long-term growth trend of fertilizer consumption.



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In 2015, there was a decline in the demand
for potash due to the worldwide economic slowdown, the drop in the prices of agricultural products, devaluation of the currency
exchange rates and availability of credit. Despite the decline in consumption in 2015, a moderate increase is expected in the upcoming
years. According to an IFA report from May 2015 the aggregate worldwide demand for potash for agricultural and other uses is expected
to grow at an average annual rate of 2.7% from 35.5 million tons of K2O in 2015 up to 38.5 million tons of K2O
in 2019.



During the second half of 2015, upon completion of potash shipments, which were derived from ICL's agreement in China in the
first half of the year, potash shipments began to be based on "spot prices". In January 2016, ICL signed new framework agreements
with its customers in China for supply of potash in the scope of about 3.4 million tons (including options) over the next
three years. The selling price will be determined on the basis of the accepted price levels in the Chinese potash market.
According to the framework agreement, which represents an increase of about 3% in the quantities supplied, compared with the
previous three year framework agreement the Company signed with its customers in China whereby 3.3 million tons of potash
were supplied in full (including options), the Company will supply 1.1 million tons of potash in 2016, 1.14 million tons in
2017, and 1.16 million tons in 2018. In 2015, the imports of potash into China reached a record high of more than 9.4 million
tons - an increase of about 18% compared with 2014. In the Company's estimation, the imports into China in 2016 will be lower
due to accumulation of large inventories at the end of 2015 and an increase in production by the local producers.



In the beginning of 2015, it appeared that
the imports of potash into India would increase significantly over 2014. This expectation did not materialize, mainly due to the
devaluation of the Indian currency and the shortfall of Monsoon rains. During 2015, India imported 4 million tons of potash, constituting
a decrease of 7%, compared with 4.3 million tons imported in 2014. In 2015, ICL signed contracts for supply of potash with its
customers in India, covering an aggregate quantity of 835 thousand tons, including options. In the Company’s estimation,
the customers in India will not utilize the entire quantities covered by the contracts due to the accumulation of inventories.



Demand for potash in Brazil peaked in 2014,
declined significantly in 2015 as a result of a fall in agricultural commodity products, weakness of the Brazilian currency and
limitations on credit to farmers. In 2015, 8.3 million tons of potash were imported into Brazil, compared with 9.1 million tons
in 2014 – constituting a decrease of 8.3%



The average prices in 2015 were significantly lower than in 2014. Since the beginning of 2015 there has been a trend of a
large decline in the potash prices. The main reasons for the above mentioned decline are, among others, a decrease in the
prices of agricultural commodities, weakness of the currencies of the importing countries, a shortage of rainfall (mainly
in India) and limitations on credit to farmers (mainly in Brazil). The beginning of 2016 was not accompanied by signs of an
economic recovery. In the global commodities market, the prices are at low multi year levels, due to the high levels of inventory
in China, which acts to postpone the negotiations in connection with renewal of the contracts for 2016.



In the first three quarters of 2015, the
average prices of the phosphate fertilizers were relatively higher than in the first three quarters of 2014, however, in the fourth
quarter of 2015, there was a decrease in prices of phosphate fertilizers. These price decreases stemmed from a combination of supply
and demand factors. On the demand side, imports into India (the main importer of DAP) were lower than expected in the second half
of the year due to a shortage of rainfall, a high level of inventory and erosion of the local currency against the dollar. In addition
to the decline in demand in India, in 2015 Brazil also imported a quantity that was 24% lower than in the prior year. The demand
in the United States was also low. On the supply side, there was a significant increase in the export of phosphate fertilizers
from China, due to imposition of VAT in China that caused a decline in the local consumption and an increase in the scope of the
exports. The new Saudi producer (Ma’aden) increased its exports this year, and the Moroccan phosphate company (OCP) placed
a new factory into service, one out of four that are in the process of gradual construction. Due to the decline in demand, a number
of major producers implemented a policy of contracting production: Mosaic, the U.S. fertilizer
producer, reduced its production by an undefined quantity, the Jordanian manufacturer (JPMC) cutback production in the final months
of the year, while the production in Tunisia suffered from many interruptions due to strikes at the plants, mines and companies
shipping the rock to the factories.



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The prices of phosphate rock also declined
in 2015, however more moderately than the phosphate Fertilizers and potash prices. The CFR prices fell by about ten percent. Part
of the decline was offset by the decrease in shipping prices, such that the FOB price was impacted to a smaller extent.



The decline in prices of raw materials
in the specialty fertilizers products market continued intermittently during 2015, as did the impact of the average selling prices
in this year. However, the decline in the selling prices was higher than the rate of the decline in the raw materials prices. In
addition, notwithstanding the decline in the selling prices and the changes in the currency exchange rates throughout 2015, the
gross profit remained about the same as in 2014 (a decrease of 0.7%).



Trends Affecting Our Industrial Products
Segment



The operations of our Industrial Products
segment are largely affected by the level of activities in the electronics, construction, automotive, oil drilling, furniture,
pharmaceutical, agro, textile and water treatment markets. In 2015, 41% of worldwide use of bromine was for flame retardants, 29%
was for intermediates and industrial uses, 19% was for clear brine solutions, 6% was for water treatment and 5% was for other uses.





Flame retardants: The trend
of pressure exerted by “green” organizations in the area of environmental protection to reduce the use of bromine-based
flame retardants is continuing. On the other hand, new sustainable bromine-based flame retardants are being developed, along with
regulation in additional countries that increases the use of bromine-based flame retardants. The worldwide economic slowdown,
in general, and the slowdown in China, in particular, over the past several years triggered a slowdown in the demand for products
in the electronics and construction industries. This trend, along with the decline in sales of personal computers due to increased
use of tablets and smartphones, caused a decline in the demand for bromine-based flame retardants in the printed circuits market,
and creation of pressure on the prices of these flame-retardant products. Nonetheless, in 2015, there was a certain improvement
in the demand for bromine-based flame retardants for some uses in the electronics sector, primarily in the automotive area. Phosphorous-based
flame retardants were adversely impacted by the weakening of the euro against the dollar as well as by competition on the part
of Chinese manufacturers.





Elemental bromine. In 2015,
elemental bromine prices were relatively stable in the United States, Europe and India whereas in China prices increased significantly,
mainly in the second half of the year.



Clear brine solutions. Despite
the sharp drop in oil prices in 2015, the demand continued to be strong in the market for clear brine solutions for oil and gas
drilling due to work that had been started before the decrease in oil prices.



Biocides. Demand for bromine-based
biocides used for water treatment began displaying a mixed trend in 2015. Demand for biocides used for onshore gas and oil fracking
decreased significantly, following the sharp drop in petroleum prices, which led to reduced shale gas drillings in the United States.



The activities of ICL Industrial Products
in the area of biocides are expected to decrease commencing from 2016 as a result of the completion of Clearon’s divestiture
(chlorine-based biocide activities in the United States) in March 2016. The Company’s activities in this area will focus
on bromine-based biocide activities.



Inorganic bromides. In 2015,
the trend of increasing demand in the market for inorganic bromides for neutralizing mercury (Merquel® products) continued.
This trend stemmed mainly from demand by power stations as part of the preparations for the entry into effect in 2015 of a new
regulatory system in the U.S. that requires reduction of mercury emissions.



On the other hand, there was a decline
in demand for additional bromine-based products as a result of the weakening of the agrochemicals markets as well as an increase
in competition in the polyester fibers industry.



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Trends Affecting Our Performance Products
Segment



Food Specialties. During 2015 the demand for phosphate based Food products grew mainly due to the acquisition of a Food Specialties
business in Europe which expanded the portfolio offerings to the whey protein markets. The main phosphate defined phosphates
business encountered headwinds in the European and Russian markets due to their weak economies. In addition, expectation of
higher organic growth was not realized as a result of slower acceptance by our customers, in spite of their favorable perception
of these product solutions. The weakness in demand that existed in the first half of 2015 dissipated in the second half of
the year however, the improvement came as a result of lower prices. The market is expected to remain sluggish into Q1 2016
as global inventory levels reset and weak economic conditions persist in China, Europe and South America.



Advanced Additives. The Advanced
Additives business lines benefited from an acquisition in Brazil and a Joint Venture investment in China. These acquisitions, combined
with the stable North America markets, contributed to an overall 18% growth in the Segment and offset the economic weaknesses in
other world markets. In North America, the Segment’s demand in Industrial Specialties was strategically lower as the Segment
purposely exited low-profit markets and pursued growth in the paints and coatings markets. Additionally, the Industrial Specialties
market in Europe was adversely impacted by the ban to use phosphate based detergents in auto dish washers (effective January 2016)
as competitors lowered pricing to maintain market share in response to anticipated excess capacity in the market. The P2S5
business increased from the prior year primarily due to lower volume in the prior year due to maintenance shutdowns in North America.
At the end of the fourth quarter, sales also weakened due to several customers who took inventory control measures in response
to weak demand for Zinc-Dithio-Phosphate, an organic phosphate produced by ICL customers using ICL’s P2S5.
This weakness has continued into Q1 2016 as the market experiences a temporary slowdown and destocking actions by key customers.



General. The impact of the
weakening of the euro during 2015 was mostly offset by the decline in costs in dollar terms in the companies operating in Europe.
The impact of currency fluctuations is expected to normalize in 2016 as the European economies reach a steady state.





Finally, throughout the
year, the segment pursued the divestment of businesses that were no longer considered to be part of the strategic core businesses.
Although these divestments were concluded by the end of the second quarter 2015, the Company continues to provide manufacturing
and infrastructure services to certain buyers of the divested businesses from its existing facilities in Germany under the terms
of the sales agreements.



Expected Expenses for Equity Compensation Plans



Remuneration granted in 2014 and 2015



As at December 31, 2015, we had made the
following grants under our 2014 Equity Compensation Plans:



Following the approval of the Company’s
Board of Directors on August 6, 2014, under the 2014 Equity Compensation Plan, ICL issued, for no consideration, 4,360,073 non-marketable
options, exercisable for up to 4,360,073 of our ordinary shares, and 1,007,651 restricted shares, to approximately 450 of our officers
and senior employees under the 2014 Equity Compensation Plan. The issuance includes a significant private placement of 367,294
options and 85,907 restricted shares to our Chief Executive Officer, which was approved by the General Meeting of our shareholders.
This grant format of the options plan includes a “cap” for the value of a share where if, as at the exercise date,
the closing price of an ordinary share is higher than twice the exercise price (the “Share Value Cap”), the number
of the exercised shares will be adjusted so that the product of the exercised shares actually issued to the offeree multiplied
by the share closing price will equal the product of the number of exercised options multiplied by the Share Value Cap.



The options and restricted shares will
vest in three equal tranches: one-third at the end of 24 months from December 1, 2014, one-third at the end of 36 months from December
1, 2014 and one-third at the end of 48 months from December 1, 2014. The expiration date of the options in the first tranche is
at the end of 48 months from December 1, 2014, the expiration date of the options in the second tranche is at the end of 60 months
from December 1, 2014 and the expiration date of the options in the third tranche is at the end of 72 months from December 1, 2014.



On January 25 and 26, 2015, our
Remuneration and Human Resources Committee and the Board of Directors, respectively, and on February 26, 2015 the General
Meeting of our shareholders, approved the issuance, under the 2014 Equity Compensation Plan, for no consideration, of 99,858
restricted shares to Company directors (excluding our Chief Executive Officer, Mr. Stefan Borgas). The restricted shares will
vest in three tranches, subject to the directors continuing to serve in their positions
on the vesting date, as follows: (1) 50% vested on August 28, 2015; (2) 25% will vest at the end of two years from the date of
the General Meeting, on February 26, 2017, and (3) 25% at the end of three years from the date of the General Meeting, on February
26, 2018.



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On May 10, 2015 and June 1, 2015, and on
May 12, 2015 and June 5, 2015, the Company’s Compensation Committee and Board of Directors, respectively, under the Equity
Compensation Plan, approved the issuance of up to 7,931,500 non-marketable and non-transferrable options, for no consideration,
exercisable for up to 7,931,500 of the Company’s ordinary shares, and up to 1,397,302 restricted shares, to approximately
550 of the Company’s officers and senior employees. The said allocation includes a private placement of 404,220 options and
68,270 restricted shares to the Chairman of the Company’s Board of Directors and of 530,356 options and 89,574 restricted
shares to ICL’s Chief Executive Officer, which was approved by the General Meeting of the Company’s shareholders by
special majority on June 29, 2015.



The options and restricted shares will
vest in three equal tranches: one-third at the end of 12 months after the grant date, one-third at the end of 24 months after the
grant date and one-third at the end of 36 months after the grant date. The expiration date of the options in the first and second
tranches is at the end of 36 months after the grant date and the expiration date of the options in the third tranche is at the
end of 48 months after the grant date.



On November 8 and 11, 2015, the Compensation
Committee and the Board of Directors, respectively, and on December 23, 2015, the general shareholders meeting, under the 2014
Equity Compensation Plan, approved the issuance, for no consideration, of 120,920 restricted shares to the Company’s directors
(excluding the President & CEO, Mr. Stefan Borgas and the Executive Chairman of the Board, Mr. Nir Gilad). The restricted shares
will vest in three equal tranches, as follows: (i) 33.33% will vest at the end of 12 months from the date of the annual general
shareholders meeting; (ii) 33.33% will vest at the end of 24 months from the date of the annual general shareholders meeting; and
(iii) 33.33% will vest at the end of 36 months from the date of the annual general shareholders meeting. Vesting of the Restricted
Shares would fully accelerate if the holder thereof ceases to serve as a director of the Company, unless he ceased to hold office
due to those certain circumstances regarding early termination of office or imposition of enforcement measures, as set forth in
section 231-232a and 233(2) of the Israeli Companies Law.



For a description of the 2014 Equity Compensation
Plan and additional information about the grants made in 2014 and 2015 under the 2014 Equity Compensation Plan, see “Item
6. Directors, Senior Management and Employees—E. Share Ownership—The 2014 Equity Compensation Plan.”



The fair value of the grants under the
2014 Equity Compensation Plan (including both the non-marketable options and the restricted shares) is approximately $36.9 million.
The date of approval of the issuance to our CEO by the general meeting of our shareholders will be considered the grant date, and
the fair value of the CEO’s grant will be re-measured upon such approval. The fair value will be expensed over the vesting
periods (for a description of the vesting periods, see “Item 6. Directors, Senior Management and Employees—E. Share
Ownership—The 2014 Equity Compensation Plan”). The expected expense for the periods ended December 31, 2016, December
31, 2017 and December 31, 2018 is about $12.6 million, about $6.3 million, and about $2.0 million, respectively.



In addition, In August 2014, ICL’s
Board of Directors decided to approve a long-term remuneration plan for approximately 11,800 of the Company’s non-managerial
employees in Israel and overseas, who are not managers that participated in the Company’s options and shares plan (that was
approved on the same date), in accordance with the terms stipulated in the plan. The maximum cost of the plan is approximately
$17 million. As at the date of this Annual Report, the conditions for the aforesaid plan were not met and therefore no liability
was included in respect of this plan.



Results of Operations



We have based the following discussion
on our financial statements. You should read the following discussion together with our financial statements.



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Year Ended December 31, 2015 Compared
to Year Ended December 31, 2014



Set forth below are our results of operations
for the years ended December 31, 2015 and 2014.





|                                                                    |  | For
    theYears EndedDecember 31, |                                               | Increase
|------------------------------------------------------------------- |  | ---------------------------------- | --------------------------------------------- | --------
|                                                                    |  | 2015                               |                                               | 2014    
|                                                                    |  | (US$ millions)                     |                                               |         
|Sales                                                               |  |                                    | 5,405                                         |         
|Cost of sales                                                       |  |                                    | 3,602                                         |         
|Gross profit                                                        |  |                                    | 1,803                                         |         
|Selling, transport and  marketing expenses                          |  |                                    | 653                                           |         
|General and administrative expenses                                 |  |                                    | 350                                           |         
|Research and development expenses                                   |  |                                    | 74                                            |         
|Other expenses                                                      |  |                                    | 211                                           |         
|Other income                                                        |  |                                    | (250                                          | )       
|Operating income                                                    |  |                                    | 765                                           |         
|Finance expenses, net                                               |  |                                    | 108                                           |         
|Share in earnings of equity-accounted investees                     |  |                                    | 11                                            |         
|Income before income taxes                                          |  |                                    | 668                                           |         
|Income taxes                                                        |  |                                    | 162                                           |         
|Net income                                                          |  |                                    | 506                                           |         
|Net income attributable to the shareholders of the Company          |  |                                    | 509                                           |         
|Earnings per share attributable to the shareholders of the company: |  |                                    | US
                                         $ |         
|Basic earnings per share                                            |  |                                    | 0.40                                          |         
|Diluted earnings per share                                          |  |                                    | 0.40                                          |         



Sales



Below is a geographical breakdown of our
sales by customer location:



|                  |  | Year Ended December 31,
|----------------- |  | -----------------------
|                  |  | 2015                   
|                  |  | (USD  millions)        
|Europe            |  |                        
|North America     |  |                        
|Asia              |  |                        
|South America     |  |                        
|Rest of the world |  |                        
|Total             |  |                        



ICL’s sales in the year ended on
December 31, 2015 amounted to $5,405 million, compared with $6,111 million in the corresponding period last year. The decrease
is attributable mainly to the decrease in the quantities sold as a result of the strike at ICL Dead Sea and at ICL Neot Hovav,
in the amount of approximately $452 million, the impact of the change in the currency exchange rates, in the amount of approximately
$335 million (mainly from the devaluation of the euro against the dollar), sale of non-core businesses (net of revenue from services
in a subsidiary in Germany which is not part of the Company’s core businesses and which is designated for sale), which led
to a decrease in sales of approximately $355 million, and a decline in sales as a result of the fire in a fertilizers production
facility in Israel, of approximately $51 million. This decrease was partly offset by an increase in the quantities sold, mainly,
of potash, phosphates and in the ICL Performance Products segment, including the first-time consolidation of companies acquired,
which led to an increase in sales of approximately $461 million and an increase in the selling prices, mainly of phosphate fertilizers,
which contributed approximately $26 million to sales.



The labor interruptions at ICL Dead Sea
and ICL Neot Hovav, which were in response to the efficiency program the Company is currently executing, negatively impacted sales
by approximately $452 million, as noted above. The negative impact of the strike on
the operating income is approximately $248 million. The Company estimates that it will be able to recover most of the lost potash
sales resulting from the strike in future periods, due to the fact that there is excess production capacity in the potash plants
while the evaporation activities in the ponds were not interrupted during the strikes. The contribution to the operating income
after implementation of the efficiency plan is expected to be higher than the losses caused by the strike.



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Breakdown of sales by geographical regions



The breakdown of sales in the year ended
December 31, 2015, shows an increase in the sales in South America mainly from the contribution of the acquisition of Fosbrasil
and an increase in quantities of phosphate rock sold. This increase was partly offset as a result of a drop in the quantities of
potash sold, among other things, due to the strike at ICL Dead Sea and a decline in the price of the potash sold. The decline in
sales in Europe derived mainly from sale of non-core businesses in ICL Performance Products segment, weakness of the euro and the
British pound against the U.S. dollar, a decline in the quantities sold of phosphorous-based flame retardants and elemental bromine
and a decline in the price of the potash sold. This decline was partly offset by the first-time consolidation of companies acquired.
The decline in sales in Asia derived primarily from a decrease in quantities of potash sold in India, mainly due to the strike
at ICL Dead Sea, a decline in sales of elemental bromine and bromine-based flame retardants, mainly as a result of the strike,
and from sale of non-core businesses in the ICL Performance Products segment. This decrease was partly offset by the impact of
the first-time consolidation of the joint venture in China and by an increase in the quantities sold and selling price of the green
phosphoric acid in India. In addition, there was a decline in sales in North America, mainly due to a decrease in the quantities
and price of the potash sold, which is partly the result of the strike at ICL Dead Sea and a decline in the quantities sold of
bromine-based and phosphorous-based flame retardants, bromine-based biocides and magnesium chloride. This decline was partly offset
by an increase in sales of fire prevention and flame-retardant products in the ICL Performance Products segment.



Cost of Sales



The cost of sales in the year ended December
31, 2015 amounted to $3,602 million compared with $3,915 million in the corresponding period last year. The decrease derives primarily
from the impact of the change in currency exchange rates, in the amount of approximately $288 million, mainly due to the devaluation
of the euro, the shekel and the Brazilian real against the dollar, a decrease in costs resulting from divestitures of non-core
businesses )net of costs from provision of services in a subsidiary in Germany which is not part of the Company’s core businesses
and which is designated for sale) in the amount of approximately $208 million, the impact of the strike at ICL Dead Sea and at
ICL Neot Hovav, in the amount of approximately $147 million, a decrease in the quantities produced and sold deriving from the impact
of the fire in a fertilizers production facility in Israel, in the amount of approximately $36 million, compensation received from
the Manufacturers Association relating to the strike at ICL Dead Sea and ICL Neot Hovav, in the amount of approximately $17 million,
and a drop in the energy prices, in the amount of approximately $9 million. This decrease was partly offset by an increase in the
quantities sold (excluding the impact of the strike), including the first-time consolidation of companies acquired, in the amount
of approximately $374 million, an increase in the depreciation expenses, in the amount of approximately $14 million, mainly as
a result of an increase in the depreciation expenses in ICL Rotem, due to a drop in the scope of the mining activities during the
period of the strike last year, together with an increase in the depreciation expenses, in the amount of approximately $6 million,
due to acceleration of the depreciation of the facilities of ICL UK stemming from update of the potash reserves, an increase in
raw-material prices, in the amount of approximately $5 million, mainly as a result of the increase in sulfur prices, and in the
area of specialty fertilizers, and an increase in other operating expenses in the amount of approximately $10 million. The cost
of sales in the corresponding period last year included the negative impact of the strike at ICL Rotem, in the amount of approximately
$26 million, net of a strike insurance award, in the amount of approximately $9 million.



Energy expenses accounted for approximately
7% of our total operating costs in 2014 and 2015. Of these energy expenses, the cost of oil and oil products, electricity and natural
gas represented approximately 9% ($30 million), approximately 49% ($170 million) and approximately 29% ($101 million), respectively,
in 2014 and approximately 7% ($21 million), approximately 50% ($153 million) and approximately 26% ($79 million), respectively,
in 2015. Energy costs decreased in 2015 compared with the prior year by approximately 13%. The decrease stems mainly from a decrease
in production due to the strike at ICL Dead Sea and ICL Neot Hovav, a change in tariffs of Israel Electric Company commencing from
February 2015 and of OPC and a decline in the gas prices.



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Selling and marketing expenses



Selling and marketing expenses in the year
ended December 31, 2015 amounted to $ 653 million, compared with $ 839 million in the corresponding period last year. The decrease
in the expenses is attributable mainly to sale of non-core businesses, a decline in the quantities sold due to the strike at ICL
Dead Sea and at ICL Neot Hovav, the impact of the change in the currency exchange rates and a decline in shipping prices.



Marine transportation expenses were approximately
7% in 2014 and approximately 6% in 2015 of our total operating costs. In 2014 and 2015, our marine transportation expenses amounted
to approximately $369 million and approximately $282 million, respectively. 2014 was characterized mainly by a general trend of
falling bulk shipping prices, whereas 2015 was characterized by stable prices in the first half of the year and a sharp increase
in prices in the third quarter. However in the fourth quarter the marine transportation expenses resumed their downward trend and
fell below 500 points at the end of December 2015. This trend continued into 2016. The average index (Baltic Dry Index (“BDI”))
for 2015 was 35% less than the average index for 2014 and the average index for the fourth quarter of 2015 was 43% less than the
average index for the fourth quarter 2014. The decline in the marine transportation expenses stems primarily from the decline in
fuel prices owing to the drop in the oil prices that started at the end of 2014 and continued throughout all of 2015, as well as
due to a decrease in the quantities sold, as a result of the strike at ICL Dead Sea and ICL Neot Hovav.



General and administrative expenses



General and administrative expenses in
the year ended December 31, 2015 amounted to $350 million, compared with $306 million last year. The increase in the general and
administrative expenses stems mainly from acquisition of new companies and professional service costs relating to these acquisitions,
expenses with respect to the equity compensation plans granted to employees, implementation costs of the global ERP system and
other professional service costs in connection with implementation of the Company’s strategy, including establishment of
the shared services centers (SHS).



Research and development expenses



Research and development expenses in the
year ended December 31, 2015 amounted to $74 million, a decrease of $13 million compared with last year. The decrease stems, mainly,
from a decline in activities as a result of the strike at ICL Dead Sea and at ICL Neot Hovav, as well as a decline in activities
relating to the non-core businesses sold during the year.



Other income and other expenses, net



Other income, net, in the year ended
on December 31, 2015 amounted to $39 million. The other income include mainly gains from sale of non-core businesses, in the
amount of $215 million, insurance income relating to the fire in the fertilizers production plant in Israel, in the amount of
$20 million, and income from the first-time consolidation, in the amount of $7 million, as a result of acquisition of the
entire holdings in Allana Potash in June 2015. On the other hand, this income was partly offset by expenses, including an
impairment in the value of assets located in Germany, Israel and the United States, in the amount of $90 million, a provision
for early retirement in Bromine and in ICL UK as a result of the efficiency plan, in the amount of $48 million, a provision
in respect of system-wide electricity costs in Israel, relating to prior periods (June 2013 to December 2014), in the amount
of $20 million, update of the provision for removal of historical waste in ICL Industrial Products, in the amount of
$20 million, an expense relating to the strike damage caused to external contractors, in the amount of $8 million, update of
the provision for arbitration relating to royalties on downstream products in respect of prior years, in the amount of
$10 million, and a provision for legal claims, in the amount of $8 million.



In the corresponding period last year,
the Company recognized an expense, in the amount of $149 million (before interest expenses and the related tax effect) relating
to prior periods due to an arbitration decision with respect to royalties relating to downstream products, and a decline in the
value of assets of subsidiaries in the United States and Europe, in the amount of $71 million. On the other hand, the Company recognized
income from entry into the consolidation, in the amount of $36 million, due to acquisition of the entire holdings in Fosbrasil.



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Financing expenses, net



The net financing expenses in the year
ended on December 31, 2015 amounted to $108 million, compared with net financing expenses of $157 million last year – a decrease
of $49 million. The decline in the financing expenses compared with last year stems mainly from a decrease, in the amount of about
$80 million, in the expense in respect of change in the fair value of foreign-currency hedging transactions, energy and marine
transportation, as well as revaluation of short-term financial liabilities. In addition, there was a decrease in the interest expenses
in respect of provisions for employee benefits, in the amount of about $4 million, and an increase of about $6 million in the capitalization
of credit costs. On the other hand, there was a decline, in the amount of about $39 million, income from exchange rate differences
in respect of provisions for employee benefits, compared with expenses last year as a result of the devaluation of the shekel against
the dollar approximately 0.3%, compared with a devaluation of about 12% in 2014.



Tax expenses



The tax expenses in the year ended on December
31, 2015 amounted to $162 million, compared with tax expenses of $166 million last year. The tax rate on the pre-tax income is
24%, compared with a tax rate on pre-tax income of 26% last year. The tax rate in 2015 was favorably impacted by adjustment of
the deferred taxes in ICL Rotem to the tax rates in accordance with the Law for Encouragement of Capital Investments, in the amount
of about $18 million, which was almost completely offset by tax expenses stemming from the write off of a tax asset in respect
of carryforward tax losses in Magnesium, in the amount of about $19 million. In addition, the effective tax rate was favorably
impacted by recognition of deferred taxes at high tax rates in respect of losses recognized in connection with the bromine activities
in Israel and in the United States, and tax expenses at a rate lower than 26% relating to sale of the Company’s non-core
businesses outside of Israel. The tax rate in 2014 was impacted by tax expenses, in the amount of about $62 million, mainly due
to assessments agreements of subsidiaries in Europe and the change in the dollar/shekel exchange rate that triggered an increase
in the tax rate of the companies operating in Israel the source of which is differences in the measurement bases.



Year Ended December 31, 2014 Compared
to Year Ended December 31, 2013



Set forth below are our results of operations
for the years ended December 31, 2014 and 2013.





|                                                                    |  | For
    the Years Ended December 31, |       | Increase
|------------------------------------------------------------------- |  | ------------------------------------ | ----- | --------
|                                                                    |  | 2014                                 |       | 2013    
|                                                                    |  | $ millions                           |       |         
|Sales                                                               |  |                                      | 6,111 |         
|Cost of sales                                                       |  |                                      | 3,915 |         
|Gross profit                                                        |  |                                      | 2,196 |         
|Selling, transport and  marketing expenses                          |  |                                      | 839   |         
|General and administrative expenses                                 |  |                                      | 306   |         
|Research and development expenses                                   |  |                                      | 87    |         
|Other expenses                                                      |  |                                      | 259   |         
|Other income                                                        |  |                                      | (53   | )       
|Operating income                                                    |  |                                      | 758   |         
|Finance expenses, net                                               |  |                                      | 157   |         
|Share in earnings of equity-accounted investees                     |  |                                      | 31    |         
|Income before income taxes                                          |  |                                      | 632   |         
|Income taxes                                                        |  |                                      | 166   |         
|Net income                                                          |  |                                      | 466   |         
|Net income attributable to the shareholders of the Company          |  |                                      | 464   |         
|Earnings per share attributable to the shareholders of the company: |  |                                      | US $  |         
|Basic earnings per share                                            |  |                                      | 0.37  |         
|Diluted earnings per share                                          |  |                                      | 0.37  |         







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Below is a geographical breakdown of our
sales according to customer location:



|                  |  | Year Ended December 31,
|----------------- |  | -----------------------
|                  |  | 2014                   
|                  |  | $ millions             
|Europe            |  |                        
|North America     |  |                        
|Asia              |  |                        
|South America     |  |                        
|Rest of the world |  |                        
|Total             |  |                        



Sales



Our sales in 2014 amounted to approximately
$6,111 million, compared with approximately $6,272 million last year. This decrease stems mainly from a decrease in selling prices,
which led to a decrease in sales of approximately $431 million. The decrease was partly offset by an increase in quantities sold,
including the first-time consolidation of companies acquired during 2014, which contributed approximately $252 million, and from
the impact of changes in currency exchange rates, in the amount of approximately $18 million. As a result of the work interruptions
at ICL Dead Sea during the fourth quarter, the Company’s sales were unfavorably impacted, in the amount of approximately
$60 million.



Breakdown of sales by geographical regions



The breakdown of sales in 2014 indicates
an increase in sales in North America, primarily as a result of a higher sales volumes of potash, bromine-based and chlorine-based
biocides for water treatment, inorganic bromine products and magnesium products. In addition, there was 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 Hagesud
and an increase in the sales of P2S5. On the other hand, there was a decrease in sales in Asia, mainly due to a decrease in prices
of potash compared with the prior year and a decrease in quantities of potash sold in Asia, except for China. The decline in South
America stems mainly from a decline in quantities sold and selling prices of fertilizers and potash sold, compared with 2013. The
decline in quantities of fertilizer sold in South America, derives, mainly, from the impact of the strike at ICL Rotem and from
a decline in the quantities of potash sold deriving from a lack of availability of granulated potash.



Cost of Sales



Our cost of sales in 2014 amounted to approximately
$3,915 million, compared with approximately $3,862 million in 2013, an increase of approximately $53 million. The increase in the
cost of sales derives, primarily, from an increase in quantities sold, including the first-time consolidation of companies acquired
during 2014, in the amount of about $116 million, the impact of the change in currency exchange rates in the amount of approximately
$35 million, from the impact of the strike at ICL Rotem in the amount of approximately $26 million, net of an amount of strike
insurance received of approximately $9 million, and an increase in the royalties expenses in the current period due to the arbitration
decision in this matter, in the amount of approximately $12 million. This increase was partly offset by a decline in the raw material
and energy prices, in the amount of approximately $56 million, a decrease in salaries expenses in the amount of about $39 million,
mainly due to the impact of retirement of employees at ICL Rotem, and from a decrease in other operating expenses in the amount
of approximately $32 million, stemming from, among other things, a decrease in the expenses for maintenance and subcontractors
and a decline in royalties due to the drop in sales.



Energy costs constituted approximately
7% of ICL’s total operating costs in 2014. Energy costs in 2014 decreased compared with 2013 due to the increased use of
natural gas which leads to a savings as a result of the switch from the use of expensive fuels, and from the undertaking to purchase
electricity from OPC, at lower costs compared with the price of the electricity purchased from the Israel Electric Company, which
contributed to a reduction in the energy costs in 2014.



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Selling and marketing expenses



Our selling and marketing expenses amounted
to approximately $839 million in 2014, compared with selling and marketing expenses of approximately $850 million in 2013. The
selling and marketing expenses include, mainly, costs with respect to marine shipping, overland transport, selling commissions
and employee salaries. The decrease in the expenses stems mainly from a decrease in shipping expenses as a result of a decline
in marine and overland shipping costs, and a change in the mix of destinations and products.



Marine shipping expenses constituted about
7% of ICL’s total operating costs in 2014, totaling approximately $369 million. After several years of falling marine bulk
transportation prices, commencing from mid-2013 there has been an increase in shipping prices which reached a level of 2,337 points
in the middle of December 2013 (the BDI - Baltic Dry Index- marine shipping index), a record high for the last 3 years. Starting
from the first quarter of 2014, prices fell to their level prior to the increase and the average index for 2014 was 8% less than
the average index for 2013. The impact of the decline in the marine shipping prices, as stated above, was partly offset by an increase
in marine shipping resulting from an increase in quantities sold.



General and administrative expenses



Our general and administrative expenses
amounted to approximately $306 million in 2014, compared with general and administrative expenses of approximately $281 million
in 2013. General and administrative expenses increased as a result of, among other things, first-time consolidation of companies
acquired in 2014 as well as due to professional service costs and other expenses in connection with updating and implementing the
Company’s strategy, issuance of the Company’s shares on the New York Stock Exchange, and additional processes.



Research and development expenses



Our research and development expenses were
approximately $87 million in 2014, an increase of about $4 million compared with 2013.



Other income and other expenses, net



Other expenses, net, in 2014, amounted
to about $206 million, compared with about $ 94 million in 2013. Other expenses included mainly an expense, in the amount of about
$149 million (before interest expenses and tax impact) relating to prior periods, due to the arbitration decision regarding the
royalties’ issue, and from an impairment in value of assets in subsidiaries in the US and Europe, in the amount of about
$71 million. This increase was partly offset by income of about $36 million resulting from a capital gain following the completion
of the acquisition of 100% holdings in Fosbrasil. Other expenses last year included primarily a provision for early retirement
at ICL Rotem in the amount of about $60 million, a provision for treatment of waste in the amount of about $25 million, and an
impairment in the value of assets in the amount of about $10 million.



Financing expenses, net



Our net financing expenses amounted to
approximately $157 million in 2014, compared with net finance expenses of approximately $26 million in 2013. Financing expenses
include a provision in the amount of about $32 million, mainly in connection with the arbitration decision dated May 19, 2014 regarding
the royalties’ issue. After elimination of the above-mentioned provision, the financing expenses amounted to approximately
$124 million – an increase of about $97 million, compared with 2013. The increase derives mainly from an increase in interest
expenses, in the amount of approximately $21 million, expenses in respect of a change in the fair value of hedging, energy, and
marine shipping transactions in the period, in the amount of approximately $41 million, compared with revenues of approximately
$20 million in 2013, and as a result of expenses in respect of a change in the fair value of currency and interest transactions
and the effects of exchange rate differences on provisions for employee benefits in the period, in the amount of approximately
$6 million, compared with revenues of approximately $21 million in 2013. On the other hand, there was a decrease in interest expenses
in respect of provisions for employee benefits, in the amount of about $3 million. In addition, borrowing costs, in the amount
of approximately $16 million, were capitalized during 2014.



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Tax expenses



Our tax expenses amounted to approximately
$166 million in 2014, compared to approximately $281 million in 2013. The tax rate on the pre-tax income is approximately 26.3%,
compared with approximately 25.5% last year. The rate of tax expenses 2014 was impacted by tax expenses in the amount of approximately
$62 million, mainly as a result of an assessment agreement in subsidiaries in Europe, from the 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 are differences in
the measurement basis, and an increase in the Israeli Corporate Tax rate to 26.5%. In 2013, tax expenses included tax expenses
recognized in respect of the release of trapped earnings, in the amount of approximately $107 million.



Segment Information



Segment Information for Year Ended December
31, 2015 Compared to Year Ended December 31, 2014



|                         |  | Year Ended December 31,
|------------------------ |  | -----------------------
|Sales by segment         |  | 2015                   
|                         |  | ($ millions)           
|ICL Fertilizers          |  |                        
|ICL Industrial Products  |  |                        
|ICL Performance Products |  |                        
|Others and setoffs       |  |                        
|Total                    |  |                        

____________________

Note: The sales data for the
segments are before setoffs of inter-segment sales.



|                                |  | Year Ended December 31,
|------------------------------- |  | -----------------------
|Operating income by segment     |  | 2015                   
|                                |  | ($ millions)           
|ICL Fertilizers                 |  |                        
|ICL Industrial Products         |  |                        
|ICL Performance Products        |  |                        
|Other and offsets               |  |                        
|Operating income (consolidated) |  |                        



Fertilizers



Below is a breakdown of the sales, gross
profit and operating income of our Fertilizers segment in 2015 and 2014, by areas of operation (before setoffs of inter-segment
sales):



|                              |  | Year Ended December 31,
|----------------------------- |  | -----------------------
|                              |  | 2015                   
|Sales*                        |  |                        
|Potash                        |  |                        
|Fertilizers and phosphate     |  |                        
|Gross profit                  |  |                        
|Potash                        |  |                        
|Fertilizers and phosphate     |  |                        
|Operating income              |  |                        
|Potash                        |  |                        
|Fertilizers and phosphate     |  |                        
|Adjusted operating income (1) |  |                        
|Potash (2)                    |  |                        
|Fertilizers and phosphate (3) |  |                        

____________________

* Includes revenues from inter-segment
sales



105


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| | (1) | Adjusted operating income is a non-IFRS number. See “Item 3.Key Information—A. Selected Financial Data”
for a definition of adjusted operating income and a reconciliation to the comparable IFRS measure.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | The adjusted items in 2015 include the impact, of employee strike at ICL Dead Sea in the amount of about $185 million, an update
of the provision for arbitration with respect to royalties relating to downstream products in respect of prior years, in the amount
of approximately $9 million, a provision for early retirement in ICL UK stemming from implementation of the efficiency plan, in
the amount of approximately $6 million, a provision for a legal claim, in the amount of approximately $6 million and income from
the first time consolidation of Allana Potash, in the amount of approximately $7 million. The adjusted item in 2014 include a provision
for arbitration relating to royalties in respect of prior periods, in the amount of about $ 8 million.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | The adjusted items in 2015 include a provision for system-wide electricity costs in Israel relating to prior periods in the
amount of about $6 million, consulting expenses in connection with closing of the joint venture transaction in China, in the amount
of about $6 million and $1 million gains from an equity divestment. The adjusted items in 2014 include the impact of the strike
in ICL Rotem, in the amount of about $16 million, offset by strike insurance received, in the amount of about $8 million.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Potash – Production, Sales and Closing Inventories



Production, sales and closing inventory
of potash in 2015 and 2014.



|                                       |  | Year Ended December 31,
|-------------------------------------- |  | -----------------------
|                                       |  | 2015                   
|                                       |  | (In thousands of tons) 
|Production                             |  |                        
|Sales to external customers            |  |                        
|Sales to internal customers            |  |                        
|Total sales (including internal sales) |  |                        
|Closing inventory                      |  |                        



Phosphates – Production and Sales



Below is a breakdown of production and
sales for fertilizers and phosphates in 2015 and 2014.



|                                          |  | Year Ended December 31,
|----------------------------------------- |  | -----------------------
|                                          |  | 2015                   
|                                          |  | (In thousands of tons) 
|Phosphate rock                            |  |                        
|Production of rock                        |  |                        
|Sales*                                    |  |                        
|Phosphate rock used for internal purposes |  |                        
|Fertilizers                               |  |                        
|Production                                |  |                        
|Sales*                                    |  |                        

____________________

* To external customers.



Geographical distribution of external sales
in 2015 and 2014:



|                  |  | Year Ended December 31,
|----------------- |  | -----------------------
|                  |  | 2015                   
|Europe            |  |                        
|Asia              |  |                        
|South America     |  |                        
|North America     |  |                        
|Rest of the world |  |                        
|Total             |  |                        

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Potash



Sales



The decrease in sales in the year ended
on December 31, 2015 is attributable mainly to the strike at ICL Dead Sea, which led to a decrease in sales, in the amount of approximately
$315 million, the impact of the change in currency exchange rates, in the amount of approximately $86 million, mainly from a devaluation
of the exchange rates of the euro and the British pound against the dollar, and a decrease in the selling prices, in the amount
of approximately $34 million. On the other hand, this decrease was partly offset by an increase in the quantities sold, in the
amount of approximately $69 million.



Production and Sales



The quantity of potash sold to external
customers in the year ended December 31, 2015 was approximately 775 thousand tonnes lower than in 2014, mainly due to a decrease
in the quantities sold to the United States, India, Brazil and China. Production of potash in the year ended December 31, 2015
was approximately 948 thousand tonnes lower than in 2014, due to a decrease in the production in Israel as a result of the strike,
which was partly offset by an increase in production in the United Kingdom.



Operating income



The operating income in the year ended
December 31, 2015 was impacted by the strike at ICL Dead Sea, in the amount of approximately $193 million, a decrease in the selling
prices, in the amount of approximately $34 million, an increase in the cost of sales, due to, among other things, an increase in
the quantities sold (excluding the strike impact), in the amount of approximately $22 million, an increase in expenses in connection
with update and implementation of the Company’s strategy and additional processes, in the amount of approximately $30 million,
update of the provision for arbitration with respect to royalties relating to downstream products in respect of prior years, in
the amount of approximately $10 million, a provision for early retirement in ICL UK stemming from implementation of the efficiency
plan, in the amount of approximately $6 million, a provision for a legal claim, in the amount of approximately $6 million, and
acceleration of the depreciation of the facilities of ICL UK as a result of an update of the potash reserves, in the amount of
approximately $6 million. This decrease was partly offset by an increase in the quantities sold, in the amount of approximately
$69 million, a decline in the shipping expenses, in the amount of approximately $18 million, as a result of a decline in the shipping
prices, the impact of the changes in the currency exchange rates, in the amount of approximately $9 million, compensation received
from the Manufacturers Association of Israel for the strike, in the amount of approximately $8 million, a decrease in the energy
prices, in the amount of approximately $6 million, income from the first time consolidation of Allana Potash, in the amount of
approximately $7 million, and a decline in other operating expenses, in the amount of approximately $21 million, as a result of,
among other things, a drop in the number of employees and a decline in the maintenance expenses. The operating income in 2014 was
impacted by a provision for arbitration with reference to royalties relating to prior years, in the amount of approximately $8
million.



Fertilizers and Phosphates



Sales



The increase in sales in the year ended
December 31, 2015 stems from an increase in the quantities sold, mainly due to the first time consolidation of the joint venture
in China (YPH), which gave rise to an increase in sales, in the amount of approximately $159 million, along with an increase in
the selling prices of phosphate fertilizers, which gave rise to an increase in sales of approximately $40 million. On the other
hand, this increase was partly offset by the impact of the change in the currency exchange rates, in the amount of approximately
$123 million, mainly as a result of devaluation of the exchange rate of the euro against the dollar, and a decline in sales as
a result of the impact of the fire in a fertilizers production facility in Israel, in the amount of approximately $51 million.



Operating income



The increase in operating income in the
year ended December 31, 2015 derives mainly from an increase in the quantities sold, primarily as a result of the first time consolidation
of the joint venture in China (YPH), in the amount of approximately $159 million, an increase in the selling prices, in the amount
of approximately $40 million, insurance income relating to the fire in a fertilizers production facility in Israel, in the amount
of approximately $19 million, a drop in the energy prices, in the
amount of approximately $17 million, a decline in shipping expenses due to a decrease in the shipping prices, in the amount of
approximately $15 million, and the impact of the change in the currency exchange rates, in the amount of approximately $11 million.
On the other hand, this increase was partly offset by an increase in the cost of sales, as a result of an increase in the quantities
produced and sold, net of the impact of the fire in the fertilizers production facility in Israel, in the amount of approximately
$144 million, a decrease in the operating income, in the amount of approximately $16 million, due to a decline in the quantities
produced and sold as a result of the impact of the fire in the fertilizers production facility in Israel, an increase in the prices
of raw materials, in the amount of approximately $15 million, deriving mainly from an increase in the sulfur prices and in the
area specialty fertilizers, an increase in expenses in connection with update and implementation of the Company’s strategy
and additional processes, in the amount of approximately $19 million, an increase in the depreciation expenses, in the amount of
approximately $15 million, mainly as a result of a decline in the scope of the mining during the period of the strike at ICL Rotem
last year, a provision for system-wide electricity costs in Israel relating to prior periods (June 2013 through December 2014),
in the amount of approximately $6 million, an increase in the shipping costs, in the amount of approximately $3 million, as a result
of the increase in the quantities shipped, and an increase in other operating expenses, in the amount of approximately $30 million,
stemming from, among other things, a current provision for system-wide electricity costs, in the amount of approximately $4 million,
and an increase in consulting expenses in connection with closing of the joint venture transaction in China. The operating income
last year was impacted by the strike at ICL Rotem, in the amount of approximately $16 million, net of insurance proceeds relating
to the strike, in the amount of approximately $8 million.



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Production and Sales:



The quantity of the fertilizers sold in
the year ended December 31, 2015 is lower than in 2014, mainly due to a decrease in the sales in Brazil and Europe.



Production of phosphate fertilizers, in
the year ended December 31, 2015, was approximately 49 thousand tonnes higher than in 2014 as a result of the first-time consolidation
of YPH and net of the impact of the fire in the fertilizers production facility in Israel that took place in the second quarter
of 2015.



Production of phosphate rock, in the year
ended December 31, 2015, was approximately 1,060 thousand tonnes higher than in 2014, as a result of the first-time consolidation
of YPH and an increase in production at the rock production facilities.



Industrial Products



|                              |  | Year Ended December 31,
|----------------------------- |  | -----------------------
|                              |  | 2015                   
|                              |  | ($ millions)           
|Sales(*)                      |  |                        
|Gross profit                  |  |                        
|Operating income (loss)       |  |                        
|Adjusted operating income(**) |  |                        

____________________

| | (*) | Includes revenues from inter-segment sales
| | --- | ------------------------------------------



| | (**) | Adjusted operating income is a non-IFRS number. See “Item 3. Key Information—A. Selected Financial Data”
for a definition of adjusted operating income and a reconciliation to the comparable IFRS measure.
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Adjusted items in 2015 include the impact, of employee strike at ICL Dead Sea in the amount of about $49 million, an
                                                         impairment of the value of assets in Israel and the United States, in the amount of $56 million, a provision for early
                                                         retirement, in the amount of $42 million, a provision for waste removal in the amount of $20 million, and a provision for a
                                                         legal claim, in the amount of $2 million. Adjusted items in 2014 include a provision for arbitration relating to royalties in
                                                         respect of prior periods, in the amount of about $ 141 million, and impairment in the value of assets in the United States
                                                         and Europe, in the amount of approximately $49 million.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Geographical distribution of external sales
in 2015 and 2014:



|                  |  | Year Ended December 31,
|----------------- |  | -----------------------
|                  |  | 2015                   
|North America     |  |                        
|Europe            |  |                        
|Asia              |  |                        
|South America     |  |                        
|Rest of the world |  |                        
|Total             |  |                        





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Sales:



Sales of the ICL Industrial Products segment
in the year ended December 31, 2015 were $1,115 million – a decrease of $222 million compared with last year. The impact
of the strike at ICL Neot Hovav and ICL Dead Sea decreased sales by approximately $112 million, in addition to the decrease in
the quantities sold, in the amount of approximately $78 million, mainly of bromine-based and phosphorous-based flame retardants
and elemental bromine, which does not derive from the strike, and the impact of currency exchange rates, in the amount of approximately
$45 million. This decrease was partly offset by an increase in the selling prices, which contributed approximately $13 million,
mainly of bromine-based flame retardants and of elemental bromine.



Operating income (loss):



The operating loss in the year ended December
31, 2015 totaled $24 million, compared with an operating loss of $62 million last year.



The adjusted operating income in the year
ended December 31, 2015, amounted to approximately $145 million, as compared with adjusted operating income of $128 million last
year.



The operating loss in the year ended December
31, 2015 was impacted by the strike at ICL Neot Hovav and ICL Dead Sea, in the amount of approximately $58 million, a provision
for impairment of the value of assets in Israel and the United States, in the amount of approximately $56 million, a provision
for early retirement, in the amount of approximately $42 million, a provision for waste removal in the amount of approximately
$20 million, and a provision for a legal claim, in the amount of approximately $2 million. On the other hand, the Company received
compensation from the Manufacturers Association of Israel in respect of the strike, in the amount of approximately $9 million.
The operating loss in 2014 was impacted by a provision for arbitration in respect of royalties relating to prior periods, in the
amount of approximately $141 million, and from an impairment in the value of assets in the United States and Europe, in the amount
of approximately $49 million.



The adjusted operating income in the year
ended December 31, 2015 was favorably impacted, mainly due to an increase in the selling prices, in the amount of $13 million,
primarily of bromine-based flame retardants and elemental bromine, a decline in the energy and raw-material prices, in the amount
of approximately $13 million, a decline in the shipping prices, in the amount of approximately $4 million, and a decrease in other
operating expenses, in the amount of approximately $11 million, mainly payroll expenses resulting from the implementation of the
efficiency plan. This increase was partly offset by the mix of products sold and by a decrease in the quantities produced and sold,
in the amount of approximately $14 million, and an increase in the expenses relating to the update and implementation of the Company’s
strategy and additional processes, in the amount of approximately $10 million.



Performance Products



|                            |  | Year Ended December 31,
|--------------------------- |  | -----------------------
|                            |  | 2015                   
|                            |  | ($ millions)           
|Sales*                      |  |                        
|Gross profit                |  |                        
|Operating income            |  |                        
|Adjusted operating income** |  |                        



____________________





| | (*) | Includes revenues from inter-segment sales
| | --- | ------------------------------------------



| | (**) | Adjusted operating income is a non-IFRS number. See “Item 3. Key Information—A. Selected Financial
                                                            Data” for a definition of adjusted operating income and a reconciliation to the comparable IFRS measure. The
                                                            adjusted items in 2015 include the impact, of income from sales of non core businesses, in the amount of $214 million and, an
                                                            impairment in value of assets in Germany, in the amount of $34 million. The adjusted item in 2014 include an income from
                                                            entry into the consolidation, in the amount of $36 million and, an impairment in value of assets of subsidiaries in Europe,
                                                            in the amount of $22 million, and an increase in costs due to the strike at ICL Rotem, in the amount of approximately $9
                                                            million.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







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Geographical distribution of external sales
in 2015 and 2014:



|                  |  | Year Ended December 31,
|----------------- |  | -----------------------
|                  |  | 2015                   
|North America     |  |                        
|Europe            |  |                        
|South America     |  |                        
|Asia              |  |                        
|Rest of the world |  |                        
|Total             |  |                        



Sales



The total sales in the year ended on December
31, 2015 amounted to $1,472 million, a decrease of $142 million compared with last year. This decrease stems from a decline in
the quantities sold, as a result of sale of non-core businesses (net of revenue from services in a subsidiary in Germany which
is not part of the Company’s core businesses and which is designated for sale), in the amount of approximately $355 million,
and the impact of the changes in currency exchange rates, in the amount of approximately $79 million, mainly from the devaluation
of the euro and the Brazilian real against the dollar. On the other hand, there was an increase in the quantities sold, mainly
due to the first-time consolidation of companies acquired, in the amount of approximately $291 million, and an increase in the
selling prices, in the amount of approximately $1 million.



Operating income



The segment’s operating income in
the year ended on December 31, 2015 amounted to $319 million, an increase of $122 million compared with last year. Adjusted operating
income amounted to $139 million, compared with adjusted operating income of $192 million in 2014. The rate of the adjusted operating
income from the sales amounted to 9%, compared with 12% last year



The results in the period of the
report were impacted by income from sales of non-core businesses, in the amount of approximately $214 million and, on the
other hand, by an impairment in value of assets in Germany, in the amount of approximately $34 million. The operating income
last year was impacted by income from entry into the consolidation, in the amount of approximately $36 million and, on the
other hand, by an impairment in value of assets of subsidiaries in Europe, in the amount of approximately $22 million, and an
increase in costs due to the strike at ICL Rotem, in the amount of approximately $10 million (net of insurance proceeds
relating to the strike, in the amount of approximately $1 million).



The decrease in the adjusted operating
income in the year ended on December 31, 2015, is mainly due to a decline stemming mainly from sale of non-core businesses, in
the net amount of approximately $42 million, an increase in operating expenses in connection with update and implementation of
the Company’s strategy and additional processes, in the amount of approximately $10 million, the impact of the changes in
the currency exchange rates, in the amount of approximately $7 million, an increase in the depreciation expenses in the amount
of approximately $2 million, an impairment in value of inventory, in the amount of approximately $1 million, an increase in the
shipping expenses, in the amount of approximately $1 million, due to an increase in the quantities sold, an increase in other operating
expenses, in the amount of approximately $37 million, as a result of, among other things, salaries expenses stemming from expansion
of the marketing set-up in the food sector, due to implementation of the Company’s strategy, an increase in personnel in
some of the production lines due to an increase in the quantities sold as a result
of a shortage of raw materials and acquisition from third parties, as a result of shutdown of the ammonia tank due to the fire
in a fertilizers production facility in Israel, consulting costs with respect to improvement of processes with the goal of operational
efficiency, and consulting costs with respect to completion of the acquisition  of companies in the food sector. On
the other hand, this decrease was partly offset by an increase in the quantities sold, including the first-time consolidation of
companies acquired, in the amount of approximately $38 million, a decline in raw-material prices, in the amount of approximately
$8 million, and an increase in the selling prices, in the amount of approximately $1 million.



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Segment Information for Year Ended December
31, 2014 Compared to Year Ended December 31, 2013



|                         |  | Year Ended December 31,
|------------------------ |  | -----------------------
|Sales by segment         |  | 2014                   
|                         |  | ($ millions)           
|ICL Fertilizers          |  |                        
|ICL Industrial Products  |  |                        
|ICL Performance Products |  |                        
|Others and setoffs       |  |                        
|Total                    |  |                        

____________________

Note: The sales data for the
segments are before setoffs of inter-segment sales.



|                               |  | Year Ended December 31,
|------------------------------ |  | -----------------------
|Operating income by segment    |  | 2014                   
|                               |  | ($ millions)           
|ICL Fertilizers                |  |                        
|ICL Industrial Products        |  |                        
|ICL Performance Products       |  |                        
|Other and offsets              |  |                        
|Operating income(consolidated) |  |                        



Fertilizers



Below is a breakdown of the sales, gross
profit and operating income of our Fertilizers segment in 2014 and 2013, by areas of operation (before setoffs of inter-segment
sales):



|                             |  | Year Ended December 31,
|---------------------------- |  | -----------------------
|                             |  | 2014                   
|Sales(*)                     |  |                        
|Potash                       |  |                        
|Fertilizers and phosphate    |  |                        
|Gross profit                 |  |                        
|Potash                       |  |                        
|Fertilizers and phosphate    |  |                        
|Operating income             |  |                        
|Potash                       |  |                        
|Fertilizers and phosphate    |  |                        
|Adjusted operating income(1) |  |                        
|Potash(2)                    |  |                        
|Fertilizers and phosphate(3) |  |                        

____________________

| | (*) | Includes revenues from inter-segment sales.
| | --- | -------------------------------------------



| | (1) | Adjusted operating income is a non-IFRS number. See “Item 3. Key Information—A. Selected Financial Data”
for a definition of adjusted operating income and a reconciliation to the comparable IFRS measure.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | Adjusted items in 2014 include a provision for arbitration relating to royalties in respect of prior periods, in the amount
of about $ 8 million.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | Adjusted items in 2014 include the impact of the strike at ICL Rotem, in the amount of about $ 16 million, net of receipt of
strike insurance reimbursement, in the amount of about $ 8 million. Adjusted items in 2013 include a provision for early retirement
at ICL Rotem, in the amount of about $ 60 million.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Table of Contents




Potash – Production, Sales and Closing Inventories



Below is a breakdown of production, sales
and closing inventories for potash in 2014 and 2013.



|                                       |  | Year Ended December 31,
|-------------------------------------- |  | -----------------------
|                                       |  | 2014                   
|                                       |  | (In thousands of tons) 
|Production                             |  |                        
|Sales to external customers            |  |                        
|Sales to internal customers            |  |                        
|Total sales (including internal sales) |  |                        
|Closing inventory                      |  |                        



Phosphates – Production and Sales



Below is a breakdown of production and
sales for fertilizers and phosphates in 2014 and 2013.



|                                          |  | Year Ended December 31,
|----------------------------------------- |  | -----------------------
|                                          |  | 2014                   
|                                          |  | (In thousands of tons) 
|Phosphate rock                            |  |                        
|Production of rock                        |  |                        
|Sales(*)                                  |  |                        
|Phosphate rock used for internal purposes |  |                        
|Fertilizers                               |  |                        
|Production                                |  |                        
|Sales(*)                                  |  |                        

____________________

| | (*) | To external customers.
| | --- | ----------------------



Geographical distribution of external sales
in 2014 and 2013.



|                  |  | Year Ended December 31,
|----------------- |  | -----------------------
|                  |  | 2014                   
|Europe            |  |                        
|Asia              |  |                        
|South America     |  |                        
|North America     |  |                        
|Rest of the world |  |                        
|Total             |  |                        



Potash



Sales:



The decrease in revenues in 2014,
compared with the previous year, stems from a decrease in selling prices, which led to a decrease in sales, in the amount of
about $ 325 million. In contrast, this decrease was partly offset by an increase in quantities sold, which led to an increase
in revenues, in the amount of about $ 103 million and from the impact of the change in the currency exchange rates, in the
amount of about $ 12 million.



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Table of Contents


Operating income



The decrease in operating income in 2014
stems mainly from a decrease in the selling prices of potash, which led to a decline, in the amount of about $ 325 million, an
increase in the cost of sales due to an increase in quantities sold, in the amount of about $ 19 million, and from an expense in
connection with a provision for arbitration relating to royalties in respect of prior periods, in the amount of about $ 8 million.
On the other hand, this decrease was partly offset by the impact of the increase in quantities of potash sold, in the amount of
about $ 103 million, a decline in the energy costs, in the amount of about $ 35 million, from a decline in shipping expenses, in
the amount of about $ 7 million, and from a decline in other operating expenses, in the amount of about $ 3 million.



Production and Sales



The quantity of potash sold to external
customers in 2014 is about 322 thousand tonnes higher than in 2013, mainly due to an increase in the quantities sold to China,
the United States and Europe, which was partly offset by a decline in the quantities sold to India and South America. Production
of potash in 2014 was about 12 thousand tonnes lower, than in 2013, as a result of a decrease in production in Israel, due to,
among other things, labor interruptions at ICL Dead Sea, which was partly offset by an increase in production in the United Kingdom
and in Spain.



Fertilizers and Phosphates



Sales:



Revenue from fertilizers and phosphates
derive from sales in and outside Israel of phosphate rock, fertilizers (including phosphate fertilizers, compound, liquid and fully
soluble fertilizers and slow-release and controlled-release fertilizers), phosphoric acid used as a raw material for fertilizer
production (“green acid”) and other products.



The decrease in sales in 2014 stems from
a decrease in selling prices of phosphate fertilizers, which caused a decrease in the sales of about $ 94 million. This decrease
was partly offset as a result of the change in the currency exchange rates, in the amount of about $ 18 million.



Operating income



The increase in operating income in 2014
derives mainly from a decrease in the prices of raw materials, in the amount of about $ 33 million, from a decline in salaries
expenses, in the amount of about $ 36 million, mainly as a result of the retirement of employees at ICL Rotem, from changes in
currency exchange rates, in the amount of about $ 3 million, a drop in shipping expenses due to a fall in the quantities sold in
the amount of about $ 2 million, and a decline in other operating costs, in the amount of about $ 22 million, due to, among other
things, a decrease in maintenance costs and costs of contractors. On the other hand, this increase was partially offset by a fall
in selling prices, in the amount of about $ 94 million, and the impact of the strike at ICL Rotem, in the amount of about $ 16
million, net of receipt of strike insurance reimbursement, in the amount of about $ 8 million. Operating income in 2013 was impacted
by a provision for early retirement at ICL Rotem, in the amount of about $ 60 million.



Production and Sales



Production of phosphate fertilizers and
phosphate rock, in 2014, was 157 thousand tonnes and 221 thousand tonnes lower, respectively, compared 2013, as a result of the
strike at ICL Rotem that took place in the first half of 2014 and the damage caused to ICL Rotem’s sulfuric acid production
facility.



Industrial Products



|                              |  | Year Ended December 31,
|----------------------------- |  | -----------------------
|                              |  | 2014                   
|                              |  | (In thousands of tons) 
|Sales(*)                      |  |                        
|Gross profit                  |  |                        
|Operating income (loss)       |  |                        
|Adjusted operating income(**) |  |                        

____________________

| | (*) | Includes revenues from inter-segment sales
| | --- | ------------------------------------------



| | (**) | Adjusted operating income is a non-IFRS number. See “Item 3. Key Information—A. Selected Financial Data”
for a definition of adjusted operating income and a reconciliation to the comparable IFRS measure.
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





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Adjusted items in 2014 include a provision
for arbitration relating to royalties in respect of prior periods, in the amount of about $ 141 million, and impairment in the
value of assets in the United States and Europe, in the amount of approximately $49 million. Adjusted items in 2013 include an
impairment of the value of assets, in the amount of $10 million, and a provision for waste removal in the amount of $25 million.



Geographical distribution of external sales
in 2014 and 2013:



|                  |  | Year Ended December 31,
|----------------- |  | -----------------------
|                  |  | 2014                   
|North America     |  |                        
|Europe            |  |                        
|Asia              |  |                        
|South America     |  |                        
|Rest of the world |  |                        
|Total             |  |                        



Sales



Sales of ICL-IP in 2014 were about $1,337
million – an increase of about $40 million compared with 2013. This increase stems from an increase in quantities sold, mainly
of bromine-based flame retardants, bromine-based and chlorine-based biocides used for water treatment, inorganic bromine products
and magnesium products, in the amount of about $65 million. This increase was partly offset by a decline in selling prices, mainly
of inorganic bromine products and bromine-based flame retardants, which reduced sales by about $22 million, as well as the impact
of the currency exchange rates, in the amount of about $3 million.



Operating income (loss)



The operating loss in 2014 totaled about
$62 million, compared with operating income of about $115 million in 2013. Adjusted operating income, as detailed below, in 2014,
amounted to about $128 million, compared with adjusted operating income in 2013, in the amount of about $150 million. The rate
of adjusted operating income out of the sales amounted to about 9.6% in 2014, compared with an adjusted operating income rate in
2013 of about 11.5%.



The decrease in operating income is primarily
a result of expenses incurred due to a provision for royalties arbitration relating to prior periods in the amount of about $141
million, an impairment of assets in subsidiaries in the US and Europe, in the amount of about $49 million, a decrease in selling
prices, which led to a decrease in profitability of about $22 million, the impact of changes in currency exchange rates, in the
amount of about $15 million, an increase in royalty expenses relating to the current period as a result of the arbitration ruling,
in the amount of about $12 million, an increase in shipping expenses due mainly to an increase in quantities sold, in the amount
of about $8 million, and an increase in other operating expenses, in the amount of about $4 million. This decrease was partly offset
by an increase in quantities sold and a change in the mix of the quantities of various products sold, which led to an increase
in income of about $24 million, and a decrease in raw-material and energy prices, which contributed about $15 million to profitability.
The operating income in 2013 was impacted by a provision for treatment of waste and an impairment of assets, in the amounts of
about $25 million and about $10 million, respectively.



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Performance Products



|                              |  | Year Ended December 31,
|----------------------------- |  | -----------------------
|                              |  | 2014                   
|                              |  | ($ millions)           
|Sales(*)                      |  |                        
|Gross profit                  |  |                        
|Operating income              |  |                        
|Adjusted operating income(**) |  |                        

____________________

| | (*) | Includes revenues from inter-segment sales
| | --- | ------------------------------------------



| | (**) | Adjusted operating income is a non-IFRS number. See “Item 3.Key Information—A. Selected Financial
                                                            Data” for a definition of adjusted operating income and reconciliation to the comparable IFRS measure. The adjusted
                                                            item in 2014 include an income from entry into the consolidation, in the amount of $36 million and, an impairment in value of
                                                            assets of subsidiaries in Europe, in the amount of $22 million, and an increase in costs due to the strike at ICL Rotem, in
                                                            the amount of approximately $9 million.
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Geographical distribution of external sales
in 2014 and 2013:



|                  |  | Year Ended December 31,
|----------------- |  | -----------------------
|                  |  | 2014                   
|North America     |  |                        
|Europe            |  |                        
|South America     |  |                        
|Asia              |  |                        
|Rest of the world |  |                        
|Total             |  |                        



Sales



Total sales in 2014 amounted to approximately
$1,614 million, an increase of approximately $39 million compared with 2013. This increase stems from the first-time consolidation
of companies acquired during 2014, in the amount of approximately $56 million, and from an increase in selling prices of approximately
$12 million. These impacts were partly offset by a decrease in quantities sold of approximately $21 million, and the impact of
changes in currency exchange rates, in the amount of approximately $7 million.



Operating income



The segment’s operating income in
2014 amounted to approximately $197 million, an increase of approximately $2 million compared with 2013. This increase stems mainly
from income due to entry into the consolidation, in the amount of $36 million, resulting from acquisition of the entire holdings
in Fosbrasil S.A. (hereinafter – “Fosbrasil”) which led to an increase from a rate of holdings of 44.25% to 100%,
resulting in the consolidation of, Fosbrasil in the Company’s financial statements, and from an increase in selling prices,
in the amount of approximately $12 million. This increase was partially offset by an impairment in value of assets in subsidiaries
in Europe, in the amount of approximately $22 million, an increase in costs due to the strike at ICL Rotem in the amount of approximately
$10 million (net of the insurance reimbursement received on account of the strike, in the amount of approximately $1 million),
a decline in quantities sold, net of first-time consolidation of companies acquired during 2014, in the amount of approximately
$9 million, and an increase in raw-material prices in the amount of approximately $5 million.



B.	LIQUIDITY AND CAPITAL RESOURCES



Overview





As at December 31,
2015, ICL had a balance of approximately $161 million in cash and cash equivalents. As at December 31, 2015, the Company's
net financial liabilities were approximately $3,230 million, including approximately $2,805 million of long-term debt
(excluding current maturities) and debentures, and approximately $673 million of short-term debt (including current maturities
of long-term debt).





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The Company’s policy is to secure
sources of financing for its operating activities and investments, while diversifying the sources of financing among various financial
instruments, and between local and international financing entities. The Company’s sources of financing are short- and long-term
loans from banks (mainly international banks) and institutional entities in Israel, debentures issued to institutional investors
in Israel and the United States, and securitization of customer receivables whereby some of our subsidiaries sell their customer
receivables in return for a cash payment. The Company’s policy is to fully utilize the various financing facilities according
to our cash flow requirements, alternative costs and market conditions.



ICL’s management believes that its
sources of liquidity and capital resources, including working capital, are adequate for its current requirements and business operations
and should be adequate to satisfy its anticipated working-capital requirements during the next twelve months, along with its capital
expenditures and other current corporate needs. We expect to incur additional long-term debt during 2016, subject to the market
conditions.



Distributions of dividends to ICL from
its subsidiaries and transfers of funds through certain countries may under certain circumstances result in the creation of tax
liabilities. However, taxation on dividend distributions and funds transfers have not had and are not expected to have a material
impact on the Company’s ability to meet its cash obligations.



In addition to the Company’s operating
expenses, including its debt service, capital expenditures and dividend payments, in 2015, the Company was required to make a one-time
payment, in the amount of $152 million, to the State of Israel as a result of the recent partial arbitration ruling concerning
royalties, issued on May 19, 2014. For additional information, see “Item 8. Financial Information—Legal Proceedings—Arbitration
concerning Royalties at ICL Dead Sea Ltd.” Moreover, in March 2015, the Company completed the acquisition of Prolactal,
a leading European producer of dairy proteins for the food and beverage industry, for a total consideration of about $90 million.
In June 2015, the Company acquired the balance of Allana’s shares (approximately 83.78%) for a total consideration of approximately
$112 million, of which approximately $96 million was in cash, and approximately $16 million was by means of issuance of 2,225,337
ordinary shares of the Company, and in October 2015, the Company completed the establishment of the Joint Venture (YPH JV) with
Yunnan Phosphate Chemicals Group Corporation Ltd. (“YTH”), China’s leading phosphate producer, for a total consideration
of approximately $180 million. In January 2016, the purchase of 15% of the equity of YTH was completed by the Company (this purchase
was one of the terms for closing the YPH deal), after the transaction was approved by the PRC Ministry of Commerce and the China
Securities Regulatory Commission (CSRC), for a total consideration of approximately $250 million. During 2015, the Company completed
the sales of the alumina, paper and water business (APW), the thermoplastic products for the footwear industry (Renoflex), the
hygiene products for the food industry (Anti Germ) and the pharmaceutical and gypsum businesses (PCG), for a total consideration
of approximately $364 million.



On October 29, 2015, the credit rating
company Standard & Poor’s revised its rating outlook of the Company’s credit, which is rated BBB (together with
the rating of the debentures) from stable to negative. The Company’s local credit rating in Israel by Standard and Poor’s
Maalot remained unchanged at ilAA, with a stable rating outlook.



Subsequent to the balance sheet date, Fitch Ratings Services revised its rating outlook of the Company's credit, which is
rated BBB (together with the rating of the debentures) from stable to negative.



Sources and Uses of Cash



The following table sets forth our cash
flows for the periods indicated:



|                                                    |  | Year Ended December 31,
|--------------------------------------------------- |  | -----------------------
|                                                    |  | 2015                   
|                                                    |  | ($ millions)           
|Net cash provided by operating activities           |  |                        
|Net cash used in investing activities               |  |                        
|Net cash provided by (used in) financing activities |  |                        



Operating Activities



Net cash flows from operating activities
are a significant source of liquidity for the Company. In 2015, the net cash provided by operating activities was approximately
$573 million, compared with approximately $893 million last year. Most of the decline in cash flows
from operating activities derives from the decline in the net income, mainly as a result of the strike at ICL Dead Sea and ICL
Neot Hovav, and after eliminating the capital gain in the amount of $364 million from sale of the companies that are not part of
the Company’s core businesses which are included in the cash flows from investing activities, an increase in the working
capital due to payment of royalties in respect of prior periods, payments relating to retirement of employees, changes in the fair
value of derivatives, changes in the balance of the trade receivables stemming from increased sales of potash upon conclusion of
the strike, an increase in current interest payments and a payment relating to an operating lease on the concession site acquired
in China. The cash flows from operating activities, together with the increase in the financial liabilities, were the source used
to fund payment of the dividends, investments in property, plant and equipment, and acquisition of operations.



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The cash flows from operating activities
in 2014 amounted to approximately $893 million, compared with approximately $1,127 million in 2013. Most of the decline in cash
flows from operating activities derives from the decline in income, after setting off the change in working capital in the “trade
payables” category, mainly as a result of the decline in fair value of derivatives (after setting off the effect of changes
in trade receivables and inventory) and from adjusting non-cash accounting expenses and income in respect of impairment of assets
and income from entry into consolidation.



Investing Activities



In 2015, the net cash used in investing
activities was approximately $547 million, compared with approximately $996 million in 2014. The decrease in cash used in investing
activities derives mainly from a drop in investments in property, plant and equipment, mainly as a result of the strike at ICL
Dead Sea and ICL Neot Hovav (approximately $502 million compared to approximately $752 million) after setting off the effect of
payments paid to property, plant, and equipment suppliers in 2015 and business combinations, in the amount of approximately $351
million. These impacts were partially offset by the sale of companies that are not part of the Company’s core businesses,
in the amount of approximately $364 million and an increase in investments in intangible assets.



In 2014, net cash used in investing activities
was approximately $996 million, compared with approximately $840 million in 2013. In 2014, investments in property, plant, and
equipment declined, mainly as a result of the completion in 2013 of the major part of the work on the construction of a partition
in the dikes that surround Pond 5 at the Dead Sea. The cash flows used for investments in property, plant, and equipment in 2014
declined compared with 2013 (approximately $752 million compared to $827 million) as a result of the decline in said investments
after setting off the effect of payments paid to property, plant, and equipment suppliers. Nonetheless, the cash flow used in investing
activities increased in 2014, mainly as a result of the increase in payments for business combinations, investments in intangible
assets, and investments in investees treated under the equity method.



Financing Activities



Net cash provided by financing activities
in 2015 amounted to approximately $15 million, as compared to $70 million in 2014. The primary reason for the net decrease in cash
from financing activities is the reduction in the net amount of the long-term and short-term loans taken out in 2015, in the amount
of $363 million, in contrast with $916 million in 2014, mainly due to a special dividend payment in March 2014, in the amount of
$500 million, and the decrease in investment activities in 2015, which was partly offset by the decrease in cash flow from current
activities, as specified above. Nonetheless, the Company’s net debt increased as a result of first-time consolidation of
the net financial liabilities of the YPH JV in China.



The net cash provided by financing activities
in 2014 amounted to $70 million, compared to $309 million used in financing activities in 2013. The primary factor causing the
increase in net cash provided by financing activities was the increase in the taking out of net long-term loans in 2014 in the
amount of approximately $916 million, compared with approximately $325 million in 2013, as a result of the increase in investment
activities in 2014 and the decrease in cash flow from current activities, as specified above, and the increase in dividends paid
in the amount of approximately $211 million as a result of a special dividend in the amount of approximately $500 million that
was paid in March 2014.



As at December 31, 2015, the Company’s
non-current liabilities consisted of loans from financial institutions in the amount of approximately $1,740 million and debentures
in the amount of approximately $1,065 million. For information about the currencies in which the Company’s liabilities are
denominated and their interest rates, see Note 17 to the Company’s financial statements.
As at December 31, 2015, the Company had approximately $519 million of unutilized long-term credit lines.



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Subsequent to the balance sheet date, the Company increased its financial liabilities in order to finance the purchase of
15% of the shares of the public company Yunan Yuntianhua, the shares of which are traded on the Chinese stock exchange, in
the aggregate amount of approximately $250 million, through the utilization of long-term credit lines, in the amount of approximately
$200 million.



A portion of ICL’s loans bear variable
interest rates based on the short-term LIBOR rate for a period of one to twelve months, plus a margin as defined in each loan agreement.
Therefore, the Company is exposed to changes in the cash flows arising from changes in these interest rates. Some of the loans
and debentures issued by ICL bear fixed interest for the entire loan period. The Company hedges part of this exposure using financial
instruments to fix the range of the interest rates, in order to conform the actual interest-rate structure to the projections regarding
the anticipated developments in the interest rates.



For a description of material financial
covenants in the Company’s loan agreements and any potential risk relating to compliance with them – see Note 17 to
the Company’s financial statements.



Credit Agreements



In December 2010, the Company received
a loan from a European Bank in the amount of €100 million. The loan was repaid on December 15, 2015.



On March 23, 2015, ICL entered into an
agreement with a group of eleven international banks, which will provide ICL a revolving credit facility in the total amount of
$1,705 million, on the following terms:



| | a. | The loan agreement is for a term of five full years from the signing date of the credit facility.
| | -- | -------------------------------------------------------------------------------------------------



b.	The loan agreement does
not include an undertaking for minimum use of the credit facility. A non-utilization fee will be at the rate of 0.21% per year.



| | c. | Annual interest will apply to the amount of the loan actually used, scaled to the amount of the credit facility actually used,
as follows:
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------



|·Up to 33% use of the credit:       | Libor + 0.7%.                          
|----------------------------------- | ---------------------------------------
|·From 33% to 66% use of the credit: | Libor + 0.8% (on the entire sum used). 
|·66% or more use of the credit:     | Libor + 0.95% (on the entire sum used).



| | d. | ICL has an option to choose between a dollar loan and a euro loan.
| | -- | ------------------------------------------------------------------



| | e. | Under the loan agreement, ICL undertook restrictions that include financial covenants (which are identical to the financial
covenants applicable to the Company’s prior loans, as detailed in Note 17D), a cross-default mechanism and a negative pledge.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



This loan agreement replaced credit facilities
taken out in March 2011 and in December 2011 in the aggregate amount of $1,325 million for a period of five years and credit lines
in the amount of $125 million that were taken out in the beginning of 2014, all of which were repaid during the period of the report.
As of December 31, 2015, this credit facility has been utilized in the amount of $1,330 million. Subsequent to the balance sheet
date, the loan agreement termination date was extended for a period of one year, until March 2021. The amount and credit terms
of the loan agreement remain unchanged.



In March 2014, the Company entered into an agreement with a European bank, under which the bank granted a credit facility
of €100 million and $100 million. This credit facility is for a period of six years and is payable in entirety at the
end of the period. The dollar credit facility bears variable interest on the basis of Libor plus a margin of between 0.9%
and 1.4%. The euro credit facility bears variable interest on the basis of Euribor plus a margin of between 0.9% and 1.4%.
The non-utilization commission is 0.32% per year. On March 23, 2015, the dollar credit facility was decreased to $35 million
on the same terms. As at December 31, 2015, both the dollar and the euro credit facilities were not utilized.







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On September 11, 2012, the Company received
a loan in the amount of $50 million from a third party. The loan was repaid on December 11, 2015, and another loan was taken out,
in the same amount, bearing interest at the three-month Libor rate plus a margin of 0.6%. This loan will be renewed every three
months.



In December 2012, the Company entered into
a credit facility agreement with a European bank for a loan of approximately €100 million. As at December 31, 2015, the Company
utilized the full amount of the euro facility and the loan was fixed as a dollar loan, in the amount of approximately $129 million.
This amount is scheduled for repayment in December 2019. The interest rate on this credit is LIBOR plus 1.4%.



In November 2013, the Company signed a
loan agreement with several institutional entities, in the amount of approximately NIS 600 million, bearing fixed interest at a
rate of 4.74%. The loan is payable in installments starting from 2015 and up to 2024. As at December 31, 2015, the total amount
of the loan is approximately $148 million (approximately NIS 576 million).



In June 2014, the Company signed loan agreements
with a number of international institutional entities in the aggregate amount of approximately €57 million and approximately
$45 million. The proceeds of these loans were received in July 2014. The loans are to be repaid in a period of between five to
ten years, where some of the loans bear fixed interest in the range of 2.1% to 3.75%, some bear variable interest based on LIBOR
plus 1.55% and some bear variable interest based on Euribor plus a margin of 1.4% to 1.7%.



In December 2014, the Company signed a
loan agreement in the amount of 161 million Brazilian reals with a European bank. The loan is payable in installments starting
from 2015 and running up to 2021. The loan bears CDI interest (Brazilian Interbank Certificates of Deposits) plus a margin of 1.35%.
As of December 31, 2015, the total amount of the loan is approximately 149 million Brazilian reals (approximately $38 million).



During 2015, the Company received a number
of short-term loans from Israeli banks. As at December 31, 2015, the total amount of the loans was approximately $30 million.



In October 2015, as part of establishment
of the YPH JV, the Company consolidated for the first time the short-term loans of the joint venture, in the amount of 1,682 million
Chinese yuans (about $259 million), which were received from a Chinese bank and from the partner in the YPH JV. Most of the loans
bear annual interest at a fixed rate of 4.6%-5.89% and they are scheduled for repayment in 2016.



Securitization Transaction



In July 2015, the Company and certain Group
subsidiaries (hereinafter – “the Subsidiaries”) signed a series of agreements regarding a securitization transaction
with three international banks for the sale of their customer receivables to a foreign company which was established specifically
for this purpose and which is neither owned nor controlled by the ICL Group (hereinafter – “the Acquiring Company”).



This agreement replaces the prior securitization
agreement, in the amount of $350 million, which came to an end in July 2015. The main structure of the new securitization agreement
is the same as the prior securitization agreement. The Company’s policy is to utilize the securitization limit based on its
cash-flow needs, alternative financing sources and market conditions. The new securitization agreement will expire in July 2020.
In the agreement, ICL undertook to comply with a financial covenant whereby the ratio of net debt to EBITDA will not exceed 4.75.
If ICL does not comply with the said ratio, the Acquiring Company is allowed to discontinue acquiring new trade receivables (without
affecting the existing acquisitions). As at the date of this Annual Report, ICL is in compliance with the aforementioned financial
covenant.



The Acquiring Company finances acquisition
of the debts by means of a loan received from a financial institution, which is not related to ICL, which finances the loan out
of the proceeds from the issuance of commercial paper on the U.S. commercial paper market. The repayment of both the commercial
paper and the loan are backed by credit lines from the Lending Banks. The amount of cash that will be received in respect of the
sale of the customer debts in the securitization transaction will be up to $405 million.



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The acquisitions are on an ongoing basis,
such that the proceeds received from customers whose debts were sold are used to acquire new trade receivables. The period in which
the Subsidiaries are entitled to sell their trade receivables to the Acquiring Company is five years from the closing date of the
transaction, where both parties have the option at the end of each year to give notice of cancellation of the transaction.



The selling price of the trade receivables
is the amount of the debt sold, less the calculated interest cost based on the anticipated period between the sale date of the
customer debt and its repayment date. Upon acquisition of the debt, the Acquiring Company pays the majority of the debt price in
cash and the remainder in a subordinated note, which is paid after collection of the debt sold. The rate of the cash consideration
varies according to the composition and behavior of the customer portfolio. The Subsidiaries handle collection of the trade receivables
included in the securitization transaction, on behalf of the Acquiring Company.



In addition, as part of the agreements
a number of conditions were set in connection with the quality of the customer portfolios, which gives the Lending Banks the option
to end the undertaking or determining that some of the Subsidiaries, of which the customer portfolios do not meet the conditions
provided, will no longer be included in the securitization agreement.



The securitization of trade receivables
does not meet the conditions for disposal of financial assets prescribed in International Standard IAS 39, regarding Financial
Instruments – Recognition and Measurement, since the Group did not transfer all of the risks and rewards deriving from the
trade receivables. Therefore, the receipts received from the Acquiring Company are presented as a financial liability as part of
the short-term credit. As at December 31, 2015, utilization of the securitization facility and the balance of the trade receivables
included in this framework amounted to $285 million (as at December 31, 2014 – approximately $290 million).



Once the Company has transferred its trade
receivables, it no longer has the right to sell them to another party. In the case of a credit default, the Company bears 30% of
the total balance of the trade receivables.



2005 Debentures



In 2005, the Company issued debentures
to institutional investors in a private issuance in the United States in the amount of $125 million bearing fixed interest. As
at December 31, 2014, the outstanding balance of the debentures was approximately $67 million, bearing fixed interest at a rate
of 5.72%. On March 3, 2015, the debentures were repaid in full.



2013 Debentures



In November 2013, a wholly-owned and controlled
subsidiary of the Company entered into an agreement with institutional and international investors to make a private offering in
the United States of unregistered debentures in an amount of $275 million. The proceeds in respect of the issuance were received
in January 2014.



The debentures were issued in three series,
as follows:



| | A. | $84 million of debentures with a repayment date of January 15, 2021 bearing interest at a fixed rate of 4.55%.
| | -- | --------------------------------------------------------------------------------------------------------------



| | B. | $145 million of debentures with a repayment date of January 15, 2024 bearing interest at a fixed rate of 5.16%.
| | -- | ---------------------------------------------------------------------------------------------------------------



| | C. | $46 million of debentures with a repayment date of January 15, 2026 bearing interest at a fixed rate of 5.31%.
| | -- | --------------------------------------------------------------------------------------------------------------



2014 Debentures



On December 2, 2014, the Company
completed the private issuance of senior notes pursuant to Rule 144A and Regulation S under the U.S. Securities Act of 1933,
as amended, to institutional investors in the U.S., Europe, and Israel, in an aggregate principal amount of $800 million,
scheduled for repayment on December 2, 2024. The notes bear an annual coupon of 4.5% to be paid in semi-annual installments,
on June 2 and December 2 of each year. The notes were issued at a price of 99.285% to yield 4.59%. The proceeds received by
the Company for the debentures amount to about $794 million. The notes have
been rated BBB (stable) by Standard and Poor’s and by Fitch Rating Ltd. The notes are registered for trading in the TACT
Institutional, by the Tel-Aviv Stock Exchange Ltd.



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On October 29, 2015, Standard & Poor’s
revised its rating outlook of the Company’s credit, which is rated BBB (together with the rating of the debentures) from
stable to negative.





Subsequent to balance sheet
date, Fitch Ratings Services revised its rating outlook of the Company’s credit, which is rated BBB (together with the rating
of the debentures) from stable to negative.





Critical Accounting Policies and Estimates



The following is a description of certain
key accounting policies on which our financial condition and results of operations are dependent. The key accounting policies generally
involve complex quantitative analyses or are based on subjective judgments or assumptions. Management bases its estimates and judgments
on historical experience and on various other factors that are believed to be reasonable under current circumstances. Actual results
may differ from these estimates if assumptions and conditions change.



Employee Benefits



According to International Standard IAS
19, some of our employee benefit plans constitute a defined benefit plan as defined in IAS 19. Such plans principally include liabilities
for pension and severance benefits.



In computing pension liability, we use
various assessments. These assessments include, among other things, the interest rate for discounting our pension liability and
the pension fund assets, assessments regarding the long-term increase in wages and an assessment of the life expectancy of the
group of employees entitled to a pension. Assessment of the interest rate for purposes of discounting our pension liability and
the pension fund assets is based on the rate of return on bonds of corporations operating in countries where an active market exists
for corporate bonds and on the rate of return on government bonds for companies operating in countries where there is no active
market for corporate bonds. The rate of return on long-term bonds changes according to market conditions. As a result the discount
rate will also change as will the pension liability and the pension fund assets will change accordingly. The assessment regarding
the increase in wages is based on our forecasts in accordance with past experience and existing labor agreements. Such assessments
may be different than the actual wage increases. The life expectancy assessment is based on actuarial research published in each
country. This research is updated every several years, and accordingly the life expectancy assessment may be updated.



Measurement of the liability for severance
pay is based upon an actuarial assessment, which takes into account various assessments including, among others, the future increase
in employee wages and the rate of employee turnover. The measurement is made on the basis of discounting the expected future cash
flows according to the interest rate on high ranking highly rated corporate bonds. In addition, the severance pay deposits are
measured according to their fair value. Changes in the assumptions used for the calculation of the liability for severance pay
and the related plan assets for severance pay could increase or decrease the net liability for severance pay recognized.



Environmental and Contingent Liabilities



We produce fertilizers and chemical products
and, therefore, are exposed in our ordinary course of business to obligations and commitments under environmental and related laws
and regulations. We recognize a liability in our books when such liability is expected, is derived from a liability event that
has already occurred and can be reliably measured. Assessment of the liability is based mostly on past experience, familiarity
with the legal requirements concerning our areas of operation, as well as assessments regarding contingent claims existing against
us based on opinions of legal advisors and other experts. As explained in Note 23 to our audited financial statements, a number
of lawsuits are pending against us, the results of which may have a material impact on our results of operations.



When assessing the possible outcomes of
legal claims that were filed against us and our investee companies, we base our assessments on the opinions of our legal advisors.
These opinions of the legal advisors are based on their best professional judgment, and take into consideration the current stage
of the proceedings and the legal experience accumulated with respect to the various matters. As the results of the claims will
ultimately be determined by the courts or as part of a settlement, they may be different from these estimates by us and our legal
advisors.



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Impairment of Assets IAS 36



We examine at every reporting date whether
there have been events or changes in circumstances indicating that there has been an impairment of one or more non-monetary assets.
When there are indications of impairment, an examination is made as to whether the carrying amount of the investment can be recovered
from the discounted cash flows anticipated to be derived from the asset, and if necessary, we record an impairment provision up
to the amount of the recoverable value. Assessment of the impairment of goodwill and of other intangible assets having an indefinite
useful is performed once a year or more frequently when indications of impairment exist.



The recoverable value of the asset or the
cash generating unit is determined based on the higher of the fair value of the asset less realization costs and the present value
of the future cash flows expected from the continued use of the asset in its existing state, including the cash flows expected
upon removal of the asset from service and its eventual sale (value in use).



The future cash flows are discounted to
their present value using a discount rate that reflects assessments of the market participants of the time value of money and the
risks specific to the asset. The estimates regarding cash flows are based on past experience with respect to this asset or similar
assets, and on our best assessments regarding the economic conditions that will exist during the asset’s remaining useful
life.



The estimates of the future cash flows
are based on our forecasts. Since the actual cash flows could be different than our forecasts, the amount of the realizable value
determined in the examination of impairment in value may change in succeeding periods, such that in the future an additional reduction
of the value of the assets or elimination of a reduction recorded in prior periods may be required.



Business Combinations



We are required to allocate the cost of
acquiring companies and operations in business combinations on the basis of the estimated fair value of the assets and liabilities
acquired. We use the valuations of external independent appraisers and internal valuations for purposes of determining the fair
value. The valuations include assessments and estimates of management concerning forecasts of the expected cash flows from the
acquired business, and models for calculating the fair value of the acquired items and their depreciation period. Management’s
estimates have an impact on the balance of assets and liabilities acquired and the depreciation and amortization in the statement
of income. Management’s estimates of the forecasted cash flows and useful lives of the acquired assets may differ from the
actual results.



Taxes on Income



The Company and the group companies are
subject to income taxes in numerous jurisdictions and, therefore, our management is required to exercise considerable judgment
in order to determine the aggregate provision for taxes. A provision in respect of uncertain tax positions is recorded where it
is more likely than not that a flow of economic resources will be required in order to discharge the obligation. For details –
see Note 20 to the Company’s financial statements. In the estimation of Company Management, based on its legal advisors,
the chances that at the end of the appeal process the Company’s contentions will be accepted exceed the chances that they
will be rejected and, accordingly, no provision for tax has been included in the financial statements as a result of said assessment.



The deferred taxes are computed according
to the tax rates expected to apply when the timing differences are realized, as stated in Note 3 to our audited financial statements.
The tax rate expected to apply upon the realization of the timing differences applying to Benefited Enterprises in Israel entitled
to tax benefits is based on forecasts of future revenues to be earned by such Benefited Enterprises in proportion to our total
revenues. For additional information about Benefited Enterprises in Israel, see “Item 10. Additional Information—E.
Taxation.” Changes in these assessments could lead to changes in the book value of these tax assets, the tax liabilities
and the results of operations.



Inventories



Inventories are measured in the financial
statements at the lower of cost or net realizable value. The net realizable value is an estimate of the selling price in the ordinary
course of business, less the estimate of the cost of completion and the estimate of the costs needed to effect the sale. The selling
price is estimated on the basis of the selling price expected at the time of realization of the inventories. A decrease in the
expected selling price could cause a decrease in the book value of the
inventories and therefore our results of operations. Raw materials are written down to realizable value, which is based on the
realization values of the inventories of the finished products in which they are included, only when the finished products in which
they are included are expected to be sold at prices below cost. In cases where the replacement price of raw materials serves as
the best available evidence for realizable value, measurement of realizable value is based on the replacement price. A decline
in the expected replacement value could give rise to a decline in the value of the inventories of raw materials in the books and
our results of operations.



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Part of the raw materials, work in process
and finished goods are in bulk. The quantities are based on estimates made, for the most part, by third parties who measure the
volume and density of the inventory. Variances in the estimates used in determining the assessments may cause a change in the value
of the inventory in the books.



Principal Capital Expenditures and Divestitures



We had capital expenditures of approximately
$947 million, $958 million and $1,270 million in 2013, 2014 and 2015, respectively. The above capital expenditures include investments
in fixed and intangible assets including such items which were consolidated as part of business combinations in the said years.
Our principal capital expenditures since January 1, 2013 have consisted of work on the dike surrounding the evaporation ponds
of our Fertilizers segment at the Dead Sea, construction work with respect to a new power station at Sodom, investments as part
of a plan to gradually increase the production capacity of the Sodom plans, investments to increase the production capacity of
our mines in Europe and improvements in our logistics setup and the purchase and refurbishing of isotanks for transporting bromine.
We are financing our capital expenditures from cash flows from operations and from credit facilities.





Our capital expenditures
in 2015 are primarily in Israel and Spain, and include expansion of our potash production capacity at the Suria site in Spain (mine,
facilities and logistics), the new power station in Sodom and continuation of the investment in the Harmonization project (planning
and establishment of one centralized ERP system, for each company). In addition, the Company is the examination, planning and evaluation
stages in connection with large projects in Africa and China. The Company is funding these capital expenditures using cash flows
from operations and our credit facilities. The Company is continuing the arrangement stemming from the agreement between Dead Sea
Works and the State of Israel regarding financing of the costs of the dike (the temporary defenses stage) pursuant to which Dead
Sea Works will bear 39.5% of the financing and the State of Israel will bear the rest. For additional details regarding this agreement
– see Note 23 to our audited financial statements.





According to the Company’s strategy,
from time to time various possibilities are examined in connection with its non-core activities, including the sale thereof. Accordingly,
in 2015 the Company completed sale of the APW (Alumina, Paper, Water), Rhenoflex, Pharma/Cosmetics/Gypsum, Medentech and the Anti-Germ
businesses, which produced over $350 million positive cash flows. In March 2016 we successfully completed the sale of Clearon (chlorine-based
biocide activities in USA) in accordance with ICL strategy. Additional divestiture opportunities in our non-core businesses include
IDE.



C.	RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.



Research and development



In 2015, we significantly expanded our
research activities with third parties in our core areas: agriculture, food, and industrial materials. Also included in these activities
are: establishment of an agronomical research collaboration between ICL group and the Volcani Center, whose activities are based
in Gilat in the Southern part of Israel, and establishment of a research center in Kunming in China for development of phosphorous-based
processes and products as part of the transaction for establishment of the YPH JV (joint venture). The incubator (ICL Innovation)
operations, which focus mainly on technologies in the initial stages of development and are high risk in comparison with ordinary
research and development projects, include 7 on-going projects and 4 new approved ones. During 2015, two projects were transferred
from ICL Innovation to two ICL business units for further development and commercialization.



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The cross-segment development teams that
were set up in 2014 by the ICL R&D Management Forum, headed by the CTO, are continuing to work together based on common areas
of interest and operations in order to promote the application of new products and technologies.



Several of the defined goals of the research
and development operations are directed at the expansion of our new products and new technologies portfolio, activities to improve
processes in our manufacturing facilities (reducing costs per ton), and cultivating technological human capital.



Our R&D expenses, net were $83 million,
$87 million and $74 million in 2013, 2014 and 2015, respectively.



Our Fertilizers segment’s R&D
activities in 2015 focused on the following items:



| | · | Improvement of processes and reduction of costs in the phosphates and potash plants;
| | - | ------------------------------------------------------------------------------------



| | · | Improvement of the quality of the products being sold;
| | - | ------------------------------------------------------



| | · | Research regarding environmental protection, including development of methods for reducing and treating effluents;
| | - | ------------------------------------------------------------------------------------------------------------------



| | · | Analysis of alternative methods for increasing production capacity of carnallite;
| | - | ---------------------------------------------------------------------------------



| | · | Production of a new fertilizer from wastewater flows;
| | - | -----------------------------------------------------



| | · | Further analysis of adaptation of various types of phosphate rock (bituminous and brown phosphates) for the production of phosphoric
acid and its downstream products as part of an effort to exploit and increase existing phosphate reserves;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Development of a new process for production of white acid at the China site;
| | - | ----------------------------------------------------------------------------



| | · | Development of products having a high-acid content allowing diverse applications of soluble fertilizers;
| | - | --------------------------------------------------------------------------------------------------------



| | · | Development of controlled-release products with coating materials of compositions and thicknesses unlike those currently available
in the market with the addition of micro-nutrients;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Development of controlled-release fertilizers with improved environmental profile;
| | - | ----------------------------------------------------------------------------------



| | · | Development of applications preserving water and improving availability of the fertilizers around the root;
| | - | -----------------------------------------------------------------------------------------------------------



| | · | Geological examination of our concessions in Spain in order to ascertain whether a significant expansion is possible;
| | - | ---------------------------------------------------------------------------------------------------------------------



| | · | Examination of technologies for improvement of the production of polysulphate on the Company’s site in the UK; and
| | - | ------------------------------------------------------------------------------------------------------------------



| | · | Development of a manufacturing process for potassium and potassium sulfate in a project of ICL in Ethiopia.
| | - | -----------------------------------------------------------------------------------------------------------



Our Fertilizers segment’s total R&D
expenses in 2015 were approximately $22 million.



The R&D activities of our Industrial
Products segment are part of the Company’s strategic plan. The global research activities are based on internal research
together with joint activities with a wide range of universities and research institutes along with other long-term innovative
activities. The units execute activities directed at the present and future needs of the market. The activities will be focused
primarily on identifying additional uses for bromine or its derivatives, as well as developments in the area of magnesia and phosphorus-based
flame retardants.





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The R&D activities of our Industrial
Products segment are as follows:



| | · | Brominated polymers: continued development of brominated flame retardants, which are destined to become the generation of environmentally
friendly flame retardants, and potential future substitutes of existing products such as DECA and FR 1410.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Textiles: continued development of TexFRon®, a series of textile flame-retardant products. TexFRon® 4002 is an effective
and environmentally friendly solution for diverse textile products, replacing DECA and offering a transparent and laundry-durable
solution that is not currently available on the market. In the prior year, nylon-intensive flame-retardant products were developed
to satisfy an unmet need in the market. In addition, unique flame-retardant system solutions were introduced to the market that
do not include Antimony Trioxide (ATO)). These green solutions are creating interest among the Company’s customers and are
being commercially evaluated.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Energy storage: continued development of bromine-based solutions for storing energy using diverse technologies.
| | - | ---------------------------------------------------------------------------------------------------------------



| | · | Ecological research to improve sewage treatment systems, and to reduce air emissions and solid waste.
| | - | -----------------------------------------------------------------------------------------------------



| | · | Biocides: continued development of new materials for water treatment and prevention of biofilm (algae) in irrigation systems
and water coolants for industry. In addition, there is research activity for polymer synthesis with biocidal activity.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Phosphorus-based products: development of new reactive phosphorus-based products and/or integration of a
                                                                                                               phosphorus/bromine chemistries mainly flame-retardants for the polyurethane foam (i.e., flexible and rigid foam). A common
                                                                                                               application of polyurethane flame retardants is in insulation used in the construction, furniture and automobile industries.
                                                                                                               In addition, new clear solutions are been developed.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Support of production: improving product quality and lowering production costs by changing and improving processes, while using
the principles of green chemistry (for example, research on the reduction of use of organic solvents in production processes).
There is extensive use of a “sustainability index” model for new products, which includes various parameters relating
to product properties.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Engineering: research in the area of building materials in order to overcome problems of accelerated wear and tear of building
materials, corrosion prevention, equipment adaptation, and experiments in accelerated obsolescence.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our Industrial Products segment’s
total R&D expenses in 2015 were approximately $25 million.



The principal R&D activities of our
Performance Products segment in 2015 were as follows:



Advanced Additives - Phosphoric acid varieties
and its downstream products, phosphate salt specialties:



| | · | Process development for improving competitiveness as a global supplier for phosphoric acid specialties;
| | - | -------------------------------------------------------------------------------------------------------



| | · | Flame retardants based on phosphate salts for the automotive industry and for paints & coatings;
| | - | ------------------------------------------------------------------------------------------------



| | · | New cost effective defoamers were introduced into the EU market to service the Mediterranean region during the 2015 European
Coating Show. Downstream polyphosphate and polyacrylate dispersants were introduced into the battery market and interior architectural
water-based paints. This also included intellectual property filing for a novel additive which allows customers to eliminate or
use less biocides in interior paints as the new biocide labeling regulations were promulgated and began to be enforced in mid-2015;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Voice-of-customer (VOC) efforts led to the approval of two new corrosion inhibitors for the architectural market in the Do-It-Yourself
(DIY) segment. Sales of organic corrosion inhibitors began in 2015;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Joint development work with three key customers led to the qualification and approval of our dicalcium phosphate/hydrotalcite
corrosion inhibitor for epoxy coatings designed for potable water applications. This patented ICL technology will give
us a unique position in this market currently regulated by the National Sanitation Foundation (NSF);
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | · | As part of our innovation strategy, several new VOC driven projects entered the stage-gate process and were bucketed into two
areas of focus: Coatings & Constructions. The Coatings area was further subdivided into wood, metal and concrete sub-segments
which together represent an addressable market of approximately $2.5 billion for additives. Construction is comprised of roads
& roofs in which asphalt was the primary construction material;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | R&D projects in Coatings and Construction were chosen based on their ability to address VOC-derived unmet needs in Adhesion,
Durability, and Fire Protection;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Fire Chemicals: Long-term retardant, fire suppressant foam and water enhancers improve the effectiveness of aerial firefighting.
We successfully upgraded three new retardants in 2015 in what was a remarkable year for the Fire Safety business.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Food Specialties - Development of innovative formulations for modifying texture and stability of processed food:
| | - | ----------------------------------------------------------------------------------------------------------------



| | · | New dairy ingredient-based products partly developed through new process technology in co-operation with subsidiary Prolactal/Rovita,
such as whey protein isolates and concentrates for dairy beverages, cheese and bakery applications.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Investigation of properties of vegetable and milk proteins as components for complex formulations, including fundamental research
on process parameters;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Providing a tool box for modifying texture and stability of food products, including meatless meat (vegetarian meat substitutes).
cheese boosters and beverage fortification.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Development of novel products by exploiting synergies between food phosphates, proteins, starches and fibers; stabilization
systems for sauces, dessert and bakery products;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Continued development uses of low-sodium salts based on raw materials from the Dead Sea and integration of SALONA into spice
blends for meat applications and culinary sauces.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our Performance Products segment’s
total R&D expenses in 2015 were approximately $14 million.



In the past, some of our Israeli subsidiaries
received grants from the Office of the Chief Scientist in the Israeli Ministry of the Economy (“OCS”) under the Law
for the Encouragement of Industrial Research and Development, 1984, and the regulations promulgated thereunder (“the R&D
Law”). In general, the grants are required to be repaid in the form of royalties on the revenues, if any, generated by the
funded projects, plus interest. Our remaining financial obligations under the grants are minimal. According to the R&D Law,
the transfer of OCS-funded know-how is subject to OCS approval and to possible payments to the OCS in the event of transfer of
the know-how outside of Israel.



Intellectual property



We believe that protecting our intellectual
property is one of the methods of protecting and developing our business activities.



Our Speciality Fertilizers Business has
13 groups of patents, mostly related to derivatives of the Osmocote brand, for specific soluble fertilizers, production technology
of coatings (P1, P2), and for applications of controlled fertilizer compounds and plant protection products.



Industrial Products has approximately 278
patents that have been registered over the years and approximately 159 patent applications that are in various stages of review
around the world. As at the date of this Annual Report, these patents protect a relatively small portion of our Industrial Products
segment’s products. In 2015, 44 new patent applications filed by our Industrial Products segment were approved.



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Our Performance Products segment has, in
various countries, approximately 1,012 registered trademarks and approximately 302 registered patents.



We do not believe that the expiration of
any patent or violation by any of our entities would have a material effect on our operations or our financial results.



D.	TREND INFORMATION



Trend information is included throughout
the other sections of this Item 5. In addition, the fluctuations in the operating results may continue in the upcoming quarters.
Specific material drivers of these trends are identified in the discussion above with respect to the years ended December 31, 2013,
2014 and 2015. Seasonality of our business is included in Item 4. Information on the Company—B. Business Overview.



E.	OFF-BALANCE SHEET ARRANGEMENTS



As of December 31, 2015, we had no off-balance
sheet arrangements.



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F.	CONTRACTUAL OBLIGATIONS



The following table presents information
related to our contractual obligations, including estimated interest payments, as of December 31, 2015.



|                                                                |  | As at December 31, 2015
|--------------------------------------------------------------- |  | -----------------------
|                                                                |  | Total amount           
|                                                                |  | ($ millions)           
|Credit from banks and others (not including current maturities) |  |                        
|Trade payables                                                  |  |                        
|Other payables                                                  |  |                        
|Operating lease obligations                                     |  |                        
|Purchase obligations(1)                                         |  |                        
|Employee Benefits                                               |  |                        
|Non-convertible debentures                                      |  |                        
|Long-term bank loans (including current maturities)             |  |                        
|Total                                                           |  |                        

____________________





| | * | Subsequent to the date of the report, the Company financed the purchase
of 15% of the shares of the public company Yunan Yuntianhua, the shares of which are traded on the Chinese stock exchange, in the
aggregate amount of approximately $250 million.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | (1) | This information excludes ordinary course agreements for purchases within the next twelve months.
| | --- | -------------------------------------------------------------------------------------------------



|                                                                             |  | As at December 31, 2015
|---------------------------------------------------------------------------- |  | -----------------------
|                                                                             |  | Total amount           
|                                                                             |  | ($ millions)           
|Financial liabilities – derivative instruments utilized for economic hedging |  |                        
|Interest rate swaps and  options                                             |  |                        
|Foreign exchange derivatives                                                 |  |                        
|Derivative instruments on energy and marine transport                        |  |                        
|                                                                             |  |                        



G.	SAFE HARBOR



The safe harbor provided in Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act, or the statutory safe harbors, shall apply to forward-looking
information provided pursuant to “Item 5. Operating and Financial Review and Prospects—F. Contractual obligations”
above. For our cautionary statement on the forward-looking statements in this Annual Report, see “Special Note Regarding
Forward-Looking Statements,” on page  ii of this Annual Report.



Item 6.  Directors, Senior
Management and Employees



A.	DIRECTORS AND OFFICERS







The following table lists
the names and ages of our directors as of the publication date of this Annual Report. The mailing address of our directors is c/o
Israel Chemicals Ltd., 23 Aranha Street, Millennium Tower, Tel Aviv, 61070, Israel.







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|Name                 | Age | Position                                    
|-------------------- | --- | --------------------------------------------
|Nir Gilad**          | 59  | Executive Chairman of the Board of Directors
|Avisar
    Paz       | 59  | Director                                    
|Aviad
    Kaufman    | 45  | Director                                    
|Ron
    Moskovitz    | 53  | Director                                    
|Sagi
    Kabla       | 39  | Director                                    
|Ovadia
    Eli       | 71  | Director                                    
|Yaacov
    Dior      | 72  | External Director                           
|Dr. Miriam
    Haran | 66  | External Director                           
|Geoffery
    Merszei | 65  | Director                                    
|Shimon
    Eckhaus   | 65  | Director                                    
|Stefan
    Borgas    | 51  | Director                                    



____________________





| | * | Messrs. Yair Orgler and Victor Medina finished their
tenures as Company directors in 2015.
| | - | ------------------------------------------------------------------------------------------



| | ** | Mr. Nir Gilad will retire from the
company's Board at September 1, 2016. The Board has formed a Search Committee comprised of two board members: Mr. Yaacov Dior,
Chairman of the HR and Compensation Committee and Mr. Ron Moskovitz. The Committee will determine its order of work and will
identify suitable candidates and propose the nomination to the full Board for election, no later than by May 1, 2016. The company
intends to invite a special shareholders meeting in August 2016 to approve appointment of the newly elected candidate as well
as his terms of tenure, and by this allow an orderly overlap between the Mr. Gilad and the new elected Chairman.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | *** | Mr. Eran Sarig has retired from our Board of Directors,
effective as of March 14, 2016, following his retirement as an executive officer in Israel Corporation Ltd.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------







Messrs. Yaacov Dior, Miriam Haran, Geoffrey
Merszei and Shimon Eckhaus are independent directors under the rules applicable to U.S. companies listed on the NYSE. Messrs. Nir
Gilad, Avisar Paz,   Aviad Kaufman, Ron Moskovitz, Sagi Kabla, Ovadia Eli and Stefan Borgas are not considered independent
directors by virtue of the positions they hold with our controlling shareholder or in the Company; these directors are not considered
independent directors also under Israeli law due to a relationship with our controlling shareholder or with the Company. Two of
our directors are “external directors” under the Israeli Companies Law, 1999 (the “Companies Law”) as
described under “Item 6. Directors, Senior Management and Employees—C. Board Practices—External Directors”.





Nir Gilad. Mr. Gilad
serves as chairman of the Board of Directors since January 2008 and as of May 12, 2015, as Executive Chairman of the Board. He serves as director in Oil Refineries Ltd. and until
January 7, 2015, he served as president and chief executive officer of Israel Corporation. Mr. Gilad also served as deputy
chief executive officer for business development and strategy in Israel Corporation. He served as chairman of the boards of
directors of ZIM Integrated Shipping Services LTD., IC Power Israel Ltd., IC Green Energy Ltd., and H.L. Management and
Consulting (1986) Ltd. Mr. Gilad served as director in companies fully owned by Israel Corporation, as director in Tower
Semiconductor Ltd. and Qoros Automotive Co. Ltd. (formerly known as Chery Quantum Auto Co. Ltd. 2007) Ltd. Prior to joining
Israel Corporation, Mr. Gilad was senior vice president of Migdal Insurance Company, chief executive officer of Migdal
Investment Management Ltd. and chairman of Migdal Capital Markets Ltd. During his term of office as accountant general of the
Ministry of Finance and deputy head of the budget division of the Ministry of Finance, Mr. Gilad played a role in the
negotiations towards the peace accords with Jordan and with the Palestinian Authority. He also served as the chief financial
officer of the Israeli Aircraft Industries. He was responsible for the initiation and direction of strategic programs for the
Government of Israel, aimed at improving Israel’s Negev and Galilee regions. Mr. Gilad is active in Yedidei Atidim
Association, a non-profit organization that integrates peripheral populations into the higher education system. Mr. Gilad is
a member of the executive committee of the “South” and “North”, private companies for public benefit
(non-profit), established by Israeli and Jewish entrepreneurs and philanthropists in order to lead national strategic
planning programs to the Negev and the Galilee. Mr. Gilad is chairman of the Friends of the Soroka Medical Center and is a
director in the Herzliya Interdisciplinary Center. Mr. Gilad holds a BA in Economics, Agricultural Administration and Natural
Sciences from the Hebrew University and an MA in Business Administration from Bar Ilan University.



Avisar Paz. Mr. Paz serves
as director since April 2001. He is the chief executive officer of Israel Corporation and was previously Israel Corporation’s
chief financial officer. Mr. Paz serves as director in various subsidiaries of Israel Corporation. He serves as director in Oil
Refineries Ltd. Mr. Paz holds a BA in Economics and Accounting from Tel Aviv University and is a certified public accountant in
Israel.





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Aviad Kaufman. Mr. Kaufman
serves as director since March 2014. He is the chief financial officer of Quantum Pacific (UK) LLP, and is also a board member
of Israel Corporation Ltd., Kenon Holdings Ltd. and IC Power Pte. Ltd., each of which may be associated with the same ultimate
beneficiary, Mr. Idan Ofer. Mr. Kaufman served as chief financial officer of Quantum Pacific Advisory Limited (2008-2012). He served
as director of international taxation and fulfilled different senior corporate finance roles at Amdocs Ltd. (2002-2007). Previously,
Mr. Kaufman held various consultancy positions with KPMG. Mr. Kaufman is a certified public accountant and holds a BA in Accounting
and Economics from the Hebrew University in Jerusalem (with distinction), and an MBA majoring in Finance from Tel Aviv University.



Ron Moskovitz. Mr. Moskovitz
was appointed as a director of the Company on February 8, 2016. Mr. Moskovitz is the Chief Executive Officer of Quantum Pacific
(UK) LLP, and serves as chairman of the Board of Israel Corporation Ltd. and Pacific Drilling S.A. and as director of Kenon Holdings
Ltd., each of which may be associated with the same ultimate beneficiary, Mr. Idan Ofer. From July 2008 until December 2012, Mr.
Moskovitz served as Chief Executive Officer of Quantum Pacific Advisory Limited. From July 2002 until November 2007, Mr. Moskovitz
served as Senior Vice President and Chief Financial Officer of Amdocs Limited. From 1998 until July 2002, he served as Vice President
of Finance at Amdocs. Between 1994 and 1998, Mr. Moskovitz held various senior financial positions at Tower Semiconductor Ltd.
and served on its board of directors from 2007 to 2011. Mr. Moskovitz is a CPA in Israel and holds a BA in Accounting and Economics
from Haifa University and a Master of Business Administration from Tel Aviv University.



Sagi Kabla. Mr. Kabla was
appointed director on February 8, 2016. He is the chief financial officer of Israel Corporation since December 2015. He serves
as director in Bazan Group and previously served as senior director, business development, strategy and IR in Israel Corporation.
Prior to joining Israel Corporation, Mr. Kabla held various positions at KPMG Corporate Finance. Mr. Kabla is a qualified CPA in
Israel and holds a BA in Accounting and Economics from Bar-Ilan University and an MBA (Finance) from the College of Management
Studies.



Ovadia Eli. Mr. Eli serves
as director since August 2011. He served as chairman of the board of the Israel Airports Authority, Shmanim Basisim Haifa Ltd.
and I.C.P.I. He was a member of the boards of directors of Salt Industries Israel Ltd., Shaarei Ribit, Ltd., Zim Integrated Shipping
Services Ltd. and OPC Rotem Ltd. Mr. Eli serves as chairman of Oil Refineries Ltd. Mr. Eli holds a BA in Educational Counseling
and Bible Studies from the Haifa University and is a graduate of the Lifshitz Teachers Academy, Jerusalem.



Yaacov Dior. Mr. Dior
served as external director since October 2011 and until October 2014 and serves as an external director since February 2015.
He is external director at Clal Insurance Holdings Ltd. He was CEO of Israel Credit Cards Ltd., of Visa Alfa Ltd., and of IDT
Carmel Ltd. He served as director on  the boards of Visa Europe and Visa International. He was also chairman of the board of
Cellarix Mobile Payments Ltd. and of Kneh Hacol Ltd. Mr. Dior is a member of the Friends Society and is chairman of the audit
committee of Bar-Ilan University. Mr. Dior is also a member of the public council of Alut – the National Association
for Autistic Children, and a member of the Association of Friends of Meir Hospital. Mr. Dior holds a B.A. in Economics and
Political Science from the Hebrew University of Jerusalem and an MBA from Tel Aviv University.



Dr. Miriam Haran. Dr. Haran
serves as external director since September 2009. She served as director general of Israel’s Ministry of the Environment.
She is currently head of Ono Academic College’s MBA Program in Environmental Management and is a board member in M.A.I (Recycling
Electrical and Electronic Waste). Dr. Haran served as a board member of the Company for Environmental Services (2008-2012) and
as chairperson of the Consumer Council (2012-2014). Dr. Haran holds a B.Sc. in Natural Sciences from the Hebrew University of Jerusalem
and a PhD in Organic Chemistry from Brandeis University.





Geoffrey Merszei.
Mr. Merszei serves as director since February 2015. He serves as chairman of the Board of Zolentis AG, Switzerland. From 1977 to
2001 and from 2005 to 2013, Mr. Merszei served in a number of positions at The Dow Chemical Company, including as its executive
vice president (2005 to 2012) and chief financial officer (2005 to 2009), during which time he also served on Dow’s
Board (2005 to 2009). Mr. Merszei was CEO and chairman of the Board of Dow Europe, the Middle East and Africa (2009 to 2012). In
2001 Mr. Merszei left Dow to be executive vice president and chief financial officer of Alcan Inc. He returned to Dow in July 2005.
Mr. Merszei has served as a lead director of the Dow Corning Corporation (2005 to 2010) and as a director of
the Chemical Financial Corporation and Chemical Bank (2006 to 2010). Mr. Merszei previously served as an executive committee member
of the European Chemical Industry Council (CEFIC) (2009 to 2012). Mr. Merszei holds a BA in Economics from Albion College, Michigan,
U.S.A.









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Shimon Eckhaus. Mr. Eckhaus
serves as director since February 2015. He serves as the president of Worldwide Integrated Network Ltd. and also serves on the
board of directors of Orbit Technologies Ltd. and AqWise Ltd. Mr. Eckhaus is a strategic and marketing advisor to a number of private
and public companies. From 2009 to 2011, Mr. Eckhaus served as chairman of the board of Starling Advanced Communications Ltd. and
as a member of the board of directors of Israel Electric Company Ltd. and O.D.F Optronics Ltd. Mr. Eckhaus holds a B.Sc. in Materials
and Process Engineering, including a specialization in Nuclear Engineering, and an M.Sc. in Materials and Processing Engineering,
both from Ben Gurion University.



The following table lists the names, ages
and positions of our Executive Officers as of the publication date of this report. The address for sending notices is c/o Israel
Chemicals Ltd., 23 Aranha Street, Millenium Tower, Tel Aviv, 61070, Israel.







|Name               | Age | Position                                                                 
|------------------ | --- | -------------------------------------------------------------------------
|Stefan Borgas      | 51  | ICL Chief Executive Officer                                              
|Asher Grinbaum     | 66  | ICL Chief Operating Officer                                              
|Kobi Altman        | 47  | ICL Chief Financial Officer                                              
|Nissim Adar        | 64  | President, ICL Fertilizers                                               
|Charles M. Weidhas | 57  | President, ICL Industrial Products                                       
|Mark Volmer        | 52  | President, ICL Performance Products                                      
|Eli Amit***        | 61  | Senior Vice President, ICL Global Economics                              
|Dan Chen***        | 64  | Executive Vice President, ICL Global Corporate Relations                 
|Lisa Haimovitz     | 50  | Senior Vice President, ICL Global General Counsel and Corporate Secretary
|Hezi Israel        | 48  | Executive Vice President, ICL Corporate Development, M&A and Strategy    
|Yakir Menashe      | 44  | Executive Vice President, ICL Global Human Resources                     
|Karl Mielke        | 64  | Executive Vice President, ICL Specialty Fertilizers                      
|Lizette Killian    | 50  | Senior Vice President, ICL Global Corporate Relations                    
|Ido Lilian         | 52  | Executive Vice President, ICL Global Procurement                         



____________________

| | * | On November 11, 2015, the Board of Directors decided that only members of the management (the Global Executive
                                                          Committee)                                                           and those who are managers who report directly to the
                                                          Chief Executive Officer, according to the definition in the Companies Law, 5759-1999,
                                                          would be considered as officers. During 2015 and until the aforesaid Board decision, the following served as Company
                                                          officers: Messers.                                                           Herzel Bar-Niv (VP International Taxation), Amir
                                                          Benita (VP), Shmuel Daniel (Internal Auditor), Israel Dreyfuss
                                                          (Controller),                                                           Eyal Ginzberg (SVP, Chief Technology Officer),
                                                          Michael Hazzan (VP Finance) and Ofer Lifshitz (SVP Global Processes).
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ** | Mr. Avi Doitchman and Mr. Ronnie Shushan retired in 2015.
| | -- | ---------------------------------------------------------



| | (1) | On November 11, 2014, Eli Amit gave notice of his wish to retire from his position during 2016. On November 4, 2015, Mr. Dan
Chen gave a notice of his wish to retire from his position during 2016.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Stefan Borgas. Mr. Borgas
serves in his position since September 2012 and is also a director of the Company. Mr. Borgas previously served as chief executive
officer of Lonza-Group (2004 to 2012) and is director in the Syngenta Group. Mr. Borgas is a member of the board of the Israeli-German
Chamber of Commerce and serves on the board of directors of IFA, the International Fertilizers Association. He holds a BA in Business
Administration from the University of Saarbrucken (Germany) and an MBA from the University of St. Gallen (Switzerland).



Asher Grinbaum. Mr. Grinbaum
serves in his position since January 2008. He is director in Dead Sea Works Ltd., Rotem Amfert Negev Ltd., Dead Sea Bromine Company
Ltd. and Bromine Compounds Ltd. – subsidiaries of the Company. He is a member of the management committee of the non-profit
“To See” Association and was member of the board of the Israel Chemistry Society and chairman of the Chemistry Society
and the Environmental Committee of the Israeli Industry Association. After about 18 years, Mr. Grinbaum recently finished his role
as chairman of the management committee of Beer-Sheva Theatre. Mr. Grinbaum holds a BA in Mechanical Engineering and an MBA in
Business Management, both from Ben Gurion University.



Kobi Altman. Mr. Altman
serves in his position since April 2015. He is director in Dead Sea Works Ltd., Rotem Amfert Negev Ltd., Dead Sea Bromine
Company Ltd. and Bromine Compounds Ltd.– subsidiaries of the Company. Mr. Altman previously held several senior
financial positions at  Teva Pharmaceuticals Industries Ltd. (2006-March 2015). Mr. Altman is a qualified CPA in Israel and
holds a BA in Accounting and Economics from Bar Ilan University and an MA from Bar Ilan University.



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Nissim Adar. Mr. Adar serves
in his position since October 2013. He previously served as chief executive officer of the Industrial Products Segment (2008 to
October 2013). Mr. Adar holds a BA in Chemical Engineering and an MBA in Industrial Management from Ben Gurion University.



Charles M. Weidhas. Mr. Weidhas
serves in his position since October 2013 and is currently chairman of Tami IMI R&D Institute. He previously served as the
chief executive officer of the Performance Products Segment (2007 to 2013) and previously held management positions with Monsanto
and Solutia. Mr. Weidhas holds a B.Sc. in Chemical Engineering and an MBA from Northeastern University.



Mark Volmer. Mr. Volmer serves
in his position since November 2013. Previously he served in different business manager roles at BASF in Europe and Asia Pacific.
Mr. Volmer holds an M.Sc. in Chemistry from Vrije University Amsterdam and an MBA from the Rotterdam School of Management, Erasmus
University.



Eli Amit. Mr. Amit serves
in his position since January 2002. He serves as director in Dead Sea Works Ltd., Rotem Amfert Negev Ltd., Dead Sea Bromine Company
Ltd. and Bromine Compounds Ltd. Mr. Amit holds a BA in Economics and Philosophy and an MBA from Tel Aviv University, as well as
an MA in Economics from Northwestern University.





Dan (Dani) Chen. Mr. Chen
serves in his current position since October 2013. He was Chief Executive Officer of the Fertilizers segment until October 2013.
Mr. Chen holds a BA in Electrical Engineering from the Technion-Israel Institute of Technology in Haifa and an MA in Industrial
Management from Ben Gurion University of the Negev.





Lisa Haimovitz. Ms. Haimovitz
serves in her position since May 2009. She served as vice president for strategy in the Delek Group and has served in a number
of positions in the Israel Securities Authority. She holds an LLB and an MBA from Tel Aviv University and is a member of the Israel
Bar.



Hezi Israel. Mr. Israel serves
in his position since March 2012. He served as vice president of strategy and business development for the Industrial Products
Segment. He holds a BA in Economics and Political Science and an MBA majoring in Finance, both from Tel Aviv University.



Yakir Menashe. Mr. Menashe
serves in his position since March 2013. He served as a vice president of compliance ®ulatory affairs and assistant to the
chief executive officer of the Company. Mr. Menashe holds an LLB in Law from the College of Management and is a member of the Israel
Bar.



Karl Georg Mielke. Mr. Mielke
serves in his position since November 2013. He served as head of K+S Aktiengesellschaft Global salt business unit (2009–2013)
and previously held various positions in the BASF Group. Mr. Mielke holds an MBA from the University of Muenster, Germany.



Lizette Killian. Ms. Kilian
serves in her position since December 2015. She previously held various strategic communications positions in the International
Atomic Energy Agency, OPEC and the OPEC Fund. Ms. Kilian holds a BA degree in International Relations and Political Science from
Columbia University, New York.



Ido Lilian. Mr. Lilian serves
in his position since the beginning of 2014. He previously served in several positions in the Industrial Products Segment, among
others vice president operations, engineering and procurement (2012-2014), vice president of the supply chain and engineering (2011-2012),
vice president of the magnesia division (2007-2011), head of the planning and purchasing division (2005-2007) and head of the technical
department and purchasing division (2003-2007). Mr. Lilian holds a B.Sc. in Chemical Engineering and an MSc degree in Industrial
Engineering and Management, both from Ben Gurion University.



Family Relationships



There are no family relationships between
any members of our executive management and our directors.



Arrangements for Election of Directors
and Members of Management



There are no arrangements or understandings
with major shareholders, customers, suppliers or others pursuant to which any of our executive management or our directors were
selected.



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B.	COMPENSATION



Under the Israeli Companies Law and
regulations promulgated thereunder (collectively, the “Companies Regulations”), the compensation of directors
must comply with the company’s compensation policy and requires the approval of the Human Resources & Compensation
Committee, Board of Directors and Shareholders, in that order. The Companies Regulations set minimum and maximum amounts of
cash compensation, depending on the size of the company, or cash and/or equity compensation that are relative to that of
other directors who are not controlling shareholders or employed thereby and who are not employed by the Company
(collectively, “Other Directors”). Until February 26, 2015, all the directors in the Company (excluding directors
employed by Israel Corp.), were entitled to receive cash compensation in the maximum amount permitted by the Companies
Regulations for external directors. Directors who are employees of Israel Corp. do not receive additional cash compensation for their services as
directors. Instead, such fees are included in the annual management fees we pay to Israel Corp. pursuant to our agreement
with them.



On January 25 and 26, 2015, the Human Resources
& Compensation Committee and the Board of Directors, respectively, and on February 26, 2015, the General Meeting of Shareholders,
approved that the cash compensation to be paid to each of the directors (excluding directors employed by Israel Corp.), who serve
from time to time, shall include a fixed annual fee component of NIS 200,000 (approximately $50,850 on the date of the shareholders’
approval), and a per meeting attendance fee which, as of August 29, 2015, would be reduced to equal the lowest fee payable to external
directors of companies of the size of ICL pursuant to the Compensation Regulations, as adjusted from time to time. Such amount
equaled (on the date of the shareholders’ approval) NIS 2,410 (approximately $613) per meeting for directors who do not meet
the qualifications of an expert director and NIS 3,205 (approximately $815) per meeting for directors who meet the qualifications
of an expert director. Until August 29, 2015, per meeting attendance fee was paid in the maximum amount permitted by the Compensation
Regulations. It was further approved by the authorized bodies in their meetings set forth above, to allocate 9,078 restricted shares
to each of the directors (excluding the Company’s CEO, Mr. Stefan Borgas), for
no consideration, in accordance with the Company’s Equity Compensation Plan (2014), as specified below. The aforementioned
bodies further approved that the directors employed by Israel Corp. (the “IC Directors”) may assign their restricted
shares (or the economic benefit thereof) to Israel Corp., subject to the resolution of the applicable tax ramifications and that
Mr. Aviad Kaufman may assign to Millennium Investments Elad Ltd. (“Millennium”) his cash compensation paid by us (including
compensation previously paid) and his restricted shares (or the economic benefit thereof). For information on the fair value of
the restricted shares, see “E. Share Ownership-The 2014 Equity Compensation Plan.”



On November 8 and 11, 2015, the Human
Resources & Compensation Committee and the Board of Directors, respectively, and on December 23, 2015, the General
Meeting of Shareholders, approved the cash compensation to be paid to each of the directors (excluding directors employed by
Israel Corp.), who serve from time to time, shall include a fixed annual fee component of NIS 365,000 (approximately $93,088
on the date of the shareholders’ approval) and a per meeting attendance fee equal to the lowest fee payable to external
directors of companies of the size of ICL pursuant to the Compensation Regulations, as adjusted from time to time. Such
amount equaled (on the date of the shareholders’ approval) NIS 2,391 (approximately $610) per meeting for directors who
do not meet the qualifications of an expert director and NIS 3,180 (approximately $811) per meeting for directors who meet
the qualifications of an expert director. It was further approved by the authorized bodies in their meetings set forth above,
to allocate 15,115 restricted shares to each of the directors (excluding the Company’s CEO, Mr. Stefan Borgas and the
chairman of the Board, Mr. Nir Gilad), for no consideration, in accordance with the Company’s Equity Compensation Plan
(2014), as specified below. The aforementioned authorized bodies further approved that the IC Directors and Mr. Aviad Kaufman
will assign their Restricted Shares (or the economic benefit thereof) to Israel Corp. and that Mr. Aviad Kaufman will also
assign to Israel Corp. the 9,078 Restricted Shares that were granted pursuant to the February 26, 2015, General
Meeting’s approval, as further specified above. Mr. Aviad Kaufman will assign to Millennium his cash compensation paid
by the Company. Accordingly, 54,423 shares were allocated to Israel Corp. For information on the fair value of the
restricted shares, see “E. Share Ownership-The 2014 Equity Compensation Plan.”





On May 12, 2015, Mr. Nir Gilad was
appointed as our Executive Chairman of the Board, a role which requires the devotion of 80% of his business hours.
Mr. Gilad's compensation terms were approved by our Compensation Committee and Board of Directors on May 10, 2015 and on May
12, 2015, respectively, and on June 29, 2015, by the general meeting of our shareholders, as follows: (1) Mr. Gilad's annual
base salary is $800,000, representing devotion of 80% of his business hours; (2) Mr. Gilad is entitled to an annual cash
bonus based on the Company's financial performance in the applicable year, as reflected in the applicable annual audited
consolidated financial statements of the Company. Mr. Gilad’s Target Bonus in respect of 2015 was $720,000
(representing 80% devotion of his time). Mr. Gilad’s target bonus is calculated, according to the Companies
Compensation Policy; (3) Mr. Gilad was granted a one-time equity grant of Options exercisable into 404,220 Ordinary Shares
and 68,270 Restricted Shares, with a fair value of $485,021 and $461,615, respectively; (4) Mr. Gilad is further entitled to
advance notice of termination of 12 months in case the notice is given by the Company or to give 6 months if the notice is
given by Mr. Gilad. During such advance notice period, Mr. Gilad may be required to continue to work for the Company. During the
Advance Notice Period, employer-employee relations would continue to apply and thus Mr. Gilad would be entitled to all of his
compensation terms, including annual bonus; (5) upon termination, Mr. Gilad will be entitled to a severance payment equal to
two times his last monthly salary multiplied by the number of years that he served as the Company’s Executive Chairman;
(6) Mr. Gilad is entitled to all other cash and non-cash benefits payable to our senior executives pursuant to our policies
in effect from time to time, including but not limited to, pension, study fund, disability insurance,  and Company car
etc.



Mr. Nir Gilad will retire from the company’s Board at
September 1, 2016. The Board has formed a Search Committee comprised of two board members: Mr. Yaacov Dior, Chairman of the HR
and Compensation Committee and Mr. Ron Moskovitz. The Committee will determine its order of work and will identify suitable candidates
and propose the nomination to the full Board for election, no later than by May 1, 2016.



The aggregate compensation paid to all of the members of our senior management (GEC members) (including
the officers listed in the table below) was approximately $8 million in 2015. The following table and accompanying footnotes
describe the compensations given in 2015 to the five highest earning senior officers in the Company and its subsidiaries.



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|                   |  | Details of the Recipient |                                     | Payments for services
|------------------ |  | ------------------------ | ----------------------------------- | ---------------------
|Name               |  | Position                 |                                     | Scope of position    
|                   |  |                          |                                     |                      
|Stefan Borgas(3)   |  |                          | ICL CEO                             |                      
|Dan Chen(4)        |  |                          | EVP, ICL Global Corporate Relations |                      
|Avner Maimon(5)    |  |                          | General Manager ICL Israel          |                      
|Charles Weidhas(6) |  |                          | President ICL Industrial Products   |                      
|Asher Grinbaum(7)  |  |                          | EVP, COO                            |                      

______________

| | * | Less than %
| | - | -----------





| | (1) | The compensation component set out in the above table
includes all of the following components: monthly salary, social benefits, customary social and related provisions, company car,
relocation expenses, rent and reimbursement of telephone and newspaper expenses.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | In its meeting dated March 15, 2016 the board decided to further discuss the bonuses payout for 2015 in its
upcoming meeting. The bonus for Mr. Maimon was fully paid subsequent to his retirement.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | Mr. Stefan Borgas has served as our Chief Executive
Officer since September 20, 2012. Mr. Borgas’ employment agreement is for an unlimited period and may be terminated
by either party at any time. His monthly base salary, as of December 31, 2015, is approximately $83,333. Stefan Borgas’
base salary is paid in NIS at the representative exchange rate on the date of payment. In addition to his monthly base salary,
Mr. Borgas is entitled to monthly participation for the cost of a residence. In addition, Mr. Borgas is entitled to coverage
for the cost of airplane tickets for two annual vacations in Europe for himself and for his family, as well as participation in
his medical insurance costs. With respect to severance, other than in cases where the right to compensation is revoked under Israeli
law, Mr. Borgas is entitled to a notice period equivalent to 6 months’ salary if his resignation is at his request,
and equivalent to 12 months’ salary if his resignation is initiated by the Company. In addition to the amounts provided
regularly for pension and severance, additional severance compensation for Mr. Borgas will be calculated and paid on the
basis of his last monthly base salary multiplied by the number of years he is employed by the Company.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (4) | Mr. Dan (Dani) Chen serves as Executive Vice President,
ICL Global Corporate Relations, since October 1, 2013; on November 4, 2015, Mr. Chen gave notice of his wish to retire from his
position in 2016. The 1978 employment contract with Mr. Chen, as amended to date, states that Mr. Chen’s base
salary will be updated twice a year according to the rise in the CPI in the months that passed since the last update. The employment
contract is not limited in time and will be in force until it is ended by one of the parties giving prior written notification.
Mr. Chen is entitled to a notice period of 6 months. According to the employment contract and the salary updates, as
decided by our Board of Directors from time to time, Mr. Chen’s monthly base salary as of December 31, 2015 is
approximately NIS 117,056. Mr. Chen is entitled, in addition to the current provisions for pension funds and severance pay,
to additional severance pay in the amount of his last salary multiplied by the number of years of his service as President of
ICL Fertilizers. The value of the equity component in the table above includes the acceleration of unvested portions.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (5) | Mr.  Avner Maimon has served as General Manager of ICL Israel. on September 16, 2015 Mr. Maimon retired and was
                                                                                appointed                                                                                 as Chief Executive Officer of Oil
                                                                                Refineries Ltd. Mr. Maimon served in ICL since 1991. Mr. Maimon received a notice period of
                                                                                6 months and his base salary as of September 2015 was approximately NIS 82,700. The value of the equity  component in the
                                                                                table above includes the acceleration of unvested portions of the equity grant he received in 2014 and 2015. The
                                                                                compensation                                                                                 in the table above includes
                                                                                redemption of notice period accumulates annual vacation days and a special bonus. Mr. Maimon was not considered as an officer
                                                                                of the Company.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







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| | (6) | Mr. Charles Weidhas serves as President, ICL Industrial Products, as of October 1, 2013. Mr. Weidhas’ employment agreement
is for an unlimited period and may be terminated by either party at any time by written notification. Mr. Weidhas is entitled to
a notice period and adjustment period of 6 months each and is entitled to life insurance and health insurance for himself and his
family. For a period of 5 years, Mr. Weidhas is entitled to reimbursement of his rent. Mr. Weidhas’ monthly base salary as of
December 31, 2015 is approximately NIS 117,056. His employment agreement states that his base salary will be updated twice a year according
to the rise in the CPI in the months that passed since the last update. Mr. Weidhas is also entitled to maintain the net amount
in respect of all payments made to him as would be obtained in the United States (tax equalization). In addition to the amount
provided regularly to the pension fund and severance pay, Mr. Weidhas is entitled to severance payment equal to his last salary
multiplied by the number of years he serves as President of ICL Industrial Products.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | (7) | Mr. Asher Grinbaum serves as Executive Vice President
and Chief Operating Officer since 2008. The 1994 employment contract with Mr. Grinbaum, as amended to date, states that Mr. Grinbaum’s
base salary will be updated twice a year according to the rise in the CPI in the months that passed since the last update. The
employment contract is not limited in time and will remain in force until it is ended by one of the parties by means of providing
prior written notification. Mr. Grinbaum is entitled to a notice period of 6 months. According to the employment contract
and the salary updates, as decided by our Board of Directors from time to time, Mr. Grinbaum’s monthly base salary
as of December 31, 2015 was approximately NIS 137,774. Mr. Grinbaum is entitled, in addition to the current provisions
for pension and severance, to additional severance pay equal to his last salary multiplied by the years of his service.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------











| | (8) | On November 26, 2012, an allotment of 1,190,000
non-negotiable options, for no consideration, was approved for Mr. Stefan Borgas under our 2012 Option Plan. On December 30,
2012, the options were assigned to a trustee in Mr. Borgas’ favor. The options are exercisable into our ordinary shares
at an exercise price of NIS 46.6 (subject to adjustments) and will vest in three equal portions beginning on November 26, 2013,
2014 and 2015. The expiration date for the options vesting within the first and second portions is upon the lapse of 48 months
from the date of allocation, and the expiration date for the options vesting within the third portion is upon the lapse of 60
months of the date of allocation. The weighted financial value of each option, on the date of approval, was NIS 11.9 for the first
and second portions, and NIS 12.7 for the third portion. For additional information, see “E. Share Ownership-The 2012 Option
Plan”. The amount appearing in the table reflects the aggregate expenditure recorded by us in 2015 with regard to the allocation
of options to Mr. Borgas, based on generally accepted accounting principles. The exercise price for converting the options
into shares as of March 14, 2016, is NIS 40.49, this price is 139.6% higher than the share price on this date (meaning, these
options are “out of the money”).
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





On
August 4, 2014 and August 6, 2014 the Human Resources & Compensation Committee and the Board of Directors, respectively, approved,
and on December 11, 2014 the General Meeting of Shareholders approved an allocation of 367,294 non-negotiable options for no consideration
to Mr. Stefan Borgas, as well as 85,907 restricted shares, under our 2014 Equity Compensation Plan. On December 11, 2014 the options
and restricted shares were allocated to a trustee in Mr. Borgas’ favor. The options are exercisable into Company shares
at an exercise price of NIS 28.71 (subject to adjustments). The options and restricted shares will vest in three equal portions
as follows: one third upon the lapse of 24 months after December 1, 2014 (the “Commencement Date”), one third upon
the lapse of 36 months after the Commencement Date, and one third upon the lapse of 48 months after the Commencement Date. The
expiration date for the options vesting within the first portion is upon the lapse of 48 months of the Commencement Date, the
expiration date for the options vesting within the second portion is upon the lapse of 60 months of the Commencement Date, and
the expiration date for the options vesting within the third portion is upon the lapse of 72 months of the Commencement Date.
The weighted financial value of each such option, at the date of approval, was NIS 6.57. The fair value of the restricted shares,
at the date of approval, was NIS 28.09 (see also“E. Share Ownership-The
2014 Equity Compensation Plan”). The amount specified in the table reflects the aggregate expenditure recorded by us in
2015 with respect to the allocation of options and restricted shares to Mr. Borgas, based on generally accepted accounting
principles. The vesting price for converting the options into shares as of March 14, 2016 is NIS 26.76 (about $6.88), the share
price on that day was NIS 16.9 (about $4.34).



On May 10 and May 12, 2015, the Human Resources & Compensation Committee and
the Board of Directors, respectively, approved, and on June 29, 2015 the General Meeting of Shareholders approved, an allocation
of 530,356 non-negotiable options for no consideration to Mr. Stefan Borgas, as well as 89,574 restricted shares, under our 2014
Equity Compensation Plan. On July 12, 2015, the options and restricted shares were allocated to a trustee in Mr. Borgas’
favor. The options are exercisable into Company shares at an exercise price of NIS 27.76 (subject to adjustments). The options
and restricted shares will vest in three equal portions as follows: one third upon the lapse of 12 months after July 12, 2015
(the “Commencement Date”), one third upon the lapse of 24 months after the Commencement Date, and one third upon the
lapse of 36 months after the Commencement Date. The expiration date for the options vesting within the first and the second portion
is upon the lapse of 36 months of the Commencement Date, and the expiration date for the options vesting within the third portion
is upon the lapse of 48 months of the Commencement Date. The weighted financial value of each such option, at the date of approval,
was NIS 4.55. The fair value of the restricted shares, at the date of approval, was NIS 26.94 (see also“E. Share
Ownership-The 2014 Equity Compensation Plan”). The amount specified
in the table reflects the aggregate expenditure recorded by us in 2015 with respect to the allocation of options and restricted
shares to Mr. Borgas, based on generally accepted accounting principles. The vesting price for converting the options into
shares as of March 14, 2016 is NIS 27.07 (about $6.96), the share price on that day was NIS 16.9 (about $4.34).







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| | (9) | On November 26, 2012, an allotment of 380,000 non-negotiable
options was approved, for no consideration, for Mr. Dan Chen under our 2012 Plan. On December 30, 2012, the options
were assigned to a trustee in Mr. Chen’s favor. The options are exercisable into our ordinary shares at an exercise
price of NIS 46.6 (subject to adjustments) and will mature in three equal portions beginning on November 26, 2013, 2014 and 2015.
The expiration date for the options vesting within the first and second portions is upon the lapse of 48 months from the date
of allocation, and the expiration date for the options vesting within the third portion is upon the lapse of 60 months of the
date of allocation. The weighted financial value of each option, on the date of approval, was NIS 11.9 for the first and second
portions, and NIS 12.7 for the third portion. For additional information, see “E. Share Ownership-The 2012 Option Plan”.
The amount appearing in the table reflects the aggregate expenditure recorded by us in 2015 with regard to the allocation of options
to Mr. Chen, based on generally accepted accounting principles. The exercise price for converting the options into shares
as of March 14, 2016, is NIS 40.49, this price is 139.6% higher than the share price on this date (meaning, these options are
“out of the money”).
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







On August 4, 2014 and August
6, 2014 the Human Resources & Compensation Committee and the Board of Directors, respectively, approved an allocation of 95,129
non-negotiable options for no consideration to Mr. Dan Chen, as well as 22,250 restricted shares, under our 2014 Equity Compensation
Plan. On September 27, 2014 the options and restricted shares were allocated to a trustee in Mr. Chen's favor. The options
are exercisable into Company shares at an exercise price of NIS 28.71 (subject to adjustments). The options and restricted shares
will mature in three equal portions as follows: one third upon the lapse of 24 months after December 1, 2014 (the “Commencement
Date”), one third upon the lapse of 36 months after the Commencement Date, and one third upon the lapse of 48 months after
the Commencement Date. The expiration date for the options vesting within the first portion is upon the lapse of 48 months of
the Commencement Date, the expiration date for the options vesting within the second portion is upon the lapse of 60 months of
the Commencement Date, and the expiration date for the options vesting within the third portion is upon the lapse of 72 months
of the Commencement Date. The weighted financial value of each such option, at the date of approval, was NIS 6.57. The fair value
of the restricted shares, at the date of approval, was NIS 28.09 (see also “E. Share Ownership-The
2014 Equity Compensation Plan”). The amount specified in the table reflects the aggregate expenditure recorded by
us in 2015 with respect to the allocation of options and restricted shares to Mr. Chen, based on generally accepted accounting
principles. The vesting price for converting the options into shares as of March 14, 2016 is NIS 26.76 (about $6.88), the share
price on that day was NIS 16.9 (about $4.34).



On May 10 and May 12, 2015,
the Human Resources & Compensation Committee and the Board of Directors approved an allocation of 137,363 non-negotiable options
for no consideration to Mr. Dan Chen, as well as 23,200 restricted shares, under our 2014 Equity Compensation Plan. On July 12,
2015, the options and restricted shares were allocated to a trustee in Mr. Chen's favor. The options are exercisable into
Company shares at an exercise price of NIS 27.76 (subject to adjustments). The options and restricted shares will vest in three
equal portions as follows: one third upon the lapse of 12 months after July 12, 2015 (the “Commencement Date”), one
third upon the lapse of 24 months after the Commencement Date, and one third upon the lapse of 36 months after the Commencement
Date. The expiration date for the options vesting within the first and the second portion is upon the lapse of 36 months of the
Commencement Date, and the expiration date for the options vesting within the third portion is upon the lapse of 48 months of
the Commencement Date. The weighted financial value of each such option, at the date of approval, was NIS 4.55. The fair value
of the restricted shares, at the date of approval, was NIS 26.94 (see also“E. Share Ownership-The
2014 Equity Compensation Plan”). The amount specified in the table reflects the aggregate expenditure recorded by us in
2015 with respect to the allocation of options and restricted shares to Mr. Chen, based on generally accepted accounting
principles. The vesting price for converting the options into shares as of March 14, 2016 is NIS 27.07 (about $6.96), the share
price on that day was NIS 16.9 (about $4.34).







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| | (10) | On November 26, 2012, an allotment of 220,000 non-negotiable
options was approved, for no consideration, for Mr. Avner  Maimon under our 2012 Plan. On December 30, 2012
the options were assigned to a trustee in Mr. Maimon’s favor. The options are exercisable into our ordinary shares at
an exercise price of NIS 46.6 (subject to adjustments) and will mature in three equal portions beginning on November 26, 2013,
2014 and 2015. The expiration date for the options vesting within the first and second portions is upon the lapse of 48 months
from the date of allocation, and the expiration date for the options vesting within the third portion is upon the lapse of 60
months of the date of allocation. The weighted financial value of each option, on the date of approval, was NIS 11.9 for the first
and second portions, and NIS 12.7 for the third portion. For additional information, see “E. Share Ownership-The
2012Option Plan”. The amount appearing in the table reflects the aggregate expenditure recorded by us in 2015 with
regard to the allocation of options to Mr. Maimon, based on generally accepted accounting principles. The exercise price
for converting the options into shares as of March 14, 2016, is NIS 40.49, this price is 139.6% higher than the share price on
this date (meaning, these options are “out of the money”).
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





On
August 4, 2014 and August 6, 2014 the Human Resources & Compensation Committee and the Board of Directors, respectively,
approved an allocation of 64,688  non-negotiable options for no consideration to Mr. Avner Maimon, as well as 15,130
restricted shares, under our 2014 Equity Compensation Plan. On September 27, 2014 the options and restricted shares were
allocated to a trustee in Mr. Maimon's favor. The options are exercisable into Company shares at an exercise price of
NIS 28.71 (subject to adjustments). The options and restricted shares will mature in three equal portions as follows: one
third upon the lapse of 24 months after December 1, 2014 (the “Commencement Date”), one third upon the lapse of
36 months after the Commencement Date, and one third upon the lapse of 48 months after the Commencement Date. The expiration
date for the options vesting within the first portion is upon the lapse of 48 months of the Commencement Date, the expiration
date for the options vesting within the second portion is upon the lapse of 60 months of the Commencement Date, and the
expiration date for the options vesting within the third portion is upon the lapse of 72 months of the Commencement Date. The
weighted financial value of each such option, at the date of approval, was NIS 6.57. The fair value of the restricted shares,
at the date of approval, was NIS 28.09 (see also“E. Share Ownership-The
2014 Equity Compensation Plan”). The amount specified in the table reflects the aggregate expenditure recorded by us in
2015 with respect to the allocation of options and restricted shares to Mr. Maimon, based on generally accepted
accounting principles. The vesting price for converting the options into shares as of March 14, 2016 is NIS 26.76 (about
$6.88), the share price on that day was NIS 16.9 (about $4.34).





On
May 10 and May 12, 2015, the Human Resources & Compensation Committee and the Board of Directors approved an allocation of
109,890 non-negotiable options for no consideration to Mr. Avner Maimon, as well as 18,560 restricted shares, under our 2014
Equity Compensation Plan. On July 12, 2015, the options and restricted shares were allocated to a trustee in Mr. Maimon's
favor. The options are exercisable into Company shares at an exercise price of NIS 27.76 (subject to adjustments). The options
and restricted shares will vest in three equal portions as follows: one third upon the lapse of 12 months after July 12, 2015
(the “Commencement Date”), one third upon the lapse of 24 months after the Commencement Date, and one third upon the
lapse of 36 months after the Commencement Date. The expiration date for the options vesting within the first and the second portion
is upon the lapse of 36 months of the Commencement Date, and the expiration date for the options vesting within the third portion
is upon the lapse of 48 months of the Commencement Date. The weighted financial value of each such option, at the date of approval,
was NIS 4.55. The fair value of the restricted shares, at the date of approval, was NIS 26.94 (see also“E. Share
Ownership-The 2014 Equity Compensation Plan”). The amount specified
in the table reflects the aggregate expenditure recorded by us in 2015 with respect to the allocation of options and restricted
shares to Mr. Maimon, based on generally accepted accounting principles. The vesting price for converting the options into
shares as of March 14, 2016 is NIS 27.07 (about $6.96), the share price on that day was NIS 16.9 (about $4.34).









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| | (11) | On November 26, 2012, an allotment of 380,000 non-negotiable options was approved, for no consideration for
                                                                                 Mr. Weidhas  under our 2012 Option Plan. On December 30, 2012, the options were assigned to a trustee in
                                                                                 behalf of Mr. Weidhas. The options are exercisable into our ordinary shares at an exercise price of NIS 46.6
                                                                                 (subject                                                                                  to adjustments) and will mature in
                                                                                 three equal portions beginning on November 26, 2013, 2014 and 2015. The expiration date
                                                                                 for the options vesting within the first and second portions is upon the lapse of 48 months from the date of allocation, and
                                                                                 the expiration date for the options vesting within the third portion is upon the lapse of 60 months of the date of
                                                                                 allocation. The weighted financial value of each option, on the date of approval, was NIS 11.9 for the first and
                                                                                 second portions, and NIS 12.7 for the third portion. For additional information, see “E. Share Ownership - The 2012
                                                                                 Option Plan”. The amount appearing in the table reflects the aggregate expenditure recorded by us in 2015 with regard
                                                                                 to the allocation of options to Mr. Weidhas, based on generally accepted accounting principles. The exercise price for
                                                                                 converting the options into shares as of March 14, 2016, is NIS 40.49, this price is 139.6% higher than the share price on
                                                                                 this date (meaning, these options are “out of the money”).
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------













On August 4, 2014 and August
6, 2014 the Compensation and Human Resources Committee and the Board of Directors, respectively, approved an allocation of 95,129
non-negotiable options for no consideration to Mr. Charles Weidhas, as well as 22,250 restricted shares, under our 2014 Equity
Compensation Plan. On September 29, 2014 the options and restricted shares were allocated to a trustee in Mr. Weidhas' favor.
The options are exercisable into Company shares at an exercise price of NIS 28.71 (subject to adjustments). The options and restricted
shares will mature in three equal portions as follows: one third upon the lapse of 24 months after December 1, 2014 (the “Commencement
Date”), one third upon the lapse of 36 months after the Commencement Date, and one third upon the lapse of 48 months after
the Commencement Date. The expiration date for the options vesting within the first portion is upon the lapse of 48 months of the
Commencement Date, the expiration date for the options vesting within the second portion is upon the lapse of 60 months of the
Commencement Date, and the expiration date for the options vesting within the third portion is upon the lapse of 72 months of the
Commencement Date. The weighted financial value of each such option, at the date of approval, was NIS 6.57. The fair value of the
restricted shares, at the date of approval, was NIS 28.09 (see also “E. Share Ownership - The 2014 Equity Compensation Plan”).
The amount specified in the table reflects the aggregate expenditure recorded by us in 2015 with respect to the allocation of options
and restricted shares to Mr. Weidhas, based on generally accepted accounting principles. The vesting price for converting
the options into shares as of March 14, 2016 is NIS 26.76 (about $6.88), the share price on that day was NIS 16.9 (about $4.34).





On
May 10 and May 12, 2015, the Human Resources & Compensation Committee and the Board of Directors approved an allocation of
137,363 non-negotiable options for no consideration to Mr. Charles Weidhas, as well as 23,200 restricted shares, under our 2014
Equity Compensation Plan. On July 12, 2015, the options and restricted shares were allocated to a trustee in Mr. Weidhas favor.
The options are exercisable into Company shares at an exercise price of NIS 27.76 (subject to adjustments). The options and restricted
shares will vest in three equal portions as follows: one third upon the lapse of 12 months after July 12, 2015 (the “Commencement
Date”), one third upon the lapse of 24 months after the Commencement Date, and one third upon the lapse of 36 months after
the Commencement Date. The expiration date for the options vesting within the first and the second portion is upon the lapse of
36 months of the Commencement Date, and the expiration date for the options vesting within the third portion is upon the lapse
of 48 months of the Commencement Date. The weighted financial value of each such option, at the date of approval, was NIS 4.55.
The fair value of the restricted shares, at the date of approval, was NIS 26.94 (see also“E. Share Ownership-The
2014 Equity Compensation Plan”). The amount specified in the table reflects the aggregate expenditure recorded by us in 2015
with respect to the allocation of optionsand restricted shares to Mr. Weidhas, based on generally accepted accounting
principles. The vesting price for converting the options into shares as of March 14, 2016 is NIS 27.07 (about $6.96), the share
price on that day was NIS 16.9 (about $4.34).









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| | (12) | On November 26,
2012, an allotment of 380,000 non-negotiable options was approved, for no consideration, for Mr. Asher Grinbaum under our
2012 Option Plan. On December 30, 2012 the options were allocated to a trustee in behalf of Mr. Grinbaum. The options
are exercisable into our ordinary shares at an exercise price of NIS 46.6 (subject to adjustments) and will mature in three equal
portions beginning on November 26, 2013, 2014 and 2015. The expiration date for the options vesting within the first and second
portions is upon the lapse of 48 months from the date of allocation, and the expiration date for the options vesting within the
third portion is upon the lapse of 60 months of the date of allocation. The weighted financial value of each option, on the date
of approval, was NIS 11.9 for the first and second portions, and NIS 12.7 for the third portion. For additional information, see
“E. Share Ownership-The 2012Option Plan”. The amount
appearing in the table reflects the aggregate expenditure recorded by us in 2015 with regard to the allocation of options to Mr. Grinbaum,
based on generally accepted accounting principles. The exercise price for converting the options into shares as of March 14, 2016,
is NIS 40.49, this price is 139.6% higher than the share price on this date (meaning, these options are “out of the money”).
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------











On
August 4, 2014 and August 6, 2014 the Human Resources & Compensation Committee and the Board of Directors, respectively, approved
an allocation of 95,129 non-negotiable options for no consideration to Mr. Asher Grinbaum, as well as 22,250 restricted shares,
under our 2014 Equity Compensation Plan. On September 27, 2014 the options and restricted shares were allocated to a trustee in
Mr. Grinbaum's favor. The options are exercisable into Company shares at an exercise price of NIS 28.71 (subject to adjustments).
The options and restricted shares will mature in three equal portions as follows: one third upon the lapse of 24 months after December
1, 2014 (the “Commencement Date”), one third upon the lapse of 36 months after the Commencement Date, and one third
upon the lapse of 48 months after the Commencement Date. The expiration date for the options vesting within the first portion is
upon the lapse of 48 months of the Commencement Date, the expiration date for the options vesting within the second portion is
upon the lapse of 60 months of the Commencement Date, and the expiration date for the options vesting within the third portion
is upon the lapse of 72 months of the Commencement Date. The weighted financial value of each such option, at the date of approval,
was NIS 6.57. The fair value of the restricted shares, at the date of approval, was NIS 28.09 (see also“E. Share
Ownership-The 2014 Equity Compensation Plan”). The amount specified
in the table reflects the aggregate expenditure recorded by us in 2015 with respect to the allocation of options and restricted
shares to Mr. Grinbaum, based on generally accepted accounting principles. The vesting price for converting the options into
shares as of March 14, 2016 is NIS 26.76 (about $6.88), the share price on that day was NIS 16.9 (about $4.43).



On May 10 and May 12, 2015, the Human Resources & Compensation Committee and the Board of Directors
approved an allocation of 137,363 non-negotiable options for no consideration to Mr. Asher Grinbaum, as well as 23,200 restricted
shares, under our 2014 Equity Compensation Plan. On July 12, 2015, the options and restricted shares were allocated to a trustee
in Mr. Grinbaum's favor. The options are exercisable into Company shares at an exercise price of NIS 27.76 (subject to adjustments).
The options and restricted shares will vest in three equal portions as follows: one third upon the lapse of 12 months after July
12, 2015 (the “Commencement Date”), one third upon the lapse of 24 months after the Commencement Date, and one third
upon the lapse of 36 months after the Commencement Date. The expiration date for the options vesting within the first and the second
portion is upon the lapse of 36 months of the Commencement Date, and the expiration date for the options vesting within the third
portion is upon the lapse of 48 months of the Commencement Date. The weighted financial value of each such option, at the date
of approval, was NIS 4.55. The fair value of the restricted shares, at the date of approval, was NIS 26.94 (see also “E.
Share Ownership-The 2014 Equity Compensation Plan”).
The amount specified in the table reflects the aggregate expenditure recorded by us in 2015 with respect to the allocation of options
and restricted shares to Mr. Grinbaum, based on generally accepted accounting principles. The vesting price for converting
the options into shares as of March 14, 2016 is NIS 27.07 (about $6.96), the share price on that day was NIS 16.9 (about $4.34).







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The Annual Bonus Component





In its meeting dated March
15, 2016 the board decided to further discuss the bonuses for 2015 in its upcoming meeting. The bonus for Mr. Maimon was fully
paid subsequent to his retirement.









The formula of the annual bonus
to Mr. Maimon is as specified in the Compensation Policy (as amended), while the weights of the various categories are as follows:
Financial Indicators Category – 55%, KPIs – 25%, Managerial Capabilities Evaluation – 10% and Manager Discretion
– 10%. Mr. Maimon’s KPIs included efficiency, one ICL and communication indicators. Mr. Maimon met his targets.







Pensions, Retirement and Similar Benefits



We set aside approximately $1.2 million
for pension or other retirement benefits for our senior management (GEC) in 2015.



C.	BOARD PRACTICES



Board of Directors



According to our Articles of Association,
we must have at least seven and no more than twenty directors. Our directors are normally elected by our shareholders at our annual
meeting. Our Board of Directors is also authorized to appoint directors in order to fill vacancies or for any other reason. Each
of our directors, other than our external directors, serves from the date of election or appointment until our next annual meeting
of shareholders. A majority of the members of our Board of Directors must be both citizens and residents of Israel. The approval
of at least a majority of the voting rights represented at a shareholders’ meeting and voting on the matter is generally
required to remove any of our directors from office (other than external directors).



As of the date of this
Annual Report, our Board of Directors consists of eleven directors. In the event of equal votes of our Board of Directors, our
Chairman of the Board has the right to cast the deciding vote. Messrs. Yaacov Dior, Miriam Haran, Geoffrey Merszei and Shimon Eckhaus
are independent directors under the rules applicable to U.S. companies listed on the NYSE. Messrs. Nir Gilad, Avisar Paz,
Aviad Kaufman, Ron Moskovitz, Sagi Kabla, Ovadia Eli and Stefan Borgas are not considered independent directors by virtue of the
positions they hold with our controlling shareholder or with the Company. Two of our directors are external directors according
to the Companies Law. We do not have service contracts with our current directors, excluding the CEO, Mr. Stefan Borgas and the
Executive Chairman of the Board, Mr. Nir Gilad.







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External Directors



As a public Israeli company, we are required
by the Companies Law to have at least two external directors who meet certain independence criteria to ensure that they are not
related parties to the Company or to our controlling shareholder. The definition of “external director” under the Companies
Law and the definition of “independent director” under the NYSE rules overlap to a significant degree such that we
would generally expect a director who qualifies as one to also qualify as the other. Since the definitions are not identical, however,
it is possible for a director to qualify as one and not as the other.



An external director must also have either
financial and accounting expertise or professional qualifications, as defined in regulations promulgated under the Companies Law,
and at least one of the external directors is required to have financial and accounting expertise. An external director is entitled
to reimbursement of expenses and compensation as provided in regulations promulgated under the Companies Law but is otherwise prohibited
from receiving any other compensation from us, directly or indirectly, during his term and for two years thereafter.



Under the Companies Law, external directors
must be elected at a shareholders’ meeting by a simple majority of the votes cast on the matter, provided that such majority
includes a majority of the votes cast by non-controlling shareholders and shareholders who do not have a personal interest in the
election (excluding a personal interest that did not result from the shareholder’s relationship with the controlling shareholder),
unless the votes cast by such shareholders against the election did not exceed 2% of our aggregate voting rights. External directors
serve for up to three terms of three years each, and our Audit and Accounting Committee and Board of Directors may nominate them for
additional terms under certain circumstances. Even if an external director is not nominated by our Board of Directors for reelection
for a second or third term, shareholders holding at least 1% of our voting rights have the right to nominate the external director
for reelection, and in addition, the external director may nominate himself for reappointment. In such a case, the reelection can
be approved without the approval of our controlling shareholder if it is approved by a majority of the votes cast by non-controlling
shareholders and shareholders who do not have a personal interest in the election (excluding a personal interest that did not result
from the shareholder’s relationship with the controlling shareholder) and the votes cast by such shareholders approving the
election exceed 2% of our aggregate voting rights. A term of an external director may be terminated prior to expiration only by
a shareholder vote, by the same threshold required for election, or by a court, but in each case only if the external director
ceases to meet the statutory qualifications for election or if the external director breaches his duty of loyalty to us.



Under the Companies Law, each committee
of a company’s board of directors that is authorized to exercise powers of the board of directors is required to include
at least one external director, and all external directors must be members of the company’s audit committee and compensation
committee.



We currently have two external directors:
Mr. Yaacov Dior, whose second term commenced on February 26, 2015, and Dr. Miriam Haran, whose third term commenced on August 29,
2015.



Financial Experts



Our Board of Directors has resolved that
at least three of its members must have financial and accounting expertise, as defined in regulations promulgated under the Companies
Law. Our Board of Directors has determined that ten of our current directors meet such qualifications.



In addition, our Board of Directors has
determined that all members of our Audit and Accounting Committee are financially literate as determined in accordance with NYSE rules
and that Mr. Dior and Mr. Merszei are qualified to serve as “audit committee financial experts” as defined by SEC rules.



Alternate Directors





Our Articles of Association
provide, consistent with Israeli law, that any director may appoint another person who is not a director or an alternate director
to serve as his alternate director, subject to the approval of the Board of Directors. The term of an alternate director can be
terminated at any time by the appointing director or the Board of Directors and automatically terminates upon the termination of
the term of the appointing director. The Companies Law stipulates that an external director may not appoint an alternate director
except under very limited circumstances. An alternate director has the same rights and responsibilities as a director, except for
the right to appoint an alternate director. As of the date of this Annual Report, no alternate director was appointed.







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Our Committees



Our Board of Directors has established
the following committees. Each committee operates in accordance with a written charter that sets forth the committee’s structure,
operations, membership requirements, responsibilities and authority to engage advisors.



Audit and Accounting Committee



Under the Companies Law,
the board of directors of a public company must establish an audit committee. The audit committee must consist of at least three
directors who meet certain independence criteria and must include all of the company’s external directors. The chairman of
the audit committee is required to be an external director. The responsibilities of an audit committee under the Companies Law
include identifying and addressing flaws in the business management of the company, reviewing and approving interested party transactions,
establishing whistleblower procedures, overseeing the company’s internal audit system and the performance of its internal
auditor, and assessing the scope of the work and recommending the fees of the company’s independent accounting firm. In addition,
the audit committee is required to determine whether certain interested party actions and transactions are “material”
or “extraordinary” for the purpose of the requisite approval procedures under the Companies Law and to establish procedures
for reviewing proposed transactions with a controlling shareholder.



In accordance with U.S. law and NYSE requirements,
our Audit and Accounting Committee is also responsible for the appointment, compensation and oversight of the work of our independent
auditors and, according to such rules and to the Companies Law and regulations by virtue thereof, the Audit and Accounting Committee
is also responsible for assisting our Board of Directors in monitoring our financial statements, the effectiveness of our internal
controls and our compliance with legal and regulatory requirements.



Our Audit and Accounting Committee consists
of three directors: Mr. Yaacov Dior (Chairman), Dr. Miriam Haran and Mr. Geoffery Merszei. Our Audit and Accounting Committee complies
with the requirements applicable to U.S. companies that are listed on the NYSE. Mr. Dior and Dr. Haran are external directors as
defined in the Companies Law and all the members are also independent as defined in SEC rules and NYSE listing requirements. Our
Board of Directors has determined that all the members of the Audit and Accounting Committee are financially literate as determined
in accordance with NYSE rules and that Mr. Dior and Mr. Merszei are qualified to serve as “audit committee financial experts”
as defined by SEC rules.



Human Resources and Compensation Committee



Under the Companies Law, the board of directors
of a public company must establish a compensation committee. The compensation committee must consist of at least three directors
who meet certain independence criteria and include all of the company’s external directors, who are required to constitute
a majority of its members. The chairman of the compensation committee must be an external director. The remaining members are required
to meet certain independence criteria and be paid in accordance with the regulations governing the compensation of external directors.
The responsibilities of a compensation committee under the Companies Law include recommending to the board of directors, for ultimate
shareholder approval by a special majority, a policy governing the compensation of directors and officers based on specified criteria,
reviewing modifications to and implementation of such compensation policy from time to time and approving the actual compensation
terms of directors and officers prior to approval by the board of directors.



Our Compensation and Human Resources Committee
is also charged with oversight of our human resources strategy and key programs, including our “One ICL” program, senior
leadership development, bonus and equity plans and top management evaluation and succession planning.







Our Compensation and Human
Resources Committee consists of three directors, Dr. Miriam Haran (Chairperson), Mr. Yaacov Dior and Mr. Shimon Eckhaus. Dr. Haran
and Mr. Dior are external directors as defined in the Companies Law and all the members are also independent as defined in SEC
rules and NYSE listing requirements.







Environment, Safety and Public Affairs
Committee





Our Environment, Safety
and Public Affairs Committee is designed to assist our Board of Directors to oversee our environment and safety policies and programs
and our community outreach, public relations and advocacy programs. Our Environment, Safety and Public Affairs Committee is not
authorized to exercise any power of our Board of Directors. It consists of four directors, Mr. Shimon Eckhaus (Chairman),
Dr. Miriam Haran, Mr. Ovadia Eli and Mr. Sagi Kabla.







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Operations Committee







The purpose of our Operations Committee
is to assist our Board of Directors in fulfilling its responsibilities with respect to our equity management, business operations
and strategy implementation, including M&A transactions and research and development strategy. Our Operations Committee is
not authorized to exercise any power of our Board of Directors. The committee consists of six members, Mr. Nir Gilad (Chairman),
Mr. Avisar Paz, Mr. Sagi Kabla, Mr. Ovadia Eli, Mr. Geoffrey Merszei and Mr. Shimon Eckhaus.





Financing Committee



The purpose of our Financing Committee is to assist our Board of Directors in fulfilling its responsibilities
with respect to our financing and equity management and operations, including loans, debt offerings and other financing vehicles.
Our Financing Committee is not authorized to exercise any power of our Board of Directors. The committee consists of five
members, Mr. Avisar Paz (Chairman), Mr. Yaacov Dior, Mr. Sagi Kabla, Mr. Aviad Kaufman and Mr. Geoffery Merszei.



Internal Auditor



Under the Companies Law, the board of directors
is required to appoint an internal auditor recommended by the audit committee. The role of the internal auditor is to examine,
among other things, whether the company’s actions comply with applicable law and proper business procedures. The internal
auditor may not be an interested party, a director or an officer of the company, or a relative of any of the foregoing, nor may
the internal auditor be our independent accountant or a representative thereof. Our chief internal auditor oversees the work of
various internal auditors throughout our organization. Our chief internal auditor is Mr. Shmuel Daniel, who is a certified internal
auditor and certified public accountant in Israel. The chief internal auditor serves in this position since August 1, 2014 and
for a period of three years.



Insurance and indemnification



The Articles of Association of
the Company and its Israeli subsidiaries include provisions that permit exemption, indemnification and insurance of the
liability of officers, all in accordance with the provisions of the Israeli Companies Law. The Company, with the approval of
the Audit Committee, the Board of Directors and the General Meeting of Shareholders, granted its officers an exemption and
letters of indemnification, and has also taken out an insurance policy covering directors and officers. The insurance and
the compensation do not apply to those cases specified in Section 263 of the Israeli Companies Law. The exemption is
for damage caused and/or to be caused by such officers, due to a breach of the duty of care to the Company. The amount of
the indemnification payable by the Company under the letter of indemnification, in addition to amounts received from an
insurance company, if any, for all of the officers on a cumulative basis, for one or more of the events detailed therein, was
limited to $300 million. The insurance is renewed annually. On May 8, 2014 the General Meeting of Shareholders approved
an increase of the insurance coverage as determined within the framework resolution approved by the General Meeting
of Shareholders in August 2012, from $300 million to $350 million from the date on which our shares were listed
for sale on the US stock exchange. In August 25 and 27, 2015, respectively, the Compensation Committee and the Board of
Directors approved the renewal of the insurance policy for officers currently serving or that will serve in the Company from
time to time, as well as their liability in their capacity as officers of certain companies to which they have been or will
be appointed by the ICL Group or on its behalf, for the period of an additional year, commencing on September 1,
2015. Concurrently with the approval of the Compensation Committee and the Board, the policy that was valid until August 31,
2015 was extended for two additional months, until the satisfaction of a condition relating to the joint tier that will
enable to engage in the New Policy. On October 13, 2015, following the satisfaction of the aforementioned condition, the
policy was renewed, commencing as of September 1, 2015 until August 31, 2016. Pursuant to the New Policy the division of the
premium amount in the joint tier was changed so that 70% will be paid by the Company and 30% by the Israel Corporation, in
accordance with the authority given to the Compensation Committee and the Board to approve changes, from time to time, in
connection with the rate of premium division between the ICL Group and Israel Corp. Group as pertains to the shared tier, up
to a deviation at the rate of 25% of the original division, in accordance with the framework resolution. The insurance
policy includes a joint tier with Israel Corporation with a joint liability limit up to $20 million per occurrence and in the
aggregate, and a separate tier that covers officers' liability in the ICL Group alone for additional up to $200 million per
occurrence and in the aggregate (the total policy amounts to $220 million). According to the framework resolution, the
officers of the ICL group are beneficiaries of both tiers. As part of the approvals, an annual premium was approved which
will be paid by the Company in respect of the aforementioned policy; it does not exceed the maximum premium amount specified
in the framework resolution. The terms of the New Policy adhere to the terms of the framework resolution and of the Company's
Compensation Policy.The coverage in effect (including a shared tier with the parent company of up to $20 million) stands at
an aggregate amount of $220 million.







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Other Information



We do not have any agreement with directors
providing for benefits upon termination of employment.



D.	EMPLOYEES



As of December 31, 2015, we had a workforce
of 13,558 employees. Of these, 71 were employed at our headquarters and the balance were employed by our various subsidiaries.



Breakdown of Employees by Segment



|                                                     |  | 2015 |        | 2014 |  | 2013
|---------------------------------------------------- |  | ---- | ------ | ---- |  | ----
|ICL Fertilizers                                      |  |      | 7,660  |      |  |     
|ICL-IP                                               |  |      | 2,260  |      |  |     
|ICL-PP                                               |  |      | 2,793  |      |  |     
|Other (includes employees of DSM and ICL management) |  |      | 845    |      |  |     
|Total employees                                      |  |      | 13,558 |      |  |     



Geographic Breakdown of Employees



|                |  | 2015 |        | 2014 |  | 2013
|--------------- |  | ---- | ------ | ---- |  | ----
|Israel          |  |      | 4,812  |      |  |     
|China           |  |      | 2,565  |      |  |     
|Spain           |  |      | 1,300  |      |  |     
|Germany         |  |      | 1,170  |      |  |     
|UK              |  |      | 1,162  |      |  |     
|USA             |  |      | 1,142  |      |  |     
|Netherlands     |  |      | 576    |      |  |     
|Brazil          |  |      | 249    |      |  |     
|France          |  |      | 120    |      |  |     
|Other           |  |      | 462    |      |  |     
|Total employees |  |      | 13,558 |      |  |     



As at December 31, 2015, our workforce
comprised of 13,558 employees, compared to 12,457 employees as at December 31, 2014 – an increase of 1,101 employees. The
increase in the number of employees stems from the additional workforce in respect of acquisition of companies, mainly in China
(YPH), in Europe (Prolactal) and Allana Ethiopia. This increase was partly offset by the sale of companies, mainly in Europe, in
the Performance Products segment.



In most of ICL’s companies in Israel,
labor disputes have been declared, partly due to the efficiency plan and the strategy that the Company is implementing, as well
as a result of construction of the joint service center established in Israel. In some of the ICL’s production facilities
in Israel, the employees have started to strike.



In the beginning of 2014, a strike was
started at Rotem, against the background of the efficiency plan at Rotem’s factories. The strike lasted 33 days, and on April
11, 2014, an agreement between Rotem and the Rotem Workers Council was signed. The Agreement stated that the downsizing process
would be completed, and that efficiency arrangements would be put in place for a number of subjects (consolidation of units, reduction
of available positions, not hiring new employees in place of those who terminated their employment under the downsizing arrangement,
and more).



On February 2, 2015, the Workers Council
of Bromine Compounds Ltd. (“Bromine Compounds”), which belongs to ICL’s Industrial Products segment, started
a full-scale strike at the Bromine Compounds’ plants in Neot Hovav and halted all shipments of goods from the plants. The
strike at the plants came, among other things, in response to the efficiency programs that the Company is currently executing in
Neot Hovav, whereby the Company requested that a number of employees employed under a collective agreement will be dismissed and/or
will leave under early retirement conditions. On February 19, 2015, in response to the termination letters that were sent to employees
of Bromine Compounds, and further to similar efficiency discussions held at Dead Sea Works (“ICL Dead Sea”), the Workers Council of Dead
Sea Works gave notice of a full-scale strike at ICL Dead Sea’s facilities in Sodom, including the bromine facility and the
power station.



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On May 28, 2015, an agreement was signed
between ICL Dead Sea and Bromine Compounds and between the General Workers Council (Histadrut), the Workers Council of ICL Dead
Sea and the Bromine Compounds Workers Council, ending the strike, the employment disputes and the legal proceedings pending among
the parties, and allowing the immediate return of the employees to full employment (hereinafter – “the Agreement”).



The key elements of the Agreement are as
follows:



a.	210 employees will voluntarily retire
under the early retirement route.



b.	38 employees will end their employment
by December 31, 2015 under the severance pay route (or earlier under certain conditions), and will be entitled to special severance
pay in excess of that prescribed by law.



c.	The parties consent to implementation
of the efficiency plans in ICL Dead Sea and Bromine Compounds and to implementation of the plan to establish the regional shared
services center (under ICL Israel).



d.	During the period beginning on the
signing date of the Agreement and up to completion of the efficiency plans or until December 31, 2018, whichever occurs first (the
“Efficiency Period”), no collective dismissal, including early retirement which is not voluntary, shall take place
in ICL Dead Sea and in Bromine Compounds. Despite the aforesaid, up to July 1, 2017, the management of Bromine Compounds may execute
an early retirement plan which is not voluntary retirement, wherein up to 45 employees, will retire subject to certain terms specified in the Agreement.



e.	During the Efficiency Period it was
determined, among other things, that the management may transfer employees and may adjust the number of positions in the companies,
perform structural and organizational changes, and establish and operate new installations and projects.



f.	Management will be permitted to transfer
employees under the existing employment agreements – this being in addition to the employee transfer provisions in Section
e. above.



On September 21, 2015, a labor dispute
was declared at Bromine Compounds Ltd., following a claim made by the Workers Council concerning breach of contracts and unilateral
actions that contradicted the agreements.



On October 7, 2015, a labor dispute was
declared at Rotem, in light of a number of general issues.



On January 19, 2016, a labor dispute was
declared at ICL Dead Sea, following a claim lodged by the Workers Council concerning management’s unwillingness to discuss
the new employment agreement, and the failure to provide information pursuant to the Workers Council’s request.



The Company is conducting negotiations
with the various workers councils.



As part of the efficiency plan approved
by the Company’s Board of Directors and in order to implement further operating excellence measures in the Company’s
factories worldwide, in January 2015, the Company inaugurated a new European headquarters in Amsterdam, in addition to the joint
service center already operating in the United States (St. Louis), which will manage all of the Company’s activities in Europe,
and in June 2015, the Company operated its joint services center in Israel (in Beer Sheba). The new headquarters will serve as
ICL’s joint (shared) global service centers (together with the existing service center in the United States). The center
established in Amsterdam will also operate as the Company’s worldwide procurement (purchasing) center. The joint service
centers in Israel and Europe are to provide services to all ICL companies in Europe and Israel.



The activities to be included in these
service centers include accounting and finance, human resources, information technology, procurement and legal services. The Company
expects that establishment of these service centers will contribute to improvement of the quality of service provided, uniform
application of processes within the Company, improvement of control and compliance processes, and also result in cost savings,
mainly as a result of savings relating to procurement costs and consolidation of processes.



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During the fourth quarter of 2015, the
Company completed the procurement of the YPH joint venture, together with YPC, China’s leading manufacturer of phosphates.
Through this transaction, the Company added about 2,100 employees to its headcount.





During the fourth quarter
of 2015, as a result of the depletion of potash reserves at the mine in the United Kingdom, the Company decided to make a gradual
transition from extracting and producing potash to producing polysulphate. In the framework of this process, the Company has commenced
implementation of an efficiency plan whereby in the first quarter of 2016 a reduction of about 330 full time positions was completed.



Employment Agreements, Collective Bargaining
Agreements and Temporary Employees



ICL employees in Israel are employed under
collective or individual employment agreements. The collective bargaining agreements are signed for specified terms and are renewed
from time to time. By law, in the event that a new collective bargaining agreement is not signed, the terms of the original agreement
are extended for an unlimited period, unless one party gives notice to the other of its cancellation. As of the date of this Annual
Report, no notice of cancellation had been given for any of the collective bargaining agreements currently in effect at ICL.



ICL Rotem, Fertilizers and Chemical Materials
Ltd. (“FCM”), Dead Sea Magnesium and Bromine Compounds have collective bargaining agreements with termination dates
ranging from June 2016 to the end of 2018. The work agreement at ICL Dead Sea expired in September 2015.



Senior employees in special positions and
members of management are employed under individual agreements. These agreements are not limited in time and can be terminated
with advance notice of a few months.



Local employees of our subsidiaries overseas
are employed according to the employment terms prevalent in the countries in which they are employed. Most of our overseas employees,
primarily in China, Germany, the Netherlands, the United Kingdom, Spain and the United States, are employed under collective bargaining
agreements.



A relatively limited number of the employees
at our sites in Israel are employed by employment agencies for short terms. In addition, we have contracted in Israel with subcontractors
for various outsourcing services such as security, packaging, maintenance, catering, cleaning and other services. In accordance
with the decision of the boards of directors of ICL and its Israeli subsidiaries in October 2004, contractors who employ workers
at our plants in Israel are required to give employees working on a regular basis for ICL salary terms beyond those required by
law. Pursuant to this decision, the employers are obligated to grant these employees, in addition to current salary that must be
at least 5% higher than the minimum wage stipulated by law, other benefits such as uniforms and meals.



On July 11, 2013, a collective bargaining
agreement was signed between the Organization of Cleaning Companies in Israel regulating the salary and employment conditions of
the employees of these companies. The agreement applies to employers in the cleaning and maintenance sector in Israel that are
members of the Organization of Cleaning Companies.



Under PRC labor law, it is a mandatory
requirement for employers to enter into individual labor contract with their employees, in light of such, the permanent staff of
YPH JV shall be employed under respective individual labor contracts. However, under PRC law, the employees of a company have the
right to establish a labor union to represent their interests and protect their legal rights. YPH JV has a labor union. The labor
union may represent employees in negotiating with their employer for collective agreements regarding remuneration, working hours,
working safety, etc. Such collective agreements are mainly used for providing benchmark to certain working conditions. In addition,
3C, one of the subsidiaries within YPH JV, has entered into a collective agreement with its female employees regarding special
protection of female workers. The term of the collective agreement is two years starting from February 2015.



Infrastructure, performance management
processes and  human resources development



In 2015, the Company expanded the
assimilation of the performance management infrastructure and  human resources management. In this context, the
Company is assimilating a uniform technological infrastructure for managing and developing human resources within all of its
units, worldwide, as well as globally uniform work processes. The assimilated system includes the administration of employees’
data, learning and training processes, and managing the performance of
all of the Company’s employees. Since 2015, the upper echelons of the Company’s management (constituting approximately
10% of the Company’s human resources) have been taking part in a performance management based on goals, performance
evaluation, and  group and individual development plans derived from them. The assimilation of the global processes is expected
to expand to include additional processes in the fields of compensation and communications. By the beginning of 2017, it is expected
to enhance the relationship between performance and compensation, and to cover about 80% of the Company’s personnel.



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E.	SHARE OWNERSHIP



Information with respect to share ownership
of members of our Management and Supervisory Boards and our senior management is included in “Item 7. Major Shareholders
and Related Party Transactions.”



Incentive Compensation Plans



The 2014 Equity Compensation Plan



On November 8 and 11, 2015, the Compensation
Committee and the Board of Directors, respectively, and on December 23, 2015, the general shareholders meeting, under the 2014
Equity Compensation Plan, approved the issuance, for no consideration, of 120,920 restricted shares to the Company’s directors
(excluding the President & CEO, Mr. Stefan Borgas and the Executive Chairman of the Board, Mr. Nir Gilad). The restricted shares
will vest in three equal tranches, as follows: (i) 33.33% will vest at the end of 12 months from the date of the annual general
shareholders meeting; (ii) 33.33% will vest at the end of 24 months from the date of the annual general shareholders meeting; and
(iii) 33.33% will vest at the end of 36 months from the date of the annual general shareholders meeting. Vesting of the Restricted
Shares would fully accelerate if the holder thereof ceases to serve as a director of the Company, unless he ceased to hold office
due to those certain circumstances regarding early termination of office or imposition of enforcement measures, as set forth in
section 231-232a and 233(2) of the Israeli Companies Law.



On May 10, 2015 and June 1, 2015, and on
May 12, 2015 and June 5, 2015, the Company’s Compensation Committee and Board of Directors, respectively, under the 2014
equity-based compensation plan, approved the issuance of up to 7,931,500 non-marketable and non-transferrable options, for no consideration,
exercisable for up to 7,931,500 of the Company’s ordinary shares, and up to 1,397,302 restricted shares, to approximately
550 of the Company’s officers and senior employees. The said allocation includes a private placement of 404,220 options and
68,270 restricted shares to the Chairman of the Company’s Board of Directors and of 530,356 options and 89,574 restricted
shares to ICL’s Chief Executive Officer, which was approved by the General Meeting of the Company’s shareholders by
special majority on June 29, 2015 .The options and restricted shares will vest in three equal tranches: one-third at the end of
12 months after the grant date, one-third at the end of 24 months after the grant date and one-third at the end of 36 months after
the grant date. The expiration date of the options in the first and second tranches is at the end of 36 months after the grant
date and the expiration date of the options in the third tranche is at the end of 48 months after the grant date.



On January 25 and 26, 2015, our Remuneration
and Human Resources Committee and the Board of Directors, respectively, and on February 26, 2015 the General Meeting of our shareholders,
approved the issuance, under the 2014 Equity Compensation Plan plan, for no consideration, of 99,858 restricted shares to Company
directors (excluding our Chief Executive Officer, Mr. Stefan Borgas). The restricted shares will vest in three tranches, subject
to the directors continuing to serve in their positions on the vesting date, as follows: (1) 50% vested on August 28, 2015; (2)
25% will vest at the end of two years from the date of the General Meeting, on February 26, 2017, and (3) 25% at the end of three
years from the date of the General Meeting, on February 26, 2018.



Following the approval of the Company’s
Board of Directors on August 6, 2014, under the 2014 equity-based compensation plan, ICL issued, for no consideration, 4,360,073
non-marketable options, exercisable for up to 4,360,073 of our ordinary shares, and 1,007,651 restricted shares, to approximately
450 of our officers and senior employees. The issuance includes a significant private placement of 367,294 options and 85,907 restricted
shares to our Chief Executive Officer, which was approved by the General Meeting of our shareholders. This grant format of the
options plan includes a “cap” for the value of a share where if, as at the exercise date, the closing price of an ordinary
share is higher than twice the exercise price (the “Share Value Cap”), the number of the exercised shares will be adjusted
so that the product of the exercised shares actually issued to the offeree multiplied by the share closing price will equal the product of the
number of exercised options multiplied by the Share Value Cap.The options and restricted shares will vest in three equal tranches:
one-third at the end of 24 months from December 1, 2014, one-third at the end of 36 months from December 1, 2014 and one-third
at the end of 48 months from December 1, 2014. The expiration date of the options in the first tranche is at the end of 48 months
from December 1, 2014, the expiration date of the options in the second tranche is at the end of 60 months from December 1, 2014
and the expiration date of the options in the third tranche is at the end of 72 months from December 1, 2014.



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The 2012 Option Plan



On November 26, 2012, our Board of Directors
approved the issue of up to 12,000,000 non-marketable options for no consideration to 416 of our officers and senior employees
in Israel and overseas. On December 27, 2012, 11,999,400 options were issued. The issuance included a material private placement
of 1,190,000 options to our Chief Executive Officer. This plan includes a “cap” for the value of a share where if,
as at the exercise date, the closing price of a Company share is higher than twice the exercise price (the “Share Value Cap”),
the number of the exercised shares will be reduced so that the product of the exercised shares actually issued to an offeree multiplied
by the share closing price will equal the product of the number of exercised options multiplied by the Share Value Cap. The options
may be exercised in three equal tranches on November 26, 2013, 2014 and 2015. The expiration date of the options for the first
and second tranches is at the end of 48 months from the issuance date, and the expiration date of the options for the third tranche
is at the end of 60 months from the issuance date.



The 2010 Option Plan



On January 7, 2010, our Board of Directors
approved an issuance of 10,930,500 non-marketable options for no consideration to 318 of our officers and senior employees in Israel
and overseas. The issuance included a significant private placement of 1,100,000 options to our former Chief Executive Officer
and 800,000 options to our Chairman of the Board. On February 15, 2010, at an extraordinary general meeting of our shareholders,
the issuance to the Chairman of the Board was approved. The 2010 Plan options vested in three equal annual installments as follows:
one third at the end of 12 months from the date of approval of the Board of Directors; one third at the end of 24 months from the
date of approval of the Board of Directors; and one third at the end of 36 months from the date of approval of the Board of Directors.
As at December 31, 2014, all the options had expired.



Upon exercise, each option may be converted
into one ordinary share of NIS 1 par value of the Company. The ordinary shares issued as a result of exercise of the options have
the same rights as the Company’s ordinary shares, immediately upon their issuance. The options issued to the employees in
Israel are covered by the provisions of Section 102 of the Israeli Income Tax Ordinance (New Version) and the regulations promulgated
thereunder. The Company elected to perform the issuance through a trustee, under the Capital Gains Track. The exercise price is
linked to the CPI that is known as of the date of payment, which is the exercise date. In a case of distribution of a dividend
by the Company, the exercise price is reduced on the “ex-dividend” date, by the amount of the dividend per share (gross),
based on the amount thereof in NIS on the effective date. The options are not marketable and are not transferable.



Fair Value of Options



The fair value of the options granted under
the 2010 Equity Compensation Plan as stated above was estimated on the basis of the Black & Scholes model for the pricing of
options. The fair value of the options granted under the 2012 and 2014 Equity Compensation Plan was estimated using the binomial
model for pricing options. The parameters used in applying the models are as follows:



|                                     |  |           |       |           |  | 2014 Plan   
|------------------------------------ |  | --------- | ----- | --------- |  | ------------
|                                     |  | 2010 Plan |       | 2012 Plan |  | Granted 2014
|                                     |  |           |       |           |  |             
|Share price (in $)                   |  |           | 14.3  |           |  |             
|CPI-linked exercise price (in $)     |  |           | 14.3  |           |  |             
|Expected volatility:                 |  |           |       |           |  |             
|First tranche                        |  |           | 54.98 | %         |  |             
|Second tranche                       |  |           | 54.98 | %         |  |             
|Third tranche                        |  |           | 48.45 | %         |  |             
|Expected life of options (in years): |  |           |       |           |  |             
|First tranche                        |  |           | 2.5   |           |  |             



|                                                         |  |           |      |           |  | 2014 Plan   
|-------------------------------------------------------- |  | --------- | ---- | --------- |  | ------------
|                                                         |  | 2010 Plan |      | 2012 Plan |  | Granted 2014
|                                                         |  |           |      |           |  |             
|Second tranche                                           |  |           | 2.5  |           |  |             
|Third tranche                                            |  |           | 3.5  |           |  |             
|Risk-free interest rate:                                 |  |           |      |           |  |             
|First tranche                                            |  |           | 0.59 | %         |  |             
|Second tranche                                           |  |           | 0.59 | %         |  |             
|Third tranche                                            |  |           | 1.29 | %         |  |             
|Fair value (in $ millions)                               |  |           | 54.3 |           |  |             
|Weighted average grant date fair value per option (in $) |  |           | 5.0  |           |  |             



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The total fair value on the grant date
of the restricted shares issued pursuant to the approval of the Board of Directors on August 6. 2014, is about $8.4 million. The
value of the restricted shares is determined according to the closing price on the TASE on the most recent trading day preceding
the date of the approval of the Board of Directors (with the exception of the restricted shares issued to our CEO, the value of
which was determined according to the closing price on the TASE on the most recent trading date preceding the date of the approval
of the General Meeting).



The total fair value on the grant date
of the restricted shares that were allotted to directors (excluding the Company CEO, Mr. Stefan Borgas) pursuant to the approval
of the Board of Directors on January 26, 2015, is approximately $0.7 million. The value of the restricted shares offered to offerees
was determined according to the closing price on the TASE on the most recent trading day preceding the date of the approval of
the General Meeting.



The total fair value on the grant date
of the restricted shares issued in accordance with the approval of the Board of the Directors on May 12, 2015, is approximately
$9.7 million, of which approximately $0.5 million relates to the Chairman of the Company’s Board of Directors and approximately
$0.6 million relates to the Chief Executive Officer. The value of the restricted shares offered to the offerees was determined
according to the closing price on the Stock Exchange on the last trading day prior to the date of approval by our Board of Directors,
except for the Company’s CEO, Mr. Stefan Borgas and the Chairman of the Board of Directors, Mr. Nir Gilad, where the value
of the restricted shares was determined according to the closing price on the TASE on the most recent trading date preceding the
date of the approval of the General Meeting).



The total fair value on the grant date
of the restricted shares that were allotted to Directors (except for the Company’s CEO, Mr. Stefan Borgas, and the Chairman
of the Board of Directors, Mr. Nir Gilad) pursuant to the approval of the Board of Directors on November 11, 2015, is approximately
$0.5 million. The value of the restricted shares offered to offerees was determined according to the closing price on the TASE
on the most recent trading day preceding the date of the approval of the General Meeting.



The cost of the benefit embedded in the
aforesaid plans will be recognized in profit and loss over the vesting period.



The 2013 and 2014 Cash Incentive Plans



In May 2013, ICL’s Board of Directors
decided to approve a long-term remuneration plan for approximately 11,300 Company employees in Israel and overseas, who are not
managers that participated in the Company’s option plans (which were approved in November 2012), in accordance with the terms
stipulated in the plan. The maximum cost of the plan is approximately $45 million.



In August 2014, ICL’s Board of Directors
decided to approve a long-term remuneration plan for approximately 11,800 of the Company’s non-managerial employees in Israel
and overseas, who are not managers that participated in the Company’s options and shares plan (that was approved on the same
date), in accordance with the terms stipulated in the plan. The maximum cost of the plan is approximately $17 million.



As at the date of this Annual Report, the
conditions for the aforesaid plans were not met and therefore no liability was included in respect of these plans.



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Item 7 - MAJOR SHAREHOLDERS AND RELATED (AND INTERESTED) PARTY TRANSACTIONS



A. MAJOR SHAREHOLDERS



The following table presents as of March
1, 2016 (unless otherwise noted below) the beneficial ownership of our ordinary shares by each person who is known by us to be
the beneficial owner of 5% or more of our outstanding ordinary shares and each of our directors and executive officers. The data
presented is based on information provided to us by the holders or disclosed in public regulatory filings.





|                                                    |  | Ordinary Shares Beneficially Owned(1) |             | Special State Share
|--------------------------------------------------- |  | ------------------------------------- | ----------- | -------------------
|Shareholders                                        |  |                                       | Number      |                    
|Israel Corporation Ltd.(2)                          |  |                                       | 587,128,391 |                    
|PotashCorp Agricultural Cooperative Society Ltd.(3) |  |                                       | 176,088,630 |                    
|State of Israel(4)                                  |  |                                       | —           |                    
|Nir Gilad                                           |  |                                       | 472,490     |                    
|Stefan Borgas                                       |  |                                       | 2,263,131   |                    
|Avisar Paz                                          |  |                                       | —           |                    
|Aviad Kaufman                                       |  |                                       | —           |                    
|Ron Moskovitz                                       |  |                                       | —           |                    
|Sagi Kabla                                          |  |                                       | —           |                    
|Ovadia Eli                                          |  |                                       | 24,193      |                    
|Yaacov Dior                                         |  |                                       | 24,193      |                    
|Miriam Haran                                        |  |                                       | 24,193      |                    
|Geoffrey Merszei                                    |  |                                       | 24,193      |                    
|Shimon Eckhaus                                      |  |                                       | 24,193      |                    
|Asher Grinbaum                                      |  |                                       | 657,942     |                    
|Kobi Altman                                         |  |                                       | 219,954     |                    
|Eli Amit                                            |  |                                       | 171,993     |                    
|Hezi Israel                                         |  |                                       | 159,824     |                    
|Lisa Haimovitz                                      |  |                                       | 148,706     |                    
|Yakir Menashe                                       |  |                                       | 190,224     |                    
|Karl Mielke                                         |  |                                       | 258,580     |                    
|Mark Volmer                                         |  |                                       | 277,942     |                    
|Charles Weidhas                                     |  |                                       | 657,942     |                    
|Nissim Adar                                         |  |                                       | 657,942     |                    
|Dan Chen                                            |  |                                       | 672,742     |                    
|Lizette Kilian                                      |  |                                       | —           |                    
|Ido Lilian                                          |  |                                       | 176,701     |                    





____________________

| | * | Less than 1%
| | - | ------------



| | ** | For additional information, please see section (2) below.
| | -- | ---------------------------------------------------------



| |  | On February 26, 2015, the General Meeting of Shareholders approved an allocation of 9,078 restricted shares for each of the
Company directors (except for the Chairman of the Board, Mr. Nir Gilad, and the Chief Executive Officer, Mr. Stefan Borgas), for
no consideration. On December 23, 2015, the General Meeting of Shareholders approved an allocation of 15,115 for each of the Company
directors (except for the Chairman of the Board, Mr. Nir Gilad, and the Chief Executive Officer, Mr. Stefan Borgas), for no consideration.
See “Item 6. Directors, Senior Management and Employees—E.Share Ownership –The 2014 Equity Compensation Plan”.
The Company’s Human Resources & Compensation Committee, Board of Directors and General Meeting of Shareholders approved
transfer by Mr. Aviad Kaufman and by the directors employed by Israel Corporation the equity compensation granted to them (a total
of 72,579 restricted shares) or the financial benefits by virtue thereof, to the Israel Corporation. Therefore, the shares were
allocated to Israel Corp.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (1) | The percentages shown are based on 1,275,217,894 ordinary shares issued and outstanding as of March 1, 2016 (after excluding
shares held by us or our subsidiaries). In accordance with the rules of the SEC, beneficial ownership includes voting or investment
power with respect to securities and includes the shares issuable pursuant to options that are exercisable within 60 days from
March 1, 2016. Shares issuable pursuant to options are deemed outstanding for computing the percentage of the person holding such
options but are not outstanding for computing the percentage of any other person.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | (2) | Israel Corp. is a public company listed for trading on the Tel Aviv Stock Exchange (TASE). Based on the information the Company
received from Israel Corp. Millenium Investments Elad Ltd. (“Millenium”) and Mr. Idan Ofer are considered as controlling
shareholders jointly of Israel Corp., for purposes of the Securities Law (each of Millenium and Mr. Ofer hold shares in Israel
Corp. directly, and Mr. Idan Ofer serves as a director of Millenium and has an indirect interest in it as the beneficiary of the
foreign discretionary trust that has indirect control of Millenium). Millenium holds approx. 46.94% of the share capital in Israel
Corp. which holds approx. 46.04% of the voting rights and 48.88% of the issued share capital of the Company. Millenium is held
by Mashat Investments Ltd. (“Mashat”) and by XT Investments Ltd. (“XT Investments”), with 80% and 20% holdings,
respectively. Mashat is a private company, wholly owned by a Dutch company, Ansonia Holdings Singapore B.V. (“Ansonia”).
Ansonia is a wholly-owned subsidiary of Jelany Corporation N.V. (registered in Curaçao), which is a wholly-owned subsidiary
of the Liberian company, Court Investments Ltd. (“Court”). Court is wholly owned by a foreign discretionary trust,
in which Mr. Idan Ofer is the beneficiary. XT Investments, which directly holds approximately 1.24% of the share capital of Israel
Corp., is a shareholder in Millenium as stated. XT Investments is a private company, wholly owned by XT Holdings Ltd. (“XT
Holdings”), a private company whose ordinary shares are held in equal shares by Orona Investments Ltd. (which is indirectly
controlled by Mr. Ehud Angel) and by Lynav Holdings Ltd., a company that is controlled by a foreign discretionary trust in which
Mr. Idan Ofer is a prime beneficiary. Mr. Ehud Angel holds, among other things, a special share that grants him, inter alia, under
certain limitations and for certain issues, an additional vote on the board of directors of XT Holdings. In addition, Kirby Enterprises
Inc., which is indirectly held by the same trust that holds Mashat, in which, as stated, Mr. Idan Ofer is the beneficiary, holds
approximately 0.74% of the share capital of Israel Corp. Furthermore, Mr. Idan Ofer holds directly approximately 3.85% of the share
capital of Israel Corp. Furthermore, XT Investments directly holds approximately 0.03% of the Company’s capital (namely,
377,662 Ordinary Shares).
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





On September 24, 2014,
we listed our ordinary shares on the NYSE in connection with the initial public offering of our shares. The offering, including
the subsequent option exercise, included 42,222,942 of our ordinary shares sold by Israel Corporation and 23,951,015 of our ordinary
shares sold by certain forward counterparties. Immediately following the offering, Israel Corporation had voting rights with respect
to approximately 46.18% of our outstanding ordinary shares (after excluding shares held by us or our subsidiaries). Even though
Israel Corporation has less than 50% of our ordinary shares, it still has a major impact on the General Meeting of Shareholders
and de facto has the power to appoint directors and has a strong influence upon the composition of our Board of Directors.







| |  | As of March 1, 2016, 392 million ordinary shares have been pledged by Israel Corporation to secure certain liabilities, almost
entirely comprised of margin loans with an aggregate outstanding principal amount of $754 million.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | PotashCorp Agricultural Cooperative Society Ltd. is an Israeli subsidiary of Potash Corporation of Saskatchewan Inc., a Canadian
corporation whose shares are listed for trading on the Toronto Stock Exchange and the NYSE.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (4) | For a description of the different voting rights held by the holder of the Special State Share, see “Description of
Share Capital—The Special State Share” in our registration statement on Form F-1 (File no. 333-198711) filed with
the SEC on September 22, 2014.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | To our knowledge, as of March 1, 2016, we had one Shareholder of record who was registered with an address in the United States,
holding approximately 5.36% of our outstanding ordinary shares. Such numbers are not representative of the portion of our shares
held in the United States nor are they representative of the number of beneficial holders residing in the United States, since
such ordinary shares were held of record by one U.S. nominee company, CEDE & Co. In Israel, the nominee company to the TASE
in whose name most of our ordinary shares are held of record is Registration Company of Bank Hapoalim Ltd.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



B. RELATED (AND INTERESTED) PARTY TRANSACTIONS



Approval of Related (and Interested) Party
Transactions



Approval of Related (and interested) Party Transactions





Under the Companies Law,
an interested party transaction may be approved only if it is for the benefit of the company. A transaction that is not an extraordinary
transaction in which a director or officer has a personal interest requires the approval of the Board of Directors, unless the
articles of association of the company provide otherwise. Our Articles of Association provide that such a transaction, if it does
not relate to a director’s or officer’s compensation terms, may be approved by any of our Board of Directors, our Audit
and Finance Committee, a disinterested director or officer or a person authorized for this purpose by our Board of Directors. If
the transaction is an extraordinary transaction, it must be approved by the Audit and Finance Committee and the Board of Directors,
and, under certain circumstances, by the shareholders of the company. An “extraordinary transaction” is a transaction
other than in the ordinary course of business, other than on market terms or that is likely to have a material impact on the company’s
profitability, assets or liabilities.







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Pursuant to the Companies Law, extraordinary
transactions with the controlling shareholder and extraordinary transactions in which a controlling shareholder has a personal
interest, require the approval of the audit committee, or the compensation and human resources committee if the transaction is
in connection with employment or service with the company, the board of directors and the shareholders of the company. The shareholder
approval must be by a simple majority of all votes cast, provided that (i) such majority includes a simple majority of the votes
cast by non-controlling shareholders having no personal interest in the matter or (ii) the total number of votes of shareholders
mentioned in clause (i) above who voted against such transaction does not exceed 2% of the total voting rights in the company.



The Companies Law prohibits any director
who has a personal interest in an extraordinary transaction from being present at the discussion and voting on such transaction
in the audit committee or board of directors. Notwithstanding, a director who has a personal interest may be present at the meeting
and vote on the matter if a majority of the directors or members of the audit committee have a personal interest in the approval
of such transaction. If a majority of the members of the Board of Directors have a personal interest in the transaction, such transaction
also requires shareholder approval.



Approval of Director and Officer Compensation



Under the Companies Law, we are required
to approve, at least once every three years, a compensation policy with respect to our directors and officers. Following the recommendation
of our Compensation and Human Resources Committee, the compensation policy must be approved by our Board of Directors and our Shareholders.
The shareholder approval must be by a simple majority of all votes cast, provided that (i) such majority includes a simple majority
of the votes cast by non-controlling shareholders having no personal interest in the matter or (ii) the total number of votes of
shareholders mentioned in clause (i) above who voted against such transaction does not exceed 2% of the total voting rights in
the company. In general, the compensation terms of directors, the chief executive officer and any employee or service provider
who is considered a controlling shareholder, as well as a relative of a controlling shareholder, must be approved separately by
the Compensation and Human Resources Committee, the Board of Directors and the Shareholders. Generally, shareholder approval is
not required for director compensation payable in cash up to the maximum amount set forth in the regulations governing the compensation
of external directors. Generally, the compensation terms of other officers who report directly to the chief executive officer require
the approval of the Compensation and Human Resources Committee and the Board of Directors, unless the Compensation and Human Resources
Committee approves that there is no material change to the terms of the compensation.



On July 17, 2013, our Board of Directors
approved the compensation policy for our directors and officers in accordance with the recommendation of our Compensation and Human
Resources Committee, which approved the compensation policy on July 16, 2013. Our compensation policy was approved by our Shareholders
on August 26, 2013. In March 2014, our Compensation and Human Resources Committee and our Board of Directors approved certain amendments
to our compensation policy including, among other things, with regard to the method of calculating the target bonus for officers
who have not served as officers or who have served in another position in the Company in the three years prior to the bonus, the
possibility of awarding a special bonus and certain amendments to the equity bonus mechanism (including with regard to minimum
permitted vesting period). In August 2014, our Compensation and Human Resources Committee and our Board of Directors approved,
and on December 11, 2014, the General Meeting of Shareholders approved additional specific amendments to our compensation policy
which, among other things:



| | · | add an exception to the criteria for the selection of the comparative companies in relation to which the compensation packages
offered to officers will be examined, provided that there is available public information on the compensation packages in such
companies;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | · | amend the ranges for the desirable ratios between the fixed and the variable components of the compensation of officers;
| | - | ------------------------------------------------------------------------------------------------------------------------



| | · | amend the ratio between the weights of the different categories in the formula for calculating officers’ compensation;
| | - | ----------------------------------------------------------------------------------------------------------------------



| | · | with respect to ICL and the segments’ financial measures, authorize our Compensation and Human Resources Committee and
Board to adjust (upwards or downwards) the net income and/or operating income of the Company or the respective segment for one-time
items, for purposes of calculating the annual bonus;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | for purposes of the compliant equity bonus mechanism provided in Section 7.7 of the Compensation Policy – for purposes
of determining the minimal total shareholder return, which constitutes a prerequisite for the maturity of the matching equity bonus,
the foreign comparative companies will be direct business competitors of ICL or companies that operate in similar markets as ICL,
for which available public information exists, and that have income and/or a market value within a reasonable range of our income
and market value;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | amend the way of calculating the target bonus for officers who have not served the Company in the last three years; and
| | - | -----------------------------------------------------------------------------------------------------------------------



| | · | add the possibility of granting special bonuses for special efforts or unique contributions.
| | - | --------------------------------------------------------------------------------------------



Transactions with related (and Interested) Parties



Registration Rights Agreement



We entered into a registration rights agreement
with Israel Corporation on September 12, 2014. We obtained Shareholder approval of our entry into this agreement on May 8, 2014.
This agreement provides for customary demand, piggyback and shelf registration rights and provides that we will perform various
actions and comply with various requirements to facilitate and promote such registrations, as well as cover certain expenses of
Israel Corporation in connection with any such registration.



Controlling Shareholder



As of March 1, 2016, Israel Corporation
held approximately 48.88% of our outstanding ordinary shares and approximately 46.04% of the voting rights of our Shareholders.



Israel Corporation exercises control over
our operations and business strategy and has sufficient voting power to control many matters requiring approval by our Shareholders,
including:



| | · | The composition of our Board of Directors (other than external directors, as described under “Item 6. Directors, Senior
Management and Employees—C. Board Practices—External Directors”);
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Mergers or other business combinations;
| | - | ---------------------------------------



| | · | Certain future issuances of ordinary shares or other securities; and
| | - | --------------------------------------------------------------------



| | · | Amendments to our Articles of Association, excluding provisions of the Articles of Association that were determined by the
Special State Share.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------



However, Israel Corporation does not exercise
control with respect to our compensation policy and interested party transactions, since these must be approved by a majority of our
non-related Shareholders.



Joint Insurance



On August 29, 2012, following approval
by our Audit and Finance Committee and our Board of Directors, our Shareholders approved a new framework resolution to purchase
an insurance policy for two-tier coverage of director and officer liability jointly with Israel Corporation. The first tier, which
is shared with Israel Corporation, has a joint liability limit of up to $20 million, and
the premiums are paid about 42.5% by us and about 57.5% by Israel Corporation. The second tier covers us alone for up to $200 million.
This framework resolution is valid for up to three years.



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In August 2013, following approval by our
Human Resources & Compensation Committee and our Board of Directors, our Shareholders approved an increase of the total insurance
cap to $350 million.



In connection with our initial public offering,
we updated the terms of our insurance policy for directors and officers in accordance with the practice of companies listed in
the United States, including with respect to the limit of liability, the premium and the apportioning of the insurance premium
to be paid between us and Israel Corporation. The insurance policy includes a joint tier with Israel Corporation with a liability
limit of up to $20 million and a separate tier that covers us alone for up to $220 million, with our directors and officers as
beneficiaries of both tiers. The new insurance policy was approved by our Shareholders, as a three year framework resolution, in
May 8, 2014, following approval by our Audit and Finance Committee and Board of Directors.



On August 31, 2014, we announced that our
Audit and Finance Committee and our Board of Directors had approved the renewal of our insurance policy in accordance with the
three-year framework resolution approved by our Shareholders in May 2014 and our Compensation Policy. The new insurance policy,
which entered into effect as of September 1, 2014, includes a joint tier with Israel Corporation with a joint liability limit up
to $20 million (the division of the premium amount was changed in 2014 so that about 60% will be paid by the Company and about
40% by Israel Corporation) and a separate tier that covers us alone with a liability limit up to $200 million.







On August 25 and 27,
2015, respectively, the Compensation Committee and the Board of Directors approved the renewal of the insurance policy for
officers currently serving or that will serve in the Company from time to time, as well as their liability in their capacity
as officers of certain companies to which they have been or will be appointed by the ICL Group or on its behalf, for the
period of an additional year, commencing on September 1, 2015. Concurrently with the approval of the Compensation Committee
and the Board, the policy that was valid until August 31, 2015 was extended for two additional months, until the satisfaction
of a condition relating to the joint tier that will enable us to engage in the New Policy. On October 13, 2015, following the
satisfaction of the aforementioned condition, the policy was renewed, commencing as of September 1, 2015 until August 31,
2016. Pursuant to the New Policy the division of the premium amount in the joint tier was changed so that 70% will be paid by
the Company and 30% by the Israel Corporation, in accordance with the authority given to the Compensation Committee and the
Board to approve changes, from time to time, in connection with the rate of premium division between the ICL Group and the
Israel Corp. Group as pertains to the shared tier, up to a deviation at the rate of 25% of the original division, in
accordance with the framework resolution. The insurance policy includes a joint tier with Israel Corporation with a joint
liability limit up to $20 million per occurrence and in the aggregate, and a separate tier that covers officers' liability in
the ICL Group alone for additional up to $200 million per occurrence and in the aggregate (the total policy amounts to $220
million). According to the framework resolution, the officers of the ICL group are beneficiaries of both tiers. The
Compensation and the Board of Directors further approved the annual premium under the New Policy in accordance with the terms
of the framework resolution. The terms of the New Policy adhere to the terms of the framework resolution and of the Company's
Compensation Policy.



Management Fees to Controlling Shareholder





We have paid our parent
company, Israel Corporation, annual management fees for management services, since 1996. Management services include ongoing general
consultation, such as professional, financial, strategic and managerial consulting, and consulting and representation in regulatory
discussions and issues. The parties may agree to expand management services to additional areas. In January 2015 our Human Resources
& Compensation Committee and our Board of Directors approved, and on February 26, 2015 our General Meeting of Shareholders
approved, an extension of the management agreement that expired on December 31, 2014, for the years 2015-2017, under the same
terms, except for the following changes: (1) upon approval of the terms of office for the Executive Chairman of the Board, management
fees shall be reduced to $1 million plus VAT. In case the Chairman of the Board is appointed Executive Chairman of the Board and
thereafter ceases to serve and be compensated as an Executive Chairman of the Board, as of such time management fees shall once
more be set at an amount of $3.5 million plus VAT; (2) to allow the Company to grant equity compensation to incumbent and future
directors who are employed by the Israel Corporation (such directors do not receive cash compensation for their service); these
directors may assign their equity compensation to Israel Corporation. Following Mr. Nir Gilad's appointment as Executive Chairman
of the Board, the annual management fees for management services to Israel Corporation amounts to $1 million plus VAT. Mr. Aviad
Kaufman (who is a director of Israel Corp.), and the directors employed by Israel Corp., have conveyed their right to 72,579 restricted
shares unto Israel Corp. and accordingly, those shares were allocated to Israel Corp. (see Item 7.Major Shareholders and Interested
Party Transactions-A “Major Shareholders”).







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Relationships with Other Companies



A subsidiary in our Performance Products
segment entered into a long-term agreement with an interested party of the Company for the acquisition of food-grade phosphoric
acid. The agreement was signed before the subsidiary was acquired by us and is in effect until 2018.





On February 28, 2013, our
Audit and Finance Committee and our Board of Directors approved certain of our Israeli subsidiaries in our Industrial Products
segment to purchase electricity from OPC Rotem Ltd. During 2013 additional subsidiaries from our Fertilizers segment entered into
an agreement with OPC Rotem Ltd. To purchase electricity in accordance with the amended agreement approved in February 28, 2013.







The table below sets forth certain income
statement information with respect to balances of our related party transactions.



|                                          |  | For the year ended December 31,
|----------------------------------------- |  | -------------------------------
|                                          |  | 2015                           
|                                          |  | (US$ millions)                 
|Sales                                     |  |                                
|Cost of sales                             |  |                                
|Selling, transport and marketing expenses |  |                                
|Financing expenses (income), net          |  |                                
|Management fees to the parent company     |  |                                



The table below sets forth certain balance
sheet information with respect to balances of our related party transactions



|                                              |  | As at December 31
|--------------------------------------------- |  | -----------------
|                                              |  | 2015             
|                                              |  | (US$ millions)   
|Long-term deposits, net of current maturities |  |                  
|Long term loans                               |  |                  
|Other current assets                          |  |                  
|Other current liabilities                     |  |                  



The Company declares a dollar dividend
that is paid in NIS, pursuant to the exchange rate on the effective date. The Company executes a hedging transaction in order to
hedge the exposure to changes in the U.S. dollar/NIS exchange rate. The dividend paid to the Company’s controlling shareholder,
Israel Corporation, is made partly based on the exchange rate on the effective date and partly based on the exchange rate on the
date of distribution. In addition, the dividend paid to an interested party is made pursuant to the exchange rate on the date of
distribution.



For additional information regarding our
related party transactions, see note 29 to our audited financial statements.



Option Plans



See “Item 6. Directors, Senior
Management and Employees—E. Share Ownership” for a description of the Option Plans.



C.	INTERESTS OF EXPERTS AND COUNSEL



Not Applicable.



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Item 8.  Financial Information



A.	CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION



The fixed operating costs for the years
2015, 2014 and 2013 amounted to approximately $2,335 million, $2,432 million and $2,328 million, respectively. The variable operating
costs for the years 2015, 2014 and 2013 amounted to approximately $2,305 million, $2,921 million and $2,842 million, respectively.



See “Item 18. Financial
Statements.”



Legal Proceedings



Tax Proceedings



On December 29, 2013, an assessment was
received from the Israeli Tax Authorities whereby the Company is required to pay additional tax beyond the amount already paid
for 2009 to 2011 in the amount of approximately NIS 917 million (approximately $235 million). The Company has filed its objections
to the assessment. On January 27, 2015, an order was received from the Tax Authorities, regarding the additional amount under the
said assessment. The primary contention of the Tax Authorities is that our subsidiaries, ICL Dead Sea and ICL Rotem Amfert, are
not entitled to benefits under the Law for Encouragement of Capital Investments commencing from the date on which Amendment No.
60 to this law entered into effect in 2005 or, alternatively, the mining and water pumping activities, including the activities
in the evaporation ponds, are not industrial activities and, accordingly, they are not entitled to benefits under the Law for Encouragement
of Capital Investments. The Company disagrees with the position of the Taxes Authority and on February 25, 2015, it filed an appeal
of the order.



In the Company’s estimation, the
chances that the Company’s contentions will ultimately be accepted at the end of the appeal proceeding are greater than the
chances that they will be rejected and, therefore, no provision for tax has been included in the financial statements in respect
of the said assessment.



ICL Dead Sea Proceedings



Arbitration regarding Royalties at ICL Dead
Sea Ltd.







Pursuant to the Israeli
Dead Sea Concession Law, 1961 (hereinafter—“the Concession Law”), as amended in 1986, and the concession indenture
attached as an addendum to the Concession Law, the Company was granted a concession to utilize the resources of the Dead Sea and
to lease the land required for its plants in Sodom for a period that is expected to end on March 31, 2030, accompanied by
a priority right to receive the concession after its expiration, should the Government wish to offer a new concession. In consideration
of the concession, the Company pays royalties to the Government of Israel, calculated at the rate of about 5% of the value of the
products at the factory gate, less certain expenses, where according to the Salt Harvesting agreement the royalties in respect
of the annual quantity of potash sold in excess of 1.5 million is 10% (in place of 5%). In addition, according to the
Salt Harvesting agreement, if legislation is enacted that changes the specific fiscal policy in connection with profits or royalties
deriving from mining of quarries from the Dead Sea, the Company’s consent will not apply regarding an increase in the rate
of royalties on the surplus quantities referred to above, commencing from the date on which additional tax is collected as stated
in the legislation. On November 30, 2015, the Economic Efficiency Law was published, including the implementation of the Sheshinski
recommendations, which addresses royalties and taxation of excess profits from Dead Sea minerals. The law entered into effect on
January 1, 2016. For additional information please see Note 20 to our audited financial statements.







ICL Dead Sea granted a sub-concession to
Dead Sea Bromine Ltd. to produce bromine and its compounds from the Dead Sea, the expiration date of which is concurrent with the
ICL Dead Sea’s concession. The royalties in respect of the products manufactured by the Bromine Company are received by the
Company from the Bromine Company, and the Company then pays them over to the State. In addition, there is an arrangement relating
to payment of royalties by ICL Magnesium for production of metal magnesium by virtue of a specific arrangement with the State provided
in the Government’s decision dated September 5, 1993. Pursuant to the arrangement, royalties are paid by Dead Sea Magnesium
on the basis of carnallite used for production of magnesium. The arrangement with Dead Sea Magnesium provides that during 2006
the State may demand a reconsideration in connection with the amount of the royalties and the method or their calculation for 2007
and thereafter. The State’s demand for reconsideration, as stated, was
first received at the end of 2010, and the matter is presently in an arbitration proceeding, as described below.



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In 2007, a letter was received from the
then Accountant General of the Israeli Ministry of Finance, claiming an underpayment of royalties amounting to hundreds of millions
of shekels. Pursuant to the concession, disputes between the parties relating to the concession, including royalties, are to be
decided by an arbitration panel of three arbitrators (each side appoints an arbitrator and these two appoint the third). On January
9, 2011, the State of Israel and ICL Dead Sea decided to turn to arbitration for purposes of deliberating and deciding the issue
of the manner of calculation of the royalties under the concession and royalties to be paid for magnesium metals and payment or
refunds (if any) due deriving from these matters.



In the statement of claim filed by the
State of Israel in the arbitration proceedings, the State of Israel is claiming the amount of $265 million in respect of underpayment
of royalties for the years 2000 through 2009, with the addition of interest and linkage differences, and a change in the method
of calculating royalty payments from the sale of metal magnesium.







On
May 19, 2014, a partial arbitration decision was received regarding the royalties’ issue. Based on the principles of the
decision received, ICL Dead Sea is also required to pay the State royalties on
the sale of downstream products manufactured by companies that are controlled by ICL that have production plants located both in
and outside the Dead Sea area, including outside of Israel. The royalties are to be paid according to the value of the downstream
products, which will be set according to the formula described in Section 15(a)(2) of the Concession Deed, based on the selling
price of the downstream products to unrelated third parties less the deductions set forth in subsections (I), (II) and (III) of
that Section. Regarding metal magnesium, it was decided that the State of Israel and ICL Dead Sea are to exhaust their discussions
on the subject of the royalties to be paid by ICL Dead Sea on metal magnesium, and if no agreement is reached the matter is to
be returned to arbitration. As a result of the partial arbitration decision, the Company recorded a provision in 2014, in the amount
of about $135 million for the years 2000 through 2013. The amount of this provision includes, among other things, interest and
is net of the tax effect (the amount of about $149 million in respect of royalties for prior periods plus interest of about $31
million, and net of the tax effect, in the amount of about $45 million). The arbitrators’ decision is partial and its main
decision is with respect to payment of royalties on downstream products, as mentioned above. All the principles have not yet been
determined whereby the financial calculations will be made. Such principles are being discussed in the second and current stage
of the arbitration. In 2015, as a result of decisions made as part of the arbitration discussions in connection with the principles
for the manner of calculating the royalties, the Company increased the provision by about $10 million.



In November 2015,
as part of the second stage of the royalties arbitration, the State submitted an opinion on its behalf relating, mainly, to the
principles whereby the interest to be added to the royalties' payment in the relevant arbitration period is to be calculated. As
part of the said opinion, the State presented two optional calculation methods, the results of which yield the amounts of NIS 230
million (about $59 million) and NIS 460 million (about $118 million). The Company disagrees with the State's position and calculations,
and in January, 2016, it submitted its position regarding calculation of the interest.



The
Company estimates that the chances that its position will be accepted regarding the manner of calculating the royalties, based
on the decision of the arbitrators in the partial decision, and regarding the principles for calculating the interest, are higher
than the chances that they will be rejected.



In 2015, 2014 and 2013,
ICL Dead Sea paid current royalties to the Government of Israel in the amounts of about $97 million, about $84 million and about
$110 million, respectively. In addition, in 2015, the Company paid an amount of about $152 million, in respect of royalties relating
to prior periods.



ICL Dead Sea Class Action



In 2014, ICL received a petition submitted to the District Court in Israel in respect of a purported class action against
its subsidiary, ICL Dead Sea. According to the petition, the plaintiff is a farmer who has bought and currently buys potash
in Israel, which is produced by ICL Dead Sea, for fertilization purposes and seeks to represent a group of class members that
would include all purchasers of potash or products containing potash since 2006, when potash prices were deregulated, through
the date of the action. The plaintiff alleges that ICL Dead Sea charged an excessive price for potash, contrary to the Israeli
business practices laws, and seeks damages in the amount of approximately NIS 96.4 million (approximately $24.7 million).
In February 2016, the parties submitted a request to the court for approval of a compromise arrangement, the results of which
are not expected to be significant with respect to the financial statements. As at the date of the Annual Report, the proceedings
are continuing with respect to approval of the compromise arrangement by the court. In the Company's estimation, the chances
that approval of the compromise arrangement will be confirmed exceed the chances it will be rejected. The Company has a sufficient
provision in the financial statements.



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Personal Injury Claims



During the 1990s, several claims were made
against a few of the Group’s subsidiaries in respect of plaintiffs from various countries, who worked mostly as banana plantation
workers, who allegedly have been injured by exposure to Di Bromo Chloropropane (‘‘DBCP’’) produced, many
years ago, by a number of manufacturers, including large chemical companies. As at the date of this Annual Report, the Group’s
subsidiaries are parties to one legal proceeding by 9 plaintiffs who are requesting certification of their claim as a class action.
The claim is for bodily injury and therefore the amount for the claims has not been stated. In accordance with the Company’s
management opinion, it is not possible, at this stage, to estimate the outcome of the above claims due to their complexity and
the multiple parties involved.



Environmental Claims



Kishon River Wastewater Matters







Between 2001 and 2005, a number of claims for monetary damages were filed in the Haifa District Court against the Company
and a series of other defendants (including the State of Israel) by 50 individuals (or their heirs or dependents), most of
them fishermen who worked, according to the claims, in the Kishon's fishing harbor, claiming that the flowing of sewage into
the Kishon River by each of the chemical plants operating on the river banks caused the plaintiffs' cancer and other illnesses.
In 2013, a court decision was issued rejecting all the claims. In 2014, a notice of appeal was filed by seven plaintiffs that
were subsequently rejected by the Supreme Court on September 29, 2015. Between 2000 and 2007, a number of claims were filed
in the District Court at Haifa against a list of defendants by former soldiers (and their heirs and dependents). The plaintiffs
claim that contact with toxic substances in and around the Kishon River caused them cancer and other diseases. In June 2013,
a court decision was rendered rejecting the claim for damages of 72 former soldiers (and their heirs and dependents) in the
consolidated cases, with no order for expenses, except for one claim made by 17 soldiers. On September 24, 2015, the Supreme
Court completely rejected the appeals of the soldiers, and also rejected the counter appeal regarding not charging the soldiers
for expenses.



Spain Mining License Matters



Our subsidiary in Spain (hereinafter –
“ICL Iberia”) has two potash production centers in Spain in the towns of Suria and Sallent. As a by-product of the
potash production process, salt is produced and heaps up in piles, most of which, at the present time, is not usable. To operate
in Spain, an environmental license and an urban license are required.



Regarding the Sallent site, in October
2013, the regional court issued a judgment disqualifying ICL Iberia’s environmental mining license, contending that there
were defects in provision of the license by the Government of Catalonia. On September 25, 2015, the Supreme Court affirmed this
judgment. In February 2014, the regional court also disqualified the urban license, contending that the license does not comply
with the required conditions for piling up salt on the site. In connection with the validity of the urban license after issuance
of the decision of the Supreme Court, the local planning board (CUCC) of Catalonia determined new provisions, including limitation
of the height of the salt pile and temporary extension of the salt piling activities up to the earlier of June 30, 2017 or when
the salt pile reaches a height of about 538 meters. As at the date of this Annual Report, the height of the salt pile is 509 meters.
In November 2015, the Regional Court confirmed that the new provisions conform to the provisions of the court’s decision.



As at the date of this Annual Report, ICL
Iberia’s environmental mining license, from the Government of Catalonia, had not yet been renewed. Nonetheless, in November
2015, ICL Iberia and the Government of Catalonia signed a cooperation agreement memorandum
of understanding that defines ICL Iberia’s activities in the country as preferential activities and the potash industry as
a public strategic interest. The purpose of the agreement is to arrange all the mining activities, including environmental protection
and support for the matter of regulation, transportation and infrastructures. Furthermore, the agreement relates to the matter
of ICL Iberia’s obligation to remove the salt pile on the Sallent site, including completion of the restoration plan of the
site, all of which is to be completed no later than 2070 (the removal of the salt pile should be completed by 2065). This agreement
foresees transitory measures constituting an interim solution to allow ICL Iberia to continue its activities at the Sallent site.
In ICL Iberia’s estimation, when negotiations on the detailed agreement are concluded, the agreement should advance the procurement
of the environmental permit to allow pile up salt after June 30, 2017, which is currently invalid, and will settle ICL Iberia’s
obligations to subsequently restore the site.



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Regarding the Suria site, in April 2014,
after a favorable survey was received from the Environmental Protection Authority in Catalonia, ICL Iberia received an environmental
license that complies with the new environmental protection regulations in Spain (autoritzacio substantive), this being
after ICL Iberia received the municipal license.



In January 2016, following complaints from
competitors in the salt market in Spain, the European Commission announced that it will investigate whether ICL Iberia received
illegal aid from the Spanish authorities regarding two issues:



| | (1) | whether the guarantee amounts related to environmental protection (the guarantees that are supposed to cover the potential
cost of rehabilitation of the land), which were originally set at $2 million, are lower than the amount required by the EU and
national and regional environmental rules; and
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | whether ICL Iberia should bear the cost of the environmental protection measures, in the amount of about $9 million, which
was financed by the Spanish authorities.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------





The Company disagrees with the above claims
and given the preliminary stage of these proceedings, the legal measures that need to be taken are still being examined. However,
in the Company’s estimation, based on its preliminary discussions with the Spanish authorities, the chances that the above
claims will be rejected are higher than the chances that they will be accepted.



Securities Law Proceedings



On August 29, 2013, a motion to certify
a class action against the Company, Israel Corporation, Potashcorp Cooperative Agricultural Society Ltd., the members of our Board
of Directors and our CEO, was filed in the District Court in Tel-Aviv, on the grounds of misleading information, deception and
non-disclosure of material information in our reports, allegedly in violation of the provisions of the Israeli Securities Law and
the general laws. The aggregate amount of the damage claimed is $0.7 billion (NIS 2.75 billion) or $0.84 billion (NIS 3.28 billion).
(The amount of the claim depends on the share price used to calculate the claimed damages). In November 2014, a hearing was held
on the motion to certify the claim as a class action. During 2015, proceedings took place to advance a compromise agreement that
were later discontinued by the parties. As at the date of this Annual Report, a court decision on the request had not yet been
rendered. In the Company’s opinion, based on the position of its legal advisors, the chances that the claims against it will
be rejected exceed the chances that they will be accepted. Accordingly, no provision was included in the financial statements.



Commercial Proceedings





Haifa Chemicals acquires potash from ICL
Dead Sea Works Ltd. (hereinafter– "ICL Dead Sea") as part of its manufacturing inputs. Pursuant to the agreement
between ICL Dead Sea and Haifa Chemicals, the price for which Haifa Chemicals was charged was based on the average price, FOB,
of ICL Dead Sea for its two largest customers in the preceding quarter. In 2008, an agreement between Haifa Chemicals and ICL
Dead Sea was cancelled and the parties did not succeed in reaching a new agreement. Haifa Chemicals contends that the price ICL
Dead Sea demanded in exchange for potash was unfair and that it was unable to operate at this price level. In May 2009, arbitration
proceedings between the parties commenced with respect to the potash price and in March 2014, the arbitration decision was issued,
which included a price formula on the basis of which the selling price of potash between ICL Dead Sea and Haifa Chemicals will
be determined for a period of ten years from the date of the decision and with respect to the period from the commencement of
arbitration. The price formula provides that the selling price during a quarter will be based on a price equal to the lower of
the weighted average of the lowest three FOB selling prices of potash sold by ICL Dead Sea in the prior quarter and the average
of the two lowest FOB selling prices of potash sold by ICL Dead Sea to large buyers (foreign buyers who purchase 150,000 or more
tons per year) in the prior quarter, less certain expenses and a discount of 2% (hereinafter – the “Base Price").
Based on the price formula, the possibility exists that under certain circumstances, an adjusted price will be determined that
is based on the production cost plus a certain margin. This adjusted price will apply to a quantity of 270 thousand tons of potash,
while the Base Price will continue to apply to the remainder of the potash but without the 2% discount. The arbitrator appointed
an examiner whose job it is to ascertain whether Haifa Chemicals and ICL Dead Sea are in compliance with a number of tests, and
in accordance therewith, to determine whether the price will be based on the Base Price or on ICL Dead Sea’s production
costs plus a certain margin. Haifa Chemicals gave notice that it is interested in an examination for the years 2011, 2012 and
2013, where the meaning of this is that in respect of 2009 and 2010, the price will be the Base Price, in accordance with that
stated above. On May 31, 2015, the examiner published the results of his examination in respect of 2011–2013, regarding
which Haifa Chemicals met the threshold test only for the years 2012-2013 and, accordingly, the examination process will continue
regarding ICL Dead Sea's costs in respect of these years.





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Regarding 2011, Haifa Chemicals did not
pass the examination of the threshold test and, therefore, for this year the price will be the Base Price. In 2015, Haifa Chemicals
gave notice that it is interested in an examination for 2014 and in February  2016, the examiner's decision was issued whereby
Haifa Chemicals passed the threshold test with respect to 2014 and, accordingly, the process of examining the costs of ICL Dead
Sea for this year will continue. Regarding the decision of the examiner with respect to 2012-2013, a legal proceeding has been
submitted by ICL Dead Sea, alleging that the decision of the examiner deviates from the provisions of the arbitration decision,
if the legal process is postponed, the price in all or any of those years will be based on the production costs plus a certain
margin relating to a quantity of 270,000 tons per year. In the Company’s estimation, based on its contentions included as
part of the legal proceeding and the chances thereof to be accepted and given the production costs in ICL Dead Sea, the Company
will not pay and will not receive significant amounts in respect of the past period (2009–2014). Accordingly, no provisions
or income receivable were recorded in the financial statements.



Charges from the Israeli Public Utilities
Authority Electricity



In August 2015, as further updated in September
2015, the Israeli Public Utilities Authority – Electricity (hereinafter – “the Electricity Authority”)
resolved to impose certain electricity system management services charges also on private electricity producers as opposed to only
on private consumers, this being retroactively from June 2013. On September 13 2015, ICL, ICL Dead Sea and ICL Rotem filed a petition
against the Electricity Authority’s resolution claiming that it suffers from fundamental flaws. During December 2015, ICL
Dead Sea and ICL Rotem received charges from the Electric Company relating to the said matter whereby the companies are required
to pay about $35 million for the period from June 2013 up to 2015. There is a significant disagreement between ICL Dead Sea, ICL
Rotem and the Electric Company with respect to some of the elements in the demand payments provided (about $12.5 million). ICL
Dead Sea expressed the arguments before the Electricity Authority which responded that it is reviewing the arguments and that at
this time ICL Dead Sea should pay the amount that is not in contention. As at the reporting date, the Company recorded a provision
for the full amount.



Water Matters Petition



On June 16, 2015, a petition was filed
in the Israeli Court for Water Matters, wherein the Government Water Authority is requested to act to regulate and supervise the
use of water sources by DSW, this being, among other things, by means of determining pumping limits as part of the production licenses
and imposition of production levies. The Company estimates that the chances that the petition will be accepted are lower than chances
its will be rejected.



Air pollution in Haifa Bay certification of
a claim as a class action



On June 7, 2015, a request was filed for
its certification of a claim as a class action, in the District Court in Tel Aviv–Jaffa, against eleven defendants, including
a subsidiary, Fertilizers and Chemical Ltd (ICL Haifa), in respect of claims relating to air pollution in Haifa Bay and for the
harm allegedly caused from it, to the residents of the Haifa Bay area. The amount of the claim is about NIS 14.4 billion (about
$3.8 billion). A preliminary hearing was scheduled for June 15, 2016. The Company is studying the request. In light of the complexity
of the process and the early stage of the proceeding, as well as
the fact that opinions have not yet been received from the various experts, it is difficult to predict the outcome of the proceeding.
Nonetheless, in the Company’s estimation, based on the initial factual data provided to it and the relevant court decisions,
the chances that the plaintiffs’ contentions will be rejected exceed the chances that they will be accepted.



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In addition to the contingencies referred
to in the above sections, various claims are pending against the Company and various subsidiaries (including lawsuits). In respect
of claims for an amount of up to about $21 million as of December 31, 2015, we have recorded a provision as at that date in the
amount of about $5 million. In addition, part of the above claims is covered by insurance. In the estimation of Company Management,
based on opinions of its legal advisors, the provision recognized is sufficient to cover the exposure in respect of the above mentioned
claims.



Dividend policy



On March 27, 2007, our Board of Directors
approved the payment of a quarterly dividend at a rate of up to 70% of our net income and reapproved that policy on May 24, 2010
and February 11, 2014. Any dividends must be approved by our Board of Directors, which will take into account various factors including,
inter alia, our profits, our investment plan, our financial position, the progress relating to our strategy plan, the conditions
prevailing in the market and additional factors they deem appropriate. Dividend payments are not guaranteed and our Board of Directors
may decide, in its absolute discretion, at any time and for any reason, not to pay dividends, to reduce the rate, to modify the
dividend payout policy, to pay a special dividend or to a adopt a buy-back plan.





The profits available for
distribution as dividends as of December 31, 2015 amounted to $ 2,642 million.





The terms of certain of our existing indebtedness
require us to maintain a minimum level of the Company’s equity, which could restrict our ability to pay dividends in the
future. See note 17D to our audited financial statements for additional information regarding covenants in our loan agreements
and their impact on our ability to pay dividends.



In addition, the distribution of dividends
is limited by Israeli law, which permits the distribution of dividends only out of distributable profits and only if there is no
reasonable concern that such distribution will prevent us from meeting our existing and future obligations when they become due.
Generally, dividends paid by an Israeli company are subject to an Israeli withholding tax. For a discussion of certain tax considerations
affecting dividend payments, see “Item 10. Additional Information—E. Taxation.”





On March 15, 2016, the Board of Directors
decided that it will re-examine the Company’s current dividend policy, in its next meeting, and may make changes for future
periods. Such changes could include either a reduction in the amount or the targeted dividend, or modification of the policy to
be based on other metrics. No assurances can be provided that the Board of Directors will make any changes.









B.	SIGNIFICANT CHANGES



To the best of our knowledge, no significant
changes have occurred since the date of our consolidated financial statements.



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Item 9.  The Offer and
Listing



A.	OFFER AND LISTING DETAILS



New York Stock Exchange



The following table sets forth, the annual,
quarterly and monthly range of the highest closing price and the lowest closing price of the Company’s shares as they were
reported by the New York Stock Exchange



|                                  |  | USD price
    per ordinary share
|--------------------------------- |  | --------------------------------
|                                  |  |                                 
|Year Ended December 31:           |  |                                 
|2014                              |  |                                 
|2015                              |  |                                 
|                                  |  |                                 
|Year Ended December 31, 2014:     |  |                                 
|Fourth Quarter                    |  |                                 
|Year Ended December 31, 2015:     |  |                                 
|First Quarter                     |  |                                 
|Second Quarter                    |  |                                 
|Third Quarter                     |  |                                 
|Fourth Quarter                    |  |                                 
|Year Ended December 31, 2016:     |  |                                 
|First Quarter (through March 15)  |  |                                 
|                                  |  |                                 
|Month Ended:                      |  |                                 
|September 30, 2015                |  |                                 
|October 31, 2015                  |  |                                 
|November 30, 2015                 |  |                                 
|December 31, 2015                 |  |                                 
|January 31, 2016                  |  |                                 
|February 29, 2016                 |  |                                 
|March 31, 2016 (through March 15) |  |                                 



On March 15, 2016, the last reported sale
price of our ordinary shares on the New York Stock Exchange was $4.34 per share.



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Tel Aviv Stock Exchange



The following table shows the annual, quarterly
and monthly ranges of the high and low per share sales price for our ordinary shares as reported by the TASE in NIS and U.S. dollars.
U.S. dollar per ordinary share amounts are calculated using the U.S. dollar representative rate of exchange on the date to which
the high or low market price is applicable, as reported by the Bank of Israel.



|                                  |  | NIS price per ordinary share |       | USD price per ordinary share
|--------------------------------- |  | ---------------------------- | ----- | ----------------------------
|                                  |  |                              | High  |                             
|Year Ended December 31:           |  |                              |       |                             
|2011                              |  |                              | 64.78 |                             
|2012                              |  |                              | 50.10 |                             
|2013                              |  |                              | 51.75 |                             
|2014                              |  |                              | 31.97 |                             
|2015                              |  |                              | 29.80 |                             
|                                  |  |                              |       |                             
|Year Ended December 31, 2014:     |  |                              |       |                             
|First Quarter                     |  |                              | 31.97 |                             
|Second Quarter                    |  |                              | 31.80 |                             
|Third Quarter                     |  |                              | 29.60 |                             
|Fourth Quarter                    |  |                              | 29.15 |                             
|Year Ended December 31, 2015:     |  |                              |       |                             
|First Quarter                     |  |                              | 29.80 |                             
|Second Quarter                    |  |                              | 29.48 |                             
|Third Quarter                     |  |                              | 27.03 |                             
|Fourth Quarter                    |  |                              | 22.75 |                             
|Year Ended December 31, 2016:     |  |                              |       |                             
|First Quarter (through March 15)  |  |                              | 17.55 |                             
|                                  |  |                              |       |                             
|Month Ended:                      |  |                              |       |                             
|September 30, 2015                |  |                              | 24.02 |                             
|October 31, 2015                  |  |                              | 22.75 |                             
|November 30, 2015                 |  |                              | 21.94 |                             
|December 31, 2015                 |  |                              | 20.08 |                             
|January 31, 2016                  |  |                              | 16.93 |                             
|February 29, 2016                 |  |                              | 16.81 |                             
|March 31, 2016 (through March 15) |  |                              | 17.55 |                             



On March 15, 2016, the last reported sale
price of our ordinary shares on the TASE was NIS 16.90 per share, or $4.34 per share (based on the exchange rate reported by Bank
of Israel on such date, which was NIS 3.89 = $1.00).



B.	PLAN OF DISTRIBUTION



Not applicable.



C.	MARKETS



Our ordinary shares are listed on the NYSE
and on the TASE under the symbol “ICL.”



D.	SELLING SHAREHOLDERS



Not applicable.



E.	DILUTION



Not applicable.



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F.	EXPENSES OF THE ISSUE



Not applicable.



Item 10.  Additional Information



A.	SHARE CAPITAL





As of December 31, 2015,
our authorized share capital consisted of 1,484,999,999 ordinary shares, par value NIS 1 per share, of which 1,299,704,303 ordinary
shares were issued and outstanding (including shares held by us or our subsidiaries), and 1 Special State Share, par value NIS
1 per share, which was issued and are outstanding. All of our outstanding shares have been validly issued, are fully paid and are
non-assessable. As of December 31, 2015, 24,590,041ordinary shares were held by us or our subsidiaries. Shares acquired by our
subsidiaries prior to February 2000 have both economic rights and voting rights. However, in accordance with Israeli law, ordinary
shares issued to our subsidiaries or purchased by our subsidiaries after February 2000 have economic rights but not voting rights.
Shares held by us have no economic rights or voting rights. Therefore, out of the ordinary shares held by us or our subsidiaries,
24,590,041 have no voting rights.



As of December 31, 2015, an additional
23,456,518 ordinary shares were issuable upon the exercise of outstanding options granted to our officers and employees at a weighted
average exercise price of NIS 33.77 per share. For additional information about the issuance of options and restricted shares
to officers and senior employees and their exercise in 2014-2015, as well as the allocation of restricted shares to directors
and approval of the issuance of restricted shares to directors on February 26, 2015 and December 23, 2015, see Note 24 to our
audited financial statements and “Item 6. Directors, Senior Management and Employees—E. Share Ownership—Incentive
Compensation Plans.”



In 2013, 6,633,574 options under our equity
compensation plans were exercised, resulting in the sale to certain of our officers and senior employees at a weighted average
exercise price of NIS 47.01 of 312,558 ordinary shares. In 2014 and 2015, no options under our equity compensation plans were
exercised.



In 2015, there was a transfer
of 2,225,337 ordinary Company shares that were allocated to Liberty Metals & Mining Holdings ("Liberty") as part
of the completion of the acquisition of 100% of Allana Potash Corporation, a Canadian mining company engaged in the development
of potash assets in Ethiopia, whose shares are traded on the Toronto Stock Exchange (TSX: AAA). The Company paid approximately
$112 million for 83.78% of Allana’s outstanding shares that it did not already own. The payment was made in cash ($96 million,
which were paid in Canadian Dollars) and in 2,225,337 ordinary Company shares (with a value of approximately $16 million) that
were allocated to Liberty, who owned 11.77% of the common shares of Allana. The Company shares allocated to Liberty represent about
0.17% of the Company’s outstanding shares and voting rights.



In September 2014, we completed
the initial public offering of our ordinary shares in the United States, pursuant to which Israel Corporation sold 36,207,128 ordinary
shares and certain forward counterparties sold 23,951,015 ordinary shares to hedge their positions under forward sale agreements
covering up to 36,207,128 ordinary shares owned by Israel Corporation. Subsequent to the closing of the initial public offering,
the underwriters exercised their option to purchase an additional 6,015,814 ordinary shares from Israel Corporation. We did not
issue any ordinary shares in connection with the initial public offering or receive any proceeds from the sale of our ordinary
shares by Israel Corporation or the forward counterparties. Israel Corporation ceased to have voting rights with respect to the
ordinary shares subject to the forward sale agreements and made available to the forward counterparties under those agreements.
However, Israel Corporation will regain voting rights with respect to all or a portion of the ordinary shares it makes available
to the forward counterparties under the forward sale agreements to the extent it elects a cash settlement or a net physical settlement.
Settlement under the forward sale agreements is scheduled to occur on various dates between 2016 and 2019.







B.	MEMORANDUM, ARTICLES OF ASSOCIATION AND SPECIAL STATE
SHARE



Our shareholders adopted
the Articles of Association filed as Exhibit 3.2 to our registration statement on Form F-1 (File no. 333-198711) with the SEC on
September 12, 2014.



We incorporate by reference
into this Annual Report the description of our Amended and Restated Articles of Association, which became effective upon the closing
of our IPO on the NYSE, contained in our F-1 registration statement (File No. 333-198711) originally filed with the SEC on
September 12, 2014, as amended. Such description sets forth a summary of certain provisions of our articles of association as currently
in effect.







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The State of Israel holds a nontransferable
Special State Share in ICL in order to preserve the State’s vital interests. Any change in provisions of our Articles of
Association relating to the rights attached to the Special State Share requires approval from the State of Israel. The Special
State Share grants its holder the rights described below.



Without the approval of the holder of the
Special State Share, the sale or transfer of material assets of the Company or granting any other rights in the abovementioned
assets, not in the ordinary course of our business, whether in one transaction or in a series of transactions, is invalid. The
holder of the Special State Share has the right to oppose the transfer of a material asset as stated above only if, in its opinion,
such transfer is likely to harm one of the “State’s vital interests” enumerated below. Restrictions are similarly
imposed on voluntary liquidation, mergers and reorganizations, excluding certain exceptional cases enumerated in our Articles of
Association.



In addition, without the approval of the
holder of the Special State Share, any acquisition or holding of 14% or more of our outstanding share capital is not valid. In
addition, any acquisition or holding of 25% or more of our outstanding share capital (including an increase of holdings to 25%)
is not valid without the approval of the holder of the Special State Share, even if in the past the approval of the holder of the
Special State Share had been received for ownership of less than 25%. Our Articles of Association set forth procedures required
to be followed by a person who intends to acquire shares in an amount that would require the approval of the holder of the Special
State Shares. A pledge over shares is treated like an acquisition of shares. As a condition to voting at any shareholders’
meeting, each interested party in the Company, including a holder of 5% or more of our outstanding shares, will be required to
certify in writing that the voting power derived from the holding of shares does not require the approval of the holder of the
Special State Share or that such approval has been obtained.



In addition to the above, the approval
of the holder of the Special State Share is required for the ownership of any shares that grant their holder the right, ability
or practical potential to appoint directly or indirectly 50% or more of our directors, and such appointments will not be valid
as long as that approval has not been obtained.



The holder of the Special State Share has
the right to receive information from us, as provided in our Articles of Association. Our Articles of Association also provide
that the holder of the Special State Share will use this information only to exercise its rights under the Articles of Association
for purposes of protecting the State’s vital interests.



Our Articles of Association also impose
a periodic reporting obligation on us for the benefit of the holder of the Special State Share, regarding all asset-related transactions
approved by our Board of Directors during the three months prior to the date of the report, any changes in share capital ownership
and any voting agreements among the Company’s shareholders signed during that period.



The following are the “State’s
vital interests” as defined in our Articles of Association for purposes of the Special State Share:



To preserve the character of the Company
and its subsidiaries ICL Dead Sea, ICL Rotem, Dead Sea Bromine Company, Bromine Compounds and Tami as Israeli companies whose centers
of business and management are in Israel. In our estimation, this condition is being fulfilled.



To monitor the control over minerals and
natural resources, for purposes of their efficient development and utilization, including maximum utilization in Israel of the
results of investments, research and development.



To prevent acquisition of a position of
influence in the Company or the foregoing Israeli subsidiaries by hostile entities or entities likely to harm foreign relations
or security of the State of Israel.



To prevent acquisition of a position of
influence in the Company or the foregoing Israeli subsidiaries or management of such companies, whereby such acquisition or management
will create a situation of significant conflicts of interest likely to negatively impact one of the vital interests enumerated
above.



Furthermore, our headquarters and the ongoing
management and control over our business activities must be in Israel. The majority of the members of our Board of Directors must
be Israeli citizens and residents. In general, meetings of our Board of Directors must take place in Israel.



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Other than the rights enumerated above,
the Special State Share does not grant the holder any voting or equity rights.



The State of Israel also holds a Special
State Share in the following ICL subsidiaries: ICL Dead Sea, Dead Sea Bromine Company, ICL Rotem, Bromine Compounds, Tami and Dead
Sea Magnesium. The rights granted by these shares according to the Articles of Association of these subsidiaries are substantially
similar to the rights enumerated above. The full provisions governing the rights of the Special State Share appear in our Articles
of Association and in the Articles of Association of ICL Dead Sea, ICL Rotem, Dead Sea Bromine Company, Bromine Compounds, Tami
and Dead Sea Magnesium and are available for the public’s review. We report to the State of Israel on an ongoing basis in
accordance with the provisions of our Articles of Association. Certain asset transfer or sale transactions that in our opinion
require approval, have received the approval of the holder of the Special State Share.



C.	MATERIAL CONTRACTS



Except as otherwise disclosed in this Annual
Report, we are not currently, and have not been in the last two years, party to any material contract, other than contracts entered
into in the ordinary course of business.



D.	EXCHANGE CONTROLS



There are currently no Israeli currency
control restrictions on payments of dividends or other distributions with respect to our ordinary shares or the proceeds from the
sale of the shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding certain transactions.
However, legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.



E.	TAXATION



ISRAELI TAX CONSIDERATIONS



A.	Taxation of companies in Israel



| | 1. | Measurement of results for tax purposes under the Income Tax (Inflationary Adjustments) Law, 1985 (hereafter – “the
Inflationary Adjustments Law”)
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------



The Income Tax Law (Adjustments for Inflation)
– 1985 (hereinafter – the Law), which is effective as from the 1985 tax year, introduced the concept of measurement
of results for tax purposes on a real (net of inflation) basis. On February 26, 2008, the Knesset enacted the Income Tax Law (Adjustments
for Inflation) (Amendment No. 20) (Restriction of Commencement Period), 2008, whereby the effective period of the Inflationary
Adjustments Law ceased at the end of the 2007 tax year and the depreciation of property, plant and equipment, are adjusted up to
the end of the 2007 tax year, and from this time forward their linkage will be discontinued.



The Income Tax Regulations (Adjustments
for Inflation) (Rates of Depreciation), 1986, which allow depreciation at rates different than those in Section 21 of the Income
Tax Ordinance, apply even after the Inflationary Adjustments Law is no longer in effect, and therefore the Company continues to
claim accelerated depreciation, in certain-situations, on the basis of these Regulations.



| | 2. | Income tax rates
| | -- | ----------------



Presented hereunder are the tax rates relevant
to the Company in the years 2013-2015:



2013 – 25%



2014 – 26.5%



2015 – 26.5%





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On January 4, 2016, the plenary Knesset
passed the Law for Amendment of the Income Tax Ordinance No. 216 which provides, inter alia, for a reduction of the Companies Tax
rate commencing from 2016 and thereafter by the rate of 1.5% such that the rate will be 25%.



If the legislation had been effectively
completed by December 31, 2015, the impact of the change on the financial statements as at December 31, 2015 would have been reflected
in a decline in the balance of the liabilities for deferred taxes, in the amount of $ 11.6 million, and a decline in the balance
of the deferred taxes assets, in the amount of $ 3.6 million. Update of the balances of the deferred taxes would have been recognized
against deferred tax income, in the amount of $ 7.4 million and against other comprehensive income, in the amount of $ 0.6 million.



The current taxes for the periods reported
are calculated in accordance with the tax rates shown in the table above.



| | 3. | Tax benefits under the Israeli Law for the Encouragement of Capital Investments, 1959 (hereinafter – “The Encouragement
Law”)
| | -- | -----------------------------------------------------------------------------------------------------------------------------



a) Beneficiary Enterprises



The production facilities of some of the
Company’s subsidiaries in Israel (hereinafter – “the Subsidiaries”) received “Beneficiary Enterprise”
status under the Law of Encouragement for Capital Investments, as worded after Amendment No. 60 to the Law published in April 2005.



The benefits granted to the Company are
mainly:



1) Reduced tax rates



Regarding the “tax exemption”
track, the Company chose 2005 as the election year, whereas regarding the “Ireland” track, which is subject to tax
at the rate of 11.5%, the Company chose 2008 as the election year.



The benefits deriving from a “Beneficiary
Enterprise” under the “tax exemption” track ended in 2014 while the benefits deriving from the “Ireland”
track will end in 2017.



A company having a “Beneficiary Enterprise”
that distributes a dividend out of exempt income, will be subject to Companies Tax in the year in which the dividend was distributed
on the amount distributed (including the amount of the Companies Tax applicable due to the distribution) at the tax rate applicable
under the Encouragement Law in the year in which the income was produced, had it not been exempt from tax.





The temporary difference
related to distribution of a dividend from exempt income as of December 31, 2015, in respect of which deferred taxes were not recognized,
is in the amount of about $750 million (see also Section 3(a)c below).



The part of the taxable income entitled
to benefits at reduced tax rates is calculated on the basis of the ratio of the turnover of the “Benefited Enterprise”
to the Company’s total turnover. The turnover attributed to the “Benefited Enterprise” is generally calculated
according to the increase in the turnover compared to a “base” turnover, which is the average turnover in the three
years prior to the year of election of the “Benefited Enterprise”.



2) Accelerated depreciation



In respect of buildings, machinery and
equipment used by the Approved Enterprise, the Company is entitled to claim accelerated depreciation as provided by law, commencing
from the year each asset is placed in service.



b) Preferred Enterprises



On December 29, 2010, the Israeli Knesset
approved the Economic Policy Law for 2011 2012, whereby the Law for the Encouragement of Capital Investments, 1959, was amended
(hereinafter – “the Amendment”). The Amendment is effective from January 1, 2011 and its provisions will apply
to preferred income derived or accrued by a Preferred Company, as defined in the Amendment, in 2011 and thereafter.



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The Amendment does not apply to an Industrial
Enterprise that is a mine, other facility for production of minerals or a facility for exploration of fuel. Therefore, ICL plants
that are defined as mining plants and mineral producers will not be able to take advantage of the tax rates proposed as part of
the Amendment. In addition, on August 5, 2013, the Law for Change in the Order of National Priorities, 2013, was passed by the
Knesset, which provides that the tax rate applicable to a Preferred Company in Development Area A will be 9% whereas the tax applicable
to companies in the rest of Israel will be 16%. On November 30, 2015, the Economic Efficiency Law was passed by the Knesset, which
expanded the exception to all of an Enterprise’s activities up to the time of the first marketable product (for additional
details – see Section 5 below). The Company has Preferred Enterprises at the tax rate of 9%. Nonetheless, tax benefits to
which a Benefited Plant is entitled will not be cancelled in respect of investments up to December 31, 2012. Therefore, those plants
will be able to utilize the tax benefits in respect of qualifying investments made up to December 31, 2012, in accordance with
the provisions of the old law.



It is further provided in the Amendment
that tax will not apply to a dividend distributed out of preferred income to a shareholder that is an Israeli-resident company.
A dividend distributed out of preferred income to a shareholder that is an individual or a foreign resident covered by a treaty
for prevention of double taxation, will be subject to tax at the rate of 20%.



c) Trapped Earnings Law – Temporary
Order



On November 5, 2012, the Israeli Knesset
passed Amendment No. 69 and Temporary Order to the Law for the Encouragement of Capital Investments, 1959 (hereinafter –
“the Temporary Order”), which offers a reduced tax rate arrangement to companies that received an exemption from Companies
Tax under the aforesaid law. The Temporary Order provides that companies that choose to apply the Temporary Order (effective for
one year), will be entitled to a reduced tax rate on the “release” of exempt profits.



In November 2013, the Company’s Board
of Directors decided to apply the Temporary Order and to release part of the exempt earnings. As a result, the amount of about
NIS 3.8 billion (about $1.1 billion) of the exempt earnings was released. Accordingly, in 2013 the Company recognized current tax
expenses in respect of payment of the preferred Companies Tax, in the amount of about NIS 377 million (about $108 million).



| | 4. | The Law for the Encouragement of Industry (Taxation), 1969
| | -- | ----------------------------------------------------------



a) Some of the Company’s Israeli
subsidiaries are “Industrial Companies”, as defined in the above-mentioned law. As such, these companies are entitled
to claim depreciation at increased rates for equipment used in industrial activities, as stipulated in the regulations published
under the Inflationary Adjustments Law.



b) The industrial enterprises owned by
some of the Company’s Israeli subsidiaries have a common line of production and, therefore, they file, together with the
Company, a consolidated tax return in accordance with Section 23 of the Law for the Encouragement of Industry. Accordingly, each
of the said companies is entitled to offset its tax losses against the taxable income of the other companies.



| | 5. | The Law for Taxation of Profits from Natural Resources
| | -- | ------------------------------------------------------



On November 30, 2015, the Knesset passed
the Law for Taxation of Profits from Natural Resources (hereinafter – “the Law”), which entered into effect on
January 1, 2016, except with respect to ICL Dead Sea where the effective date is January 1, 2017. The highlights of the Law are
set forth below:



The total tax on natural resources in Israel
will include three tax elements: royalties, Natural Resources Tax and Companies Tax.



Royalties



The rate of the royalties in connection
with resources produced from the quarries, in accordance with the Mines Ordinance will be 5% (with respect to production of the
phosphates, the royalty rate will be 5% of the value of the quantity produced – in place of 2%). Pursuant to the salt harvesting
agreement signed with the Government on July 8, 2012, the parties agreed, among other things, to an increase in the rate of the
royalties from 5% to 10% of the sales, for every quantity of potash chloride sold by the Company in a given year, in excess of
a quantity of 1.5 million tons. As part of the agreement, it was provided that if a law is enacted that changes the specific fiscal
policy with reference to profits or royalties deriving from quarrying from the Dead Sea, the Company’s consent to the



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increase of the rate of the royalties, as
stated, will not apply. The Law entered into effect on January 1, 2016. For additional details – see Note 23 to our audited
financial statements.



Imposition of Natural Resources Tax



The tax base, which will be calculated
for every resource separately, is the Company’s operating income in accordance with the accounting statement of income, to
which certain adjustments will be made, less financing expenses at the rate of 5% of the Company’s average working capital,
and less an amount that reflects the yield on the balance of the amortized cost of the property, plant and equipment used for production
and sale of the quarried material (hereinafter –”the Yield on the Amortized Cost”). On the tax base, as stated,
a progressive tax will be imposed at a rate to be determined based on the Yield on the Amortized Cost in that year. For the Yield
on the Amortized Cost between 14% and 20%, Natural Resources Tax will be imposed at the rate of 25%, while the yield in excess
of 20% will be subject to Natural Resources Tax at the rate of 42%.



In years in which the Natural Resources
Tax base is negative, the negative amount will be carried forward from year to year and will constitute a tax shield in the succeeding
tax year.



Limitations on the Natural Resources Tax
– the Natural Resources Tax will only apply to profits deriving from the actual production and sale of each of the following
resources: potash, bromine, magnesium and phosphates, and not to the profits deriving from the downstream industrial activities.
Calculation of the Natural Resources Tax will be made separately for every resource. Nonetheless, regarding Magnesium, it was provided
that commencing from 2017, upon sale of carnalite by Dead Sea Works (hereinafter – “ICL Dead Sea”) to Magnesium
and reacquisition of a Sylvanite by-product by ICL Dead Sea, Magnesium will charge ICL Dead Sea $100 per ton of potash which is
produced from the Sylvanite (linked to the CPI).



A mechanism was provided for determination
of the market price with respect to transactions in natural resources executed between related parties in Israel, as well as a
mechanism for calculation of the manner for allocation of the expenses between the production and sale of the natural resource,
on the one hand, and the downstream activities, on the other hand.



Regarding the bromine resource, the Natural
Resources Tax will apply in the same manner in which it is applies to the other natural resources, except with respect to the manner
of determining the transfer price in sales made to related parties in and outside of Israel. For purposes of calculating the total
revenues from bromine sold to related parties for purposes of downstream manufacturing activities in every tax year, a calculation
method will be employed (Netback) whereby the price will be determined based on the higher of the following:



1) The price for a unit of bromine (ton)
provided in the transaction;



2) The normative price of a unit of bromine.
The normative price of a unit of bromine is the total sales of the downstream products produced less the operating expenses attributable
to the downstream activities, without the acquisition cost of the bromine, and less an amount equal to 12% of the total revenues
of the downstream products produced as part of the downstream activities, where the result is divided by the number of bromine
units used to produce the downstream products sold.



Regarding the phosphate resource, for purposes
of calculating the total revenues from phosphate sold to related parties for purposes of downstream manufacturing activities in
every tax year, a calculation method will be employed (Netback) whereby the price will be determined based on the higher of the
following:



1) The price for a unit of phosphate (ton)
provided in the transaction;



2) The normative price of a unit of phosphate.
The “normative price” of a unit of phosphate is the total sales of the downstream products produced less the operating
expenses attributable to the downstream activities, without the acquisition cost of the phosphate rock, and less an amount equal
to 12% of the total revenues of the downstream products produced as part of the downstream activities, where the result is divided
by the number of phosphate units used to produce the downstream products sold.



3) The production and operating costs attributable
to a unit of phosphate.



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Companies Tax



The Law for Encouragement of Capital Investments
was revised such that the definition of a “Plant for Production of Quarries” will include all the plant’s activities
up to production of the first marketable natural resource, of potash, bromine, magnesium and phosphates. Accordingly, activities
involved with production of the resource will not be entitled to tax benefits under the Law, whereas activities relating to downstream
products, such as bromine compounds, acids and fertilizers, will not constitute a base for calculating the Excess Profits Tax and
will not be excepted from inclusion in the Law.



The Natural Resource Tax will be deductible
from the Company’s taxable income and the Company will pay the Companies Tax on the balance as is customary in Israel.



Taxation of Investors



The following are material Israeli income
tax consequences to the investors described below of owning and disposing of our ordinary shares, but it does not purport to be
a comprehensive description of all the tax considerations that may be relevant to a particular person’s decision to own the
ordinary shares.



Capital Gains Tax



Israeli law generally imposes a capital
gains tax on the sale of any capital assets by residents of Israel, as defined for Israeli tax purposes, and on the sale of capital
assets located in Israel, including shares of Israeli companies, by non-residents of Israel, unless a specific exemption is available
or unless a tax treaty between Israel and the shareholder’s country of residence provides otherwise. The law distinguishes
between real gain and inflationary surplus. The inflationary surplus is a portion of the total capital gain that is equivalent
to the increase of the relevant asset’s purchase price which is attributable to the increase in the Israeli consumer price
index or a foreign currency exchange rate between the date of purchase and the date of sale. The real gain is the excess of the
total capital gain over the inflationary surplus.



Israeli Residents



Generally, as of January 1, 2012, the tax
rate applicable to capital gains derived from the sale of shares, whether listed on a stock market or not, is the corporate tax
rate in Israel (26.5% and commencing from January 1, 2016, 25%) for Israeli companies and 25% for Israeli individuals, unless such
shareholder claims a deduction for finance expenses in connection with such shares, in which case the gain will generally be taxed
at a rate of 30%. Additionally, if such shareholder is considered a “significant shareholder” at any time during the
12 month period preceding such sale, the tax rate will be 30%. A “significant shareholder” is defined as one who holds,
directly or indirectly, including together with others, at least 10% of any means of control in the company. However, different
tax rates will apply to dealers in securities. Israeli companies are subject to the corporate tax rate on capital gains derived
from the sale of listed shares.



As of January 1, 2013, shareholders who
are individuals with taxable income that exceeds NIS 800,000 in a tax year (linked to the Israeli consumer price index each year—NIS
810,720 for 2015) will be subject to an additional tax at the rate of 2% on the portion of their taxable income for such tax year
that is in excess such threshold. For this purpose, taxable income includes taxable capital gains from the sale of our shares and
taxable income from dividend distributions.



Non-Israeli Residents



Non-Israeli residents are generally exempt
from Israeli capital gains tax on any gains derived from the sale of shares of Israeli companies publicly traded on a recognized
stock exchange outside Israel, so long as such shareholders did not acquire their shares prior to the company’s initial public
offering and the gains did not derive from a permanent establishment of such shareholders in Israel. However, shareholders that
are non-Israeli corporations will not be entitled to such exemption if Israeli residents hold an interest of more than 25% in such
non-Israeli corporation or are the beneficiaries or are entitled to 25% or more of the revenues or profits of such non-Israeli
corporation, whether directly or indirectly.



In certain instances where our shareholders
may be liable to Israeli tax on the sale of their ordinary shares, the payment of the consideration may be subject to the withholding
of Israeli tax at the source.



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In addition, pursuant to the Convention
between the Government of the United States of America and the Israeli government with respect to Taxes on Income, as amended,
or the U.S.-Israel Tax Treaty, the sale, exchange or disposition of ordinary shares by a person who qualifies as a resident of
the United States within the meaning of the U.S.-Israel Tax Treaty and who is entitled to claim the benefits afforded to such person
by the U.S.-Israel Tax Treaty generally will not be subject to the Israeli capital gains tax unless such person holds, directly
or indirectly, shares representing 10% or more of our voting power during any part of the 12-month period preceding such sale,
exchange or disposition, subject to particular conditions, or the capital gains from such sale, exchange or disposition can be
allocated to a permanent establishment in Israel or is considered to be derived from or sale of Israeli real property interests
for purposes of the U.S.-Israel Tax Treaty. If a U.S. investor is not exempt from Israeli taxes under the U.S.-Israel Tax Treaty,
such U.S. investor may be subject to Israeli tax, to the extent applicable as described above; however, under the U.S.-Israel Tax
Treaty, such person may be permitted to claim a credit for such taxes against the U.S. federal income tax imposed with respect
to such sale, exchange or disposition, subject to the limitations in U.S. laws applicable to foreign tax credits. The U.S.-Israel
Tax Treaty does not relate to U.S. state or local taxes.



Taxation of Dividend Distributions



Israeli Residents



Israeli resident individuals are generally
subject to Israeli income tax on the receipt of dividends paid on our ordinary shares, other than bonus shares (share dividends).
The tax rate applicable to such dividends is 25% or 30% for a shareholder that is considered a significant shareholder at any time
during the 12-month period preceding such distribution. Dividends paid from income derived from Approved Enterprises or Benefited
Enterprises are subject to withholding at the rate of 15%. Dividends paid from income derived from Preferred Enterprises are subject
to withholding at the rate of 20%.



Israeli resident companies are generally
exempt from tax on the receipt of dividends paid on our ordinary shares (excluding dividends paid from income derived from Approved
or Benefited Enterprises).



Non-Israeli Residents



Non-residents of Israel are subject to
income tax on income accrued or derived from sources in Israel, including dividends paid by Israeli companies. On distributions
of dividends other than stock dividends, income tax (generally collected by means of withholding) will generally apply at the rate
of 25%, or 30% for a shareholder that is considered a significant shareholder (as defined above) at any time during the 12-month
period preceding such distribution, unless a different rate is provided in a treaty between Israel and the shareholder’s
country of residence. Dividends paid from income derived from Approved or Benefited Enterprises are subject to withholding at the
rate of 15%, or 4% for Benefited Enterprises in the Ireland Track. Dividends paid from income derived from Approved or Preferred
Enterprises will be subject to withholding at the rate of 20%.



Under the U.S. Israel Tax Treaty, the maximum
tax on dividends paid to a holder of ordinary shares who qualifies as a resident of the United States within the meaning of the
U.S.-Israel Tax Treaty is 25%. The treaty provides for reduced tax rates on dividends if (a) the shareholder is a U.S. corporation
holding at least 10% of our issued voting power during the part of the tax year that precedes the date of payment of the dividend
and held such minimal percentage during the whole of its prior tax year, and (b) not more than 25% of the Israeli company’s
gross income consists of interest or dividends, other than dividends or interest received from subsidiary corporations or corporations
50% or more of the outstanding voting shares of which is owned by the Israeli company. The reduced treaty rate, if applicable,
is 15% in the case of dividends paid from income derived from Approved, Benefited or Preferred Enterprise or 12.5% otherwise.



Material U.S. Federal Income Tax Considerations for U.S.
Holders



The following are material U.S.
federal income tax consequences to the U.S. Holders described below of owning and disposing of our ordinary shares, but it
does not purport to be a comprehensive description of all the tax considerations that may be relevant to a particular
person’s decision to hold the ordinary shares. This discussion applies only to a U.S. Holder that holds the ordinary
shares as capital assets for U.S. federal income tax purposes. In addition, it does not describe all of the tax consequences
that may be relevant in light of a U.S. Holder’s particular circumstances, including alternative minimum tax
consequences, any aspect of the provisions of the Internal Revenue Code of 1986, as amended (the “Code”)
commonly known as the Medicare tax and tax consequences applicable to U.S. Holders subject to special rules, such as:



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| | · | certain financial institutions;
| | - | -------------------------------



| | · | dealers or traders in securities that use a mark-to-market method of tax accounting;
| | - | ------------------------------------------------------------------------------------



| | · | persons holding ordinary shares as part of a “straddle” or integrated transaction or persons entering into a constructive
sale with respect to the ordinary shares;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | persons whose functional currency for U.S. federal income tax purposes is not the U.S. dollar;
| | - | ----------------------------------------------------------------------------------------------



| | · | entities classified as partnerships for U.S. federal income tax purposes;
| | - | -------------------------------------------------------------------------



| | · | tax exempt entities, “individual retirement accounts” or “Roth IRAs”:
| | - | ---------------------------------------------------------------------



| | · | Persons who acquired our ordinary shares pursuant to the exercise of an employee stock option or otherwise as compensation;
| | - | ---------------------------------------------------------------------------------------------------------------------------



| | · | persons that own or are deemed to own 10% or more of our voting stock; or
| | - | -------------------------------------------------------------------------



| | · | persons holding our ordinary shares in connection with a trade or business conducted outside of the United States.
| | - | ------------------------------------------------------------------------------------------------------------------



If an entity that is classified as a partnership
for U.S. federal income tax purposes owns ordinary shares, the U.S. federal income tax treatment of a partner will generally depend
on the status of the partner and the activities of the partnership. Partnerships owning ordinary shares and partners in such partnerships
should consult their tax advisers as to the particular U.S. federal tax consequences of owning and disposing of the ordinary shares.



This discussion is based on the Code, administrative
pronouncements, judicial decisions, and final and proposed Treasury regulations, changes to any of which subsequent to the date
of this Annual Report may affect the tax consequences described herein.



For purposes of this discussion, a “U.S.
Holder” is a person who, for U.S. federal income tax purposes, is a beneficial owner of ordinary shares and is:



| | · | a citizen or individual resident of the United States;
| | - | ------------------------------------------------------



| | · | a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any
state therein or the District of Columbia; or
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.
| | - | -----------------------------------------------------------------------------------------------------------



U.S. Holders should consult their tax advisers
concerning the U.S. federal, state local tax and non-U.S. consequences of owning and disposing of our ordinary shares in their
particular circumstances.



This discussion assumes that we are not,
and will not become, a passive foreign investment company, as described below.



Taxation of Distributions



Distributions paid on our ordinary shares,
other than certain pro rata distributions of ordinary shares, will be treated as dividends to the extent paid out of our current
or accumulated earnings and profits (as determined under U.S. federal income tax principles). Because we do not calculate our earnings
and profits under U.S. federal income tax principles, it is expected that distributions generally will be reported to U.S. Holders
as dividends. Subject to applicable limitations, dividends paid to certain non-corporate U.S. Holders may be taxable at the favorable
tax rates applicable to “qualified dividend income”. Non-corporate U.S. Holders should consult their tax advisers regarding
the availability of these favorable rates on dividends in their particular circumstances. Dividends will not be eligible for the
dividends received deduction generally available to U.S. corporations under the Code. Dividends will generally be included in a U.S. Holder’s
income on the date of receipt. Dividend income will include any amounts withheld by us in respect of Israeli taxes, and will be
treated as foreign source income for foreign tax credit purposes. If any dividend is paid in NIS, the amount of dividend income
will be the dividend’s U.S. dollar amount calculated by reference to the exchange rate in effect on the date of receipt,
regardless of whether the payment is in fact converted into U.S. dollars. If the dividend is converted into U.S. dollars on the
date of receipt, a U.S. Holder should not be required to recognize foreign currency gain or loss in respect of the dividend income.
A U.S. Holder may have foreign currency gain or loss if the dividend is converted into U.S. dollars after the date of receipt.
Such gain or loss would generally be treated as U.S.-source ordinary income or loss. Subject to applicable limitations, some of
which vary depending upon the U.S. Holder’s circumstances, Israeli taxes withheld from dividends on our ordinary shares will
be creditable against the U.S. Holder’s U.S. federal income tax liability. The rules governing foreign tax credits are complex,
and U.S. Holders should consult their tax advisers regarding the creditability of foreign taxes in their particular circumstances.
In lieu of claiming a foreign tax credit, U.S. Holders may, at their election, deduct foreign taxes, including Israeli taxes, in
computing their taxable income, subject to applicable limitations. An election to deduct foreign taxes instead of claiming foreign
tax credits applies to all foreign taxes paid or accrued in the taxable year.



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Sale or Other Taxable Disposition of
Ordinary Shares



For U.S. federal income tax purposes, gain
or loss realized on the sale or other taxable disposition of our ordinary shares will be capital gain or loss, and will be long
term capital gain or loss if the U.S. Holder held the ordinary shares for more than one year. The amount of the gain or loss will
equal the difference between the U.S. Holder’s tax basis in the ordinary shares disposed of and the amount realized on the
disposition, in each case as determined in U.S. dollars. This gain or loss will generally be U.S. source gain or loss for foreign
tax credit purposes. The deductibility of capital losses is subject to limitations.



Passive Foreign Investment Company Rules



In general, a non-U.S. corporation will
be a “passive foreign investment company” (a “PFIC”) for any taxable year if (i) 75% or more of its gross
income consists of passive income or (ii) 50% or more of the average quarterly value of its assets consists of assets that produce,
or are held for the production of, passive income. For purposes of the above calculations, a non-U.S. corporation that directly
or indirectly owns at least 25% by value of the shares of another corporation is treated as if it held its proportionate share
of the assets of the other corporation and received directly its proportionate share of the income of the other corporation. Passive
income generally includes dividends, interest, rents, royalties and gains from transactions in commodities (other than certain
active business gains from the sales of commodities).



Based on the manner in which we operate
our business, we believe that we were not a PFIC for 2015. However, because PFIC status depends on the composition and character
of a company’s income and assets and the value of its assets from time to time, there can be no assurance that we will not
be a PFIC for any taxable year.



If we were a PFIC for any taxable year
during which a U.S. Holder held ordinary shares, gain recognized by a U.S. Holder on a sale or other disposition (including certain
pledges) of the ordinary shares would be allocated ratably over the U.S. Holder’s holding period for the ordinary shares.
The amounts allocated to the taxable year of the sale or other disposition and to any year before we became a PFIC would be taxed
as ordinary income. The amount allocated to each other taxable year would be subject to tax at the highest rate in effect for individuals
or corporations, as appropriate, for that taxable year, and an interest charge would be imposed on the resulting tax liability
for each such taxable year. Further, any distribution in respect of ordinary shares in excess of 125% of the average of the annual
distributions received by a U.S. Holder during the preceding three years or the U.S. Holder’s holding period, whichever is
shorter, would be subject to taxation in the same manner. Certain elections may be available that would result in alternative treatments
(such as mark-to-market treatment) of the ordinary shares in the case that we were a PFIC for any taxable year.



If we were a PFIC for any taxable year
during which a U.S. Holder owned ordinary shares, the U.S. Holder generally will be required to file annual reports on Internal
Revenue Service Form 8621. In addition, the favorable tax rates described above with respect to dividends paid to certain non-corporate
U.S. Holders would not apply if we were a PFIC for the taxable year of distribution or the preceding taxable year.



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Information Reporting and Backup Withholding



Payments of dividends and sales proceeds
that are made within the United States or through certain U.S. related financial intermediaries generally are subject to information
reporting, and may be subject to backup withholding, unless (i) the U.S. Holder is a corporation or other exempt recipient or (ii)
in the case of backup withholding, the U.S. Holder provides a correct taxpayer identification number and certifies that it is not
subject to backup withholding. Backup withholding is not an additional tax.



The amount of any backup withholding from
a payment to a U.S. Holder will be allowed as a credit against the U.S. Holder’s U.S. federal income tax liability and may
entitle it to a refund, provided that the required information is timely furnished to the Internal Revenue Service.



Certain U.S. Holders who are individuals
(and certain entities controlled by individuals) may be required to report information relating to their ownership of securities
of non-U.S. issuers, such as our ordinary shares, unless the securities are held in accounts at financial institutions (in which
case the accounts may be reportable if maintained by non-U.S. financial institutions). U.S. Holders should consult their tax advisers
regarding their reporting obligations with respect to the ordinary shares



F.	DIVIDENDS AND PAYING AGENTS



Not applicable.



G.	STATEMENT BY EXPERTS



Not applicable.



H.	DOCUMENTS ON DISPLAY



We are subject to the informational
requirements of the US Exchange Act. Accordingly, we are required to file or furnish reports and other information with the
SEC, including annual reports on Form 20-F and reports on Form 6-K. You may inspect and copy reports and other information
filed with or furnished to the SEC at the Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on
the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the SEC
maintains an Internet website that contains reports and other information about issuers, like us, that file electronically
with the SEC. The address of that website is www.sec.gov.



I.	SUBSIDIARY INFORMATION



The Company and its subsidiaries do not
maintain any direct or indirect connection with Iran or with enemy nations (as defined in the Israel Trade with the Enemy Ordinance
- 1939).



Item 11.  Quantitative
and Qualitative Disclosures about Market Risk



Risk Management



In the ordinary course of our business
activities, we are exposed to various market risks that are beyond our control, including fluctuations in the prices of certain
of our products and inputs, currency exchange rates, interest rates, energy prices and marine shipping prices, that may have an
adverse effect on the value of our financial assets and liabilities, future cash flows and profit. As a result of these market
risks, we could suffer a loss due to adverse changes in the prices of our products or our inputs, foreign exchange rates, interest
rates, energy prices or marine shipping prices.



For financial assets and financial liabilities
in currencies that are not the functional currency of our subsidiaries, our policy is to minimize this exposure as far as possible
by the use of various hedging instruments. We do not hedge against severance pay liabilities or our tax results since the exposure
is long term. We do not use hedging instruments to hedge the prices of our products. For hedging against the prices of crude oil,
marine shipping prices, projected income and expenses in currencies that are not the functional currency of our subsidiaries, and
interest rates, our policy is to hedge, as described below.



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We regularly monitor the extent of our
exposure and the hedging rates for the various risks described below. The hedging policy for all types of exposure is discussed
by our Board of Directors as part of the annual budget discussions, and our Board of Directors establishes our maximum exposure
according to a value-at-risk model. Together with a report on the quarterly financial results, our Audit and Finance Committee
receives quarterly reports on exposure and hedging rates and determines if our hedging policy should be revised. Management implements
our hedging policy with reference to actual developments and expectations in the various markets.



We use financial instruments and derivatives
for hedging purposes only. These hedging instruments reduce our exposure as described above. These transactions do not meet the
hedging conditions provided in IFRS, and therefore they are measured at fair value, and changes in the fair value are charged immediately
to profit and loss. The counterparties for our derivatives transactions are banks. We believe the credit risk in respect thereof
is negligible.



For additional information about our hedging
activities, see Note 27 to our audited financial statements.



Exchange Rate Risk



The U.S. dollar is the principal currency
of the business environment in which most of our subsidiaries operate. The majority of our activities—sales, purchase of
materials, selling, marketing expenses and financing expenses, as well as the purchase of property, plant and equipment—are
executed mainly in U.S. dollars, and so the U.S. dollar is used as the functional currency for measurement and reporting of the
Company and the majority of our subsidiaries.



We have a number of consolidated subsidiaries
overseas and one local subsidiary in Israel, whose functional currencies are their local currency—mainly the euro, the British
pound, the Brazilian real, the Israeli shekel and the Chinese yuan.



Set forth below is a description of our
principal exposures in respect of changes in currency exchange rates.



Transactions by our subsidiaries in currencies
that are not their functional currency expose us to changes in the exchange rates of those currencies compared with the functional
currencies of those companies. Measurement of this type of our exposure is based on the ratio of net income to expenses in each
currency that is not the functional currency of that company.



Part of the costs of our inputs in Israel
are denominated and paid in NIS. Thus, we are exposed to a strengthening of the NIS exchange rate against the U.S. dollar (NIS
appreciation). This exposure is similar in substance to the exposure described above for transactions in foreign currencies but
is much larger than the other currency exposures.



The results for tax purposes of us and
our subsidiaries operating in Israel are measured in NIS. As a result, we are exposed to the rate of the change in the U.S. dollar
exchange rate and the measurement base for tax purposes (the NIS) in respect of those subsidiaries.



Our subsidiaries have severance pay liabilities
that are denominated in the local currency, and in Israel they are sometimes also affected by rises in the CPI. Our subsidiaries
in Israel have reserves to cover part of these liabilities. The reserves are denominated in NIS and affected by the performance
of the funds in which the sums are invested. As a result, we are exposed to changes in the exchange rates of the U.S. dollar against
various local currencies in respect of net liabilities for severance pay.



Our subsidiaries have financial assets
and liabilities that are denominated in or linked to currencies other than their functional currencies. A surplus of assets over
liabilities denominated in currencies that are not the functional currency creates exposure for us in respect of exchange rate
fluctuations.



With respect to investment in subsidiaries
whose functional currency is not the U.S. dollar, the end-of-period balance-sheet balances of these companies are translated into
U.S. dollars based on the exchange rate of the U.S. dollar in relation to the reporting currency of these companies at the end
of the relevant period. The beginning-of-period balance-sheet balances, as well as capital changes during the period, are translated
into U.S. dollars at the exchange rate at the beginning of the period or on the date of the change in capital, respectively. The
differences arising from the effect of the change in the exchange rate between the U.S. dollar and the currency in which the companies
report create exposure. The effects of this exposure are charged directly to equity.



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Our Finance Forum (whose members are the
senior financial managers of our Company and each of our segments) periodically examines the extent of the hedging implemented
for each of the exposures described above, and decides on the required scope of the hedging. We use various financial instruments
for our hedging activity, including derivatives.



Explanations of the main changes between
the periods



Dollar–shekel exchange rate



The liability in respect of the fair value
of derivative instruments for the dollar-shekel exchange rate as at December 31, 2014 amounted to about $67 million, due to the
strengthening of the dollar against the shekel in 2014 at the rate of 12%. During 2015, there was no significant change and the
dollar strengthened against the shekel at the rate of only about 0.33%. As at December 31, 2015, the liability in respect of the
fair value of the derivative instruments was about $5 million. As a result of income was recorded in the amount of about $62 million
with reference to open transactions.



Energy



The liability in respect of the fair value
of derivative instruments for energy costs as at December 31, 2014 amounted to about $19 million, due to the decline in the price
of crude oil in 2014 at the rate of 29%. As at December 31, 2015, the liability in respect of the fair value of the derivative
instruments was about $7 million. As a result of income was recorded in the amount of about $12 million with reference to open
transactions. During 2015, there was a decrease of about 40% in the energy prices. Part of the change in the fair-value balance
stems from a decline in the total amount of the transactions executed and a fall in the average exercise price of the transactions.



Dry bulk marine shipping



The liability in respect of the fair value
of derivative instruments for dry bulk marine shipping as at December 31, 2014 amounted to about $9 million, due to the decline
in the marine shipping prices in 2014 at the rate of 26%. As at December 31, 2015, the liability in respect of the fair value of
the derivative instruments was about $5 million. As a result of income was recorded in the amount of about $4 million with reference
to open transactions. During 2015, there was a decrease of about 37% in the marine shipping prices. Part of the change in the fair
value balance stems from a decline in the total amount of the transactions executed and a fall in the average exercise price of
the transactions.



The tables below set forth the sensitivity
of our derivative instruments and certain balance sheet items to 5% and 10% increases and decreases in the exchange rates as at
December 31, 2015.



|                               |  | Increase (decrease) in fair value |       |                |  | Increase (decrease) in fair value
|------------------------------ |  | --------------------------------- | ----- | -------------- |  | ---------------------------------
|USD/NIS Type of instrument     |  | Increase of 10%                   |       | Increase of 5% |  | Fair value                       
|                               |  | (USD millions)                   
|Cash and cash equivalents      |  |                                   | (0.2  | )              |  |                                  
|Short term deposits and loans  |  |                                   | (0.1  | )              |  |                                  
|Trade receivables              |  |                                   | (5.2  | )              |  |                                  
|Receivables and debit balances |  |                                   | (0.7  | )              |  |                                  
|Long-term deposits and loans   |  |                                   | (0.1  | )              |  |                                  
|Trade payables                 |  |                                   | 20.1  |                |  |                                  
|Other payables                 |  |                                   | 15.4  |                |  |                                  
|Long-term loans                |  |                                   | 15.1  |                |  |                                  
|Options                        |  |                                   | (57.8 | )              |  |                                  
|Forward                        |  |                                   | (11.9 | )              |  |                                  
|Swap                           |  |                                   | (16.7 | )              |  |                                  
|Total                          |  |                                   | (42.1 | )              |  |                                  

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|                             |  | Increase (decrease) in fair value |     |                |  | Increase (decrease) in fair value
|---------------------------- |  | --------------------------------- | --- | -------------- |  | ---------------------------------
|CPI Type of instrument       |  | Increase of 10%                   |     | Increase of 5% |  | Fair value                       
|                             |  | (USD millions)                   
|Long-term deposits and loans |  |                                   | 0.1 |                |  |                                  



|                               |  | Increase (decrease) in fair value |       | Fair value     |  | Increase (decrease) in fair value
|------------------------------ |  | --------------------------------- | ----- | -------------- |  | ---------------------------------
|                               |  | (USD millions)                   
|EUR/USD Type of instrument     |  | Increase of 10%                   |       | Increase of 5% |  |                                  
|Cash and cash equivalents      |  |                                   | (2.3  | )              |  |                                  
|Short term deposits and  loans |  |                                   | (0.4  | )              |  |                                  
|Trade receivables              |  |                                   | (21.9 | )              |  |                                  
|Receivables and debit balances |  |                                   | (0.1  | )              |  |                                  
|Long-term deposits and loans   |  |                                   | 0.0   |                |  |                                  
|Credit from banks and others   |  |                                   | 9.1   |                |  |                                  
|Trade payables                 |  |                                   | 15.4  |                |  |                                  
|Other payables                 |  |                                   | 11.4  |                |  |                                  
|Long-term loans from banks     |  |                                   | 3.5   |                |  |                                  
|Options                        |  |                                   | 4.2   |                |  |                                  
|Forward                        |  |                                   | (26.7 | )              |  |                                  
|Total                          |  |                                   | (7.8  | )              |  |                                  



|                               |  | Increase (decrease) in fair value |      |                |  | Increase (decrease) in fair value
|------------------------------ |  | --------------------------------- | ---- | -------------- |  | ---------------------------------
|GBP/USD Type of instrument     |  | Increase of 10%                   |      | Increase of 5% |  | Fair value                       
|                               |  | (USD millions)                   
|Trade receivables              |  |                                   | (3.7 | )              |  |                                  
|Receivables and debit balances |  |                                   | 0.0  |                |  |                                  
|Credit from banks and others   |  |                                   | 1.6  |                |  |                                  
|Trade payables                 |  |                                   | 3.4  |                |  |                                  
|Other payables                 |  |                                   | 3.8  |                |  |                                  
|Options                        |  |                                   | (0.2 | )              |  |                                  
|Forward                        |  |                                   | 28.1 |                |  |                                  
|Total                          |  |                                   | 32.5 |                |  |                                  



|                           |  | Increase (decrease) in fair value |       |                |  | Increase (decrease) in fair value
|-------------------------- |  | --------------------------------- | ----- | -------------- |  | ---------------------------------
|GBP/EUR Type of instrument |  | Increase of 10%                   |       | Increase of 5% |  | Fair value                       
|                           |  | (USD millions)                   
|Forward                    |  |                                   | (18.0 | )              |  |                                  
|Options                    |  |                                   | (0.6  | )              |  |                                  
|Total                      |  |                                   | (18.6 | )              |  |                                  





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|                             |  | Increase (decrease) in fair value |      |                |  | Increase (decrease) in fair value
|---------------------------- |  | --------------------------------- | ---- | -------------- |  | ---------------------------------
|JPY/USD Type of instrument   |  | Increase of 10%                   |      | Increase of 5% |  | Fair value                       
|                             |  | (USD millions)                   
|Cash and cash equivalents    |  |                                   | (0.4 | )              |  |                                  
|Trade receivables            |  |                                   | (1.0 | )              |  |                                  
|Long-term deposits and loans |  |                                   | 0.0  |                |  |                                  
|Trade payables               |  |                                   | 0.1  |                |  |                                  
|Other payables               |  |                                   | 0.0  |                |  |                                  
|Options                      |  |                                   | 0.2  |                |  |                                  
|Forward                      |  |                                   | 0.3  |                |  |                                  
|Total                        |  |                                   | (0.8 | )              |  |                                  



|                           |  | Increase (decrease) in fair value |      |                |  | Increase (decrease) in fair value
|-------------------------- |  | --------------------------------- | ---- | -------------- |  | ---------------------------------
|BRL/USD Type of instrument |  | Increase of 10%                   |      | Increase of 5% |  | Fair value                       
|                           |  | (USD millions)                   
|Cash and cash equivalents  |  |                                   | (0.2 | )              |  |                                  
|Trade receivables          |  |                                   | (2.5 | )              |  |                                  
|Trade payables             |  |                                   | 1.3  |                |  |                                  
|Other payables             |  |                                   | 0.1  |                |  |                                  
|Long-term loans from banks |  |                                   | 3.1  |                |  |                                  
|Total                      |  |                                   | 1.8  |                |  |                                  



|                             |  | Increase (decrease) in fair value |       |                |  | Increase (decrease) in fair value
|---------------------------- |  | --------------------------------- | ----- | -------------- |  | ---------------------------------
|CNY/USD Type of instrument   |  | Increase of 10%                   |       | Increase of 5% |  | Fair value                       
|                             |  | (USD millions)                   
|Cash and cash equivalents    |  |                                   | (8.3  | )              |  |                                  
|Trade receivables            |  |                                   | (10.2 | )              |  |                                  
|Trade payables               |  |                                   | 12.2  |                |  |                                  
|Other payables               |  |                                   | 2.2   |                |  |                                  
|Credit from banks and others |  |                                   | 28.2  |                |  |                                  
|Options                      |  |                                   | 0.0   |                |  |                                  
|Forward                      |  |                                   | (19.0 | )              |  |                                  
|Total                        |  |                                   | 5.1   |                |  |                                  

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The tables below set forth the sensitivity
of our derivative instruments and certain balance sheet items to 5% and 10% increases and decreases in the exchange rates as at
December 31, 2014.



|                               |  | Increase (decrease) in fair value |       |                |  | Increase (decrease) in fair value
|------------------------------ |  | --------------------------------- | ----- | -------------- |  | ---------------------------------
|USD/NIS Type of instrument     |  | Increase of 10%                   |       | Increase of 5% |  | Fair value                       
|                               |  | (USD millions)                   
|Cash and cash equivalents      |  |                                   | (0.7  | )              |  |                                  
|Short term deposits and  loans |  |                                   | (0.1  | )              |  |                                  
|Trade receivables              |  |                                   | (5.5  | )              |  |                                  
|Receivables and debit balances |  |                                   | (1.1  | )              |  |                                  
|Long-term deposits and loans   |  |                                   | (0.4  | )              |  |                                  
|Credit from banks and others   |  |                                   | 0.6   |                |  |                                  
|Trade payables                 |  |                                   | 22.0  |                |  |                                  
|Other payables                 |  |                                   | 13.0  |                |  |                                  
|Long-term loans                |  |                                   | 14.8  |                |  |                                  
|Options                        |  |                                   | (50.4 | )              |  |                                  
|Forward                        |  |                                   | (17.1 | )              |  |                                  
|Swap                           |  |                                   | (17.0 | )              |  |                                  
|Total                          |  |                                   | (41.9 | )              |  |                                  



|                             |  | Increase
    (decrease) in fair value |     |                    |  | Increase
    (decrease) in fair value
|---------------------------- |  | ------------------------------------- | --- | ------------------ |  | -------------------------------------
|CPI Type
    of instrument   |  | Increase
    of 10%                   |     | Increase
    of 5% |  | Fair
    value                       
|                             |  | (USD millions)                       
|Long-term deposits and loans |  |                                       | 0.1 |                    |  |                                      



|                               |  | Increase (decrease) in fair value |       |                |  | Increase (decrease) in fair value
|------------------------------ |  | --------------------------------- | ----- | -------------- |  | ---------------------------------
|EUR/USD Type of instrument     |  | Increase of 10%                   |       | Increase of 5% |  | Fair value                       
|                               |  | (USD millions)                   
|Cash and cash equivalents      |  |                                   | (6.9  | )              |  |                                  
|Short term deposits and  loans |  |                                   | (0.7  | )              |  |                                  
|Trade receivables              |  |                                   | (26.4 | )              |  |                                  
|Receivables and debit balances |  |                                   | 0.0   |                |  |                                  
|Long-term deposits and loans   |  |                                   | 0.0   |                |  |                                  
|Credit from banks and others   |  |                                   | 22.3  |                |  |                                  
|Trade payables                 |  |                                   | 17.5  |                |  |                                  
|Other payables                 |  |                                   | 11.1  |                |  |                                  
|Long-term loans from banks     |  |                                   | 7.1   |                |  |                                  
|Options                        |  |                                   | 8.8   |                |  |                                  
|Forward                        |  |                                   | (26.9 | )              |  |                                  
|Total                          |  |                                   | 5.9   |                |  |                                  

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|                               |  | Increase (decrease) in fair value |      |                |  | Increase (decrease) in fair value
|------------------------------ |  | --------------------------------- | ---- | -------------- |  | ---------------------------------
|GBP/USD Type of instrument     |  | Increase of 10%                   |      | Increase of 5% |  | Fair value                       
|                               |  | (USD millions)                   
|Cash and cash equivalents      |  |                                   | (0.6 | )              |  |                                  
|Trade receivables              |  |                                   | (3.7 | )              |  |                                  
|Receivables and debit balances |  |                                   | 0.0  |                |  |                                  
|Credit from banks and others   |  |                                   | 1.6  |                |  |                                  
|Trade payables                 |  |                                   | 2.7  |                |  |                                  
|Other payables                 |  |                                   | 1.7  |                |  |                                  
|Options                        |  |                                   | (1.5 | )              |  |                                  
|Forward                        |  |                                   | (4.6 | )              |  |                                  
|Total                          |  |                                   | (4.4 | )              |  |                                  



|                           |  | Increase (decrease) in fair value |      |                |  | Increase (decrease) in fair value
|-------------------------- |  | --------------------------------- | ---- | -------------- |  | ---------------------------------
|GBP/EUR Type of instrument |  | Increase of 10%                   |      | Increase of 5% |  | Fair value                       
|                           |  | (USD millions)                   
|Forward                    |  |                                   | 3.4  |                |  |                                  
|Options                    |  |                                   | (2.5 | )              |  |                                  
|Total                      |  |                                   | 0.9  |                |  |                                  



|                             |  | Increase (decrease) in fair value |      |                |  | Increase (decrease) in fair value
|---------------------------- |  | --------------------------------- | ---- | -------------- |  | ---------------------------------
|JPY/USD Type of instrument   |  | Increase of 10%                   |      | Increase of 5% |  | Fair value                       
|                             |  | (USD millions)                   
|Cash and cash equivalents    |  |                                   | (0.5 | )              |  |                                  
|Trade receivables            |  |                                   | (0.9 | )              |  |                                  
|Long-term deposits and loans |  |                                   | 0.0  |                |  |                                  
|Trade payables               |  |                                   | 0.1  |                |  |                                  
|Other payables               |  |                                   | 0.0  |                |  |                                  
|Options                      |  |                                   | 0.6  |                |  |                                  
|Forward                      |  |                                   | 0.7  |                |  |                                  
|Total                        |  |                                   | 0.0  |                |  |                                  



|                           |  | Increase (decrease) in fair value |      |                |  | Increase (decrease) in fair value
|-------------------------- |  | --------------------------------- | ---- | -------------- |  | ---------------------------------
|BRL/USD Type of instrument |  | Increase of 10%                   |      | Increase of 5% |  | Fair value                       
|                           |  | (USD millions)                   
|Cash and cash equivalents  |  |                                   | (1.3 | )              |  |                                  
|Trade receivables          |  |                                   | (2.0 | )              |  |                                  
|Trade payables             |  |                                   | 2.9  |                |  |                                  
|Other payables             |  |                                   | 0.2  |                |  |                                  
|Total                      |  |                                   | (0.2 | )              |  |                                  

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|                             |  | Increase (decrease) in fair value |      |                |  | Increase (decrease) in fair value
|---------------------------- |  | --------------------------------- | ---- | -------------- |  | ---------------------------------
|CNY/USD Type of instrument   |  | Increase of 10%                   |      | Increase of 5% |  | Fair value                       
|                             |  | (USD millions)                   
|Cash and cash equivalents    |  |                                   | (1.9 | )              |  |                                  
|Trade receivables            |  |                                   | (1.0 | )              |  |                                  
|Trade payables               |  |                                   | 0.2  |                |  |                                  
|Other payables               |  |                                   | 0.7  |                |  |                                  
|Credit from banks and others |  |                                   | 0.1  |                |  |                                  
|Total                        |  |                                   | (1.9 | )              |  |                                  



Interest Rate Risk



We have loans bearing variable interest
that expose our finance expenses and cash flows to changes in those interest rates. With respect to our fixed-interest loans, there
is exposure to changes in the fair value of the loans due to changes in the market interest rate.



Our Finance Forum examines the extent of
the hedging in order to adjust the structure of the actual interest to our expectations with regard to the anticipated developments
in interest rates, taking into account the cost of the hedging. The hedging is implemented by using a fixed interest range and
by hedging variable interest.



The table below sets forth the sensitivity
of certain financial instruments to 0.5% and 1% increases and decreases in the LIBOR rate as at December 31, 2015.



|                              |  | Increase (decrease) in fair value |      |                  |  | Increase (decrease) in fair value
|----------------------------- |  | --------------------------------- | ---- | ---------------- |  | ---------------------------------
|Type of instrument            |  | Increase of 1%                    |      | Increase of 0.5% |  | Fair value                       
|                              |  | (USD millions)                   
|Fixed-USD interest debentures |  |                                   | 70.4 |                  |  |                                  
|Collar transactions           |  |                                   | 0.1  |                  |  |                                  
|Swap transactions             |  |                                   | 16.9 |                  |  |                                  
|NIS/USD swap                  |  |                                   | 10.6 |                  |  |                                  
|Total                         |  |                                   | 98.0 |                  |  |                                  



The table below sets forth the sensitivity
of certain financial instruments to 0.5% and 1% increases and decreases in the LIBOR rate as at December 31, 2014.



|                              |  | Increase (decrease) in fair value |       |                  |  | Increase (decrease) in fair value
|----------------------------- |  | --------------------------------- | ----- | ---------------- |  | ---------------------------------
|Type of instrument            |  | Increase of 1%                    |       | Increase of 0.5% |  | Fair value                       
|                              |  | (USD millions)                   
|Fixed-USD interest debentures |  |                                   | 78.0  |                  |  |                                  
|Collar transactions           |  |                                   | 0.6   |                  |  |                                  
|Swap transactions             |  |                                   | 20.2  |                  |  |                                  
|NIS/USD swap                  |  |                                   | 12.2  |                  |  |                                  
|Total                         |  |                                   | 111.0 |                  |  |                                  

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The table below sets forth the sensitivity
of certain financial instruments to 0.5% and 1% increases and decreases in the NIS interest rate as at December 31, 2015.



|Sensitivity to changes in the shekel interest rate |  | Increase (decrease) in fair value |       |                  |  | Increase (decrease) in fair value
|-------------------------------------------------- |  | --------------------------------- | ----- | ---------------- |  | ---------------------------------
|Type of instrument                                 |  | Increase of 1%                    |       | Increase of 0.5% |  | Fair value                       
|                                                   |  | (USD millions)                   
|Fixed-interest long-term loan                      |  |                                   | 8.9   |                  |  |                                  
|NIS/USD swap                                       |  |                                   | (10.4 | )                |  |                                  
|Total                                              |  |                                   | (1.5  | )                |  |                                  



The table below sets forth the sensitivity
of certain financial instruments to 0.5% and 1% increases and decreases in the NIS interest rate as at December 31, 2014.



|Sensitivity to changes in the shekel interest rate |  | Increase (decrease) in fair value |       |                  |  | Increase (decrease) in fair value
|-------------------------------------------------- |  | --------------------------------- | ----- | ---------------- |  | ---------------------------------
|Type of instrument                                 |  | Increase of 1%                    |       | Increase of 0.5% |  | Fair value                       
|                                                   |  | (USD millions)                   
|NIS/USD swap                                       |  |                                   | (11.5 | )                |  |                                  



Energy Price Risk



Execution of hedging is determined by appropriate
personnel after consultation with Israeli and foreign energy advisors.



The table below sets forth the sensitivity
of instruments hedging energy price risks to 5% and 10% increases and decreases in energy prices as of December 31, 2015.



|                   |  | Increase
    (decrease) in fair value |     |                      |  | Increase
    (decrease) in fair value
|------------------ |  | ------------------------------------- | --- | -------------------- |  | -------------------------------------
|Type of instrument |  | Increase
    of 10%                   |     | Increase
    of 0.5% |  | Fair
    value                       
|                   |  | (USD millions)                       
|Energy hedges      |  |                                       | 1.1 |                      |  |                                      



The table below sets forth the sensitivity
of instruments hedging energy price risks to 5% and 10% increases and decreases in energy prices as of December 31, 2014.



|                   |  | Increase
    (decrease) in fair value |     |                      |  | Increase
    (decrease) in fair value
|------------------ |  | ------------------------------------- | --- | -------------------- |  | -------------------------------------
|Type of instrument |  | Increase
    of 10%                   |     | Increase
    of 0.5% |  | Fair
    value                       
|                   |  | (USD millions)                       
|Energy hedges      |  |                                       | 3.1 |                      |  |                                      



Marine Shipping Price Risk



We purchase hedges on part of our exposure
to marine bulk shipping prices. Hedging is executed by the appropriate personnel, after consultation with overseas experts.



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The table below sets forth the sensitivity
of instruments hedging marine shipping price risk to 5% and 10% increases and decreases in marine shipping prices as of December
31, 2015.



|                       |  | Increase
    (decrease) in fair value |     |                      |  | Increase
    (decrease) in fair value
|---------------------- |  | ------------------------------------- | --- | -------------------- |  | -------------------------------------
|Type of instrument     |  | Increase
    of 10%                   |     | Increase
    of 0.5% |  | Fair
    value                       
|                       |  | (USD millions)                       
|Marine shipping hedges |  |                                       | 0.4 |                      |  |                                      



The table below sets forth the sensitivity
of instruments hedging marine shipping price risk to 5% and 10% increases and decreases in marine shipping prices as of December
31, 2014.



|                       |  | Increase
    (decrease) in fair value |     |                      |  | Increase
    (decrease) in fair value
|---------------------- |  | ------------------------------------- | --- | -------------------- |  | -------------------------------------
|Type of instrument     |  | Increase
    of 10%                   |     | Increase
    of 0.5% |  | Fair
    value                       
|                       |  | (USD millions)                       
|Marine shipping hedges |  |                                       | 3.2 |                      |  |                                      



Item 12.  Description
of Securities Other than Equity Securities



Not Applicable.



PART
II



Item 13.  Defaults, Dividend
Arrangements and Delinquencies



None.



Item 14.  Material Modifications
to the Rights of Security Holders and Use of Proceeds



Not Applicable.



Item 15.  Controls and
Procedures



A.	DISCLOSURE CONTROLS AND PROCEDURES





ICL’s
Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of ICL’s disclosure controls and
procedures (as defined in Exchange Act Rule 13a-15(f)) as of the end of the period covered by this annual report, have concluded
that, as of such date, ICL’s disclosure controls and procedures were effective to ensure that the information required in
the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods
specified in the SEC’s rules and forms, and such information is accumulated and communicated to its management, including
its chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.





B. 	MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROLS
OVER FINANCIAL REPORTING



ICL's board of directors and management are responsible for establishing
and maintaining adequate internal control over financial reporting. ICL's internal control over financial reporting system was
designed by, or under the supervision of, the Chief Executive Officer and Chief Financial Officer, management and other personnel,
to provide reasonable assurance to ICL's management and board of directors regarding the reliability of financial reporting and
the preparation and fair presentation of its consolidated financial statements for external reporting purposes, in accordance
with generally accepted accounting principles. These include those policies and procedures that:







| | • | pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of our assets;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------



| | • | provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements, in accordance
with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorization
of our management and directors; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that
could have a material effect on our financial statements.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







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Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, effective
control over financial reporting cannot, and does not, provide absolute assurance of achieving our control objectives. Also, projections
of, and any evaluation of effectiveness of the internal controls in future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.





Under
the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer,
we assessed the effectiveness of ICL's internal control over financial reporting as of December 31, 2015. In making this assessment,
we used the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission of 2013 (COSO). Based on such assessment, management believes that, as of December 31, 2015, ICL's
internal control over financial reporting is effective based on those criteria.



C.	ATTESTATION REPORT OF THE REGISTERED PUBLIC ACCOUNTING
FIRM



Somekh Chaikin, member firm of KPMG International, an independent registered public accounting firm, has audited and reported
on the effectiveness of ICL's internal controls over financial reporting as of December 31, 2015. See Somekh Chaikin's attestation
report beginning on page F-2 of this annual report.





D.	CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING



There
has been no change in our internal control over financial reporting identified in connection with the evaluation required by Rules
13a-15 or 15d-15 that occurred during the period covered by this annual report that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.







Item 16A.  Audit Committee
Financial Expert



Our Board of Directors has determined that
Mr. Yaacov Dior and Mr. Geoffery Merszei are audit committee financial experts, as that term is defined in Item 16A(b) of Form
20-F, and that Mr. Dior, Mr. Merszei and Dr. Miriam Haran are independent for the purposes of NYSE corporate governance rules and
Rule 10A-3 of the Exchange Act.



Item 16B.  Code of Ethics



Our Board of Directors have adopted a Code
of Conduct that applies to Board of Directors, senior management and employees, including our principal executive officer, principal
financial officer, principal accounting officer or controller and any other persons who perform similar functions for us. The Code
of Conduct is available, free of charge, on our website, www.icl-group.com.



Item 16C.  Principal Accountant
Fees and Services





Somekh Chaikin, a member of KPMG International,
has served as our independent registered public accounting firm for 2014 and 2015.





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These accountants billed the following fees
to us for professional services in each of those fiscal years:



|                      |  | 2015            |       | 2014
|--------------------- |  | --------------- | ----- | ----
|                      |  | (US$ thousands)
|Audit fees(1)         |  |                 | 6,070 |     
|Audit-related fees(2) |  |                 | 400   |     
|Tax fees(3)           |  |                 | 1,600 |     
|All other fees(4)     |  |                 | 20    |     
|Total                 |  |                 | 8,090 |     

____________________



| | (1) | Audit Fees are the aggregate fees billed for the audit
of our annual financial statements. This category also includes services that generally the independent accountant provides, such
as consents and assistance with and review of documents filed with the SEC.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | Audit-Related Fees are the aggregate fees billed for
assurance and related services that are reasonably related to the performance of the audit and are not reported under Audit Fees.
These fees include mainly accounting consultations regarding the accounting treatment of matters that occur in the regular course
of business, implications of new accounting pronouncements and other accounting issues that occur from time to time.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | Tax fees are the aggregate fees billed for professional
services rendered for tax compliance, tax advice, and tax planning, assistance with tax audits and appeals.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (4) | All other fees consisted of fees billed or accrued for products and services provided by the principal accountant, other than
the services reported above under other captions in the above table.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Audit Committee’s pre-approval policies and procedures



All services provided by our auditors are
approved in advance by either the Audit and Finance Committee or members thereof, to whom authority has been delegated, in accordance
with the Audit and Finance Committee’s pre-approval policy.



Item 16D.  Exemptions
from the Listing Standards for Audit Committees



None.



Item 16E.  Purchases of
Equity Securities by the Issuer and Affiliated Purchasers



None.



Item 16F.  Change in Registrant’s
Certifying Accountant



None.



Item 16G.  Corporate Governance



Corporate Governance Practices



We are incorporated in Israel and therefore
subject to various corporate governance requirements under the Companies Law relating to such matters as external directors, the
audit committee, the compensation committee and the internal auditor. These are in addition to the requirements of the NYSE and
relevant provisions of U.S. securities laws that apply to us. As a foreign private issuer whose shares are listed on the NYSE,
we have the option to follow certain Israeli corporate governance practices rather than those of the NYSE, except to the extent
that such laws would be contrary to U.S. securities laws and provided that we disclose the practices that we are not following
and describe the home country practices we follow instead. We intend to rely on this “foreign private issuer exemption”
with respect to the following NYSE requirements:



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| | · | Majority
Independent Board.Under Section 303A.01 of the NYSE Listed Company Manual (the “LCM”), a U.S.
domestic listed company, other than a controlled company, must have a majority of independent directors. Eight of our eleven directors
are not considered independent directors under Israeli law due to either a relationship with the Company, our controlling shareholder
or the length of their tenure on our Board of Directors.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Nominating/Corporate Governance Committee. Under Section 303A.04 of the LCM, a U.S. domestic listed company,
other than a controlled company, must have a nominating/corporate governance committee composed entirely of independent directors.
The Company’s controlling shareholder, Israel Corporation, has significant control over the appointment of our directors.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Equity Compensation Plans. Under Section 303A.08 of the LCM, shareholders must be given the opportunity to vote
on all equity-compensation plans and material revisions thereto, with certain limited exemptions as described therein. We follow
the requirements of the Companies Law, under which approval of equity-compensation plans and material revisions thereto is within
the authority of the board of directors. However, under the Companies Law, any compensation to directors, the chief executive officer
or a controlling shareholder or another person in which a controlling shareholder has a personal interest, including equity-based
compensation, generally requires the approval of the compensation committee, the board of directors and the shareholders, in that
order. The compensation of directors and officers is generally required to comply with a shareholder-approved compensation policy,
which is required to include a monetary cap on the value of equity compensation that may be granted to any director or officer.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Shareholder Approval of Securities Issuances. Under Section 312.03 of the LCM, shareholder approval is a prerequisite
to (a) issuing common stock, or securities convertible into or exercisable for common stock, to a related party, a subsidiary,
affiliate or other closely related person of a related party or any company or entity in which a related party has a substantial
interest, if the number of shares of common stock to be issued exceeds either 1% of the number of shares of common shares or 1%
of the voting power outstanding before the issuance, and (b) issuing common stock, or securities convertible into or exercisable
for common stock, if the common stock has, or will have upon issuance, voting power equal to or in excess of 20% of the voting
power outstanding before the issuance or the number of shares of common stock to be issued is equal to or in excess of 20% of the
number of shares of common stock before the issuance, in each case subject to certain exceptions. We seek shareholder approval
for all corporate actions requiring such approval under the requirements of the Companies Law, which are different from the requirements
for seeking shareholder approval under Section 312.03 of the LCM. Under the Companies Law, shareholder approval is a prerequisite
to any extraordinary transaction with a controlling shareholder or in which a controlling shareholder has a personal interest.
Under the Companies Law, shareholder approval is also a prerequisite to a private placement of securities if it will cause a person
to become a controlling shareholder or in case all of the following conditions are met:
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the securities issued amount to 20% or more of the company’s outstanding voting rights before the issuance;
| | - | -----------------------------------------------------------------------------------------------------------



| | · | some or all of the consideration is other than cash or listed securities or the transaction is not on market terms; and
| | - | -----------------------------------------------------------------------------------------------------------------------



| | · | the transaction will increase the relative holdings of a 5% shareholder or will cause any person to become, as a result of
the issuance, a 5% shareholder.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------



Except as stated above, we intend to substantially
comply with the rules applicable to U.S. companies listed on the NYSE. We may in the future decide to use other foreign private
issuer exemptions with respect to some or all of the other NYSE listing requirements. Following our home country governance practices,
as opposed to the requirements that would otherwise apply to a company listed on the NYSE, may provide less protection than is
accorded to investors under NYSE listing requirements applicable to domestic issuers. For more information, see “Item
3. Key Information—D. Risk Factors—Risks Related to Our Ordinary Shares—As a foreign private issuer, we are permitted
to follow certain home country corporate governance practices instead of applicable SEC and NYSE requirements, which may result
in less protection than is accorded to investors under rules applicable to domestic issuers.”



186


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Item 16H.  Mine Safety
Disclosure



Not applicable.



PART III



Item 17.  Financial Statements



See “Item 18. Financial Statements.”



Item 18.  Financial Statements



See page F-1.





ITEM 19.  EXHIBITS



|1.1*  | Memorandum of Association of Israel Chemicals Ltd. (unofficial translation from original Hebrew).                                                                                                                                         
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.2*  | Articles of Association of Israel Chemicals Ltd. (unofficial translation from original Hebrew).                                                                                                                                           
|4.1*  | Dead Sea Concession Law, 1961 (and the Deed of Concession, dated as of May 31, 1961, between the State of Israel and Dead Sea Works, Ltd. set out as a schedule thereto) (unofficial translation from original Hebrew).                   
|4.2*  | Plan for the Private Allocation of Options for Shares of the Company to the CEO of the Company, to Office Holders and Employees of the Company and its Subsidiaries dated November 27, 2012 (unofficial translation from original Hebrew).
|4.3** | Equity Compensation Plan (2014), dated August 20, 2014 (unofficial translation from original Hebrew).                                                                                                                                     
|4.4*  | Compensation Policy for Directors and Officers, as adopted in July 2013 and approved by shareholders in August 2013.                                                                                                                      
|4.5*  | Agreement between the Israeli Ministry of Finance and Dead Sea Works Ltd. dated as of July 8, 2012 relating to salt harvesting at the Dead Sea.                                                                                           
|4.6*  | Registration Rights Agreement, dated September 12, 2014 by and among Israel Chemicals Ltd. and Israel Corporation Ltd.                                                                                                                    
|4.7   | Revolving Credit Facility Agreement, dated March 23, 2015, by and among certain financial institutions, ICL Finance B.V., and Israel Chemicals Ltd.                                                                                       
|4.8   | Amendment to Revolving Credit Facility
    Agreement, dated April 9, 2015, by and among certain financial institutions, ICL Finance B.V., Israel Chemicals Limited
    and ICL Finance Inc.                                               
|8.1   | List of subsidiaries of Israel Chemicals Ltd.                                                                                                                                                                                             
|12.1  | Certification by Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                    
|12.2  | Certification by Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                    
|13.1  | Certification by Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                    
|13.2  | Certification by Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                    
|15.1  | Consent of Somekh Chaikin, a member of KPMG International, independent registered public accounting firm.                                                                                                                                 

_______________



|*  | Incorporated by reference to our registration statement on Form F-1 (file no. 333- 198711), as amended.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|** | Incorporated by reference to our registration statement on Form
        S-8 (file no. 333-205518), dated July 6, 2015.
        
        Other than as listed above, ICL has
        no         instrument         with         respect to long-term debt under which the total amount of
        securities         authorized exceeds 10% of         the total         assets of ICL on a consolidated basis.  The
        Company agrees to         furnish to the Securities and Exchange         Commission upon         request a copy of each
        instrument with respect to         long-term debt not filed as an exhibit to this         report.



187


Table of Contents




SIGNATURES



The
registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized
the undersigned to sign this annual report on its behalf.



| | ISRAEL CHEMICALS LTD.
| | ---------------------
| |                      
| |                      
| | By:                  
| |                      
| |                      
| |                      
| |                      

| | By: | /s/ Kobi Altman
| | --- | ---------------
| |     | Name:          
| |     | Title:         



Date:
March 16, 2016







188


Table
                                         of Contents










ICL



CONSOLIDATED
FINANCIAL STATEMENTS
As at December 31, 2015





table
of contents




Page





|Auditors’ Report                                | F-2 
|----------------------------------------------- | ----
|Consolidated Statements of Financial Position   | F-4 
|Consolidated Statements of Income               | F-5 
|Consolidated Statements of Comprehensive Income | F-6 
|Consolidated Statements of Changes in Equity    | F-7 
|Consolidated Statements of Cash Flows           | F-10
|Notes to the Consolidated Financial Statements  | F-12





F-1


Table of Contents








Report of Independent Registered Public Accounting Firm



The Board of Directors and Shareholders
Israel Chemicals Ltd



We have audited the accompanying consolidated
statements of financial position of Israel Chemicals Ltd. (hereinafter – “the Company”) and subsidiaries as of
December 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, changes in equity and cash
flows for each of the years in the three year period ended December 31, 2015. We also have audited the Company’s internal
control over financial reporting as of December 31, 2015 based on criteria established in Internal Control - Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is
responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and
for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s
Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these consolidated financial
statements and an opinion on the Company’s internal control over financial reporting based on our audits.



We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether
effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial
statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.
Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinion.



A company’s internal control over
financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s
internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.



Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.



F-2


Table of Contents


In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the financial position of the Company and subsidiaries as
of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the years in the three-year
period ended December 31, 2015, in conformity with International Financial Reporting Standards as issued by the International Accounting
Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO).



/s/ Somekh Chaikin

Certified Public Accountants (Isr.)
Member Firm of KPMG International
Tel Aviv, Israel
March 15, 2016



Somekh Chaikin, a partnership registered under the
Israeli partnership
Ordinance, is the Israeli member firm of KPMG International,
a Swiss cooperative.



F-3


Table of Contents


Consolidated Statements of Financial
Position
as at December 31



|                                                        |  | Note     |  | 2015           |       | 2014
|------------------------------------------------------- |  | -------- |  | -------------- | ----- | ----
|                                                        |  |          |  | $
    millions
|Current assets                                          |  |          |  |                |       |     
|Cash and cash equivalents                               |  |          |  |                | 161   |     
|Short-term investments and deposits                     |  | 6        |  |                | 87    |     
|Trade receivables                                       |  | 7        |  |                | 1,082 |     
|Derivatives and other receivables                       |  | 27,16,8  |  |                | 207   |     
|Current tax assets                                      |  |          |  |                | 45    |     
|Inventories                                             |  | 9        |  |                | 1,364 |     
|Assets held for sale                                    |  | 11       |  |                | 39    |     
|Total current assets                                    |  |          |  |                | 2,985 |     
|Non-current assets                                      |  |          |  |                |       |     
|Investments in equity-accounted investees               |  | 10       |  |                | 159   |     
|Long-term deposits and receivables                      |  | 12,16,27 |  |                | 126   |     
|Surplus in defined benefit plan                         |  | 21       |  |                | 89    |     
|Non-current inventories                                 |  | 9        |  |                | 122   |     
|Deferred tax assets                                     |  | 20       |  |                | 199   |     
|Property, plant and equipment                           |  | 13       |  |                | 4,212 |     
|Intangible assets                                       |  | 14       |  |                | 1,185 |     
|Total non-current assets                                |  |          |  |                | 6,092 |     
|Total assets                                            |  |          |  |                | 9,077 |     
|Current liabilities                                     |  |          |  |                |       |     
|Short-term credit and current portion of long-term debt |  | 17       |  |                | 673   |     
|Trade payables                                          |  | 18       |  |                | 716   |     
|Provisions                                              |  | 22       |  |                | 42    |     
|Other current liabilities                               |  | 27,19,16 |  |                | 527   |     
|Current tax liabilities                                 |  |          |  |                | 62    |     
|Liabilities held for sale                               |  | 11       |  |                | 26    |     
|Total current liabilities                               |  |          |  |                | 2,046 |     
|Non-current liabilities                                 |  |          |  |                |       |     
|Long-term debt                                          |  | 17       |  |                | 1,740 |     
|Debentures                                              |  | 17       |  |                | 1,065 |     
|Long-term derivative instruments                        |  | 27,16    |  |                | 13    |     
|Deferred tax liabilities                                |  | 20       |  |                | 351   |     
|Employee benefits                                       |  | 21       |  |                | 547   |     
|Provisions                                              |  | 22       |  |                | 127   |     
|Total non-current liabilities                           |  |          |  |                | 3,843 |     
|Total liabilities                                       |  |          |  |                | 5,889 |     
|Equity                                                  |  | 24       |  |                |       |     
|Share capital                                           |  |          |  |                | 544   |     
|Share premium                                           |  |          |  |                | 149   |     
|Capital reserves                                        |  |          |  |                | (307  | )   
|Retained earnings                                       |  |          |  |                | 2,902 |     
|Treasury shares                                         |  |          |  |                | (260  | )   
|Total shareholders’
    equity                          |  |          |  |                | 3,028 |     
|Non-controlling interests                               |  |          |  |                | 160   |     
|Total equity                                            |  |          |  |                | 3,188 |     
|Total liabilities and
    equity                        |  |          |  |                | 9,077 |     



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





F-4


Table of Contents






Consolidated Statements of Income
for the Year Ended December 31



|                                                                        |  | Note |  | 2015           |           | 2014 |  | 2013
|----------------------------------------------------------------------- |  | ---- |  | -------------- | --------- | ---- |  | ----
|                                                                        |  |      |  | $
    millions
|Sales                                                                   |  | 26   |  |                | 5,405     |      |  |     
|Cost of sales                                                           |  | 26   |  |                | 3,602     |      |  |     
|Gross profit                                                            |  |      |  |                | 1,803     |      |  |     
|Selling, transport and  marketing expenses                              |  | 26   |  |                | 653       |      |  |     
|General and administrative expenses                                     |  | 26   |  |                | 350       |      |  |     
|Research and development expenses                                       |  | 26   |  |                | 74        |      |  |     
|Other expenses                                                          |  | 26   |  |                | 211       |      |  |     
|Other income                                                            |  | 26   |  |                | (250      | )    |  |     
|Operating income                                                        |  |      |  |                | 765       |      |  |     
|Finance expenses                                                        |  |      |  |                | 160       |      |  |     
|Finance income                                                          |  |      |  |                | (52       | )    |  |     
|Finance expenses, net                                                   |  | 26   |  |                | 108       |      |  |     
|Share in earnings of equity-accounted
    investees                     |  | 10   |  |                | 11        |      |  |     
|Income before income taxes                                              |  |      |  |                | 668       |      |  |     
|Income taxes                                                            |  | 20   |  |                | 162       |      |  |     
|Net income                                                              |  |      |  |                | 506       |      |  |     
|Net income (loss) attributable to the non-controlling
    interests     |  |      |  |                | (3        | )    |  |     
|Net income attributable
    to the shareholders of the Company          |  |      |  |                | 509       |      |  |     
|Earnings per share attributable
    to the shareholders of the company: |  | 28   |  |                | US
$      |      |  |     
|Basic earnings per share                                                |  |      |  |                | 0.40      |      |  |     
|Diluted earnings per share                                              |  |      |  |                | 0.40      |      |  |     
|Weighted-average number of ordinary shares outstanding:                 |  |      |  |                |           |      |  |     
|Basic (in thousands)                                                    |  |      |  |                | 1,271,624 |      |  |     
|Diluted (in thousands)                                                  |  |      |  |                | 1,272,256 |      |  |     



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



F-5


Table of Contents


Consolidated Statements of Comprehensive
Income
for the Year Ended December 31



|                                                                                                  |  | 2015           |      | 2014 |  | 2013
|------------------------------------------------------------------------------------------------- |  | -------------- | ---- | ---- |  | ----
|                                                                                                  |  | $
    millions
|Net income                                                                                        |  |                | 506  |      |  |     
|Components of other comprehensive income that  may
    be reclassified subsequently to net income |  |                |      |      |  |     
|Currency translation effects                                                                      |  |                | (205 | )    |  |     
|Changes in derivatives
    designated as a cash flow hedge                                        |  |                | (2   | )    |  |     
|Income tax relating to items that may be reclassified
    subsequently to income                  |  |                | —    |      |  |     
|Total                                                                                             |  |                | (207 | )    |  |     
|Items that will not be reclassified to net income                                                 |  |                |      |      |  |     
|Actuarial gains (losses) from defined benefit plan                                                |  |                | 63   |      |  |     
|Income tax relating to items that will not
    be reclassified to net income                      |  |                | (15  | )    |  |     
|Total                                                                                             |  |                | 48   |      |  |     
|Total comprehensive income                                                                        |  |                | 347  |      |  |     
|Comprehensive income (loss) attributable to
    the non-controlling interests                     |  |                | (9   | )    |  |     
|Comprehensive income
    attributable to the shareholders of the Company                          |  |                | 356  |      |  |     



The accompanying notes are an integral
part of these consolidated financial statements



F-6


Table of Contents


Consolidated Statements of Changes
in Equity



|                                     |  | Attributable
    to the shareholders of the Company |     | Non-
                                                                                controlling interests |  | Total
    equity                     
|------------------------------------ |  | --------------------------------------------------- | --- | ---------------------------------------------------------------------------------------------------------- |  | -------------------------------------
|                                     |  | Share
    Capital                                   |     | Share
    premium                                                                                          |  | Cumulative
    translation adjustment
|                                     |  | $
    millions                                     
|For the year ended December 31, 2015 |  |                                                     |     |                                                                                                            |  |                                      
|Balance as at January 1, 2015        |  |                                                     | 543 |                                                                                                            |  |                                      
|Issue of shares                      |  |                                                     | 1   |                                                                                                            |  |                                      
|Share-based compensation             |  |                                                     | —   | (*)                                                                                                        |  |                                      
|Dividends paid                       |  |                                                     | —   |                                                                                                            |  |                                      
|Consolidation of new subsidiary      |  |                                                     | —   |                                                                                                            |  |                                      
|Comprehensive income                 |  |                                                     | —   |                                                                                                            |  |                                      
|Balance as at December 31, 2015      |  |                                                     | 544 |                                                                                                            |  |                                      






| | (*) | Less
                                         than $1 million.
| | --- | --------------------------------------------------------------



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



F-7


Table of Contents






Consolidated Statements of Changes
in Equity (cont’d)



|                                     |  | Attributable
    to the equity holders of the Company |     | Non-controlling
    interests |  | Total
    equity                     
|------------------------------------ |  | ----------------------------------------------------- | --- | ----------------------------- |  | -------------------------------------
|                                     |  | Share
    Capital                                     |     | Share
    premium             |  | Cumulative
    translation adjustment
|                                     |  | $
    millions                                       
|For the year ended December 31, 2014 |  |                                                       |     |                               |  |                                      
|Balance as at January 1, 2014        |  |                                                       | 543 |                               |  |                                      
|Share-based compensation             |  |                                                       | —   | (*)                           |  |                                      
|Dividends paid                       |  |                                                       | —   |                               |  |                                      
|Comprehensive income                 |  |                                                       | —   |                               |  |                                      
|Balance as at December 31, 2014      |  |                                                       | 543 |                               |  |                                      






| | (*) | Less
                                         than $1 million.
| | --- | --------------------------------------------------------------



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



F-8


Table of Contents




Consolidated Statements of Changes
in Equity (cont’d)



|                                     |  | Attributable
    to the equity holders of the Company |     | Non-controlling
    interests |  | Total
    equity                     
|------------------------------------ |  | ----------------------------------------------------- | --- | ----------------------------- |  | -------------------------------------
|                                     |  | Share
    Capital                                     |     | Share
    premium             |  | Cumulative
    translation adjustment
|                                     |  | $
    millions                                       
|                                     |  |                                                       |     |                               |  |                                      
|                                     |  |                                                       |     |                               |  |                                      
|                                     |  |                                                       |     |                               |  |                                      
|For the year ended December 31, 2013 |  |                                                       |     |                               |  |                                      
|Balance as at January 1, 2013        |  |                                                       | 543 |                               |  |                                      
|Exercise of options                  |  |                                                       | —   | (1)                           |  |                                      
|Share-based compensation             |  |                                                       | —   | (1)                           |  |                                      
|Dividends paid                       |  |                                                       | —   |                               |  |                                      
|Comprehensive income                 |  |                                                       | —   |                               |  |                                      
|Balance as at December 31, 2013      |  |                                                       | 543 |                               |  |                                      






| | (1) | Less than $1 million.
| | --- | ---------------------



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



F-9


Table of Contents


Consolidated Statements of Cash Flows
for the Year Ended December 31



|                                                                           |  | 2015           |       | 2014 |  | 2013
|-------------------------------------------------------------------------- |  | -------------- | ----- | ---- |  | ----
|                                                                           |  | $
    millions
|Cash flows from operating activities                                       |  |                |       |      |  |     
|Net income                                                                 |  |                | 506   |      |  |     
|Adjustments for:                                                           |  |                |       |      |  |     
|Depreciation and amortization                                              |  |                | 430   |      |  |     
|Interest expenses from financial institutions, net                         |  |                | 67    |      |  |     
|Share in earnings of equity-accounted investees, net                       |  |                | (11   | )    |  |     
|Loss (gain) on sale and disposal of property, plant and equipment,
    net |  |                | 12    |      |  |     
|Share-based compensation                                                   |  |                | 15    |      |  |     
|Revaluation of assets and liabilities denominated in foreign currencies    |  |                | (23   | )    |  |     
|Gain on achievement over control of an associated company                  |  |                | (7    | )    |  |     
|Gain from divestiture of subsidiaries & equity accounted investees         |  |                | (215  | )    |  |     
|Income tax expenses                                                        |  |                | 162   |      |  |     
|                                                                           |  |                | 936   |      |  |     
|Change in inventories                                                      |  |                | 25    |      |  |     
|Change in trade and other receivables                                      |  |                | (86   | )    |  |     
|Change in trade and other payables                                         |  |                | (106  | )    |  |     
|Change in provisions and employee benefits                                 |  |                | (90   | )    |  |     
|                                                                           |  |                | 679   |      |  |     
|Income taxes paid, net of refund                                           |  |                | (20   | )    |  |     
|Interest received                                                          |  |                | 1     |      |  |     
|Interest paid                                                              |  |                | (87   | )    |  |     
|Net cash provided by operating
    activities                              |  |                | 573   |      |  |     
|                                                                           |  |                |       |      |  |     
|Cash flows from investing activities                                       |  |                |       |      |  |     
|Proceeds from sale of property, plant and equipment                        |  |                | 6     |      |  |     
|Proceeds from (investment in) deposits and investments, net                |  |                | 34    |      |  |     
|Business combinations, net of cash acquired                                |  |                | (351  | )    |  |     
|Dividends from equity-accounted investees                                  |  |                | 19    |      |  |     
|Purchases of property, plant and equipment, net                            |  |                | (502  | )    |  |     
|Purchases of intangible assets                                             |  |                | (117  | )    |  |     
|Proceeds from divestiture of subsidiaries                                  |  |                | 364   |      |  |     
|Investments in equity-accounted investees                                  |  |                | —     |      |  |     
|Net cash used in investing
    activities                                  |  |                | (547  | )    |  |     
|                                                                           |  |                |       |      |  |     
|Cash flows from financing activities                                       |  |                |       |      |  |     
|Dividend paid to the Company’s shareholders                                |  |                | (347  | )    |  |     
|Dividend paid to non-controlling interests                                 |  |                | (1    | )    |  |     
|Receipt of long-term debt                                                  |  |                | 1,201 |      |  |     
|Repayment of long-term debt                                                |  |                | (846  | )    |  |     
|Short-term credit from banks and others, net                               |  |                | 8     |      |  |     
|Net cash provided by (used
    in) financing activities                    |  |                | 15    |      |  |     
|                                                                           |  |                |       |      |  |     
|Net change in cash and cash equivalents                                    |  |                | 41    |      |  |     
|Cash and cash equivalents as at beginning of the year                      |  |                | 138   |      |  |     
|Net effect of currency translation on cash and cash equivalents            |  |                | (18   | )    |  |     
|Cash and cash equivalents included as part
    of assets held for sale     |  |                | —     |      |  |     
|Cash and cash equivalents
    as at the end of the year                    |  |                | 161   |      |  |     



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



F-10


Table of Contents






Consolidated Statements of Cash Flows
for the Year Ended December 31 (cont’d)



Appendix A - divestiture of subsidiaries



|                                   |  | 2015      
|---------------------------------- |  | ----------
|                                   |  | $ millions
|Cash                               |  |           
|Inventories                        |  |           
|Receivables                        |  |           
|Property, plant and equipment, net |  |           
|Intangible assets, net             |  |           
|Payables                           |  |           
|Employee benefits                  |  |           
|Deferred taxes, net                |  |           
|Capital gain                       |  |           
|Cash received                      |  |           
|Less cash                          |  |           
|Net cash                           |  |           



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



F-11


Table of Contents


Notes to the Consolidated Financial
Statements as at December 31, 2015



Note 1 – General



A. The reporting entity



Israel Chemicals Ltd. (hereinafter –
“the Company” or “ICL”), is a company domiciled and incorporated in Israel and the shares of which are
traded on the Tel-Aviv Stock Exchange and on the New York Stock Exchange. The address of the Company’s registered office
is 23 Aranha St., Tel Aviv, Israel. The Company and its subsidiaries, associated companies and joint ventures (hereinafter –
“the Group”) is a leading specialty minerals group that operates a unique, integrated business model. The Company competitively
extract raw materials and utilize 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 98% of the Company’s
revenues today. The Company’s operations are organized into three segments: (1) Fertilizers, which operates the raw material
extraction for ICL and markets potash, phosphates and specialty fertilizers; (2) Industrial Products, which primarily extracts
bromine from the Dead Sea and produces and markets bromine and phosphorus compounds for the electronics, construction, oil &
gas and automotive industries and (3) Performance Products, which mainly produces, markets and sells a broad range of downstream
phosphate-based food additives and industrial intermediates. The Company is a subsidiary of Israel Corporation Ltd.



The Company’s principal assets include:
One of the world’s richest, longest-life and lowest-cost sources of potash and bromine (the Dead Sea). Additionally, Potash
mines in the United Kingdom and Spain. Bromine compounds processing facilities located in Israel, in the Netherlands and in China.
A unique integrated phosphate value chain, from phosphate rock mines in the Negev Desert in Israel into production facilities of
value-added products in Israel, Europe, US, Brazil and China. An extensive global logistics and distribution network with operations
in over 30 countries and a focused and highly experienced staff which develops production processes, new applications, formulations
and products for our 3 key end markets – agriculture, food and engineered materials.



ICL operates in the markets for potash,
bromine, pure phosphoric acid, special phosphates, bromine-based and phosphorus-based flame retardants and chemicals for the prevention
of the spreading of fires.



ICL’s products are used mainly in
the areas of agriculture, electronics, food, fuel and gas exploration, water purification and desalination, detergents, cosmetics,
medicines, vehicles and others.



The Company’s overseas operations
consist mainly of the production of products that are integrated with or based on the activities of the companies in Israel or
in closely related fields. About 95% of the Group’s products are sold to customers outside of Israel.



B. State share



The State of Israel holds a Special State
Share in ICL and in some of its subsidiaries, entitling the State the right to safeguard the State of Israel interests (see Note
24).



C. Definitions



1.	Subsidiary – a company
over which the Company has control and the financial statements of which are fully consolidated with the Company’s statements
as part of the consolidated financial statements.



2.	Investee company – Subsidiaries
and companies, including a partnership or joint venture, the Company’s investment in which is stated, directly or indirectly,
on the equity basis.



3.	Related party– Within
its meaning in IAS 24 (2009), “Related Party Disclosures”.



F-12


Table of Contents


Note 2 - Basis of Preparation of the Financial Statements



A. Statement of compliance with International
Financial Reporting Standards



The consolidated financial statements have
been prepared by the Group in accordance with International Financial Reporting Standards (IFRS) as issued by the International
Accounting Standards Boards (IASB).



The consolidated financial statements were
authorized for issuance by the Company’s Board of Directors on March 15, 2016.



B. Functional and presentation currency



Items included in the consolidated financial
statements of the Company are measured using the currency of the primary economic environment in which the individual entity operates
(“the functional currency”). The consolidated financial statements are presented in United States Dollars (“US
Dollars”; $), which is the functional currency of the Company.



C. Basis of measurement



The consolidated financial statements have
been prepared on the historical cost basis except for the following assets and liabilities: derivative financial instruments, securities
held for trading that are measured at fair value, non-current assets groups held-for-sale, Investments in associates and joint
ventures, deferred tax assets and liabilities, provisions and assets and liabilities in respect of employee benefits.



For further information regarding the measurement
of these assets and liabilities see Note 3 regarding significant accounting policies.



D. Operating cycle



The Company’s regular operating cycle
is up to one year. As a result, the current assets and the current liabilities include items the realization of which is intended
and anticipated to take place within one year.



E. Use of estimates and judgment



The financial statements in conformity
with IFRS requires the management to make judgments, estimates and assumptions that affect the application of accounting policies
and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.



The preparation of accounting estimates
used in the preparation of the Group’s financial statements requires management of the Company to make assumptions regarding
circumstances and events that involve considerable uncertainty. Management of the Company prepares the estimates on the basis of
past experience, various facts, external circumstances, and reasonable assumptions according to the pertinent circumstances of
each estimate. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized
in the period in which the estimates are revised and in any future periods affected.



Information about assumptions made by the
Group with respect to the future and other reasons for uncertainty with respect to estimates that have a significant risk of resulting
in a material adjustment to carrying amounts of assets and liabilities in the next financial year are included in the following
notes:





F-13


Table of Contents


Note 2 - Basis of Preparation of the Financial
Statements (cont’d)



E. Use of estimates and judgment (cont’d)



|Estimate                          | Principal
        assumptions                                                                                                                                                                                                                                                                                               | Possible
        effects                                         | Reference   
|--------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | ------------
|Recognition of deferred tax asset | Tax rates expected to apply when the timing differences applied to Beneficiary Enterprise are realized is based on forecasts of future revenues to be earned.
                                                                                The
reasonability of future revenues to be earned to use future tax benefits. | Recognition or reversal of deferred tax asset in profit or loss. | See Note 20.



|Uncertain tax positions                                                                           | The extent of the certainty that the Group’s
    tax positions will be accepted (uncertain tax positions) and the risk of it incurring any additional tax and interest expenses.
    This is based on an analysis of a number of matters including interpretations of tax laws and the Group’s past experience. | Recognition of additional income tax expenses.                                                                                 | See Note 20.                                                                                                     
|------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------ | -----------------------------------------------------------------------------------------------------------------
|Post-employment employee benefits                                                                 | Actuarial assumptions such as the discount rate,
    future salary increases and the future pension increase.                                                                                                                                                                                                   | An increase or decrease in the post-employment defined
    benefit obligation.                                                 | For information on the effect of a change in actuarial
    assumptions, see Note 21 regarding employee benefits. 
|Assessment of probability of contingent and environmental
    liabilities                         | Whether it is more likely than not that an outflow
    of economic resources will be required in respect of legal claims pending against the Company and its investees.                                                                                                                                         | Reversal or creation of a provision for a claim.                                                                               | For information on the Company’s exposure to
    claims, see Note 23 regarding contingent liabilities.           
|Recoverable amount of cash generating unit containing
    goodwill                                | The discount rate and a budgeted growth rate.                                                                                                                                                                                                                                                                   | Change in impairment loss.                                                                                                     | For information on key assumptions used to determined
    value in use, see Note 15 regarding impairment testing.
|Assessment of the fair value of the assets and liabilities
    acquired in a business combination | Expected cash-flow forecasts of the acquired business,
    and models for calculating the fair value of the acquired items and their depreciation and amortization periods.                                                                                                                                     | Impact on the balance of assets and liabilities acquired
    and the depreciation and amortization in the statement of income. | For information on fair value of the assets and liabilities
    acquired, see Note 11.                           
|Assessment of the net realizable value of inventory                                               | Future
    selling price and expected replacement price when used as the best available evidence for realizable value.                                                                                                                                                                                          | Decrease in the carrying  value of the
    inventories and the results of operations accordingly                               |                                                                                                                  



F. Changes in accounting policies



Improvements to IFRSs 2010-2013 and 2011-2013
projects



As part of the Improvements to IFRSs
projects, the IASB published amendments to 8 IFRS. The amendment that is relevant to the Group and has an effect on the
financial statements is:



An amendment to IAS 24, “Related
Party Disclosures”, on definition of the term “related party”. The definition of the term was expanded so as
to include entities that provide key management personnel (KMP) services to the reporting entity, directly or through another entity
of the Group. Separate disclosure is to be provided of the amounts recognized as an expense in respect of the management services
provided by the management entity. Nevertheless, there is no requirement to disclose the amounts paid to specific people in the
management entity who provide such services.



Application of the amendment expanded the
types of transactions that require providing disclosures.



F-14


Table of Contents


Note 3 - Significant Accounting Policies



The accounting policies in accordance with
IFRS are consistently applied by the Group companies for all the periods presented in these consolidated financial statements.



A. Basis for Consolidation



1. Business combinations



The Group implements the acquisition method
to all business combinations. The acquisition date is the date on which the acquirer obtains control over the acquiree. Control
exists when the Group is exposed, or has rights to variable returns from its involvement with the acquiree and it has the ability
to affect those returns through its power over the acquiree. Substantive rights held by the Group and others are taken into account
when assessing control.



The Group recognizes goodwill on acquisition
according to the fair value of the consideration transferred including any amounts recognized in respect of non-controlling interest
in the acquiree as well as the fair value at the acquisition date of any pre-existing equity right of the Group in the acquiree,
less the net amount of the identifiable assets acquired and the liabilities assumed.



If the Group pays a bargain price for the
acquisition (meaning including negative goodwill), it recognizes the resulting gain in profit or loss on the acquisition date.
Furthermore, goodwill is not adjusted in respect of the utilization of carry-forward tax losses that existed on the date of the
business combination.



The consideration transferred
includes the fair value of the assets transferred to the previous owners of the acquiree, the liabilities incurred by the
acquirer  from the previous owners of the acquiree and equity instruments that were issued by the Group. In a step
acquisition, the difference between the acquisition date fair value of the Group’s pre-existing equity rights in the
acquiree and the carrying amount at that date is recognized in profit or loss under other income or expenses. In addition,
the consideration transferred includes the fair value of any contingent consideration.



Costs associated with the acquisition
that were incurred by the acquirer in  a business combination such as: finder’s fees, advisory, legal, valuation and
other professional or consulting fees, other than those associated with an issue of debt or equity instruments connected to
the business combination, are expensed in the period the services are received.



2. Subsidiaries



Subsidiaries are entities that are controlled
by the Group. The financial statements of the subsidiaries are included in the consolidated financial statements from the date
control was acquired until the date control ceases to exist. The accounting policies of subsidiaries have been changed when necessary
to align them with the accounting policies adopted by the Group.



3. Non-controlling interests



Non-controlling interests comprise the
equity of a subsidiary that cannot be attributed, directly or indirectly, to the parent company and they include components such
as: the equity component of convertible debentures of subsidiaries, share-based payments that will be settled with equity instruments
of subsidiaries and share options of subsidiaries.



Measurement of non-controlling interests
on the date of the business combination:



Non-controlling interests that are instruments
that give rise to a present ownership interest and entitle the holder to a share of net assets in the event of liquidation (for
example: ordinary shares), are measured at the date of the business combination at their proportionate interest in the identifiable
assets and liabilities of the acquiree.



Allocation of profit or loss and other
comprehensive income to the shareholders:



Profit or loss and any part of other comprehensive income are allocated to the owners of the Company and the non-controlling interests.
Total profit or loss and other comprehensive income is allocated to the owners of the Company and the non-controlling interests
even if the result is a negative balance of non-controlling interests.



F-15


Table of Contents


Note 3 - Significant Accounting Policies (cont’d)





A. Basis for Consolidation (cont’d)





Transactions with non-controlling interests,
while retaining control:



Transactions with non-controlling interests
while retaining control are accounted for as equity transactions. Any difference between the consideration paid or received and
the change in non-controlling interests is included in the owners’ share in equity of the Company.



The amount of the adjustment to non-controlling
interests is calculated as follows:



For an increase in the holding rate, according
to the proportionate share acquired from the balance of non-controlling interests in the consolidated financial statements prior
to the transaction. For a decrease in the holding rate, according to the proportionate share realized by the owners of the subsidiary
in the net assets of the subsidiary, including goodwill.



Furthermore, when the holding rate of the
subsidiary changes, while retaining control, the Company re-attributes the accumulated amounts that were recognized in other comprehensive
income to the owners of the Company and the non-controlling interests.



4. Loss of control



Upon the loss of control, the Group derecognizes
the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary.



5. Transactions eliminated on consolidation



Intra-group balances and transactions,
and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial
statements. Unrealized gains arising from transactions with associates and joint ventures are eliminated against the investment
to the extent of the Group’s interest in these investments. Unrealized losses are eliminated in the same way as unrealized
gains, but only to the extent that there is no evidence of impairment.



6. Investment in associates and joint ventures
(equity accounted investees)



Associates are those entities in which
the Group has significant influence, but not control or joint control, over the financial and operating policies. Significant influence
is presumed to exist when the Group holds between 20% and 50% of another entity. In assessing significant influence, potential
voting rights that are currently exercisable or convertible into shares of the investee are taken into account.



Joint ventures are joint arrangements in
which the Group has rights to the net assets of the arrangement.



Associates and joint ventures are accounted
for using the equity method (equity accounted investees) and are recognized initially at cost. The cost of the investment includes
transaction costs. Transaction costs that are directly attributable to an expected acquisition of an associate or joint ventures
are recognized as an asset as part of the item of deferred expenses in the statement of financial position. These costs are added
to the cost of the investment on the acquisition date. The consolidated financial statements include the Group’s share of
the income and expenses in profit or loss and of other comprehensive income of equity accounted investees, after adjustments to
align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant
influence ceases.



7. Loss of significant influence or joint
control



The Group discontinues applying the equity
method from the date it loses significant influence in an associate or joint control in a joint venture and it accounts for the
retained investment as a financial asset or subsidiary, as relevant.



On the date of losing significant influence,
the Group measures at fair value any retained interest it has in the former associate or joint venture. The Company recognizes
in profit or loss under other income or expenses any difference between the sum of the fair value of the retained interest and
any proceeds received from the partial disposal of the investment in the associate or joint ventures, and the carrying amount of
the investment on that date.



F-16


Table of Contents


Note 3 - Significant Accounting Policies (cont’d)









A. Basis for Consolidation (cont’d)



The amounts recognized in equity through
other comprehensive income with respect to the same associate or joint ventures are reclassified to profit or loss or to retained
earnings in the same manner that would have been applicable if the associate or joint venture had itself realized the same assets
or liabilities.



B. Foreign Currency



1. Transactions in foreign currency



Transactions in foreign currency are translated
into the functional currency of the Company and each of its subsidiaries based on the exchange rate in effect on the dates of the
transactions. Monetary assets and liabilities denominated in foreign currency on the report date are translated into the functional
currency of the Company and each of its subsidiaries based on the exchange rate in effect on that date. Exchange rate differences
in respect of monetary items are the difference between the net book value in the functional currency at the beginning of the year
plus the payments during the year and the net book value in foreign currency translated based on the rate of exchange at the end
of the year. Exchange rate differences deriving from translation into the functional currency are recognized in the statement of
income. Non-monetary items denominated in foreign currency and measured in terms of historical cost are translated using the exchange
rate in effect on the date of the transaction.



2. Foreign operations



The assets and liabilities of foreign operations,
including goodwill and fair value adjustments arising on acquisition, are translated to USD at exchange rates at the reporting
date. The income and expenses of foreign operations are translated to USD at exchange rates at the dates of the transactions.



Foreign currency differences are recognized
in other comprehensive income and are presented in equity in the foreign currency translation reserve (hereinafter – “translation
reserve”).



When the foreign operation is a non-wholly-owned
subsidiary of the Company, then the relevant proportionate share of the foreign operation translation difference is allocated to
the non-controlling interests. When a foreign operation is disposed of such that control, significant influence or joint control
is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as
a part of the gain or loss on disposal.



Furthermore, when the Group’s interest
in a subsidiary that includes a foreign operation changes, while retaining control in the subsidiary, a proportionate part of the
cumulative amount of the translation difference that was recognized in other comprehensive income is reattributed to non-controlling
interests.





When the Group disposes of only part of its investment in an
associate or joint venture that includes a foreign operation, while retaining significant influence or joint control, the proportionate
part of the cumulative amount of the translation difference is reclassified to profit or loss.



Generally, foreign currency differences
from a monetary item receivable from or payable to a foreign operation, including foreign operations that are subsidiaries, are
recognized in profit or loss in the consolidated financial statements. Foreign exchange gains and losses arising from a monetary
item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely in the foreseeable
future, are considered to part of a net investment in a foreign operation and are recognized in other comprehensive income, and
are presented within equity in the translation reserve.



C. Financial Instruments



1. Non-derivative financial assets



Initial recognition of financial assets:



The Group initially recognizes loans and
receivables and deposits on the date that they are created. All other financial assets acquired in a regular way purchase, including
assets designated at fair value through profit or loss, are recognized initially on the trade date at which the Group becomes a
party to the contractual provisions of the instrument, meaning on the date the Group undertook to purchase or sell the asset. Non-derivative
financial instruments comprise investments in equity and debt securities, trade and other receivables, including service concession
receivables and cash and cash equivalents.



F-17


Table of Contents


Note 3 - Significant Accounting Policies (cont’d)





C. Financial Instruments (cont’d)



Derecognition of financial assets:



Financial assets are derecognized when
the contractual rights of the Group to the cash flows from the asset expire, or the Group transfers the rights to receive the contractual
cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial
asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognized as a
separate asset or liability.



Regular way sales of financial assets are
recognized on the trade date, meaning on the date the Company undertook to sell the asset.



The Group classifies its financial assets
according to the following categories:



Financial assets at fair value through
profit or loss



A financial asset is classified at fair
value through profit or loss if it is designated as such upon initial recognition. Financial assets at fair value through profit
or loss are measured at fair value, and changes therein are recognized in profit or loss. Financial assets designated at fair value
through profit or loss include equity investments that otherwise would have been classified as available for sale.



Loans and receivables



Loans and receivables are non-derivative
financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognized initially
at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured
at amortized cost using the effective interest method, less any impairment losses.



Cash and cash equivalents



Cash and cash equivalents include cash
balances available for immediate use and call deposits. Cash equivalents include short-term highly liquid investments (with original
maturities of three months or less) that are readily convertible into known amounts of cash and are exposed to insignificant risks
of change in value.



Available-for-sale financial assets



Available-for-sale financial assets are
non-derivative financial assets that are designated as available-for-sale. The Group’s investments in certain equity securities
are classified as available-for-sale financial assets. Available-for-sale financial assets are recognized initially at fair value
plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at fair value and changes
therein, other than impairment losses, and foreign currency differences, are recognized directly in other comprehensive income
and presented within equity in a reserve for financial assets classified as available-for-sale. A dividend received in respect
of available-for-sale financial assets is recognized in profit or loss on the date the entity’s right to receive the dividend
is established. When an investment is derecognized, the cumulative gain or loss in the reserve for available-for-sale financial
assets is transferred to profit or loss.



2. Non-derivative financial Liabilities



Non-derivative financial liabilities include
bank overdrafts, loans and borrowings from banks and others, marketable debt instruments, finance lease liabilities, and trade
and other payables.



Initial recognition of financial liabilities:



The Group initially recognizes debt securities
issued on the date that they originated. All other financial liabilities are recognized initially on the trade date at which the
Group becomes a party to the contractual provisions of the instrument.



Financial liabilities (other than financial
liabilities at fair value through profit or loss) are recognized initially at fair value plus any directly attributable transaction
costs. Subsequent to initial recognition these financial liabilities are measured at amortized cost using the effective interest
method. Financial liabilities are designated at fair value through profit or loss if the Group manages such liabilities and their
performance is assessed based on their fair value in accordance with the Group’s
documented risk management strategy, providing that the designation is intended to prevent an accounting mismatch, or the liability
is a combined instrument including an embedded derivative.



F-18


Table of Contents


Note 3 - Significant Accounting Policies (cont’d)





C. Financial Instruments (cont’d)



Derecognition of financial liabilities:



Financial liabilities are derecognized
when the obligation of the Group, as specified in the agreement, expires or when it is discharged or cancelled.



Change in terms of debt instruments:



An exchange of debt instruments having
substantially different terms, between an existing borrower and lender is accounted for as an extinguishment of the original financial
liability and the recognition of a new financial liability at fair value. Furthermore, a substantial modification of the terms
of the existing financial liability or part of it, is accounted for as an extinguishment of the original financial liability and
the recognition of a new financial liability.



In such cases the entire difference between
the amortized cost of the original financial liability and the fair value of the new financial liability is recognized in profit
or loss as financing income or expense.



The terms are substantially different if
the discounted present value of the cash flows according to the new terms, including any commissions paid, less any commissions
received and discounted using the original effective interest rate, is different by at least ten percent from the discounted present
value of the remaining cash flows of the original financial liability.



In addition to the aforesaid quantitative
criterion, the Group examines, inter alia, whether there have also been changes in various economic parameters inherent in the
exchanged debt instruments, therefore as a rule, exchanges of CPI-linked debt instruments with unlinked instruments are considered
exchanges with substantially different terms even if they do not meet the aforementioned quantitative criterion.



Offset of financial instruments:



Financial assets and liabilities are offset
and the net amount presented in the statement of financial position when, and only when, the Group currently has a legal right
to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.



3. Derivative financial instruments



The Group holds derivative financial instruments
for the purpose of economic (non-accounting) hedging against foreign currency risks, risks with respect to commodity prices, marine
shipping prices, and interest risks. In addition, for purposes of an accounting hedge, the Company held derivative financial instruments
for hedging the exposure to changes in the cash flows of an undertaking for construction of a new cogeneration power plant in Sodom.
On the commencement date of the accounting hedge, the Group formally documented the hedge ratio between the hedging instrument
and the hedged item, including the risk management target and the Group’s strategy with respect to execution of the hedge,
as well as the manner in which the Group estimates the effectiveness of the hedge ratio.



Derivatives are recognized according to
fair value and the attributable transaction costs are recorded in the statement of income as incurred. Changes in the fair value
of the derivatives are recorded in the statement of income, except for derivatives used to hedge cash flows, as detailed below.



Cash flow hedges



Changes in the fair value of derivatives
used to hedge cash flows, in respect of the effective portion of the hedge, were recorded through other comprehensive income directly
in a capital reserve. With respect to the non-effective part, changes in the fair value were recognized in the statement of income.
The amount accumulated in the capital reserve was reclassified and included in the statement of income in the same period as the
hedged cash flows affected profit or loss under the same line item in the statement of income as the hedged item.



F-19


Table of Contents


Note 3 - Significant Accounting Policies (cont’d)





C. Financial Instruments (cont’d)



Where the hedged item is a non-financial
asset, the amount recorded in the capital reserve is transferred to the book value of the asset, upon recognition thereof.



If the hedging instrument no longer meets
the criteria for hedge accounting, expires or is sold, terminated or exercised, hedge accounting is discontinued. The cumulative
gain or loss previously recognized through other comprehensive income and presented in the hedging reserve in equity remains there
until the forecasted transaction occurs or is no longer expected to occur. If the forecasted transaction is no longer expected
to occur, the cumulative gain or loss previously recognized in the hedging reserve is recognized immediately in profit or loss.



Economic hedge that does not meet the
conditions of an accounting hedge



Changes in the fair value of derivatives
that do not meet the conditions of an accounting hedge in accordance with IFRS, after the date of the initial recognition thereof,
are recorded in the statement of income as financing income or expenses.



4. CPI-linked assets and liabilities not measured
at fair value



The carrying amount of index-linked financial
assets and liabilities, which are not measured at fair value, are revalued every period in accordance with the actual rate of increase/
decrease in the CPI.



D. Property, plant and equipment



1. Recognition and measurement



Property, plant and equipment are presented
at cost after deducting the related amounts of government grants and less accumulated depreciation and provision for impairment.



The cost includes expenses that can be
directly attributed to purchase of the asset. The cost of assets that were constructed independently includes the cost of the materials
and direct salary costs, as well as any additional costs that are directly attributable to bringing the asset to the required position
and condition so that it will be able to function as management intended, as well as an estimate of the costs to dismantle and
remove the items and to restore its location, where there is an obligation to dismantle and remove or to restore the site. The
cost of purchased software, which constitutes an inseparable part of operating the related equipment, is recognized as part of
the cost of said equipment.



Spare parts for facilities are valued at
cost determined based on the moving average method, after recording a write down in respect of obsolescence. The portion designated
for current consumption is presented in the “inventories” category in the current assets section.



Where significant parts of an item of property,
plant and equipment (including costs of major periodic inspections) have different life expectancies, they are treated as separate
items (significant components) of the property, plant and equipment.



Changes in a commitment to dismantle and
remove items and to restore their location, except for changes stemming from the passage of time, are added to or deducted from
the cost of the asset in the period in which they occur. The amount deducted from the cost of the asset does not exceed its book
value. Gains and losses on disposal of a property, plant or equipment item are determined by comparing the proceeds from disposal
with the carrying amount of the asset, and are recognized net in the income statement in the “other income” or “other
expenses” category, as applicable.



2. Subsequent costs (costs incurred after
the initial recognition date)



The cost of replacing part of an item of
property, plant and equipment and other subsequent costs are recognized as part of the book value of the item if it is expected
that the future economic benefit inherent therein will flow to the Group and that its cost can be reliably measured. The book value
of the part that was replaced is derecognized. Routine maintenance costs are charged to the statement of income as incurred.



F-20


Table of Contents


Note 3 - Significant Accounting Policies (cont’d)





D. Property, plant and equipment (cont’d)



3. Depreciation



Depreciation of an item of property, plant
and equipment begins when it is available for use, that is, when it has reached the place and condition required in order that
it can be used in the manner contemplated for it by Management.



Depreciation is recorded in the statement
of income according to the straight-line method over the estimated useful life of each significant component of the property, plant
and equipment items. Owned land is not depreciated.



The estimated useful life for the current
period and comparative periods is as follows:



|                                                                             | In
        Years
|---------------------------------------------------------------------------- | ----------------
|Land development, roads and structures                                       | 15–30           
|Facilities, machinery and equipment(1)                                       | 8–25            
|Dams and ponds(2)                                                            | 20–40           
|Heavy mechanical equipment, train cars and tanks                             | 5–15            
|Office furniture and equipment, motor vehicles, computer equipment and other | 3–10            






| | (1) | Mainly 25 years
| | --- | ---------------



|( | 2) | Mainly 40 years
|- | -- | ---------------



Depreciation methods, useful lives and
residual values are reviewed at the end of each reporting year and adjusted if appropriate.



E. Intangible Assets



1. Goodwill



Goodwill is recorded as a result of acquisition
of subsidiaries. Acquisition of non controlling interests are transactions with shareholders and goodwill is not recognized on
such acquisitions.



Subsequent measurement



Goodwill is measured at cost less accumulated
losses from impairment.



2. Costs of exploration and evaluation of
resources



Costs incurred in respect of exploration
of resources and the evaluation thereof are recognized as intangible assets. The expenditures are recognized on the cost basis
less a provision for impairment.



The cost includes, among other things,
costs of performing research studies, drilling costs and activities in connection with assessing the technical feasibility with
respect to the commercial viability of extracting the resources.



3. Research and development



Expenditures for research activities are
recognized in profit or loss as incurred.



Development expenditures are recorded as
intangible asset only if development costs can be measured reliably, the product or process is technically and commercially feasible,
future economic benefits are probable, and the Group has the intention and sufficient resources to complete development and to
use or sell the asset. Other development expenditures costs are recognized in profit or loss as incurred. Subsequent to initial
recognition, development expenditures are measured at cost less accumulated amortization and any accumulated impairment loss.



4. Other intangible assets



Other intangible assets purchased by the
Group, with a defined useful life, are measured according to cost less amortization and accumulated losses from impairment.



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Note 3 - Significant Accounting Policies (cont’d)





E. Intangible Assets (cont’d)



Intangible assets with indefinite useful
lives are measured according to cost less accumulated losses from impairment.



5. Subsequent costs



Subsequent costs are recognized as an intangible
asset only when they increase the future economic benefit inherent in the asset for which they were incurred. All other costs,
including costs relating to goodwill or trademarks developed independently, are charged to the statement of income as incurred.



6. Amortization



Amortization is recorded in the statement
of income according to the straight-line method from the date the assets are available for use, over the estimated useful economic
life of the intangible assets, except for customer relationships and geological surveys, which are amortized according to the rate
of consumption of the economic benefits expected from the asset on the basis of cash flow forecasts. Goodwill and intangible assets
having an indefinite lifespan are not amortized on a systematic basis but, rather, are examined at least once a year for purposes
of impairment in value.



The estimated useful life for the current
period and comparative periods is as follows:



|                                                                          | In
        Years
|------------------------------------------------------------------------- | ----------------
|Concessions – over the balance of the concession granted to the companies |                 
|Software costs                                                            | 3–10            
|Trademarks                                                                | 15–20           
|Customer relationships                                                    | 15–25           
|Agreements with suppliers and non-competition agreement                   | 10-15           
|Patents                                                                   | 7–20            



Deferred expenses in respect of geological
surveys are amortized over their useful life based on a geological estimate of the amount of the material that will be produced
from the mining site.



The estimates regarding the amortization
method and useful life are reviewed, at a minimum, at the end of every reporting year and are adjusted where necessary. The Group
assesses the useful life of the customer relationships on an ongoing basis, based on an analysis of all of the relevant factors
and evidence, considering the experience the Company has with respect to recurring orders and churn rates and considering the future
economic benefits expected to flow to the Company from these customer relationships.



The Group periodically examines the estimated
useful life of an intangible asset that is not amortized, at least once a year, in order to determine if events and circumstances
continue to support the determination that the intangible asset has an indefinite life.



F. Leased Assets



Leases, where the Group assumes substantially
all the risks and rewards of ownership of the asset, are classified as financing leases. Upon initial recognition, the leased assets
are measured and a liability is recognized at an amount equal to the lower of its fair value or the present value of the future
minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy
applicable to that asset.



Other leases are classified as operating
leases where the leased assets are not recognized in the Group’s statement of financial position. Payments under an operating
lease are recorded in the statement of income on the straight-line method, over the period of the lease.



G. Inventories



Inventories are measured at the lower of
cost or net realizable value. The cost of the inventories includes the costs of purchasing the inventories and bringing it to its
present location and condition. In the case of work in process and finished goods, the cost includes the proportionate part of
the manufacturing overhead based on normal capacity. Net realization value is the
estimated selling price in the ordinary course of business, after deduction of the estimated cost of completion and the estimated
costs required to execute the sale.



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Note 3 - Significant Accounting Policies (cont’d)





G. Inventories (cont’d)



The cost of the inventories of raw and
auxiliary materials, maintenance materials, finished goods and goods in process, is determined mainly according to the “moving
average” method.



If the benefit from stripping costs (costs
of removing waste produced as part of a mine’s mining activities during its production stage) is realized in the form of
inventories, the Company accounts for these stripping costs as inventories. In a case where the benefit is improved access to the
quarry, the Company recognizes the costs as a non-current addition to the asset, provided the criteria presented in IFRIC 20 are
met.



Inventories which are expected to be sold
in a period of more than 12 months from the reporting date are presented as non-current inventories, as part of non-current assets.



H. Capitalization of Borrowing Costs



Specific borrowing costs are capitalized
to qualifying assets (assets that require a significant period of time to prepare them for their intended use or sale) during the
period required for their completion and establishment until the time when they are ready for their intended use. Non-specific
borrowing costs are capitalized to the investment in qualifying assets using an interest rate that is the weighted-average of the
interest rates in respect of those credit sources that were not capitalized specifically. Other borrowing costs are charged to
the statement of income as incurred. Income earned on the temporary investment of specific credit received for investing in a qualifying
asset is deducted from the borrowing costs eligible for capitalization.



I. Impairment



1. Financial assets



An impairment of a financial asset not
carried at fair value through profit or loss, is examined when there is objective evidence that one or more events have occurred
that may have had a negative impact on the estimate of the future cash flows from the asset.



Objective evidence that financial assets
have been impaired can include a contractual default by a debtor, restructuring of an amount due to the Group on terms that the
Group would not otherwise consider, indications that a debtor or issuer will enter into bankruptcy, or the disappearance of an
active market for a security.



When testing for impairment available-for-sale
financial assets that are equity instruments, the Group also examines the difference between the fair value of the asset and its
original cost while taking into consideration the standard deviation of the instrument’s price, the length of time the fair
value of the asset is lower than its original cost and changes in the technological, economic or legal environment or in the market
environment in which the issuer of the instrument operates. In addition, a significant or prolonged decline in its fair value below
its cost is objective evidence of impairment.



The Group examines evidence of impairment
for receivables and loans on a specific basis.



The loss from impairment in the value of
a financial asset measured according to amortized cost is calculated as the difference between the book value of the asset and
the present value of the estimated future cash flows, discounted using the original effective interest rate. Losses are recognized
in profit or loss and reflected in a provision for loss against the balance of the financial asset measured at amortized cost.



Impairment losses on available-for-sale
financial assets are recognized by transferring the cumulative loss that has been recognized in a capital reserve to profit or
loss. The cumulative loss that is classified from other comprehensive income to profit or loss is the difference between the acquisition
cost, net of any principal repayment and amortization, and the current fair value, less any impairment loss previously recognized
in profit or loss. Changes in impairment provisions attributable to application of the effective interest method are reflected
in the item of financing income.



An impairment loss is reversed if the reversal
can be related objectively to an event occurring after the impairment loss was recognized (such as repayment by the debtor). For
financial assets measured at amortized cost and available-for-sale financial assets
that are debt securities, the reversal is recognized in profit or loss. For available-for-sale financial assets that are equity
securities, the reversal is recognized directly in other comprehensive income.



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Note 3 - Significant Accounting Policies (cont’d)





I. Impairment (cont’d)



2. Non-financial assets



In every reporting period, an examination
is made with respect to whether there are signs indicating impairment in value of the Group’s non-financial assets, other
than inventories and deferred tax assets. If such signs exist, the estimated recoverable amount of the asset is calculated. The
Group conducts an annual examination of the recoverable amount of goodwill and intangible assets with indefinite useful lives or
that are not available for use, or more frequently if there are indications of impairment.



The recoverable amount of an asset or a
cash-producing unit is the higher of its value in use or the net selling price (fair value less cost of disposal). When determining
the value in use the Group discounts the anticipated future cash flows according to a discount rate that reflects the evaluations
of the market’s participants regarding the time value of money and the specific risks relating to the asset or to a cash-producing
unit.



For purposes of testing impairment in value,
the assets are grouped together into the smallest group of assets that yields cash flows from continuing use, which is essentially
independent of the other assets and other groups (“cash generating unit”).



Subject to an operating segment ceiling
test (before the aggregation of similar segments), for the purposes of goodwill impairment testing, cash-generating units to which
goodwill has been allocated are aggregated so that the level at which impairment testing is performed reflects the level at which
goodwill is monitored for internal reporting purposes.



Assets of the Company’s headquarters
– assets of the Company’s headquarters do not produce separate cash flows and they serve more than one cash-producing
unit. Certain assets of the Company’s headquarters are allocated to cash-producing units on a reasonable and consistent basis
and are examined for impairment as part of examination of impairment of the cash-producing units to which they are allocated.



An impairment loss is recognized if the
carrying amount of an asset or cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognized
in profit or loss. Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying
amount of any goodwill allocated to the units and then to reduce the carrying amounts of the other assets in the cash-generating
unit on a pro rata basis.



An impairment loss is allocated between
the owners of the Company and the non-controlling interests on the same basis that the profit or loss is allocated. Nevertheless,
if an impairment loss allocated to non-controlling interests relates to goodwill that was not recognized in the consolidated financial
statements, the said impairment is not recognized as an impairment loss on goodwill. In such cases, only an impairment loss relating
to goodwill that was allocated to the owners of the Company is recognized as an impairment loss on goodwill.



A loss from impairment in value of goodwill
is not cancelled. Regarding other assets with respect to which losses from impairments of value were recognized in previous periods,
in each reporting period an examination is made as to whether there are signs indicating that these losses have decreased or no
longer exist. A loss from impairment of value is cancelled if there has been a change in the estimates used to determine the recoverable
value, only if the book value of the asset, after cancellation of the loss from impairment of value, does not exceed the book value,
after deduction of depreciation or amortization, that would have been determined if the loss from impairment of value had not been
recognized.



3. Investments in associates and joint ventures



An investment in an associate or joint
ventures is tested for impairment when objective evidence indicates there has been impairment.



Goodwill that forms part of the carrying
amount of an investment in an associate or joint ventures is not recognized separately, and therefore is not tested for impairment
separately.



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Note 3 - Significant Accounting Policies (cont’d)



I. Impairment (cont’d)



If objective evidence indicates that the
value of the investment may have been impaired, the Group estimates the recoverable amount of the investment, which is the greater
of its value in use and its net selling price. In assessing value in use of an investment in an associate or joint ventures, the
Group either estimates its share of the present value of estimated future cash flows that are expected to be generated by the associate
or joint ventures, including cash flows from operations of the associate or joint ventures and the consideration from the final
disposal of the investment, or estimates the present value of the estimated future cash flows that are expected to be derived from
dividends that will be received and from the final disposal.



An impairment loss is recognized when the
carrying amount of the investment, after applying the equity method, exceeds its recoverable amount, and it is recognized in profit
or loss under other expenses. An impairment loss is not allocated to any asset, including goodwill that forms part of the carrying
amount of the investment in the associate or in the joint ventures.



An impairment loss is reversed only if
there has been a change in the estimates used to determine the recoverable amount of the investment after the impairment loss was
recognized, and only to the extent that the investment’s carrying amount, after the reversal of the impairment loss, does
not exceed the carrying amount of the investment that would have been determined by the equity method if no impairment loss had
been recognized.



J. Employee Benefits



The Group has several post-employment benefit
plans. The plans are funded partly by deposits with insurance companies or funds managed by a trustee, and they are classified
as defined contribution plans and as defined benefit plans.



1. Defined contribution plans



A defined contribution plan is a post-employment
benefit plan under which the Group pays fixed contributions into a separate entity and has no legal or constructive obligation
to pay further amounts if the fund does not have sufficient assets to pay all the employee benefits relating to the employee’s
service in the current and prior periods.



The Group’s obligation to make deposits
in a defined contribution plan is recorded as an expense in the statement of income in the periods during which the employees provided
the services.



2. Defined benefit plans



Defined benefit plans are retirement benefit
plans that are not defined contribution plans.



The Group’s net obligation, regarding
defined benefit plans for post-employment benefits, is calculated for each plan separately by estimating the future amount of the
benefit to which an employee will be entitled as compensation for his services in the current and past periods. The benefit is
presented at present value after deducting the fair value of the plan assets. The discount rate for the Group companies operating
in countries having a “deep” market wherein there is a high level of trading in corporate bonds is in accordance with
the yield on the corporate bonds, including Israel. The discount rate for the Group companies operating in countries not having
a market wherein there is a high level of trading in corporate bonds, as stated above, is in accordance with the yield on government
bonds – the currency and redemption date of which are similar to the terms binding the Group. The calculations are performed
by a qualified actuary using the projected unit credit method.



When on the basis of the calculations a
net asset is created for the Group, the asset is recognized up to the net present value of the available economic benefits in the
form of a refund from the plan or by a reduction in future deposits to the plan. An economic benefit in the form of a refund from
the plan or a reduction in future deposits will be considered available when it can be realized in the lifetime of the plan or
after settlement of the obligation.



Costs in respect of past services are recognized
immediately and without reference to whether or not the benefits have vested.



The movement in the net liability in respect
of a defined benefit plan that is recognized in every accounting period in the statement of income is comprised of the following:



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Note 3 - Significant Accounting Policies (cont’d)



J. Employee Benefits (cont’d)



(i)	Current service costs
– the increase in the present value of the liability deriving from employees’ service in the current period.



(ii)	The net financing income
(expenses) are calculated by multiplying the net defined benefit liability (asset) by the discount rate used for measuring the
defined benefit liability, as determined at the beginning of the annual reporting period.



(iii)	Exchange rate differences;



(iv)	Past service costs and
plan reduction – the change in the present value of the liability in the current period as a result of a change in post-employment
benefits attributed to prior periods.



The difference, as at the date of the report,
between the net liability as at the beginning of the period plus the movement in profit and loss as detailed above, and the actuarial
liability less the fair value of the fund assets at the end of the period, reflects the balance of the actuarial income or expenses
recognized in other comprehensive income and is recorded in retained earnings.



The current interest costs and return on
plan assets are recognized as expenses and interest income in the respective financing category.



3. Other long-term employee benefits



Some of the Company’s employees are
entitled to other long-term benefits that do not relate to a post-retirement benefit plan. Actuarial gains and losses are recorded
directly to the statement of income in the period in which they arise.



In cases where the amount of the benefit
is the same for every employee, without taking into account the years of service, the cost of the benefit is recognized when entitlement
to the benefit is determined. The amount of these benefits is discounted to its present value in accordance with an actuarial evaluation.



4. Early retirement pay



Early retirement pay is recognized as an
expense and as a liability when the Group has clearly undertaken to pay it, without any reasonable chance of cancellation, in respect
of termination of employees before they reach the customary age of retirement according to a formal, detailed plan. The benefits
provided to employees upon voluntary retirement are charged when the Group proposes a plan to the employees encouraging voluntary
retirement, it is expected that the proposal will be accepted and it is possible to reliably estimate the number of employees that
will accept the proposal.



5. Short-term benefits



Obligations for short-term employee benefits
are measured on a non-discounted basis, and the expense is recorded at the time the said service is provided.



A provision for short-term employee benefits
in respect of cash bonuses is recognized when the Group has a current legal or implied obligation to pay the said amount for services
provided by the employee in the past and it is possible to reliably estimate the amount.



Classification of employee benefits as
a short term employee benefit or a long term employee benefit (for measurement purposes) is determined based on the Group’s
expectation with respect to full utilization of the benefits and not based on the date on which the employee is entitled to utilize
the benefit.



6. Share-based compensation



The fair value on the grant date of share-based
compensation awards granted to employees is recognized as a salary expense, with a corresponding increase in equity, over the period
that the employees become unconditionally entitled to the awards. The amount recognized as an expense in respect of share-based
compensation awards that are conditional upon meeting vesting conditions that are service conditions, is adjusted to reflect the
number of awards that are expected to vest.



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Note 3 - Significant Accounting Policies (cont’d)



K. Provisions



A provision is recognized when the Group
has a present legal or implied obligation as the result of an event that occurred in the past, that can be reliably estimated and
when it is expected that a flow of economic benefits will be required in order to settle the obligation. The provisions are made
by means of discounting of the future cash flows at a pre-tax interest rate reflecting the current market estimates of the time
value of money and the risks specific to the liability, and without taking into account the Company’s credit risk. The book
value of the provision is adjusted in every period in order to reflect the amount of time that has elapsed and is recognized as
financing expenses. In rare cases where it is not possible to estimate the outcome of a potential liability, no provision is recorded
in the financial statements.



The Group recognizes a reimbursement asset
if, and only if, it is virtually certain that the reimbursement will be received if the Company settles the obligation. The amount
recognized in respect of the reimbursement does not exceed the amount of the provision.



1. Warranty



A provision for warranty is recognized
when the products or services, in respect of which the warranty is provided, are sold or performed. The provision is based on historical
data and on a weighting of all possible outcomes according to their probability of occurrence.



2. Provision for environmental costs



The Group recognizes a provision for an
existing obligation for prevention of environmental pollution and anticipated provisions for costs relating to environmental restoration
stemming from current or past activities.



Costs for preventing environmental pollution
that increase the life expectancy or efficiency of a facility or decrease or prevent the environmental pollution are recorded as
a provision, are capitalized to the cost of the property, plant and equipment and are depreciated according to the usual depreciation
rates used by the Group.



3. Legal claims



A provision for legal claims is recognized
when the Group has a present legal or constructive obligation as a result of an event that occurred in the past, if it is more
likely than not that an outflow of economic resources will be required to settle the obligation and it can be reliably estimated.
Where the time value is significant, the provision is measured based on its present value.



L. Revenue Recognition



Sale of goods



Revenue from the sale of goods in the ordinary
course of business is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and
volume rebates. When the credit period is short and constitutes the accepted credit in the industry, the future consideration is
not discounted.



Revenue is recognized when persuasive evidence
exists (usually in the form of an executed sales agreement) that the significant risks and rewards of ownership have been transferred
to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably,
there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable
that discounts will be granted and the amount can be measured reliably, then the discount is recognized as a reduction of revenue
when the sales are recognized.



M. Treasury stock



Where share capital recognized as equity
has been reacquired by the Group, the amount of the consideration paid including direct expenses, is deducted from equity. The
reacquired shares are classified as treasury shares and are presented as a deduction from equity.



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Note 3 - Significant Accounting Policies (cont’d)



N. Financing Income and Expenses



Financing income includes income from interest
on amounts invested, gains from exchange rate differences, gains from derivative financial instruments recognized in the statement
of income, and gains from available-for-sale financial assets. Interest income is recognized as accrued, using the effective interest
method.



Financing expenses include interest on
loans received, changes in the time value of provisions, securitization transaction costs, losses from impairment of available
for sale financial assets, losses from derivative financial instruments, changes due to the passage of time in liabilities in respect
of defined benefit plans for employees less interest income deriving from plan assets of a defined benefit plan for employees and
losses from exchange rate differences. Borrowing costs, which are not capitalized, are recorded in the income statement using the
effective interest method.



Gains and losses from exchange rate differences
and from derivative financial instruments are reported on a net basis, as financing income or financing expenses, based on the
fluctuation in the exchange rates and based on their position (net gain or loss).



In the statements of cash flows, interest
received and interest paid are presented as part of cash flows from operating activities.



O. Taxes on Income



Taxes on income include current and deferred
taxes. Current tax and deferred tax are recognized in profit or loss except to the extent that they relate to a business combination,
or are recognized directly in equity or in other comprehensive income to the extent they relate to items recognized directly in
equity or in other comprehensive income.



Current tax is the expected tax payable
(or receivable) on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date. Current
taxes also include taxes in respect of prior years and any tax arising from dividends. Current tax assets and liabilities are offset
if there is a legally enforceable right to offset current tax liabilities and assets, and there is intent to settle current tax
liabilities and assets on a net basis or the tax assets and liabilities will be realized simultaneously.



Recognition of deferred taxes is according
to the balance sheet approach, relating to temporary differences between the book values of the assets and liabilities for purposes
of financial reporting and their value for tax purposes. The Company does not recognize deferred taxes for the following temporary
differences: initial recognition of goodwill, initial recognition of assets and liabilities for transactions that do not constitute
a business combination and do not impact the accounting income and the income for tax purposes, as well as differences deriving
from investments in subsidiaries, investee companies and associated companies that are presented according to equity method, if
it is not expected that they will reverse in the foreseeable future and if the Group controls the date the provision will reverse,
whether via sale or distribution of a dividend. The deferred taxes are measured according to the tax rates expected to apply to
the temporary differences at the time they are realized, on the basis of the law that was finally legislated or effectively legislated
as at the date of the report. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset
deferred tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity,
or on different tax entities, but they intend to settle deferred tax liabilities and assets on a net basis or their deferred tax
assets and liabilities will be realized simultaneously.



A deferred tax asset is recognized
in the books when it is expected that in the future there will be taxable income against which the temporary differences can
be utilized. Deferred tax assets are examined at each reporting date, and are reduced to the extent that it is no
longer probable that the related tax benefit will be realized.



Deferred taxes that were not recognized
are re-evaluated at every reporting date and are recognized if the expectation has changed such that it is expected that in the
future there will be taxable income against which it will be possible to utilize them.



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Note 3 - Significant Accounting Policies (cont’d)



O. Taxes on Income (cont’d)



The Group could become liable for additional
taxes in the case of distribution of intercompany dividends between the Group companies. These additional taxes are not included
in the financial statements in light of the policy of the Group companies not to cause distribution of a dividend that involves
additional taxes to the paying company in the foreseeable future. In cases where an investee company is expected to distribute
a dividend involving additional tax, the Company records a reserve for taxes in respect of the said additional tax it is expected
to incur due to distribution of the dividend.



Deferred taxes in respect of intra-company
transactions in the consolidated financial statements are recorded according to the tax rate applicable to the buying company.



P. Earnings per share



The Group presents basic and diluted earnings
per share data for its ordinary share capital. The basic earnings per share are calculated by dividing the income or loss attributable
to the holders of the Company’s ordinary shares by the weighted-average number of ordinary shares outstanding during the
year, after adjustment in respect of treasury shares. The diluted earnings per share are determined by adjusting the income or
loss attributable to the holders of the Company’s ordinary shares and the weighted-average number of ordinary shares outstanding
for the effect of restricted shares and options for shares granted to employees.



Q. Non-current assets and disposal groups
held for sale



Non-current assets (or disposal groups
composed of assets and liabilities) are classified as held for sale or distribution if it is highly probable that they will be
recovered primarily through a sale transaction or a distribution to the owners and not through continuing use. This applies also
to when the Company is obligated to a sale plan that involves losing control over a subsidiary, whether or not the Company will
retain any non-controlling interests in the subsidiary after the sale.



Immediately before classification as held
for sale or distribution, the assets (or components of the disposal group) are remeasured in accordance with the Group’s
accounting policies. Thereafter, the assets (or components of the disposal group) are measured at the lower of their carrying amount
and fair value less costs to sell.



Any impairment loss on a disposal
group is initially allocated to goodwill, and then to remaining assets and liabilities on pro rata basis, except that no loss
is allocated to assets that are not in the scope of the measurement requirements of IFRS 5 such as: inventories, financial
assets, deferred tax assets and employee benefit assets,
which continue to be measured in accordance with the Group’s accounting policies. Impairment losses recognized on
initial classification as held for sale, and subsequent gains or losses on remeasurement, are recognized in profit or loss.
Gains are not recognized in excess of any cumulative impairment loss.



In subsequent periods, depreciable assets
classified as held for sale or distribution are not depreciated on a periodic basis.



R. New Standards and Interpretations
not yet Adopted



IFRS 15, Revenue from Contracts with
Customers



IFRS 15 replaces the current guidance
regarding recognition of revenues and presents a new model for recognizing revenue from contracts with customers. IFRS 15
provides two approaches for recognizing revenue: at a point in time or over time. The model includes five steps for
analyzing transactions so as to determine when to recognize revenue and at what amount. Furthermore, IFRS 15 provides new and
more extensive disclosure requirements than those that exist under current guidance. IFRS 15 is applicable for annual
periods beginning on or after January 1, 2018 and earlier application is permitted. The Company is examining the effects of
IFRS 15 on the financial statements.



IFRS 16, Leases



The standard replaces International Accounting
Standard 17 – Leases (IAS 17) and its related interpretations. The standard’s instructions annul the existing requirement
from lessees to classify leases as operating or finance leases. Instead of this, for lessees, the new standard presents a unified
model for the accounting treatment of all leases according to which the lessee has to recognize an asset and liability in respect
of the lease in its financial statements. Similarly, the standard determines
new and expanded disclosure requirements from those required at present.



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Note 3 - Significant Accounting Policies (cont’d)



R. New Standards and Interpretations
not yet Adopted (cont’d)



The standard will become effective for
annual periods as of January 1, 2019, with the possibility of early adoption, so long as the company has also early adopted IFRS
15 – Revenue from contracts with customers. The standard includes a number of alternatives for the implementation of transitional
provisions, so that companies can choose one of the following alternatives at the implementation date: full retrospective implementation
or implementation from the effective date while adjusting the balance of retained earnings at that date. The Company is examining
the effects of IFRS 16 on the financial statements.



IFRS 9 (2014), Financial Instruments



The Standard includes revised guidance
regarding the classification and measurement of financial instruments, and a new model for measuring impairment of financial assets.



IFRS 9 (2014) is effective for annual periods
beginning on or after January 1, 2018 with early adoption being permitted. The Standard is to be applied retrospectively with some
exemptions. The Company is examining the effects of IFRS 9 on the financial statements.



Amendment to IAS 19, Employee Benefits







The amendment clarifies that the high quality corporate debentures or government debentures used in estimating
the discount rate should be denominated in the same currency as the benefits to be paid. Therefore, the market of high quality
corporate debentures should be assessed at currency level and not at country level. The amendments are applicable retrospectively
for annual periods beginning on or after January 1, 2016 with earlier application being permitted. The Company is examining the
effects of the Amendment to IAS 19 on the financial statements.





S. Indices and exchange rates



Balances in or linked to foreign currency
are included in the financial statements at the representative exchange rate on the date of the report. Balances linked to the
Consumer Price Index (hereinafter – “the CPI”) are included on the basis of the index relating to each linked
asset or liability.



Note 4 - Determination of Fair Values



As part of the accounting policies and
disclosures, the Group is required to determine the fair value of both financial and non-financial assets and liabilities. The
fair values have been determined for measurement and/or disclosure purposes based on the methods described below. Further information
about the assumptions made in determining the fair values is disclosed in the notes specific to that asset or liability.



A. Property, plant and equipment



The fair value of property, plant and equipment
recognized in a business combination is based on the cost model or on the market value model. According to the cost model, the
fair value of the property, plant and equipment is based on the depreciated replacement price of the item measured. The depreciated
replacement price takes into account adjustments in respect of physical wear and tear and obsolescence of the property, plant and
equipment item. According to the market value model, the fair value is based on the selling price determined in sale transactions
of similar assets, while making adjustments to the asset items sold and the asset item acquired in the business combination.



B. Intangible assets



The fair value of patents and trademarks
acquired in a business combination is based on the discounted estimated royalty payments that would be required to be paid if the
patent or trademark was not owned. The fair value of customer relationships acquired in a business combination is determined using
the multi-period excess earnings method, whereby the fair value of the asset is estimated after deducting a fair return on all
other assets that are part of creating the related cash flows.



F-30


Table of Contents


Note 4 - Determination of Fair Values (cont’d)



B. Intangible assets (cont’d)



The fair value of other intangible assets
is based on the discounted cash flows expected to be derived from the use and eventual sale of the assets.



C. Inventories



The fair value of inventories acquired
in a business combination is determined as follows:



(1)	Finished goods inventories
– on the basis of the estimated selling price of the products in the ordinary course of business, less the estimated selling
costs as well as a reasonable margin in respect of the efforts required for completion and sale of the inventories.



(2)	Inventory of work-in-progress
– determined on the basis of estimates described in Section 1 above, less costs required for its completion.



(3)	Inventory of raw materials
– based on replacement value.



D. Investments in securities



The fair value of financial assets classified
as available-for-sale and as held-for-trading is determined based on their market price at date of the report. If the asset or
liability measured at fair value has a bid price and an ask price, the price in the range between them that best reflects fair
value under the circumstances will be used for measuring fair value.



E. Derivatives



The fair value of forward contracts on
foreign currency is determined by averaging the exchange rate and the appropriate interest coefficient for the period of the transaction
and the relevant currency index.



The fair value of currency options is determined
based on the Black and Scholes model, taking into account the intrinsic value, standard deviation and the interest rates.



The fair value of interest rate swap contracts
is determined by discounting the estimated amount of the future cash flows on the basis of the terms and length of period to maturity
of each contract, while using market interest rates of similar instruments at the date of measurement.



Future contracts on energy prices are presented
on the basis of quotes of the prices of products on an ongoing basis.



The reasonableness of the market price
is examined by comparing it to quotations by banks.



For further information regarding the fair
value hierarchy – see Note 27 regarding financial instruments.



F. Liabilities in respect of debentures



The fair value of the liabilities and the
debentures is determined for disclosure purposes only.



The fair value of marketable debentures
is determined based on the stock market prices as at the date of the report. The fair value of the non-marketable debentures is
calculated based on the present value of future cash flows in respect of the principal and interest components, discounted at the
market rate of interest as at the reporting date.



G. Share-based compensation



The fair value of employee share options
and share appreciation rights is measured using the Black and Scholes model or a binomial model, in accordance with the plan (see
Note 24). The model’s assumptions include the share price on the measurement date, exercise price of the instrument, expected
volatility (based on the weighted-average historic volatility), the weighted-average expected life of the instruments (based on
historical experience and general option-holder behavior), expected dividends, and the risk-free interest rate (based on government
debentures).



F-31


Table of Contents


Note 5 - Operating Segments



A. General



1. Information on business segments:



ICL is a multi national enterprise, which
operates mainly in the fields of fertilizers and specialty chemicals, in three reporting segments – fertilizers (that includes
potash and phosphate), industrial products and performance products. The segments are described below:



ICL Fertilizers – ICL Fertilizers
extracts potash from the Dead Sea and mines and produces potash and salt from subterranean mines in Spain and the UK. ICL Fertilizers
processes the potash into its types and markets it throughout the world. This segment also uses part of the potash to produce
compound fertilizers.



In addition, ICL Fertilizers mines and
processes phosphate rock in open mines in the south of Israel, and produces sulfuric acid in Israel, agricultural phosphoric acid,
phosphate fertilizers, compound fertilizers, based mainly on potash and phosphate, liquid fertilizers and soluble fertilizers.
ICL Fertilizers also manufactures compound fertilizers in the Netherlands, Germany and Belgium, liquid fertilizers and soluble
fertilizers in Spain, slow-release fertilizers and controlled-release fertilizers in the Netherlands and in the United States,
and phosphate-based food additives for livestock, in Turkey and in Israel.



ICL Fertilizers markets its products worldwide,
mainly in Europe, Brazil, India, China and Israel. The activities of ICL Fertilizers also include the activities of Mifalei Tovala
Ltd., which is engaged in the transportation of cargo, mainly of ICL companies in Israel, since a large part of the Company’s
activities consists of bulk transport of cargo of the ICL Fertilizers segment.



ICL Industrial Products –
ICL Industrial Products produces bromine out of a solution that is created as a by-product of the potash production process in
Sodom, Israel, as well as bromine-based compounds. ICL Industrial Products uses most of the bromine it produces for self production
of bromine compounds at production sites in Israel, the Netherlands and China. In addition, ICL Industrial Products extracts salt,
magnesia and chlorine from Dead Sea brine, and produces chlorine-based products in Israel and the United States. In addition,
ICL Industrial Products engages in the production and marketing of flame retardants and additional phosphorus-based products.



ICL Performance Products –
ICL Performance Products cleans some of the agricultural phosphoric acid manufactured by ICL Fertilizers, purchases clean phosphoric
acid from other sources and also manufactures thermal phosphoric acid. The clean phosphoric acid and the thermal phosphoric acid
are used to manufacture downstream products with high added value, phosphate salts, which are also used as a raw material for
manufacturing, food additives, hygiene products and flame-retardants and fire extinguishment products. ICL Performance Products
also manufactures phosphorous derivatives based on phosphorous acquired from outside sources and manufactures specialty products,
based on aluminum acids (hereinafter – “Aluminia”) and other raw materials. The manufacturing of ICL’s
performance products is mostly carried out at production sites in Europe, (particularly in Germany), the United States, Brazil,
Israel, China, Mexico and other countries.



In addition to the segments described above,
ICL has other operations, including production and marketing of pure magnesium as well as magnesium alloys.



2. Segment Capital investment



Segment capital investments for each of
the reporting periods include property, plant and equipment and intangible assets acquired as part of business combinations.



3. Inter–segment transfers



Segment revenues, segment expenses and
segment results include transfers between business segments and between geographical segments. Such transfers are accounted for
at arm’s length, representing prices charged to external customers for similar goods. These transfers are eliminated as part
of consolidation of the statements.



F-32


Table of Contents


Note 5 - Operating Segments (cont’d)



B. Operating segment data



|                                                                     |  | Fertilizers    |       | Industrial |  | Performance  |       | Other |  |          |     |         
|-------------------------------------------------------------------- |  | -------------- | ----- | ---------- |  | ------------ | ----- | ----- |  | -------- | --- | --------
|                                                                     |  | Potash         |       | Phosphate  |  | Eliminations |       | Total |  | products |     | products
|                                                                     |  | $
    millions
|                                                                     |  |                |       |            |  |              |       |       |  |          |     |         
|Year 2015                                                            |  |                |       |            |  |              |       |       |  |          |     |         
|Sales to external
    parties                                        |  |                | 1,292 |            |  |              | 1,534 |       |  |          | —   |         
|Inter-segment
    sales                                              |  |                | 158   |            |  |              | 169   |       |  |          | (86 | )       
|Total
    sales                                                      |  |                | 1,450 |            |  |              | 1,703 |       |  |          | (86 | )       
|Operating
    income (loss) attributed to segment                    |  |                | 375   |            |  |              | 154   |       |  |          | —   |         
|Expenses
    not allocated to segments and intercompany eliminations |  |                |       |            |  |              |       |       |  |          |     |         
|Operating income                                                     |  |                |       |            |  |              |       |       |  |          |     |         
|Financing expenses                                                   |  |                |       |            |  |              |       |       |  |          |     |         
|Financing income                                                     |  |                |       |            |  |              |       |       |  |          |     |         
|Share
    in earning of  equity-accounted investee                   |  |                |       |            |  |              |       |       |  |          |     |         
|Income
    before taxes on income                                    |  |                |       |            |  |              |       |       |  |          |     |         
|Capital expenditures                                                 |  |                | 460   |            |  |              | 426   |       |  |          | —   |         
|Capital
    expenditures not allocated                               |  |                |       |            |  |              |       |       |  |          |     |         
|Total
    capital expenditures                                       |  |                |       |            |  |              |       |       |  |          |     |         
|Depreciation and amortization                                        |  |                | 104   |            |  |              | 138   |       |  |          | —   |         
|Depreciation
    and amortization not allocated                      |  |                |       |            |  |              |       |       |  |          |     |         
|Total
    depreciation and amortization                              |  |                |       |            |  |              |       |       |  |          |     |         

F-33


Table of Contents


Note 5 - Operating Segments (cont’d)



B. Operating segment data (cont’d)



|                                                                     |  | Fertilizers    |       | Industrial |  | Performance  |       | Other |  |          |     |         
|-------------------------------------------------------------------- |  | -------------- | ----- | ---------- |  | ------------ | ----- | ----- |  | -------- | --- | --------
|                                                                     |  | Potash         |       | Phosphate  |  | Eliminations |       | Total |  | products |     | products
|                                                                     |  | $
    millions
|Year 2014                                                            |  |                |       |            |  |              |       |       |  |          |     |         
|Sales to external parties                                            |  |                | 1,620 |            |  |              | 1,522 |       |  |          | —   |         
|Inter-segment sales                                                  |  |                | 196   |            |  |              | 156   |       |  |          | (93 | )       
|Total sales                                                          |  |                | 1,816 |            |  |              | 1,678 |       |  |          | (93 | )       
|Operating income (loss) attributed to segment                        |  |                | 536   |            |  |              | 133   |       |  |          | 1   |         
|Expenses not allocated to segments and intercompany
    eliminations |  |                |       |            |  |              |       |       |  |          |     |         
|Operating income                                                     |  |                |       |            |  |              |       |       |  |          |     |         
|Financing expenses                                                   |  |                |       |            |  |              |       |       |  |          |     |         
|Financing income                                                     |  |                |       |            |  |              |       |       |  |          |     |         
|Share in earning of equity-accounted investee                        |  |                |       |            |  |              |       |       |  |          |     |         
|Income before taxes on income                                        |  |                |       |            |  |              |       |       |  |          |     |         
|Capital expenditures                                                 |  |                | 457   |            |  |              | 153   |       |  |          | —   |         
|Capital expenditures not allocated                                   |  |                |       |            |  |              |       |       |  |          |     |         
|Total capital expenditures                                           |  |                |       |            |  |              |       |       |  |          |     |         
|Depreciation and amortization                                        |  |                | 103   |            |  |              | 122   |       |  |          | —   |         
|Depreciation and amortization not allocated                          |  |                |       |            |  |              |       |       |  |          |     |         
|Total depreciation and amortization                                  |  |                |       |            |  |              |       |       |  |          |     |         

F-34


Table of Contents


Note 5 - Operating Segments (cont’d)



B. Operating segment data (cont’d)



|                                                                     |  | Fertilizers    |       | Industrial |  | Performance  |       | Other |  |          |      |         
|-------------------------------------------------------------------- |  | -------------- | ----- | ---------- |  | ------------ | ----- | ----- |  | -------- | ---- | --------
|                                                                     |  | Potash         |       | Phosphate  |  | Eliminations |       | Total |  | products |      | products
|                                                                     |  | $
    millions
|Year 2013                                                            |  |                |       |            |  |              |       |       |  |          |      |         
|Sales to external
    parties                                        |  |                | 1,797 |            |  |              | 1,584 |       |  |          | —    |         
|Inter-segment
    sales                                              |  |                | 230   |            |  |              | 170   |       |  |          | (126 | )       
|Total
    sales                                                      |  |                | 2,027 |            |  |              | 1,754 |       |  |          | (126 | )       
|Operating
    income (loss) attributed to segment                    |  |                | 740   |            |  |              | 79    |       |  |          | 1    |         
|Expenses not allocated
    to segments and intercompany eliminations |  |                |       |            |  |              |       |       |  |          |      |         
|Operating income                                                     |  |                |       |            |  |              |       |       |  |          |      |         
|Financing expenses                                                   |  |                |       |            |  |              |       |       |  |          |      |         
|Financing income                                                     |  |                |       |            |  |              |       |       |  |          |      |         
|Share in earning of equity-accounted
    investee                    |  |                |       |            |  |              |       |       |  |          |      |         
|Income before taxes on
    income                                    |  |                |       |            |  |              |       |       |  |          |      |         
|Capital expenditures                                                 |  |                | 552   |            |  |              | 142   |       |  |          | —    |         
|Capital expenditures not
    allocated                               |  |                |       |            |  |              |       |       |  |          |      |         
|Total capital expenditures                                           |  |                |       |            |  |              |       |       |  |          |      |         
|Depreciation and amortization                                        |  |                | 100   |            |  |              | 118   |       |  |          | —    |         
|Depreciation and amortization
    not allocated                      |  |                |       |            |  |              |       |       |  |          |      |         
|Total depreciation and
    amortization                              |  |                |       |            |  |              |       |       |  |          |      |         

F-35


Table of Contents


Note 5 - Operating Segments (cont’d)



C. Information on geographical segments



Following is data regarding the distribution
of the Group sales by geographical location of the customer:



|               |  | 2015           |       | 2014           |  | 2013          
|-------------- |  | -------------- | ----- | -------------- |  | --------------
|               |  | $
    millions |       | %
    of sales |  | $
    millions
|USA            |  |                | 1,176 |                |  |               
|China          |  |                | 550   |                |  |               
|Brazil         |  |                | 506   |                |  |               
|Germany        |  |                | 487   |                |  |               
|United Kingdom |  |                | 303   |                |  |               
|France         |  |                | 295   |                |  |               
|Spain          |  |                | 285   |                |  |               
|Israel         |  |                | 240   |                |  |               
|India          |  |                | 206   |                |  |               
|All other      |  |                | 1,357 |                |  |               
|Total          |  |                | 5,405 |                |  |               



Following is data regarding the distribution
of the Group’s sales by geographical location of the assets:



|                          |  | For
    the year ended December 31
|------------------------- |  | ----------------------------------
|                          |  | 2015                              
|                          |  | $
    millions                    
|Israel                    |  |                                   
|Europe                    |  |                                   
|North America             |  |                                   
|Others                    |  |                                   
|                          |  |                                   
|Intercompany transactions |  |                                   
|                          |  |                                   



Following is data regarding the operating
income by geographical location of the assets from which the income was produced:



|              |  | For
    the year ended December 31
|------------- |  | ----------------------------------
|              |  | 2015                              
|              |  | $
    millions                    
|Israel        |  |                                   
|Europe        |  |                                   
|North America |  |                                   
|Others        |  |                                   
|Eliminations  |  |                                   
|Total         |  |                                   



Following is data reflecting the carrying
value of allocated segmental assets and allocated segmental additions to property, plant and equipment and intangible assets by
the geographical location of the assets:



|              |  | Carrying
value of assetsas at December 31 |       | Additions
to property, plant and equipment, and intangible assets for the year ended December 31
|------------- |  | ----------------------------------------- | ----- | ------------------------------------------------------------------------------------------------
|              |  | 2015                                      |       | 2014                                                                                            
|              |  | $ millions                                |       | $ millions                                                                                      
|Israel        |  |                                           | 4,672 |                                                                                                 
|Europe        |  |                                           | 2,103 |                                                                                                 
|Asia          |  |                                           | 975   |                                                                                                 
|North America |  |                                           | 889   |                                                                                                 



|Others       |  |  | 328   |   |  |  | 217   |   |  |  | 82    |   |  |  | 201   |  |  |  | 106 |  |  |  | 4   | 
|------------ |  |  | ----- | - |  |  | ----- | - |  |  | ----- | - |  |  | ----- |  |  |  | --- |  |  |  | --- | 
|Eliminations |  |  | (571  | ) |  |  | (481  | ) |  |  | (413  | ) |  |  | —     |  |  |  | —   |  |  |  | —   | 
|Total        |  |  | 8,396 |   |  |  | 7,576 |   |  |  | 7,217 |   |  |  | 1,160 |  |  |  | 929 |  |  |  | 937 | 







F-36


Table of Contents


Note 5 - Operating Segments (cont’d)





D. Sales by Main Business Lines



Set forth below is additional information
regarding sales of the Company’s main business lines (before offset of intersegment sales):



Potash – potash is the common
name for potassium chloride, which is a widely used source for potassium, one of the major nutrients essential for plant development,
which helps to protect plants from diseases and pests, to adjust to dynamic weather conditions, regulates the water in a plant,
strengthens stalks, and encourages plants to absorb more nutrients. ICL sells potash as a fertilizer for direct application and
to manufacturers of compound fertilizers. In addition, ICL uses potash for its own production of compound fertilizers, mainly phosphate-based
and potash-based.



Phosphate – phosphorous is
also one of the three major nutrients essential for plant development and directly contributes to a wide range of physiological
plant processes, including production of sugars (including starch), photosynthesis and energy transfer. Phosphate is found in phosphate
rock. The ICL phosphate business’ main products are: phosphate rock, phosphoric acid and fertilizers.



Specialty Fertilizers (SF) –
specialty fertilizers are concentrated fertilizers with high efficiency, allowing a more precise delivery of the essential nutrients
for plant development (phosphorous, potassium and nitrogen). ICL Specialty Fertilizers supplies superior-quality, cost-effective
products that help growers achieve higher yields and better quality, in spite of scarce water and limited arable land. These fertilizers
include: controlled release fertilizers (CRF), slow release fertilizers (SRF), soluble fertilizers, liquid fertilizers and peat
used as a growing bed for various crops, usually containing CRF and crop-protection products.



Flame Retardants – bromine,
phosphorous or magnesia-based chemical compounds are used worldwide in electronic, vehicle, construction and textile products and
act mainly to reduce the danger of ignition of a fire or to thwart the spreading of a fire in products wherein they serve as a
raw material.



Industrial Solutions – this
business line produces and supplies elemental bromine for a variety of uses in the chemical industry, as well as bromine and phosphorous
compounds used in a number of different industries globally, such as the rubber industry, the pharmaceutical and agronomic industry,
polyester fibers (in the production of fabrics and plastic bottles), and clear brine fluids used for balancing pressure in oil
and gas drillings. This business line also includes bromine-based biocides used for industrial water treatment, pure potash and
Dead Sea minerals for various food, pharma and industrial applications, magnesia products used for the paper industry, detergents
and oil additives, catalysts and stabilizers.



Advanced Additives – this
business line supplies mainly phosphoric acid, which is used as a raw material in the metals treatment, paints and coatings and
detergents industries. In addition, the unit supplies P2S5, a primary ingredient in lubricating oil additives and insecticides,
as well as fire retardant products used mainly to fight forest fires.



Food Specialties – ICL Food
Specialties is a leader in creative food ingredients and phosphate additives which provide texture and stability solutions to the
processed meat, fish, dairy, baked goods and processed foods markets.



|                   |  | 2015           |       | 2014           |  | 2013          
|------------------ |  | -------------- | ----- | -------------- |  | --------------
|                   |  | $
    millions |       | %
    of sales |  | $
    millions
|Potash             |  |                | 1,450 |                |  |               
|Phosphate          |  |                | 1,079 |                |  |               
|Advanced Additives |  |                | 780   |                |  |               

|Specialty Fertilizers |  |  | 693   |   |  |  | 13  |   |  |  | 770   |  |  |  | 12  |  |  |  | 794   |  |  |  | 13  | 
|--------------------- |  |  | ----- | - |  |  | --- | - |  |  | ----- |  |  |  | --- |  |  |  | ----- |  |  |  | --- | 
|Industrial Solutions  |  |  | 671   |   |  |  | 13  |   |  |  | 786   |  |  |  | 13  |  |  |  | 761   |  |  |  | 12  | 
|Food Specialties      |  |  | 614   |   |  |  | 11  |   |  |  | 525   |  |  |  | 8   |  |  |  | 494   |  |  |  | 8   | 
|Flame Retardants      |  |  | 366   |   |  |  | 7   |   |  |  | 470   |  |  |  | 8   |  |  |  | 460   |  |  |  | 7   | 
|All other and setoffs |  |  | (248  | ) |  |  | (5  | ) |  |  | 112   |  |  |  | 2   |  |  |  | 39    |  |  |  | 1   | 
|Total                 |  |  | 5,405 |   |  |  | 100 |   |  |  | 6,111 |  |  |  | 100 |  |  |  | 6,272 |  |  |  | 100 | 





F-37


Table of Contents


Note 6 – Short-Term Investments, Deposits
and Loans



|                                                                  |  | As
    at December 31
|----------------------------------------------------------------- |  | ---------------------
|                                                                  |  | 2015                 
|                                                                  |  | $
    millions       
|Trading securities                                                |  |                      
|Deposits in banks and financial institutions and short-term loans |  |                      
|Current maturities of long-term deposits                          |  |                      
|                                                                  |  |                      

Note 7 - Trade Receivables



|                                    |  | As
    at December 31
|----------------------------------- |  | ---------------------
|                                    |  | 2015                 
|                                    |  | $
    millions       
|Open accounts                       |  |                      
|Less – allowance for doubtful debts |  |                      
|                                    |  |                      

Note 8 - Other Receivables, including Derivative Instruments



|                                    |  | As
    at December 31
|----------------------------------- |  | ---------------------
|                                    |  | 2015                 
|                                    |  | $
    millions       
|Israeli government institutions     |  |                      
|Non-Israeli government institutions |  |                      
|Prepaid expenses                    |  |                      
|Advances to suppliers               |  |                      
|Derivatives                         |  |                      
|Reimbursement asset                 |  |                      
|Other                               |  |                      
|                                    |  |                      

Note 9 – Inventories



|                                     |  | As
    at December 31
|------------------------------------ |  | ---------------------
|                                     |  | 2015                 
|                                     |  | $
    millions       
|Finished products                    |  |                      
|Work in progress                     |  |                      
|Raw materials and supplies           |  |                      
|Spare parts and maintenance supplies |  |                      

|                                                                 |  |  | 1,486 |     |  |  | 1,392 | 
|---------------------------------------------------------------- |  |  | ----- | --- |  |  | ----- | 
|Less – non-current inventories (presented in non-current assets) |  |  | 122   | (*) |  |  | 57    | 
|                                                                 |  |  | 1,364 |     |  |  | 1,335 | 












| | (*) | The increase in the non-current inventories is mainly due to the establishment of a joint venture (“YPH JV”). See
Note 10 for additional details.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------





F-38


Table of Contents




Note 10 - Investments in Subsidiaries and Investee Companies



A. Acquisition of subsidiaries



Establishment of joint venture (“YPH
JV”)



In December 2014, ICL signed a strategic
partnership agreement with Yunnan Phosphate Chemicals Group Corporation Ltd. (“YTH”), China’s second largest
chemicals manufacturer and the third largest phosphate producer in the world, which is traded on the Shanghai stock exchange. The
agreement established operation of a 50/50 joint venture company (“YPH JV”), controlled by ICL, having a fully backward
integrated phosphate business with a world-scale phosphate rock mine and other downstream operations. For purposes of strengthening
the strategic partnership between ICL and YTH, and to create added value for their shareholders, ICL also committed in the agreement
to acquire a strategic holding in YTH by means of investing in newly issued shares, such that after the issuance, ICL will hold
15% of YTH’s total issued share capital on a fully diluted basis.



Based on the agreement, ICL controls YPH
JV mainly in light of its power to direct the relevant activities, which significantly affects YPH JV’s returns and as a
result ICL consolidates YPH JV’s financial information commencing from the closing date (see below).



The transaction is expected to transform
ICL into the world’s leading specialty phosphate player. YPH JV is
also targeted to improve the cost competitiveness of ICL’s phosphate operations by providing ICL access to a low-cost phosphate
rock operation with extensive reserves, as well as to low-cost phosphoric acid.



On October 12, 2015, the Company
completed the establishment of YPH JV. The closing occurred following fulfillment of the closing conditions to the
parties’ satisfaction, including all necessary approvals and ICL’s net payment of approximately $172 million in
consideration of its share of YPH JV. ICL’s 15% investment in YTH (which was initially a closing condition) has been
preliminarily approved by the PRC Ministry of Commerce and was pending final approval by the China Securities Regulatory
Commission (CSRC).



The information relating to revenues and
profits of YPH JV for the entire current reporting period was not disclosed due to impracticability.





Following the approval from the China
Securities Regulatory Commission, On January 16, 2016, the Company completed its investment in 15% of the issued and outstanding
share capital on a fully diluted basis of YTH against payment of about US$250 million based on the agreed share price of 8.24
CNY which was determined on December 2014. The share price at the closing date was 9.10 CNY per share. The new shares will be
subject to a three-year lock up period as required under the PRC law. This investment will be classified as an “available
for sale financial asset”, meaning that the investment will be measured at fair value, and in subsequent periods, fair value
updates, other than impairment losses, will be recognized directly in other comprehensive income and presented within equity in
a reserve for financial assets classified as available-for-sale. In light of the lock up period mentioned above, the Company is
examining the need for a discount to the fair value as at the initial recognition and its impact, if any, on the measurement thereof.







Identifiable assets acquired and liabilities
assumed



|Identifiable
    assets             |  | $
                                         millions
|----------------------------------- |  | ---------------------------------------------------
|Cash and cash equivalents           |  |                                                    
|Short-term investments and deposits |  |                                                    
|Rights over leases                  |  |                                                    
|Trade and other receivables         |  |                                                    
|Inventory                           |  |                                                    
|Intangible assets                   |  |                                                    
|Property, Plant and Equipment       |  |                                                    

|Trade and other payables     |  |  | (109 | )
|---------------------------- |  |  | ---- | -
|Short-term loans and credits |  |  | (229 | )
|Deferred tax assets          |  |  | 4    |  
|Other long-term liabilities  |  |  | (9   | )
|Net identifiable assets      |  |  | 328  |  





F-39


Table of Contents




A. Acquisition of subsidiaries (cont’d)





As at the date of the report, the
Company is still in the process of finalizing YPH JV’s Purchase Price Allocation (PPA).



Measurement of fair value



Presented hereunder is information regarding
the techniques the Group used to measure the fair value of the assets and liabilities recognized as a result of the business combination:



Buildings and Structures and Machinery
and Equipment



DRC Method under the cost approach
- the principle behind the DRC Method is that a prudent investor will not purchase an asset for more than it will cost him to replace
this asset with an asset of comparable utility. The steps for utilizing this method are: (1) estimating the replacement cost new
(“RCN”); (2) deriving Rate of Newness (“RN”) based on the estimated economic useful lives (“EUL”)
and effective age; and (3) depreciating the replacement cost new over economic life to reflect obsolescence related to effective
age.



Land Use Rights



Market Comparison Method - determines
the current market land value by making reference to recent comparable transactions. The valuer may make certain adjustments to
those recorded transactions by taking into account factors such as differences in the transaction timing, location, site services
and infrastructure available and other matters affecting the land value. However, its application is limited to certain types of
land transactions in those well-developed areas and is always subject to the availability of sufficient and reliable public market
data.



Mining Rights



Multi Period Excess Earnings Method
- the steps for utilizing this method are: (1) derive cash flows generated by the subject asset: to derive cash flows generated
by the subject asset, prospective financial information has to be considered. Prospective financial information might need to be
adjusted both on revenues and costs, to eliminate all elements not associated with the asset as well as all synergies which are
specific to the acquisition. (2) apply contributory assets charges (“CAC”): cash flows are projected to be realized
with the subject asset by using various other assets, also contributing to these cash flows. (3) to derive cash flows attributable
to the subject asset to be valued, contributory asset charges based on returns on and returns of FV of contributory assets necessary
for realizing the projected cash flows have to be deducted. Thus contributory asset charges are notional lease charges for the
use of contributory assets. (4) deduct tax payments: expected tax payments resulting from excessive cash flows attributable to
the subject asset have to be taken into account. (5) calculate present values of net excess cash flows attributable to the subject
asset: to calculate present values, attributable net excess earnings have to be discounted using a discount rate, which is appropriate
for the specific asset to be valued. (6) add tax amortization benefit.



Customer relationship



Cost Saving Method - An intangible
asset may afford its owner a cost savings over the best alternative to the asset. These cost savings represent the value of ownership
of the intangible asset. Under the cost saving method, the fair value of the subject intangible asset is measured using the post-tax
costs saved by owning the asset.



Trademark and Technology



Relief-from-Royalty Method - It
estimates the value of future forgone royalty payments over the life of the asset by virtue of owning the asset. In arriving at
an estimate of value using the relief-from-royalty method, the annual revenues a market participant acquirer investor would expect
the subject asset to generate over a discrete projection period are forecast. These forecast annual
revenues are then multiplied by a royalty rate that could be expected to be charged if the asset was licensed from a third party
in the market place, giving consideration to the characteristics of the asset and its uses. The resulting cash flows for each of
the years are then converted to their present value equivalent using a rate of return appropriate for the risk of achieving the
asset’s projected cash flows.



F-40


Table of Contents


Note 10 - Investments in Subsidiaries and Investee
Companies (cont’d)



A. Acquisition of subsidiaries (cont’d)



Inventories



Net Realizable Value method - The
fair value of inventories is determined based on the estimated selling price in the ordinary course of business less the estimated
costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventories.



The aggregate cash flows derived for the
Group as a result of the acquisition:



|                                    |  | $
    millions
|----------------------------------- |  | --------------
|Cash and cash equivalents paid, net |  |               
|Cash and cash equivalents of the JV |  |               
|                                    |  |               



Goodwill



Goodwill was recognized as a result of
the acquisition as follows:



|                                           |  | $
    millions
|------------------------------------------ |  | --------------
|Consideration transferred, net             |  |               
|Capital reverses                           |  |               
|Non-Controlling interests*                 |  |               
|Less fair value of identifiable net assets |  |               
|Goodwill                                   |  |               










| | * | The Company has chosen to measure the non-controlling interests, arising from the acquisition of  YPH based on their
                                                          proportionate interest in the identifiable net assets of the acquiree that grant it a present ownership interest (ordinary
                                                          shares).
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The goodwill is attributable mainly to
ICL’s access to the fast-growing specialty phosphate market in China through the formation of the partnership with YTH, the
increased phosphate platform, the secured long-term phosphate reserves as well as the expanded phosphate end-to-end business model
focusing on Asia (See Note 15 on intangible assets). None of the goodwill recognized is expected to be deductible for tax purposes.



Acquisition-related costs



The Group incurred acquisition-related
costs of $10 million related to legal fees and due diligence costs. These costs have been included in general and administrative
expenses in the statement of income.



Acquisition of Allana Potash



In March 2015, the Company signed an agreement
to acquire the shares of Allana Potash (hereinafter – “Allana”), a company that focuses on acquisition and development
of potash assets, the shares of which were traded on the Toronto Stock Exchange. Allana holds a concession to mine potash in Ethiopia,
through its subsidiary, Allana Potash Afar Plc.



On June 22, 2015, the Company acquired
the balance of Allana’s shares (83.78%) for a total consideration of approximately $112 million, of which approximately $96
million was in cash, and approximately $16 million was by means of issuance of 2,225,337 ordinary shares of the Company, the fair
value of which was based on the price of ICL’s shares on June 22, 2015 ($7.08 per share).



The acquisition
consideration reflected  a value of about $134 million, which was allocated as follows: $149 million to intangible assets
constituting mining rights, $2 million to current assets, $53 million to current liabilities including deferred taxes and an
amount of about $36 million, was allocated to goodwill. As at the date of the report, the Company is still in the process of
finalizing Allana’s Purchase Price Allocation (PPA).



F-41


Table of Contents


Note 10 - Investments in Subsidiaries and Investee
Companies (cont’d)



A. Acquisition of subsidiaries (cont’d)



As part of the acquisition, a gain of $7
million was realized, as a result of re measurement of the fair value of 16.22% of the shares of the acquired company that ICL
held prior to obtaining control. The gain was recorded under “other income” in the statement of income for 2015. For
additional information related to the mining license, see note 23.



Acquisition of Prolactal



In March 2015, the Company completed the
acquisition of Prolactal, a leading European producer of dairy proteins for the food and beverage industry, for a total consideration
of about $90 million. Prolactal, a privately-held company with sales of approximately €100 million in 2014, produces a range
of functional dairy proteins used by the beverage, dairy and meat industries to stabilize and improve the nutritional value of
beverages and foods. The combination of ICL’s backward integrated specialty phosphate capabilities, Prolactal’s protein
capabilities and both companies’ advanced know-how will enable ICL Food Specialties to provide a broader selection of innovative,
value-added food additives for improvement of texture and stability that outperform other currently available solutions, and to
meet the growing demand for healthy foods and beverages containing higher protein levels. The acquisition of Prolactal constitutes
a strategic step aimed at strengthening and expanding ICL’s core business activities in the area of specialty-food ingredients.



B. Movement during the year in investments
in equity-accounted investees



|                                                                                                                              |  | $
    millions
|----------------------------------------------------------------------------------------------------------------------------- |  | --------------
|Balance as at January 1, 2015                                                                                                 |  |               
|Changes during the year:                                                                                                      |  |               
|Share in earnings                                                                                                             |  |               
|Dividends received                                                                                                            |  |               
|Increase in rate of holdings in associated company – initial
    consolidation and  divestiture of equity accounted investees |  |               
|Cumulative translation adjustments                                                                                            |  |               
|Balance as at December 31, 2015                                                                                               |  |               

F-42


Table of Contents


Note 10 - Investments in Subsidiaries and Investee
Companies (cont’d)



C. Condensed data with respect to equity-accounted
investees



Set forth below is condensed financial
data with respect to equity-accounted investees which are individually insignificant without adjustments for the ownership rates
held by the Group.



|                   |  | As
    at December 31, 2015
|------------------ |  | ---------------------------
|                   |  | $ millions                 
|                   |  | Current
    assets         
|Joint arrangements |  |                            



|                   |  | As
    at December 31, 2014
|------------------ |  | ---------------------------
|                   |  | $ millions                 
|                   |  | Current
    assets         
|Joint arrangements |  |                            



Note 11 - Assets and Liabilities held for sale



Pursuant to the Company’s strategy,
in connection with the continued integration of non-core businesses activities, the Company completed during 2015 the sale of these
activities:



1.	In
January 2015, the alumina, paper and water industry (APW) sale transaction was closed. In February 2015, the sales of the thermoplastic
products for the footwear industry (Renoflex) and the hygiene products for the food industry (Anti Germ) were closed and in June
2015 the Company completed the sale of the pharmaceutical and gypsum businesses (PCG). As a result of completion of the sale of
these activities, in 2015 the Company recognized a gain of about $214 million, which was included under “other income”
in the statement of income ($162 million net of tax).



2.	During
2015, in light of the process of selling service provider activities in Germany and the Clearon Company of the Industrial Products
segment in the United States, the Company reclassified these activities as “assets held for sale”. As a result of
re-measurement of these assets, based on the lower of their carrying value in the books and their fair value (less selling expenses),
in 2015 the Company recognized a loss in the amount of $47 million, which was included under “other expenses” in the
statement of income ($36 million net of tax).



Note 12 - Long-Term Deposits and Receivables



|                          |  | As
    at December 31
|------------------------- |  | ---------------------
|                          |  | 2015                 
|                          |  | $
    millions       
|Bank deposits and other   |  |                      
|Less – current maturities |  |                      
|                          |  |                      
|Other receivables         |  |                      
|Total                     |  |                      






| | * | The increase in other receivables is mainly due to the establishment of a joint venture (“YPH JV”). See Note 10
for additional details.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------



F-43


Table of Contents


Note 13 - Property, Plant and Equipment



|                                                |  | Land,
    land development, roads and buildings |     | Installations,
    machinery and equipment |  | Dikes
    and evaporating ponds |       | Heavy
    mechanical equipment, railroad cars and tanks |  | Furniture,
    office equipment, vehicles, computer equipment and other |       | Plants
    under construction(1) and spare parts for installations |  | Total
|----------------------------------------------- |  | ----------------------------------------------- | --- | ------------------------------------------ |  | ------------------------------- | ----- | ------------------------------------------------------- |  | ----------------------------------------------------------------------- | ----- | ------------------------------------------------------------------ |  | -----
|                                                |  | $
    millions                                 
|Cost                                            |  |                                                 |     |                                            |  |                                 |       |                                                         |  |                                                                         |       |                                                                    |  |      
|Balance as at January 1, 2015                   |  |                                                 | 715 |                                            |  |                                 | 4,915 |                                                         |  |                                                                         | 1,528 |                                                                    |  |      
|Additions                                       |  |                                                 | 45  |                                            |  |                                 | 258   |                                                         |  |                                                                         | 140   |                                                                    |  |      
|Additions in respect of business combinations   |  |                                                 | 55  |                                            |  |                                 | 150   |                                                         |  |                                                                         | 6     |                                                                    |  |      
|Disposals                                       |  |                                                 | (2  | )                                          |  |                                 | (70   | )                                                       |  |                                                                         | (16   | )                                                                  |  |      
|Translation differences                         |  |                                                 | (33 | )                                          |  |                                 | (103  | )                                                       |  |                                                                         | (24   | )                                                                  |  |      
|Classification to assets held for sale          |  |                                                 | (20 | )                                          |  |                                 | (112  | )                                                       |  |                                                                         | -     |                                                                    |  |      
|                                                |  |                                                 |     |                                            |  |                                 |       |                                                         |  |                                                                         |       |                                                                    |  |      
|Balance as at December 31, 2015                 |  |                                                 | 760 |                                            |  |                                 | 5,038 |                                                         |  |                                                                         | 1,634 |                                                                    |  |      
|                                                |  |                                                 |     |                                            |  |                                 |       |                                                         |  |                                                                         |       |                                                                    |  |      
|Accumulated depreciation                        |  |                                                 |     |                                            |  |                                 |       |                                                         |  |                                                                         |       |                                                                    |  |      
|Balance as at January 1, 2015                   |  |                                                 | 365 |                                            |  |                                 | 3,104 |                                                         |  |                                                                         | 791   |                                                                    |  |      
|Additions                                       |  |                                                 | 30  |                                            |  |                                 | 180   |                                                         |  |                                                                         | 90    |                                                                    |  |      
|Disposals                                       |  |                                                 | (2  | )                                          |  |                                 | (55   | )                                                       |  |                                                                         | (16   | )                                                                  |  |      
|Impairment                                      |  |                                                 | 37  |                                            |  |                                 | 38    |                                                         |  |                                                                         | -     |                                                                    |  |      
|Translation differences                         |  |                                                 | (14 | )                                          |  |                                 | (77   | )                                                       |  |                                                                         | (17   | )                                                                  |  |      
|Classification to assets held for sale          |  |                                                 | (20 | )                                          |  |                                 | (105  | )                                                       |  |                                                                         | -     |                                                                    |  |      
|                                                |  |                                                 |     |                                            |  |                                 |       |                                                         |  |                                                                         |       |                                                                    |  |      
|Balance as at December 31, 2015                 |  |                                                 | 396 |                                            |  |                                 | 3,085 |                                                         |  |                                                                         | 848   |                                                                    |  |      
|                                                |  |                                                 |     |                                            |  |                                 |       |                                                         |  |                                                                         |       |                                                                    |  |      
|Depreciated balance as at December 31,
    2015 |  |                                                 | 364 |                                            |  |                                 | 1,953 |                                                         |  |                                                                         | 786   |                                                                    |  |      

F-44


Table of Contents


Note 13 - Property, Plant and Equipment (cont’d)



|                                              |  | Land, land development, roads and buildings |     | Installations, machinery and equipment |  | Dikes and evaporating ponds |       | Heavy mechanical equipment, railroad cars and tanks |  | Furniture, office equipment, vehicles, computer equipment and other |       | Plants under construction(1) and spare parts for installations |  | Total
|--------------------------------------------- |  | ------------------------------------------- | --- | -------------------------------------- |  | --------------------------- | ----- | --------------------------------------------------- |  | ------------------------------------------------------------------- | ----- | -------------------------------------------------------------- |  | -----
|                                              |  | $ millions                                 
|Cost                                          |  |                                             |     |                                        |  |                             |       |                                                     |  |                                                                     |       |                                                                |  |      
|Balance as at January 1, 2014                 |  |                                             | 741 |                                        |  |                             | 4,842 |                                                     |  |                                                                     | 1,429 |                                                                |  |      
|Additions                                     |  |                                             | 23  |                                        |  |                             | 272   |                                                     |  |                                                                     | 128   |                                                                |  |      
|Additions in respect of business combinations |  |                                             | 22  |                                        |  |                             | 7     |                                                     |  |                                                                     | -     |                                                                |  |      
|Disposals                                     |  |                                             | (6  | )                                      |  |                             | (39   | )                                                   |  |                                                                     | -     |                                                                |  |      
|Translation differences                       |  |                                             | (41 | )                                      |  |                             | (112  | )                                                   |  |                                                                     | (29   | )                                                              |  |      
|Classification to assets held for sale        |  |                                             | (24 | )                                      |  |                             | (55   | )                                                   |  |                                                                     | -     |                                                                |  |      
|                                              |  |                                             |     |                                        |  |                             |       |                                                     |  |                                                                     |       |                                                                |  |      
|Balance as at December 31, 2014               |  |                                             | 715 |                                        |  |                             | 4,915 |                                                     |  |                                                                     | 1,528 |                                                                |  |      
|                                              |  |                                             |     |                                        |  |                             |       |                                                     |  |                                                                     |       |                                                                |  |      
|Accumulated depreciation                      |  |                                             |     |                                        |  |                             |       |                                                     |  |                                                                     |       |                                                                |  |      
|Balance as at January 1, 2014                 |  |                                             | 367 |                                        |  |                             | 3,026 |                                                     |  |                                                                     | 738   |                                                                |  |      
|Additions                                     |  |                                             | 20  |                                        |  |                             | 192   |                                                     |  |                                                                     | 75    |                                                                |  |      
|Disposals                                     |  |                                             | (6  | )                                      |  |                             | (37   | )                                                   |  |                                                                     | -     |                                                                |  |      
|Impairment                                    |  |                                             | 20  |                                        |  |                             | 34    |                                                     |  |                                                                     | -     |                                                                |  |      
|Translation differences                       |  |                                             | (18 | )                                      |  |                             | (79   | )                                                   |  |                                                                     | (22   | )                                                              |  |      
|Classification to assets held for sale        |  |                                             | (18 | )                                      |  |                             | (32   | )                                                   |  |                                                                     | -     |                                                                |  |      
|                                              |  |                                             |     |                                        |  |                             |       |                                                     |  |                                                                     |       |                                                                |  |      
|Balance as at December 31, 2014               |  |                                             | 365 |                                        |  |                             | 3,104 |                                                     |  |                                                                     | 791   |                                                                |  |      
|                                              |  |                                             |     |                                        |  |                             |       |                                                     |  |                                                                     |       |                                                                |  |      
|Depreciated balance as at December 31, 2014   |  |                                             | 350 |                                        |  |                             | 1,811 |                                                     |  |                                                                     | 737   |                                                                |  |      










| | (1) | Plants under construction and spare parts for installations – the changes represent additions during the year, net of
transfers to property, plant and equipment.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------





F-45


Table of Contents


Note 14 - Intangible Assets



A.	Composition



|                                              |  | Intangible
                                         assets acquired |     | Intangible
                                         assetsinternally developed |  | Computer
                                         application |     | Others                                                        |  | Total                                                          
|--------------------------------------------- |  | ------------------------------------------------------------------- | --- | ------------------------------------------------------------------------------ |  | ------------------------------------------------------------- | --- | ------------------------------------------------------------- |  | ---------------------------------------------------------------
|                                              |  | Goodwill                                                            |     | Concessions
                                         and mining rights(1)      |  | Trademarks                                                    |     | Technology
                                         / patents |  | Customer
                                         relationships
|                                              |  | $
                                         millions                
|Cost                                          |  |                                                                     |     |                                                                                |  |                                                               |     |                                                               |  |                                                                
|Balance as at January 1, 2015                 |  |                                                                     | 327 |                                                                                |  |                                                               | 154 |                                                               |  |                                                                
|Additions                                     |  |                                                                     | -   |                                                                                |  |                                                               | -   |                                                               |  |                                                                
|Additions in respect of business combinations |  |                                                                     | 90  |                                                                                |  |                                                               | 116 |                                                               |  |                                                                
|Translation differences                       |  |                                                                     | (47 | )                                                                              |  |                                                               | (8  | )                                                             |  |                                                                
|Classification to assets held for sale        |  |                                                                     | -   |                                                                                |  |                                                               | -   |                                                               |  |                                                                
|                                              |  |                                                                     |     |                                                                                |  |                                                               |     |                                                               |  |                                                                
|Balance as at December 31, 2015               |  |                                                                     | 370 |                                                                                |  |                                                               | 262 |                                                               |  |                                                                
|                                              |  |                                                                     |     |                                                                                |  |                                                               |     |                                                               |  |                                                                
|Amortization and impairment losses            |  |                                                                     |     |                                                                                |  |                                                               |     |                                                               |  |                                                                
|Balance as at January 1, 2015                 |  |                                                                     | 24  |                                                                                |  |                                                               | 48  |                                                               |  |                                                                
|Amortization for the year                     |  |                                                                     | -   |                                                                                |  |                                                               | 4   |                                                               |  |                                                                
|Translation differences                       |  |                                                                     | (3  | )                                                                              |  |                                                               | -   |                                                               |  |                                                                
|Classification to assets held for sale        |  |                                                                     | -   |                                                                                |  |                                                               | -   |                                                               |  |                                                                
|                                              |  |                                                                     |     |                                                                                |  |                                                               |     |                                                               |  |                                                                
|Balance as at December 31, 2015               |  |                                                                     | 21  |                                                                                |  |                                                               | 52  |                                                               |  |                                                                
|                                              |  |                                                                     |     |                                                                                |  |                                                               |     |                                                               |  |                                                                
|Amortized Balance as at December 31,
    2015 |  |                                                                     | 349 |                                                                                |  |                                                               | 210 |                                                               |  |                                                                

F-46


Table of Contents


Note 14 - Intangible Assets (cont’d)



A.	Composition (cont’d)



|                                              |  | Intangible
    assets acquired |     | Intangible
    assets internally developed |  | Computer
    application |     | Others                   |  | Total                     
|--------------------------------------------- |  | ------------------------------ | --- | ------------------------------------------ |  | ------------------------ | --- | ------------------------ |  | --------------------------
|                                              |  | Goodwill                       |     | Concessions
    and mining rights(1)       |  | Trademarks               |     | Technology
    / patents |  | Customer
    relationships
|                                              |  | $
    millions                
|Cost                                          |  |                                |     |                                            |  |                          |     |                          |  |                           
|Balance as at January 1, 2014                 |  |                                | 291 |                                            |  |                          | 162 |                          |  |                           
|Additions                                     |  |                                | -   |                                            |  |                          | -   |                          |  |                           
|Additions in respect of business combinations |  |                                | 104 |                                            |  |                          | -   |                          |  |                           
|Translation differences                       |  |                                | (25 | )                                          |  |                          | (8  | )                        |  |                           
|Classification to assets held for sale        |  |                                | (43 | )                                          |  |                          | -   |                          |  |                           
|                                              |  |                                |     |                                            |  |                          |     |                          |  |                           
|Balance as at December 31, 2014               |  |                                | 327 |                                            |  |                          | 154 |                          |  |                           
|                                              |  |                                |     |                                            |  |                          |     |                          |  |                           
|Amortization and impairment losses            |  |                                |     |                                            |  |                          |     |                          |  |                           
|Balance as at January 1, 2014                 |  |                                | 24  |                                            |  |                          | 45  |                          |  |                           
|Amortization for the year                     |  |                                | -   |                                            |  |                          | 3   |                          |  |                           
|Translation differences                       |  |                                | (3  | )                                          |  |                          | -   |                          |  |                           
|Impairment                                    |  |                                | 12  |                                            |  |                          | -   |                          |  |                           
|Classification to assets held for sale        |  |                                | (9  | )                                          |  |                          | -   |                          |  |                           
|                                              |  |                                |     |                                            |  |                          |     |                          |  |                           
|Balance as at December 31, 2014               |  |                                | 24  |                                            |  |                          | 48  |                          |  |                           
|                                              |  |                                |     |                                            |  |                          |     |                          |  |                           
|Amortized Balance as at December 31,
    2014 |  |                                | 303 |                                            |  |                          | 106 |                          |  |                           






| | (1) | Regarding mining rights of a subsidiary in Spain see Note 23.
| | --- | -------------------------------------------------------------



F-47


Table of Contents


Note 14 - Intangible Assets (cont’d)



B. Total book value of intangible assets
having defined useful lives and those having indefinite useful lives are as follows:



|                                                       |  | As
    at December 31
|------------------------------------------------------ |  | ---------------------
|                                                       |  | 2015                 
|                                                       |  | $
    millions       
|Intangible assets having a defined useful life         |  |                      
|Intangible assets having an indefinite useful
    life |  |                      
|                                                       |  |                      



Note 15 - Impairment Testing for Property, Plant and Equipment
and Cash-Generating Units Containing Goodwill



A.	Impairment testing for cash generating
units containing goodwill and intangible assets with an indefinite useful life



For the purpose of impairment testing,
goodwill and intangible assets with an indefinite useful life are allocated to the cash-generating units which represent the lowest
level within the Group at which the goodwill is monitored for internal management purposes.



The aggregate carrying amounts of goodwill
and intangible assets with an indefinite useful life allocated to each unit are as follows:



|                                    |  | As
    at December 31
|----------------------------------- |  | ---------------------
|                                    |  | 2015                 
|                                    |  | $
    millions       
|Goodwill                            |  |                      
|Potash *                            |  |                      
|Phosphate *                         |  |                      
|Performance Products *              |  |                      
|Potash, Spain                       |  |                      
|Specialty Fertilizers               |  |                      
|Industrial Products, Europe         |  |                      
|Industrial Products, United States  |  |                      
|Performance Products, United States |  |                      
|Fertilizers, Israel                 |  |                      
|Industrial Products, Israel         |  |                      
|Performance Products, Europe        |  |                      
|Performance Products, South America |  |                      
|                                    |  |                      
|Trademarks                          |  |                      
|Industrial Products, United States  |  |                      
|Industrial Products, Europe         |  |                      
|Performance Products, United States |  |                      
|                                    |  |                      
|                                    |  |                      






| | * | Goodwill acquired in a business combination starting from 2015, is tested for impairment at the segment level as this is the
lowest level at which the goodwill is monitored for internal management purposes.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Value in use was determined by discounting
the future cash flows generated from the continuing operation of the cash-generating unit and was based on the following key assumptions:



F-48


Table of Contents


Note 15 - Impairment Testing for Property, Plant and Equipment
and Cash-Generating Units Containing Goodwill (cont’d)



A.	Impairment testing for cash generating
units containing goodwill and intangible assets with an indefinite useful life (cont’d)



|                                    |  | Discount rate |     | Average annual growth rate (1-5 years) |  | Long-term growth rate |     | Period of projected cash flows
|----------------------------------- |  | ------------- | --- | -------------------------------------- |  | --------------------- | --- | ------------------------------
|Industrial Products, United States  |  |               | 7.7 | %                                      |  |                       | 4.2 | %                             
|Industrial Products, Europe         |  |               | 9.0 | %                                      |  |                       | 7.0 | %                             
|Performance Products, United States |  |               | 7.8 | %                                      |  |                       | 3.4 | %                             
|Performance Products, Europe        |  |               | 9.0 | %                                      |  |                       | 7.2 | %                             
|Performance Products, South America |  |               | 9.0 | %                                      |  |                       | 4.0 | %                             
|Potash, Spain                       |  |               | 9.5 | %                                      |  |                       | 6.0 | %                             
|Specialty Fertilizers               |  |               | 9.0 | %                                      |  |                       | 2.5 | %                             
|Fertilizers – Israel                |  |               | 8.0 | %                                      |  |                       | 2.1 | %                             
|Fertilizers segment – potash        |  |               | 8.0 | %                                      |  |                       | 2.1 | %                             
|Fertilizers segment – phosphate     |  |               | 8.0 | %                                      |  |                       | 7.2 | %                             
|Performance Products Segment        |  |               | 8.7 | %                                      |  |                       | 6.6 | %                             



The recoverable value of the above mentioned
units is based on their value in use. The value in use of the units has been determined by an internal valuation made by the Company.
It has been determined in all cases that the stated value of the units in the financial statements is lower than their recoverable
value, and accordingly no impairment loss has been recognized in respect of such units.



The estimates and assumptions represent
Management’s assessment of the future trends in the industry and they are based on both internal and external sources.



In the reporting period, the Company examined
the recoverable amount of some of its facilities in the Industrial Products segment in Israel, in view of the decision of the Company’s
management regarding the continued use of various facilities on the Company’s sites. The recoverable amount is the higher
of the fair value less selling costs and the value in use. As a result of the said decision, it was determined that the recoverable
amount of the facilities is their fair value less cost of disposal.



Following the Company’s examination,
the recoverable amount of the facilities was lower than their carrying amount in the books and, accordingly, the Company recognized
an impairment loss, in the amount of about $43 million, which was included in the “other expenses” category.



In addition, as a result of the classification
of assets held for sale, in 2015 the Company recognized an impairment loss, in the amount of about $47 million, which is included
in the “other expenses” category in the statement of income ($36 million, net of tax), stemming from re-measurement
of the activities designated for sale, from the Performance Products and Industrial Products segments based on the lower of their
carrying amount in the books and their fair values (see Note 11 above).



Note 16 - Derivative Instruments



|                                                          |  | As
    at December 31, 2015 |   | As
    at December 31, 2014
|--------------------------------------------------------- |  | --------------------------- | - | ---------------------------
|                                                          |  | Assets                      |   | Liabilities                
|                                                          |  | $
    millions             
|Included in current assets and liabilities:               |  |                             |   |                            
|Foreign currency and derivative instruments               |  |                             | 9 |                            
|Interest derivative instruments                           |  |                             | - |                            
|Derivative instruments on energy and marine
    transport |  |                             | - |                            
|                                                          |  |                             | 9 |                            
|Included in non-current assets and liabilities:           |  |                             |   |                            
|Foreign currency and  derivative instruments              |  |                             | - |                            
|Interest derivative instruments                           |  |                             | - |                            
|Derivative instruments on energy and marine
    transport |  |                             | - |                            
|                                                          |  |                             | - |                            

F-49


Table of Contents


Note 17 - Credit from Banks and Others



A. Composition



|                                                                                         |  | As
    at December 31
|---------------------------------------------------------------------------------------- |  | ---------------------
|                                                                                         |  | 2015                 
|                                                                                         |  | $
    millions       
|Current liabilities                                                                      |  |                      
|Short-term credit:                                                                       |  |                      
|From financial institutions                                                              |  |                      
|Other liabilities                                                                        |  |                      
|                                                                                         |  |                      
|Current maturities of:                                                                   |  |                      
|Long term loans from financial institutions                                              |  |                      
|Non Marketable Debentures                                                                |  |                      
|                                                                                         |  |                      
|Total current liabilities                                                                |  |                      
|                                                                                         |  |                      
|Non current liabilities                                                                  |  |                      
|Loans from financial institutions                                                        |  |                      
|Other loans                                                                              |  |                      
|                                                                                         |  |                      
|Less – current maturities in respect
    of loans from financial institutions and others |  |                      
|                                                                                         |  |                      
|Marketable debentures                                                                    |  |                      
|Non-marketable debentures                                                                |  |                      
|                                                                                         |  |                      
|Less – current maturities                                                                |  |                      
|                                                                                         |  |                      
|Total non-current liabilities                                                            |  |                      



B. Classified by currency and interest
rates



|                                                 |  | Weighted
    average interest rate as at |     |                      
|------------------------------------------------ |  | ---------------------------------------- | --- | ---------------------
|                                                 |  | December
    31                          |     | As
    at December 31
|                                                 |  | 2015                                     |     | 2015                 
|                                                 |  | $
    millions                           |     | $
    millions       
|Current liabilities (without current maturities) |  |                                          |     |                      
|Short-term credit from financial institutions:   |  |                                          |     |                      
|In Dollar (1)                                    |  |                                          | 1.0 |                      
|In Euro (2)                                      |  |                                          | 0.3 |                      
|In Renminbi (3)                                  |  |                                          | 4.4 |                      
|In other currencies                              |  |                                          | 1.4 |                      
|Short-term credit from others:                   |  |                                          |     |                      
|In Dollar                                        |  |                                          | 1.1 |                      
|In Renminbi (3)                                  |  |                                          | 5.7 |                      
|                                                 |  |                                          |     |                      
|                                                 |  |                                          |     |                      



F-50


Table of Contents


Note 17 - Credit from Banks and Others (cont’d)



B. Classified by currency and interest
rates (cont’d)



|                                                        |  | Weighted
average interest rate as at |      |                  
|------------------------------------------------------- |  | ------------------------------------ | ---- | -----------------
|                                                        |  | December
31                          |      | As
at December 31
|                                                        |  | 2015                                 |      | 2015             
|                                                        |  | $ millions                           |      | $ millions       
|                                                        |  |                                      |      |                  
|Non-current liabilities (including current  maturities) |  |                                      |      |                  
|Loans from financial institution:                       |  |                                      |      |                  
|In Dollar (1)                                           |  |                                      | 1.4  |                  
|In Israeli currency – unlinked                          |  |                                      | 4.7  |                  
|In Euro (2)                                             |  |                                      | 2.2  |                  
|In Brazilian real (4)                                   |  |                                      | 15.7 |                  
|                                                        |  |                                      |      |                  
|Loans from others:                                      |  |                                      |      |                  
|In Dollar                                               |  |                                      | 3.0  |                  
|In Euro                                                 |  |                                      | 4.8  |                  
|In other currencies                                     |  |                                      | -    |                  
|                                                        |  |                                      |      |                  
|                                                        |  |                                      |      |                  
|                                                        |  |                                      |      |                  
|                                                        |  |                                      |      |                  
|Non-marketable debentures – in Dollar (5)               |  |                                      | 5.0  |                  
|                                                        |  |                                      |      |                  
|Marketable debentures – in Dollar (5)                   |  |                                      | 4.5  |                  
|                                                        |  |                                      |      |                  
|Unutilized long-term credit lines (6):                  |  |                                      |      |                  






| | (1) | The interest in respect of most of the dollar debt is determined based on LIBOR + a margin at a rate of about 1.0%.
| | --- | -------------------------------------------------------------------------------------------------------------------



| | (2) | The interest in respect of most of the Euro debt is determined based on the Euribor + a margin at a rate of about 0.8%.
| | --- | -----------------------------------------------------------------------------------------------------------------------



| | (3) | The interest in respect of most of the debt in Chinese yuans is a fixed weighted average rate of about 5.5%.
| | --- | ------------------------------------------------------------------------------------------------------------



| | (4) | The interest in respect of most of the Brazilian real debt is determined based on CDI + a margin at a rate of about 1.35%.
| | --- | --------------------------------------------------------------------------------------------------------------------------



| | (5) | See Section F.
| | --- | --------------



| | (6) | See Sections H, I.
| | --- | ------------------



C. Maturity periods



The credit and the loans from banks and
others including debentures (net of current maturities) mature in the years after the date of the report, as follows:



|                          |  | As
    at December 31
|------------------------- |  | ---------------------
|                          |  | 2015                 
|                          |  | $
    millions       
|Second year               |  |                      
|Third year                |  |                      
|Fourth year               |  |                      
|Fifth year*               |  |                      
|Sixth year and thereafter |  |                      
|                          |  |                      



* See Note 17H hereafter for additional
information.



F-51


Table of Contents


Note 17 - Credit from Banks and Others (cont’d)



D. Restrictions on the Group relating
to the receipt of credit



As part of the loan agreements the Group
has signed, various restrictions were set including financial covenants, a cross default mechanism and a negative pledge.



Set forth below is information regarding
the financial covenants applicable to the Company as part of the loan agreements and the compliance therewith:



|                                                                                                       |  | Financial Ratio Required under the Agreement |  | Financial Ratio December 31, |                       | Financial Ratio December 31,
|------------------------------------------------------------------------------------------------------ |  | -------------------------------------------- |  | ---------------------------- | --------------------- | ----------------------------
|Financial Covenants(1)                                                                                 |  |                                              |  | 2015                         |                       | 2014                        
|Equity                                                                                                 |  | Equity greater than 2,000 million dollar     |  |                              | 3,028 million dollars |                             
|The ratio of the EBITDA to the net interest expenses                                                   |  | Equal to or greater than 3.5                 |  |                              | 20.31                 |                             
|Ratio of the net financial debt EBITDA                                                                 |  | Less than 3.5                                |  |                              | 2.16                  |                             
|Ratio of the financial liabilities of the subsidiaries to the total assets of the consolidated company |  | Less than 10%                                |  |                              | 3.75                  | %                           






| | (1) | Examination of compliance with the above mentioned financial covenants is made as required based on the data in the Company’s
consolidated financial statements.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



E. Sale of receivables under securitization
transaction



In July 2015, the Company and certain Group
subsidiaries (hereinafter – “the Subsidiaries”) signed a series of agreements regarding a securitization transaction
with three international banks (hereinafter – “the Lending Banks”) for the sale of their customer receivables
to a foreign company which was established specifically for this purpose and which is not owned by the ICL Group
(hereinafter – “the Acquiring Company”).



Those agreements replace the prior securitization
agreements, in the amount of $350 million, which came to an end in July 2015. The main structure of the new securitization agreement
is the same as the prior securitization agreement. The Company’s policy is to utilize the securitization limit based on its
cash flow needs, alternative financing sources and market conditions. The new securitization agreement will expire in July 2020.
In the agreement, ICL undertook to comply with a financial covenant whereby the ratio of net debt to EBITDA will not exceed 4.75.
If ICL does not comply with the said ratio, the Acquiring Company is allowed to discontinue acquiring new trade receivables (without
affecting the existing acquisitions). As at the reporting date, ICL is in compliance with the aforementioned financial covenant.



The Acquiring Company finances acquisition
of the debts by means of a loan received from a financial institution, which is not related to ICL, which finances the loan out
of the proceeds from the issuance of commercial paper on the U.S. commercial paper market. The repayment of both the commercial
paper and the loan are backed by credit lines from the Lending Banks. The amount of cash that will be received in respect of the
sale of the customer debts in the securitization transaction will be up to $405 million.



The acquisitions are on an ongoing basis,
such that the proceeds received from customers whose debts were sold are used to acquire new trade receivables. The period in which
the Subsidiaries are entitled to sell their trade receivables to the Acquiring Company is five years from the closing date of the
transaction, where both parties have the option at the end of each year to give notice of cancellation of the transaction. The
selling price of the trade receivables is the amount of the debt sold, less the calculated interest cost based on the anticipated
period between the sale date of the customer debt and its repayment date. Upon acquisition of the debt, the Acquiring Company pays
the majority of the debt price in cash and the remainder in a subordinated note, which is paid after collection of the debt sold.
The rate of the cash consideration varies according to the composition and behavior of the customer portfolio. The Subsidiaries
handle collection of the trade receivables included in the securitization transaction, on behalf of the Acquiring Company.



In addition, as part of the agreements
a number of conditions were set in connection with the quality of the customer portfolios, which give the Lending Banks the option
to end the undertaking or determine that some of the Subsidiaries, the customer portfolios of which do not meet the conditions
provided, will no longer be included in the securitization agreement.



F-52


Table of Contents


Note 17 - Credit from Banks and Others (cont’d)



E. Sale of receivables under securitization
transaction (cont’d)



The securitization of trade receivables
does not meet the conditions for disposal of financial assets prescribed in International Standard IAS 39, regarding Financial
Instruments – Recognition and Measurement, since the Group did not transfer all of the risks and rewards deriving from the
trade receivables. Therefore, the receipts received from the Acquiring Company are presented as a financial liability as part of
the short-term credit. As of December 31, 2015, utilization of the securitization facility and trade receivables within this framework
amounted to $285 million (as at December 31, 2014, approximately $290 million).



Once the Company transferred its trade
receivables, it no longer has the right to sell them to another party. In the case of a credit fault, the Company bears 30% of
the overall secured trade receivable balance.



The value of the transferred assets (which
is approximately their fair value), fair value of the associated liabilities and net position are as follows:



|                                         |  | Year
    ended December 31,
|---------------------------------------- |  | ---------------------------
|                                         |  | 2015                       
|                                         |  | $
    millions             
|Value of the transferred assets          |  |                            
|Fair value of the associated liabilities |  |                            
|Net position*                            |  |                            



*	Less than $1 million.



F. Issuance of Debentures



1.	In 2005, we issued debentures to
institutional investors in a private issuance in the United States in the amount of $125 million bearing fixed interest. As of
December 31, 2014, the outstanding balance of the debentures was approximately $67 million, bearing fixed interest at a rate of
5.72%. On March 3, 2015, the debentures were repaid in full.



2.	In November 2013, a wholly owned
and controlled subsidiary of ours entered into an agreement with institutional and international investors to make a private offering
in the United States of unregistered debentures in an amount of $275 million. The proceeds in respect of the issuance were received
in January 2014.



The debentures were issued in three series,
as follows:



A.	$84 million of debentures with a
repayment date of January 15, 2021 bearing interest at a fixed rate of 4.55%.



B.	$145 million of debentures with a
repayment date of January 15, 2024 bearing interest at a fixed rate of 5.16%.



C.	$46 million of debentures with a
repayment date of January 15, 2026 bearing interest at a fixed rate of 5.31%.



3.	On December 2, 2014, the Company
completed the private issuance of senior notes pursuant to Rule 144A and Regulation S under the U.S. Securities Act of 1933, as
amended, to institutional investors in the U.S., Europe, and Israel, in an aggregate principal amount of $800 million, scheduled
for repayment on December 2, 2024. The notes bear an annual coupon of 4.5% to be paid in semi-annual installments, on June 2 and
December 2 of each year. The notes were issued at a price of 99.285% to yield 4.59%. The proceeds received by the Company for the
debentures amount to about $794 million. The notes have been rated BBB (stable) by Standard and Poor’s and by Fitch Rating
Ltd. The notes are registered for trade in the TACT Institutional, by the Tel-Aviv Stock Exchange Ltd.



On October 29, 2015, Standard & Poor’s
Ratings Services revised its rating outlook of the Company’s credit, which is rated BBB (together with the rating of the
debentures) from stable to negative.



Subsequent to balance sheet
date, Fitch Ratings Services revised its rating outlook of the Company’s credit, which is rated BBB (together with the
rating of the debentures) from stable to negative.



The local credit Rating of the Company
in Israel by Standard & Poor’s Maalot is been unchanged at ilAA with a stable outlook.



F-53


Table of Contents


Note 17 - Credit from Banks and Others (cont’d)





G.



In December 2010, the Company received
a loan from a European Bank in the amount of €100 million. The loan was repaid on December 15, 2015.



H.



On March 23, 2015, ICL entered into an
agreement with a group of eleven international banks, which will provide ICL a revolving credit facility in the total amount of
$1,705 million, on the following terms:



a.	The loan agreement is for a term
of five full years from the signing date of the credit facility.



b.	The loan agreement does not include
an undertaking for minimum use of the credit facility. A non-utilization fee will be at the rate of 0.21% per year.



c.	Annual interest will apply to the
amount of the loan actually used, scaled to the amount of the credit facility actually used, as follows:



|•	    Up to 33% use of the credit:      | Libor + 0.7%.                          
|--------------------------------------- | ---------------------------------------
|•    From 33% to 66% use of the credit: | Libor + 0.8% (on the entire sum used). 
|•	    66% or more use of the credit:    | Libor + 0.95% (on the entire sum used).





d.
ICL has an option to choose between a dollar loan and a euro loan.



e.
Under the loan agreement, ICL undertook restrictions that include financial covenants (which are identical to the financial covenants
applicable to the Company’s prior loans, see Section D), a cross-default mechanism and a negative pledge.



This loan agreement replaces
credit facilities taken out in March 2011 and in December 2011 in the aggregate amount of $1,325 million for a period of five
years and credit lines in the amount of $125 million that were taken out in the beginning of 2014, all of which were repaid
during the period of the report. As of December 31, 2015, this credit facility has been utilized in the amount of $1,330
million. Subsequent to the balance sheet date, the loan agreement termination date has been extended for a period of one
year, until March 2021. The amount and credit terms of the loan agreement remain unchanged.



I.



In March 2014, the Company entered into
an agreement with a European bank, under which the bank granted a credit facility of €100 million and $100 million. This credit
facility is for a period of six years and is payable in entirety at the end of the period. The dollar credit facility bears variable
interest on the basis of Libor plus a margin of between 0.9% and 1.4%. The euro credit facility bears variable interest on the
basis of Eurobor plus a margin of between 0.9% and 1.4%. The non-utilization commission is 0.32% per year. On March 23, 2015, the
dollar credit facility was decreased to $35 million on the same terms. As at December 31, 2015, both the dollar and the euro credit
facilities were not utilized.



J.



On September 11, 2012, the Company received
a loan in the amount of $50 million from a third party. At December 11, 2015 the loan has been repaid and the Company received
a loan at the same amount, the loan bears interest at the three-month Libor rate plus a margin of 0.6%. the loan will be extended
every three months.



K.



In December 2012, the Company entered into
a credit facility agreement with a European bank for a loan of approximately €100 million. As of December 31, 2015, the Company
utilized the full amount of the euro facility and the loan was fixed as a dollar loan, in the amount of approximately $129 million.
This amount is scheduled for repayment in December 2019. The interest rate on this credit is LIBOR plus 1.4%.



L.



In November 2013, the Company signed a
loan agreement with several institutional entities, in the amount of NIS 600 million, bearing fixed interest at the rate of 4.74%.
The loan is payable in installments starting from 2015 and
up to 2024. As at December 31, 2015, the total amount of the loan is approximately $148 million (approximately NIS 576 million).



F-54


Table of Contents


Note 17 - Credit from Banks and Others (cont’d)



M.



In June 2014, the Company signed loan agreements
with a number of international institutional entities in the aggregate amount of approximately €57 million and approximately
$45 million. The proceeds of these loans were received in July 2014. The loans are to be repaid in a period of between five to
ten years, where some of the loans bear fixed interest in the range of 2.1% to 3.75%, some bear variable interest based on LIBOR
plus 1.55% and some bear variable interest based on Euribor plus a margin of 1.4% to 1.7%.



N.



In December 2014, the Company signed a
loan agreement in the amount of approximately Brazilian reals 161 million with a European bank. The loan is payable in installments
starting from 2015 and running up to 2021. The loan bears CDI interest (Brazilian Interbank Certificates of Deposits) plus a margin
of 1.35%. As of December 31, 2015, the total amount of the loan is approximately Brazilian reals 149 million (approximately $38
million).



O.



During 2015, the Company received a number
of short-term loans from Israeli banks. As at December 31, 2015, the total amount of the loans was approximately $30 million.



P.



In October 2015, as part of establishment
of the “YPH” joint venture, the Company consolidated for the first time the short-term loans of the joint venture,
in the amount of 1,682 million Chinese yuans (about $259 million), which were received from a Chinese bank and from the Company’s
partner in the “YPH” joint venture. Most of the loans bear annual interest at a fixed rate of 4.6%-5.89% and they are
scheduled for repayment in 2016.



*For further information regarding
Financial Liabilities, see Note 27.



Note 18 - Trade Payables



|               |  | As
    at December 31
|-------------- |  | ---------------------
|               |  |                      
|               |  |                      
|Open accounts  |  |                      
|Checks payable |  |                      
|               |  |                      



Note 19 - Other current Liabilities



|                                                              |  | As
                                         at December 31
|------------------------------------------------------------- |  | ----------------------------------------------------------
|                                                              |  |                                                           
|                                                              |  |                                                           
|Government of Israel – mainly in respect of royalties
    (1) |  |                                                           
|Employees                                                     |  |                                                           
|Accrued expenses                                              |  |                                                           
|Derivative instruments                                        |  |                                                           
|Benefits for early retirement                                 |  |                                                           
|Others                                                        |  |                                                           
|                                                              |  |                                                           

___________________



| | 1. | See Note 23
| | -- | -----------



F-55


Table of Contents




Note 20 - Taxes on Income



A. Taxation of companies in Israel



1. Measurement of results for tax purposes
under the Income Tax (Inflationary Adjustments) Law, 1985 (hereafter – “the Inflationary Adjustments Law”)



The Income Tax Law (Adjustments for
Inflation) – 1985 (hereinafter – the Law), which is effective as from the 1985 tax year, introduced the concept
of measurement of results for tax purposes on a real (net of inflation) basis. On February 26, 2008, the Knesset enacted the
Income Tax Law (Adjustments for Inflation) (Amendment No. 20) (Restriction of Commencement Period), 2008, whereby the
effective period of the Inflationary Adjustments Law ceased at the end of the 2007 tax year and the depreciation of property,
plant and equipment, are adjusted up to the end of the 2007 tax year, and from this time forward their linkage will be
discontinued.



The Income Tax Regulations
Adjustments for Inflation (Rates of Depreciation), 1986, which allow depreciation at rates different than those in Section 21
of the Income Tax Ordinance, apply even after the Inflationary Adjustments Law is no longer in effect, and therefore
the Company continues to claim accelerated depreciation, in certain situations, on the basis of these Regulations.



2. Income tax rates



Presented hereunder are the tax rates relevant
to the Company in the years 2013-2015:



2013 – 25%



2014 – 26.5%



2015 – 26.5%



On January 4, 2016, the plenary Knesset
passed the Law for Amendment of the Income Tax Ordinance No. 216 which provides, inter alia, for a reduction of the Companies Tax
rate commencing from 2016 and thereafter by the rate of 1.5% such that the rate will be 25%.



If the legislation had been effectively
completed by December 31, 2015, the impact of the change on the financial statements as at December 31, 2015 would have been reflected
in a decline in the balance of the liabilities for deferred taxes, in the amount of $11.6 million, and a decline in the balance
of the deferred taxes assets, in the amount of $3.6 million. Update of the balances of the deferred taxes would have been recognized
against deferred tax income, in the amount of $7.4 million and against other comprehensive income, in the amount of $0.6 million.



The current taxes for the periods reported
are calculated in accordance with the tax rates shown in the table above.



3. Tax benefits under the Israeli Law for
the Encouragement of Capital Investments, 1959 (hereinafter – “The Encouragement Law”)



a) Beneficiary Enterprises



The production facilities of some
of the Company’s subsidiaries in Israel (hereinafter – “the Subsidiaries”) received
“Beneficiary Enterprise” status under the Law of Encouragement for Capital Investments, as worded after Amendment No. 60 to
the Law published in April 2005.



The benefits granted to the Company are
mainly:



1) Reduced tax rates



Regarding the “tax exemption”
track, the Company chose 2005 as the election year, whereas regarding the “Ireland” track, which is subject to tax
at the rate of 11.5%, the Company chose 2008 as the election year.



The benefits deriving from a “Beneficiary
Enterprise” under the “tax exemption” track ended in 2014 while the benefits deriving from the “Ireland”
track will end in 2017.



F-56


Table of Contents


Note 20 - Taxes on Income (cont’d)



A. Taxation of companies in Israel (cont’d)



A company having a “Beneficiary Enterprise”
that distributes a dividend out of exempt income, will be subject to Companies Tax in the year in which the dividend was distributed
on the amount distributed (including the amount of the Companies Tax applicable due to the distribution) at the tax rate applicable
under the Encouragement Law in the year in which the income was produced, had it not been exempt from tax.



The temporary difference related to distribution
of a dividend from exempt income as of December 31, 2015, in respect of which deferred taxes were not recognized, is in the amount
of about $750 million (see also Section 3(a)c below).



The part of the taxable income entitled
to benefits at reduced tax rates is calculated on the basis of the ratio of the turnover of the “Benefited Enterprise”
to the Company’s total turnover. The turnover attributed to the “Benefited Enterprise” is generally calculated
according to the increase in the turnover compared to a “base” turnover, which is the average turnover in the three
years prior to the year of election of the “Benefited Enterprise”.



2) Accelerated depreciation



In respect of buildings, machinery and
equipment used by the Approved Enterprise, the Company is entitled to claim accelerated depreciation as provided by law, commencing
from the year each asset is placed in service.



b) Preferred Enterprises



On December 29, 2010, the Israeli Knesset
approved the Economic Policy Law for 2011-2012, whereby the Law for the Encouragement of Capital Investments, 1959, was amended
(hereinafter – “the Amendment”). The Amendment is effective from January 1, 2011 and its provisions will apply
to preferred income derived or accrued by a Preferred Company, as defined in the Amendment, in 2011 and thereafter.



The Amendment does not apply to an Industrial
Enterprise that is a mine, other facility for production of minerals or a facility for exploration of fuel. Therefore, ICL plants
that are defined as mining plants and mineral producers will not be able to take advantage of the tax rates proposed as part of
the Amendment. In addition, on August 5, 2013, the Law for Change in the Order of National Priorities, 2013, was passed by the
Knesset, which provides that the tax rate applicable to a Preferred Company in Development Area A will be 9% whereas the tax applicable
to companies in the rest of Israel will be 16%. On November 30, 2015, the Economic Efficiency Law was passed by the Knesset, which
expanded the exception to all of an Enterprise’s activities up to the time of the first marketable product (for additional
details – see Section 5 below). The Company has Preferred Enterprises at the tax rate of 9%. Nonetheless, tax benefits to
which a Benefited Plant is entitled will not be cancelled in respect of investments up to December 31, 2012. Therefore, those plants
will be able to utilize the tax benefits in respect of qualifying investments made up to December 31, 2012, in accordance with
the provisions of the old law.



It is further provided in the Amendment
that tax will not apply to a dividend distributed out of preferred income to a shareholder that is an Israeli-resident company.
A dividend distributed out of preferred income to a shareholder that is an individual or a foreign resident covered by a treaty
for prevention of double taxation, will be subject to tax at the rate of 20%.



c) Trapped Earnings Law – Temporary
Order



On November 5, 2012, the Israeli Knesset
passed Amendment No. 69 and Temporary Order to the Law for the Encouragement of Capital Investments, 1959 (hereinafter –
“the Temporary Order”), which offers a reduced tax rate arrangement to companies that received an exemption from Companies
Tax under the aforesaid law. The Temporary Order provides that companies that choose to apply the Temporary Order (effective for
one year), will be entitled to a reduced tax rate on the “release” of exempt profits.



In November 2013, the Company’s Board
of Directors decided to apply the Temporary Order and to release part of the exempt earnings. As a result, the amount of about
NIS 3.8 billion (about $1.1 billion) of the exempt earnings was released. Accordingly, in 2013 the Company recognized current tax
expenses in respect of payment of the preferred Companies Tax, in the amount of about NIS 377 million (about $108 million).



F-57


Table of Contents


Note 20 - Taxes on Income (cont’d)



A. Taxation of companies in Israel (cont’d)



4. The Law for the Encouragement of Industry
(Taxation), 1969



a) Some of the Company’s Israeli
subsidiaries are “Industrial Companies”, as defined in the above-mentioned law. As such, these companies are entitled
to claim depreciation at increased rates for equipment used in industrial activities, as stipulated in the regulations published
under the Inflationary Adjustments Law.



b) The industrial enterprises owned by
some of the Company’s Israeli subsidiaries have a common line of production and, therefore, they file, together with the
Company, a consolidated tax return in accordance with Section 23 of the Law for the Encouragement of Industry. Accordingly, each
of the said companies is entitled to offset its tax losses against the taxable income of the other companies.



5. The Law for Taxation of Profits from Natural
Resources



On November 30, 2015, the Knesset passed
the Law for Taxation of Profits from Natural Resources (hereinafter – “the Law”), which entered into effect on
January 1, 2016, except with respect to Dead Sea Works where the effective date is January 1, 2017. The highlights of the Law are
set forth below:



The total tax on natural resources in Israel
will include three tax elements: royalties, Natural Resources Tax and Companies Tax.



Royalties:



The rate of the royalties in connection
with resources produced from the quarries, in accordance with the Mines Ordinance will be 5% (with respect to production of the
phosphates, the royalty rate will be 5% of the value of the quantity produced – in place of 2%). Pursuant to the salt harvesting
agreement signed with the Government on July 8, 2012, the parties agreed, among other things, to an increase in the
rate of the royalties from 5% to 10% of the sales, for every quantity of potash chloride sold by the Company in a given year, in
excess of a quantity of 1.5 million tons. As part of the agreement, it was provided that if a law is enacted that changes the specific
fiscal policy with reference to profits or royalties deriving from quarrying from the Dead Sea, the Company’s consent to
the increase of the rate of the royalties, as stated, will not apply. The Law entered into effect on January 1, 2016. For additional
details – see Note 23C.



Imposition of Natural Resources Tax:



The tax base, which will be calculated
for every resource separately, is the Company’s operating income in accordance with the accounting statement of income, to
which certain adjustments will be made, less financing expenses at the rate of 5% of the Company’s average working capital,
and less an amount that reflects the yield on the balance of the amortized cost of the property, plant and equipment used for production
and sale of the quarried material (hereinafter –”the Yield on the Amortized Cost”). On the tax base, as stated,
a progressive tax will be imposed at a rate to be determined based on the Yield on the Amortized Cost in that year. For the Yield
on the Amortized Cost between 14% and 20%, Natural Resources Tax will be imposed at the rate of 25%, while the yield in excess
of 20% will be subject to Natural Resources Tax at the rate of 42%.



In years in which the Natural Resources
Tax base is negative, the negative amount will be carried forward from year to year and will constitute a tax shield in the succeeding
tax year.



Limitations on the Natural
Resources Tax – the Natural Resources Tax will only apply to profits deriving from the actual production and sale of
each of the following resources: potash, bromine, magnesium and phosphates, and not to the profits deriving from the
downstream industrial activities. Calculation of the Natural Resources Tax will be made separately for every resource.
Nonetheless, regarding Magnesium, it was provided that commencing from 2017, upon sale of carnalite by Dead Sea Works
(hereinafter – “DSW”) to Magnesium and reacquisition of a Sylvanite by-product by DSW, Magnesium will
charge DSW $100 per ton of potash which is produced from the Sylvanite (linked to the CPI).



A mechanism was provided for determination
of the market price with respect to transactions in natural resources executed between related parties in Israel, as well as a
mechanism for calculation of the manner for allocation of the expenses between the production and sale of the natural resource,
on the one hand, and the downstream activities, on the other hand.



F-58


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Note 20 - Taxes on Income (cont’d)



A. Taxation of companies in Israel (cont’d)



Regarding the bromine resource, the Natural
Resources Tax will apply in the same manner in which it is applies to the other natural resources, except with respect to the manner
of determining the transfer price in sales made to related parties in and outside of Israel. For purposes of calculating the total
revenues from bromine sold to related parties for purposes of downstream manufacturing activities in every tax year, a calculation
method will be employed (Netback) whereby the price will be determined based on the higher of the following:



1) The price for a unit of bromine (ton)
provided in the transaction;



2) The normative price of a unit of bromine.
The normative price of a unit of bromine is the total sales of the downstream products produced less the operating expenses attributable
to the downstream activities, without the acquisition cost of the bromine, and less an amount equal to 12% of the total revenues
of the downstream products produced as part of the downstream activities, where the result is divided by the number of bromine
units used to produce the downstream products sold.



Regarding the phosphate resource, for purposes
of calculating the total revenues from phosphate sold to related parties for purposes of downstream manufacturing activities in
every tax year, a calculation method will be employed (Netback) whereby the price will be determined based on the higher of the
following:



1) The price for a unit of phosphate (ton)
provided in the transaction;



2) The normative price of a unit of phosphate.
The “normative price” of a unit of phosphate is the total sales of the downstream products produced less the operating
expenses attributable to the downstream activities, without the acquisition cost of the phosphate rock, and less an amount equal
to 12% of the total revenues of the downstream products produced as part of the downstream activities, where the result is divided
by the number of phosphate units used to produce the downstream products sold.



3) The production and operating costs attributable
to a unit of phosphate.



Companies Tax:



The Law for Encouragement of Capital Investments
was revised such that the definition of a “Plant for Production of Quarries” will include all the plant’s activities
up to production of the first marketable natural resource, of potash, bromine, magnesium and phosphates. Accordingly, activities
involved with production of the resource will not be entitled to tax benefits under the Law, whereas activities relating to downstream
products, such as bromine compounds, acids and fertilizers, will not constitute a base for calculating the Excess Profits Tax and
will not be excepted from inclusion in the Law.



The Natural Resource Tax will be deductible
from the Company’s taxable income and the Company will pay the Companies Tax on the balance as is customary in Israel.



B. Taxation of non-Israeli subsidiaries



Subsidiaries incorporated outside of Israel
are assessed for tax under the tax laws in their countries of residence. The principal tax rates applicable to the major subsidiaries
outside Israel are as follows:



Subsidiary incorporated in the Netherlands
– tax rate of 25%.



Subsidiary incorporated in Germany –
tax rate of 29%.



Subsidiary incorporated in the United States
– tax rate of 40%.



Subsidiary incorporated in Spain –
tax rate of *28%.



Subsidiary incorporated in United Kingdom
– tax rate of 20%.



Subsidiary incorporated in China –
tax rate of 25%.



* The tax rate in Spain was reduced to
25% commencing from 2016.



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Note 20 - Taxes on Income (cont’d)



C. Carried forward tax losses



As at December 31, 2015, the balances of
the carryforward tax losses of subsidiaries, for which deferred taxes were recorded, amount to about $397 million (December 31,
2014 – about $351 million).



The balances of the carryforward tax losses
to future losses of subsidiaries, for which deferred taxes were not recorded, is about $121 million (December 31, 2014 –
about $25 million).



As at the date of the report, the capital
losses for tax purposes available for carryforward to future years for which deferred taxes were not recorded, amount to about
$41 million. In accordance with an assessment agreement with the Israeli Tax Authorities, about $14 million of losses out of this
amount may be utilized only against capital gains the Group companies have from a sale of shares of companies in which they hold
directly at least 30%, to a company they control, directly or indirectly, at the rate of at least 50%.





D. Tax assessments



The Company and the companies consolidated
with it for Israeli tax purposes have received final tax assessments up to and including the 2008 tax year.



The rest of the Israeli subsidiaries have
final tax assessments up to and including the 2009 tax year.



Significant subsidiaries outside of Israel
have final tax assessments up to and including the 2010, 2011 and 2012 tax years (for the majority of them).



In December 2013, an assessment was received
from the Israeli Tax Authority (“ITA”) whereby the Company is required to pay tax in addition to the amount it already
paid in respect of the years 2009-2011, in the amount of about NIS 917 million (about $235 million). The Company has appealed the
ITA’s assessment. On January 27, 2015, an Order was received from the ITA with respect to the amount of the additional tax
demanded, as stated. The main contentions of the ITA are that ICL’s subsidiaries: Dead Sea Works and Rotem Amfert Negev,
are not entitled to benefits under the Law for Encouragement of Capital Investments – this being from the date of entry into
effect of Amendment No. 60 to this Law, in 2005 or, alternatively, the mining and water pumping activities, including the activities
in the evaporation ponds, are not industrial activities and, therefore, are not entitled to benefits under the Law for Encouragement
of Capital Investments. The Company disagrees with the ITA’s position and on February 25, 2015 it filed an appeal of the
Order.



In the Company’s estimation, the
chances that its claims will be accepted at the end of the appeal process are higher than the chances that they will be rejected
and, therefore, no provision for tax was included in the financial statements as a result of the said assessment.



In connection with the tax
returns for the years 2012-2014, in 2015 the Company received a refund of advance tax deposits, in the amount of about
NIS 452 million (about $117 million).





F-60


Table of Contents


Note 20 - Taxes on Income (cont’d)



E. Deferred income taxes



1. The composition of the deferred taxes and
the changes therein, are as follows:



|                                              |  | In
    respect of financial position          |      |             |  |                                     
|--------------------------------------------- |  | --------------------------------------------- | ---- | ----------- |  | ------------------------------------
|                                              |  | Depreciable
    property, plant and equipment |      | Inventories |  | Provisions
    for employee benefits
|                                              |  | $
    millions                               
|Balance as at January 1, 2014                 |  |                                               | (332 | )           |  |                                     
|Changes in 2014:                              |  |                                               |      |             |  |                                     
|Amounts recorded to a capital reserve         |  |                                               | –    |             |  |                                     
|Translation differences                       |  |                                               | 7    |             |  |                                     
|Amounts recorded in the statement of income   |  |                                               | (63  | )           |  |                                     
|Transfer to the group assets held for sale    |  |                                               | –    |             |  |                                     
|Balance as at December 31, 2014               |  |                                               | (388 | )           |  |                                     
|Changes in 2015:                              |  |                                               |      |             |  |                                     
|Additions in respect of business combinations |  |                                               | 4    |             |  |                                     
|Amounts recorded to a capital reserve         |  |                                               | –    |             |  |                                     
|Translation differences                       |  |                                               | 5    |             |  |                                     
|Amounts recorded in the statement of income   |  |                                               | 16   |             |  |                                     
|Balance as at December 31, 2015               |  |                                               | (363 | )           |  |                                     



2. Deferred taxes are presented in the statement
of financial position as follows:



|                                   |  | As
    at December 31
|---------------------------------- |  | ---------------------
|                                   |  | 2015                 
|                                   |  | $
    millions       
|As part of non-current assets      |  |                      
|As part of non-current liabilities |  |                      
|                                   |  |                      



F-61


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Note 20 - Taxes on Income (cont’d)



E. Deferred income taxes (cont’d)



3. The currencies in which the deferred taxes
are denominated:



|        |  | As
    at December 31
|------- |  | ---------------------
|        |  | 2015                 
|        |  | $
    millions       
|Dollar  |  |                      
|Euro    |  |                      
|Shekels |  |                      
|Other   |  |                      
|        |  |                      



4. For companies in Israel – the deferred
taxes as at December 31, 2015 are calculated mainly at the weighted-average tax rate of 25.6% (December 31, 2014 – 25.6%).
Regarding companies outside of Israel – see B above.



F. Taxes on income included in the income
statements



1. Composition



|                                                |  | For
    the year ended December 31
|----------------------------------------------- |  | ----------------------------------
|                                                |  |                                   
|                                                |  |                                   
|Current taxes                                   |  |                                   
|Deferred taxes                                  |  |                                   
|Taxes in respect of release of trapped earnings |  |                                   
|Taxes in respect of prior years(*)              |  |                                   
|                                                |  |                                   



_____________________



| | (*) | Including deferred taxes in respect of prior years.
| | --- | ---------------------------------------------------



2. Following is a reconciliation of the theoretical
tax expense, assuming all income is taxed at the regular tax rates in Israel (see A(2) above) and the tax expense presented in
the statements of income:



|                                                                                                                                                        |  | For
                                         the year ended December 31
|------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------
|                                                                                                                                                        |  | 2015                                                                   
|                                                                                                                                                        |  | $ millions                                                             
|Income before taxes on income, as reported in the
    statements of income                                                                              |  |                                                                        
|Statutory tax rate                                                                                                                                      |  |                                                                        
|Theoretical tax expense on this income                                                                                                                  |  |                                                                        
|Less – tax benefits arising from
    reduced tax rate applicable to an “Preferred Enterprise” and “Benefited Enterprise”                                |  |                                                                        
|                                                                                                                                                        |  |                                                                        
|Add (less) – the tax effect of:                                                                                                                         |  |                                                                        
|Differences between the basis of measurement for tax purposes
    and for financial reporting purposes (the dollar)                                     |  |                                                                        
|Differences in respect of foreign subsidiaries                                                                                                          |  |                                                                        
|Non–deductible expenses                                                                                                                                 |  |                                                                        
|Additional deduction for tax purposes for foreign subsidiaries
    and withholding of tax at the source in respect of a dividend from outside of Israel |  |                                                                        
|Taxes in respect of prior years                                                                                                                         |  |                                                                        
|Elimination of tax calculated in respect of the Company’s
    share in profits of associated companies                                                  |  |                                                                        
|Other differences                                                                                                                                       |  |                                                                        
|Taxes on income included in the income
    statements                                                                                                   |  |                                                                        



F-62


Table of Contents


Note 20 - Taxes on Income (cont’d)



G. Taxes on income relating to equity
items



|                                                                                                                |  | For the year ended December 31
|--------------------------------------------------------------------------------------------------------------- |  | ------------------------------
|                                                                                                                |  | 2015                          
|                                                                                                                |  | $ millions                    
|Tax recorded in other comprehensive income                                                                      |  |                               
|Actuarial gains from defined benefit plan                                                                       |  |                               
|Change in fair value of derivatives used for hedging cash flows                                                 |  |                               
|Taxes in respect of exchange rate differences on equity loan to a subsidiary included in translation adjustment |  |                               
|                                                                                                                |  |                               



Note 21 - Employee Benefits



A. Composition



|                                                                                            |  | As
                                         at December 31
|------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------
|                                                                                            |  | 2015                                                      
|                                                                                            |  | $ millions                                                
|Present value of funded obligations                                                         |  |                                                           
|Less – fair value of plan assets                                                            |  |                                                           
|                                                                                            |  |                                                           
|Present value of unfunded obligations                                                       |  |                                                           
|Post-retirement medical benefits                                                            |  |                                                           
|Recognized liability for defined benefit obligations plans                                  |  |                                                           
|Liability for severance benefits                                                            |  |                                                           
|Total liability for employee benefits recognized
    in the statement of financial position |  |                                                           



The liability in respect of employee benefits
is presented in the statement of financial position as follows:



|                                   |  | As
    at December 31
|---------------------------------- |  | ---------------------
|                                   |  | 2015                 
|                                   |  | $
    millions       
|As part of non-current assets      |  |                      
|As part of non-current liabilities |  |                      
|As part of current liabilities     |  |                      
|                                   |  |                      



Composition of the plans’ assets:



|                                  |  | As at December 31
|--------------------------------- |  | -----------------
|                                  |  | 2015             
|                                  |  | $ millions       
|Equity instruments                |  |                  
|With quoted market price          |  |                  
|Debt instruments                  |  |                  
|With quoted market price          |  |                  
|Without quoted market price       |  |                  
|                                  |  |                  
|Deposits with insurance companies |  |                  
|                                  |  |                  



F-63


Table of Contents


Note 21 - Employee Benefits (cont’d)





B. Linkage terms



|               |  | As
    at December 31
|-------------- |  | ---------------------
|               |  | 2015                 
|               |  | $
    millions       
|Dollar         |  |                      
|Euro           |  |                      
|Israeli Shekel |  |                      
|British pound  |  |                      
|Other          |  |                      
|               |  |                      



C. Severance pay



1. Israeli companies



Pursuant to Israeli labor laws and the
labor contracts in force, the Company and its Israeli subsidiaries are required to pay severance pay to dismissed employees and
employees leaving their employment in certain other circumstances. Severance pay is computed based on length of service and generally
according to the latest monthly salary and one month’s salary for each year worked.



The liabilities relating to employee severance
pay rights are covered as follows:



a) Under collective labor agreements, the
Group companies in Israel make current deposits in outside pension plans for some of the employees. These plans generally provide
full severance pay coverage and, in some cases, 72% of the severance pay liability.



The severance pay liabilities covered by
these plans are not reflected in the financial statements, since all the risks relating to the payment of the severance pay, as
described above, have been transferred to the pension funds.



b) The Group companies in Israel make current
deposits in Insurance policies in respect of employees holding management positions. These policies provide coverage for the severance
pay liability in respect of the said personnel. Under employment agreements, subject to certain limitations, these insurance policies
are the property of the employees. The amounts funded in respect of these policies are not reflected in the balance statements
of financial position since they are not under the control and management of the companies.



c) As to the balance of
the liabilities that are not funded, as mention above, a provision is  recorded in the financial statements based on an
actuarial calculation.



2. Certain subsidiaries outside Israel



Since the countries wherein these subsidiaries
operates have no law requiring payment of severance pay, the Group has not recorded a provision in the financial statements for
possible eventual future severance payments to employees, except in cases where part of the activities of the enterprise is discontinued
and, as a result, the employees are dismissed.



F-64


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Note 21 - Employee Benefits (cont’d)



D. Pension and early retirement



Some of the Group’s
employees in and outside of Israel (some of whom have already left the Group) have defined benefit pension plans (control and
management of the Group companies) for their retirement. Generally, the terms of the plans provide that the employees
are entitled to receive pension payments based on, among other things, their number of years of service (in certain cases up
to 70% of their last base salary) or computed, in certain cases, based on a fixed salary.



In addition to the above, some Group companies
have entered into an agreement with funds – and with a pension fund for some of the employees – under which such companies
make current deposits with that fund which releases them from their liability for making a pension payment under the labor agreements
to all of their employees upon reaching a retirement age. The amounts funded are not reflected in the statements of financial position
since they are not under the control and management of the Group companies.



Employees of a subsidiary in Sodom, Israel
are entitled to early retirement if they meet certain conditions, including age and seniority at the time of retirement.



In December 2013, a plan was approved whereby
a number of employees of the Rotem subsidiary may leave on early retirement prior to the retirement age provided by law. As a result,
in 2013 the Group recorded an expense in the amount of about $60 million included in “other expenses” in the statement
of income.



At the end of 2015, an efficiency plan
was approved whereby it was decided to reduce the number of the Company’s employees in the United Kingdom. As a result of
that stated, in 2015 an expense was recorded, in the amount of about $6 million, in the “other expenses” category in
the statement of income.



On February 2, 2015, the Workers Council
of Bromine Compounds Ltd. (“Bromine Compounds”), which belongs to ICL’s Industrial Products segment, started
a full scale strike at Bromine Compounds’ plants in Neot Hovav and halted all shipments of goods from the plants. The strike
at the plants came, among other things, in response to the efficiency programs the Company is currently executing in Neot Hovav,
whereby the Company requested that a number of employees employed under a collective agreement will be dismissed and/or will leave
under early retirement conditions. On February 19, 2015, in response to the termination letters that were sent to employees of
Bromine Compounds, and further to similar efficiency discussions held at Dead Sea Works (“DSW”), the Workers Council
of DSW gave notice of a full scale strike at DSW’s facilities in Sodom, including the bromine facility and the power station.



On May 28, 2015, an agreement was signed
between DSW and Bromine Compounds, on the one hand, and between the General Workers Council (Histadrut), the DSW Workers Council
and the Bromine Compounds Workers Council, on the other hand, ending the strike, the employment disputes and the legal proceedings
pending among the parties, and allowing the immediate return of the employees to full employment (hereinafter: the “Agreement”).



The key elements of the Agreement are as
follows:



1.	210 employees will voluntarily retire
under the early retirement route.



2.	38 employees will end their employment
by December 31, 2015 under the severance pay route (or earlier under certain conditions), and will be entitled to special severance
pay in excess of that prescribed by law.



3.	The parties consent to implementation
of the efficiency plans in DSW and Bromine Compounds and to implementation of the plan to establish the regional shared services
center (under ICL Israel).



4.	During the period beginning on the
signing date of the Agreement and up to completion of the efficiency plans or until December 31, 2018, whichever occurs first (the
“Efficiency Period”), no collective dismissal, including early retirement which is not voluntary, shall take place
in DSW and in Bromine Compounds. Despite the aforesaid, up to July 1, 2017, the management of Bromine Compounds may execute an
early retirement plan which is not voluntary retirement, wherein up to 45 employees will retire subject to certain terms specified in the Agreement.



F-65


Table of Contents


Note 21 - Employee Benefits (cont’d)



D. Pension and early retirement (cont’d)



5.	During the Efficiency Period it was
determined, among other things, that the management may transfer employees and may adjust the number of positions in the companies,
perform structural and organizational changes, and establish and operate new installations and projects.



6.	Management will be permitted to transfer
employees under the existing employment agreements – this being in addition to the employee transfer provisions in Section
e. above.



In light of the Agreement, in 2015,
the Company increased the provision for employee benefits in respect of conclusion of employment by about $42 million.



E. Post-employment retirement benefits



Some of the retirees of the Group companies
receive, aside from the pension payments from a pension fund, benefits that are primarily holiday gifts and weekend trips. The
companies’ liability for these costs accrues during the employment period. The Group companies include in their financial
statements the projected costs in the post-employment period according to an actuarial calculation.



F.



1.	Movement in present value of defined
benefit plans



|                                                                        |  | For the year ended December 31
|----------------------------------------------------------------------- |  | ------------------------------
|                                                                        |  | 2015                          
|                                                                        |  | $ millions                    
|Obligation in respect of defined benefit plan at beginning of the year  |  |                               
|Current service costs                                                   |  |                               
|Interest costs                                                          |  |                               
|Employee contributions                                                  |  |                               
|Benefits paid                                                           |  |                               
|Actuarial losses (gains) deriving from changes in financial assumptions |  |                               
|Actuarial gains deriving from changes in demographic assumptions        |  |                               
|Past service cost                                                       |  |                               
|Changes in respect of exchange rate differences                         |  |                               
|Changes in respect of translation differences                           |  |                               
|Assets held for sale                                                    |  |                               
|Obligation in respect of defined benefit plan  at end of the year       |  |                               



2.	Movement in plan assets for defined
benefit plans



|                                                    |  | For the year ended December 31
|--------------------------------------------------- |  | ------------------------------
|                                                    |  | 2015                          
|                                                    |  | $ millions                    
|Fair value of plan assets at beginning of the  year |  |                               
|Interest income                                     |  |                               
|Actuarial gains recognized in equity                |  |                               
|Employer contributions                              |  |                               
|Employee contributions                              |  |                               
|Benefits paid                                       |  |                               
|Changes in respect of exchange rate differences     |  |                               
|Changes in respect of translation differences       |  |                               
|Assets held for sale                                |  |                               
|Fair value of plan assets at end of the year        |  |                               



F-66


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Note 21 - Employee Benefits (cont’d)



F. (cont’d)



3.	Expenses recognized in the income statement



|                               |  | For
    the year ended December 31
|------------------------------ |  | ----------------------------------
|                               |  | 2015                              
|                               |  | $
    millions                    
|Current service costs          |  |                                   
|Interest costs                 |  |                                   
|Interest income                |  |                                   
|Past service cost              |  |                                   
|Exchange rate differences, net |  |                                   
|                               |  |                                   



4.	Actual and expected return



|                                        |  | For
    the year ended December 31
|--------------------------------------- |  | ----------------------------------
|                                        |  | 2015                              
|                                        |  | $ millions                        
|Actual return
    (loss) on plan assets |  |                                   
|Expected yield on plan
    assets       |  |                                   



5.	Actuarial gains and losses recognized
directly in equity



|                                                                                          |  | For
    the year ended December 31
|----------------------------------------------------------------------------------------- |  | ----------------------------------
|                                                                                          |  | 2015                              
|                                                                                          |  | $
    millions                    
|Cumulative amount (before tax) as at  January
    1                                       |  |                                   
|Actuarial losses (gains) deriving from changes in demographic
    assumptions             |  |                                   
|Actuarial losses (gains) deriving from changes
    in financial assumptions               |  |                                   
|Cumulative amounts (before tax) as at December 31                                         |  |                                   
|Deferred taxes in respect of actuarial gains
    and losses recognized directly in equity |  |                                   
|                                                                                          |  |                                   



6a.	Actuarial assumptions



Principal actuarial assumptions at the reporting
date (expressed as weighted averages):



|                                |  | For
    the year ended December 31
|------------------------------- |  | ----------------------------------
|                                |  | 2015                              
|                                |  |                                   
|Discount rate as at December 31 |  |                                   
|Future salary increases         |  |                                   
|Future pension increase         |  |                                   



The assumptions regarding the future mortality
rate are based on published statistics and accepted mortality tables.



In 2014, it was determined that there is
a deep market for high quality corporate debentures in Israel. Accordingly, commencing December 31, 2014, the defined benefit obligation
and other long-term benefits that are shekel-denominated or shekel-linked are to be discounted according to an interest rate derived
from an interest curve based on the rate of the yields on high quality corporate debentures in accordance with IAS 19, Employee
Benefits.



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Note 21 - Employee Benefits (cont’d)



F. (cont’d)



6b.	Sensitivity analysis



Assuming all other assumptions remain constant,
the following reasonable possible changes effect the defined benefit obligation as of the date of the financial statements in the
following manner:



|                                  |  | December
    2015
|--------------------------------- |  | -----------------
|                                  |  | Decrease
    10% 
|                                  |  | $
    millions   
|Significant actuarial assumptions |  |                  
|Discount rate                     |  |                  
|Salary increase                   |  |                  
|Mortality table                   |  |                  



G.



The expenses recorded in respect of defined
contribution plans in 2015 is about $23 million (in 2014 and
2013 – expenses were declared in the amounts of about $25.9 million and about $26.4 million, respectively).



The Group’s estimate of the deposits
expected to be made in 2016 in funded defined benefit plans is about $16 million.



The Group’s estimate life of the
defined benefit plans (based on a weighted average), as at the end of the period of the report, is about 12.2 years (2014–
about 12.8 years).



H. Long-term remuneration plan



In May 2013, ICL’s Board of Directors
decided to approve a long-term remuneration plan for about 11,300 employees of the Company in and outside of Israel who are not
managers that participated in the Company’s options’ plan (which was approved in November 2012) based on terms defined
in the plan. The maximum cost of the plan is about $45 million.



In August 2014, ICL’s Board of Directors
decided to approve a long-term remuneration plan for about 11,800 Company employees in and outside of Israel that are not managers,
who participated in the Company’s options and shares plan (which was approved on the same date) pursuant to the terms provided
in the plan. The maximum cost of the plan is about $17 million.



As at the reporting date, the said terms
were not met and, accordingly, no liability was included in the books in respect of these plans.



Note 22 – Provisions



A. Composition and changes in the provision



|                                                   |  | Site
    restoration, removal and dismantling of property, plant and equipment items |     | Legal
    claims |  | Other |    | Total
|-------------------------------------------------- |  | ------------------------------------------------------------------------------------ | --- | ---------------- |  | ----- | -- | -----
|                                                   |  | $
    millions                                                                      
|Balance as at January 1, 2015                      |  |                                                                                      | 103 |                  |  |       | 4  |      
|Change in respect of business combinations         |  |                                                                                      | 10  |                  |  |       | 1  |      
|Provisions made during the period                  |  |                                                                                      | 24  |                  |  |       | 9  |      
|Provisions reversed during the period              |  |                                                                                      | –   |                  |  |       | (1 | )    
|Effect of the passage of time (due to discounting) |  |                                                                                      | 4   |                  |  |       | –  |      
|Payments during the  period                        |  |                                                                                      | (4  | )                |  |       | (1 | )    
|Translation differences                            |  |                                                                                      | (5  | )                |  |       | (1 | )    
|Balance as at December 31, 2015                    |  |                                                                                      | 132 |                  |  |       | 11 |      



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Note 22 – Provisions (cont’d)



A. Composition and changes in the
provision (cont’d)



Presentation in the statement of financial
position:



|                           |  | As
    at December 31
|-------------------------- |  | ---------------------
|                           |  | 2015                 
|                           |  | $
    millions       
|In current liabilities     |  |                      
|In non-current liabilities |  |                      
|                           |  |                      



B. Restoration of mines and mining sites



1. The Group recorded a
provision for restoration of mines and mining sites. The provision is based on the present value of the cash flows based on an
estimate of the future expenses that will be required to close down the mines and to restore the mining sites. The estimated closing
date of the mines is based on a geological evaluation of the quantity of minerals remaining in the mines.





2. Pursuant to the provisions of
Spanish law covering environmental protection in connection with areas affected by mining activities, in the year 2015, a
subsidiary in Spain from the ICL Fertilizers segment (hereinafter – "ICL Iberia") has submitted to the
Catalan Government Restoration Programs of mining sites for ICL Iberia’s two production sites, Suria and Sallent,
(hereinafter – “the Restoration Plans”), which includes plans of removing the waste and dismantling of
installations. The Restoration of Suria site is intended to last until year 2094 and for Sallent site until the year 2070. As
at December 31, 2015, based on the Restoration Plans and according to ICL Iberia’s estimation, the total provision in
the ICL Iberia’s books amounts to about $11 million. The provision was calculated on the basis of discounting the
projected costs of removing the waste and dismantling of installations. Regarding the signing of the agreement of
understandings with the Government of Catalonia, which is intended to regulate the obligations of ICL Iberia to restore
the site – see Note 23 below.



3. A manufacturing facility of the
Group in Neot Hovav, Israel has solid waste. Pursuant to the requirements of the Israeli Ministry of Environmental
Protection, the subsidiary is required to treat the existing waste (historical), which is stored on a special site on the
facility's premises, as well as the ongoing waste that is produced in the facility's present manufacturing processes. The
treatment will be partly through a restoration facility of hydro-bromine acid, operated by the subsidiary, while part of the
waste will be sent outside for treatment. As part of the treatment processes of the historical waste that began in 2015, it
was found that additional costs are required to be incurred, due to, among other things, the need to use higher-cost raw materials.
In light of that stated, the Company recorded an additional provision, in the amount of about $20 million, which was recorded
in the "other expenses" in the statement of income. As at December 31, 2015, the total provision for treatment
of waste amounts to about $65 million. In the Company's estimation, based on the information it has as at the approval date
of the financial statements, the provision covers the estimated cost of treating the historical waste.





Note 23 - Commitments, Concessions and Contingent Liabilities



A. Commitments



(1) Several of the Group’s subsidiaries
have entered into agreements with suppliers in and outside of Israel for the purchase of raw materials in the ordinary course
of business, for various periods ending on December 31, 2022. The total amount of the commitments under the said purchase periods
of the agreements is approximately $664 million as of December 31, 2015.



(2) Several of the Group’s subsidiaries
have entered into agreements with suppliers for acquisition of property, plant and equipment. As at December 31, 2015, the subsidiaries
had capital purchase commitments of about $230 million.



(3) A subsidiary in England has entered
into 114 long-term land contracts for the lease of land used to mine potash. The lease fees are generally determined based on
the quantity of potash mined in each leased area. The two main lease contracts run up to 2020 and 2035. The contracts are usually
signed for a term of 35 to 50 years. As at the date of the report, the remaining term covered by the lease contracts range from
5 to 23 years.





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Note 23 - Commitments, Concessions and Contingent
Liabilities (cont’d)



A. Commitments (cont’d)



(4) In 2003, a long-term (20 year) supply
agreement was signed between an Israeli subsidiary and a non-Israeli corporation commencing from January 2004, for the supply of
bromine and bromine compounds by the subsidiary.



(5) The Articles of Association of the
Company and its Israeli subsidiaries include provisions that permit exemption, indemnification and insurance of the liability of
officers, all in accordance with the provisions of the Israeli Companies Law.



The Company, with the approval of the Audit
Committee, the Board of Directors and the General Meeting of the shareholders, granted its officers an exemption and letters of
indemnification, and has also taken out an insurance policy covering directors and officers. The insurance and the indemnity do
not apply to those cases specified in Section 263 of the Israeli Companies Law. The exemption is for damage caused and/or that
will be caused by such officers, due to a breach of the duty of care to the Company. Commencing from the date of registration of
the Company’s shares for trading in the United States, the amount of the indemnification payable by the Company under the
letter of indemnification, in addition to amounts received from an insurance company, if any, for all of the officers on a cumulative
basis, for one or more of the events detailed therein, was limited to $350 million ($250 million up to the date of registration
of the Company’s shares for trading in the United States). The insurance is renewed annually. The coverage in effect (including
a joint layer with the parent company in the amount of $20 million) is in the aggregate amount of $220 million.



(6) Several of the Group’s subsidiaries
in Israel have signed agreements with various natural gas vendors for the supply of natural gas to the Group’s manufacturing
facilities in Israel. The Company committed to “take or pay” with respect to a minimum annual quantity of gas in a
scope and in accordance with the mechanism provided in the agreements. The total quantities under the currently existing agreements
should provide the Group all its gas needs until September 30, 2017, including quantities required to operate the power station
the Group intends to construct in Sodom, Israel, which is expected to start in the second half of 2016. The supply of the gas under
the currently existing agreements is for a term ending September 30, 2017. In 2012, the Council for Natural Gas Matters published
a decision regarding arrangement of use of the natural gas pipeline capacity from the Tamar drilling rig up to the exit point of
the natural gas from the receiving station in Ashdod (hereinafter – “the Gas Authority Decision” and “the
Gas Pipeline”). The Gas Authority Decision stipulates that the gas pipeline capacity is limited and it is not able to supply
the entire amount of the anticipated demand in the upcoming years. Accordingly, the Gas Authority Decision provides, among other
things, that upon a shortage of capacity in the production of gas, allocation of the supply of gas will be pro rata among all the
consumers connected to the national gas transport system, based on the formula provided in the Gas Authority Decision. In addition,
as part of the Gas Authority Decision, certain limited exceptions were provided for the pro rata mechanism regarding assurance
of capacity for supply of certain quantities of natural gas to the transport network’s consumers and giving priority with
respect to utilization of natural gas in the Israel Natural Gas Lines transport pipeline (“linepack”) to consumers
that signed an agreement with the Yam Thetys Group and/or with the Tamar Group prior to August 14, 2012. This arrangement of the
transport capacity is different than allocation provisions with respect to capacity in the gas pipeline upon a shortage of capacity,
which were included in the Tamar agreement. To the best of the Company’s knowledge, the pro rata mechanism in the Gas Authority
Decision should increase the amount of gas supplied to the Company upon a shortage of capacity in the gas pipeline in accordance
with the Tamar agreement. As at the date of the report, it is not known how the Gas Authority Decision will be implemented and/or
its impact on the Yam Thetys agreement and/or on the Tamar agreement. The Company anticipates that the amount of the annual consumption
of the gas, after operation of the power station, as is expected to be received based on the Yam Thetys agreement and the Tamar
agreement, will be about BCM 0.76.



(7) In June 2012, the Company entered
into agreements regarding a project to construct a new cogeneration power station in Sodom, Israel
(hereinafter—“the Project”). The power station will have a production capacity of about 230 megawatt hours
and about 330 tons of steam per hour, which will supply electricity and steam requirements for the production plants at the
Sodom site. The Company intends to operate the new power station concurrently with the existing power station, which will be
operated on a partial basis in a “hot back up” format, to produce electricity and steam. The total
electricity production in the short term will be 245 megawatt hours. The Company also intends to utilize its
present gas contracts and thereafter to enter into new gas contracts in order to run the power station.



Construction of the project was
expected to be completed in the second half of 2015.  In 2015, the executing contractor (the Spanish Company
“Abengoa”) experienced difficulties and pursuant to the decision of the Spanish court delivered in November 2015,
it was granted protection from its creditors up to the end of the first quarter of 2016. The Company is examining
the possibility of continuing execution of the construction work of the power
station and completion thereof. In light of that stated, the Company expects to complete the project and to commence
operation of the power station in the second half of 2016, with additional costs that are not material.



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Note 23 - Commitments, Concessions and Contingent
Liabilities (cont’d)



A. Commitments (cont’d)



(8) Subsequent to the date of the report,
on February 24, 2016, the Company signed a long term agreement with Albemarle for supply of polymer flame retardants, a modern
product produced in ICL’s factories in the Netherlands and in Israel. The agreement is subject to preconditions, among others,
approval of the Antitrust Authority in Israel. In the framework of the agreement, Albermarle will supply the Company all the bromine
it needs to produce GreenCrest® (Albermarle’s brand name).



B. Concessions



(1) Dead Sea Works Ltd. (DSW)



Pursuant to the Israeli Dead Sea Concession
Law, 1961 (hereinafter—”the Concession Law”), as amended in 1986, and the concession indenture attached as an
addendum to the Concession Law, the Company was granted a concession to utilize the resources of the Dead Sea and to lease the
land required for its plants in Sodom for a period that is expected to end on March 31, 2030, accompanied by a priority right to
receive the concession after its expiration, should the Government wish to offer a new concession.



In August 2015, the Minister of Finance
appointed a team for the establishment of the “governmental activities to be conducted towards the end of the concession
period”. In September 2015, the team published a request for comments of the public regarding positions and viewpoints in
connection with the end of the concession, which are to be submitted by the end of March 2016. The team is expected to submit its
recommendations to the Minister of Finance by May 2016. There is no certainty as to what the recommendations of this committee
will be with regard to the procedures that the government will undertake in connection with the existing concession and as to the
manner in which future mining rights will be granted.



According to the Concession Law, ICL
has a right of first offer in the event that following the expiration of the current concession the government would offer
new concession rights to a third party.



The Minister of Finance also appointed
a second team designated to establish certainty regarding the manner in which, according to the current concession, the replacement
value of DSW’s tangible assets will be calculated at the end of the concession period in the event such assets are to be
returned to the government. The actual calculation will be executed only in 2030.



This team was expected to submit its recommendations
to the Minister of Finance by March 2015. There is no certainty as to what the recommendations of this team will be with regards
to the above mentioned and as to whenever they are expected to be submitted.



In addition, there is no certainty as to
how the government will interpret the Concession Law, the manner in which this process and methodology will eventually be implemented,
as well as how the value of the tangible assets will be calculated.







In consideration of the
concession, the Company pays royalties to the Government of Israel, calculated at the rate of about 5% of the value of the products
at the factory gate, less certain expenses, where according to the Salt Harvesting agreement, the royalties rate in respect of
the annual quantity of potash sold in excess of 1.5 million tons is 10% (in place of 5%). In addition, according to the
Salt Harvesting agreement, if legislation is enacted that changes the specific fiscal policy in connection with profits or royalties
deriving from mining of quarries from the Dead Sea, the Company’s consent will not apply regarding an increase in the rate
of royalties on the surplus quantities referred to above, commencing from the date on which additional tax is collected as stated
in the legislation. On November 30, 2015, the Economic Efficiency Law was published, including the implementation of the Sheshinski
recommendations, which address royalties and taxation of excess profits from Dead Sea minerals. The law entered into effect on
January 1, 2016. For further details see – Note 20(5) above.



DSW granted a sub-concession to Dead Sea
Bromine Ltd. to produce bromine and its compounds from the Dead Sea, the expiration date of which is concurrent with the
DSW's concession. The royalties in respect of the products manufactured by the Bromine Company are received by DSW from the Bromine
Company, and DSW then pays them over to the State.







In addition, there is an arrangement relating
to payment of royalties by Dead Sea Magnesium for production of metal magnesium by virtue of a specific arrangement with the State
provided in the Government’s decision dated September 5, 1993. Pursuant to the arrangement, royalties are paid by Dead Sea
Magnesium on the basis of carnallite used for production of magnesium.



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Note 23 - Commitments, Concessions and Contingent
Liabilities (cont’d)



B. Concessions (cont’d)



The arrangement with Dead Sea Magnesium
provides that during 2006 the State may demand a reconsideration in connection with the amount of the royalties and the method
or their calculation for 2007 and thereafter. The State’s demand for reconsideration, as stated, was first received at the
end of 2010, and the matter is presently in an arbitration proceeding, as described below.



In 2007, a letter was received from the
Accountant General of the Israeli Ministry of Finance, claiming an underpayment of royalties amounting to hundreds of millions
of shekels. Pursuant to the concession, disputes between the parties relating to the concession, including royalties, are to be
decided by an arbitration panel of three arbitrators (each side appoints an arbitrator and these two appoint the third). On January
9, 2011, the State of Israel and DSW decided to turn to arbitration for purposes of deliberating and deciding the issue of the
manner of calculation of the royalties under the concession and royalties to be paid for magnesium metals and payment or refunds
(if any) due deriving from these matters. Each of the parties appointed an arbitrator on its behalf and these arbitrators appointed
the third arbitrator.



In the statement of claim filed by the
State of Israel in the arbitration proceedings, the State of Israel is claiming the amount of $265 million in respect of underpayment
of royalties for the years 2000 through 2009, with the addition of interest and linkage differences, and a change in the method
of calculating royalty payments from the sale of metal magnesium.



On May 19, 2014, a
partial arbitration decision was received regarding the royalties’ issue. Based on the principles of the decision
received, DSW is also required to pay the State royalties on the sale of downstream products manufactured by companies that
are controlled by ICL that have production plants located both in and outside the Dead Sea area, including outside of Israel.
The royalties are to be paid according to the value of the downstream products, which will be set according to the formula
described in Section 15(a)(2) of the Concession Deed, based on the selling price of the downstream products to unrelated
third parties less the deductions set forth in subsections (I), (II) and (III) of that Section. Regarding metal magnesium, it
was decided that the State of Israel and DSW are to exhaust their discussions on the subject of the royalties to be paid by
DSW on metal magnesium, and if no agreement is reached the matter is to be returned to arbitration. As a result of the
partial arbitration decision, the Company recorded a provision in 2014, in the amount of about $135 million for the years
2000 through 2013. The amount of this provision includes, among other things, interest and is net of the tax effect (the
amount of about $149 million in respect of royalties for prior periods plus interest of about $31 million and net of the tax
effect, in the amount of about $45 million). The arbitrators’ decision is partial and its main decision is with respect
to payment of royalties on downstream products, as mentioned above. All the principles have not yet been determined whereby
the financial calculations will be made. Such principles are being discussed in the second and current stage of the
arbitration. In  2015, as a result of decisions made as part of the arbitration discussions in connection with the
principles for the manner of calculating the royalties, the Company increased the provision by about $10 million.



In November  2015, as part of the
second stage of the royalties arbitration, the State submitted an opinion on its behalf relating, mainly, to the principles
whereby the interest to be added to the royalties’ payment in the relevant arbitration period is to be calculated. As
part of the said opinion, the State presented two optional calculation methods, the results of which yield the amounts of NIS
230 million (about $59 million) and NIS 460 million (about $118 million). The Company disagrees with the State’s
position and calculations, and in January, 2016, it submitted its position regarding calculation of the interest.



The
Company estimates that the chances that its position will be accepted regarding the manner of calculating the royalties, based
on the decision of the arbitrators in the partial decision, and regarding the principles for calculating the interest, are higher
than the chances that they will be rejected.





In 2015, 2014 and 2013, DSW paid current royalties to the Government of Israel in the amounts of about $97 million, about
$84 million and about $110 million, respectively. In addition, in 2015, the Company paid an amount of about $152 million,
in respect of royalties relating to prior periods.



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Note 23 - Commitments, Concessions and Contingent
Liabilities (cont’d)



B. Concessions (cont’d)



(2) Rotem



Rotem has been mining phosphates in the
Negev in Israel for more than fifty years. The mining is conducted in accordance with phosphate mining concessions, which are granted
from time to time by the Minister of National Infrastructures under the Mines Ordinance, through the Supervisor of Mines in his
Office (hereinafter—“the Supervisor”), accompanied by mining authorizations issued by the Israel Lands Administration
(hereinafter—“the ILA”). The concessions relate to the quarry (phosphate rock) whereas the authorizations relate
to use of land as active mine sites.



Rotem has the following mining concessions:



i. Rotem Field – valid up to the
end of 2021;



ii. Zafir Field – (Oron Zin) –
valid up to the end of 2021;



iii. Hatrurim Field – the Supervisor
has decided to extend the area of the Rotem field concession so that it will include the Hatrurim Field and the matter has been
transferred to the ILA to deal with the extension of the area of the mining permit for the Rotem Field, in accordance with the
extension of the concession area.



In September 2012, a committee was set
up by the Director General of the Israeli Ministry of Energy and Water, to examine the phosphates sector in order to look into
the use of the phosphate resource in Israel. The committee published its recommendations and, among other things, recommended to
examine the possibility of imposing certain restrictions on the manner of the mining and utilization of the phosphates, and also
recommended to approve mining in additional fields, such as, the Barir field.



As at the reporting date, no operative
decisions had been made based on the committee’s recommendations.



Mining royalties



In respect of mining of the phosphate, Rotem is required to pay the State of Israel royalties based on a calculation format
stipulated in the Israeli Mines Ordinance. The calculation format for the royalties was updated in February 2010 as part of
a compromise agreement that settled all the disputes regarding past royalties and formulas for future royalties. On November
30, 2015, the Economic Efficiency Law was published, including the implementation of the Sheshinski recommendations, which
address royalties and taxation of excess profits from Dead Sea minerals. The law entered into effect on January 1, 2016. For
further details see – Note 20(5) above.



In 2015, 2014 and 2013, Rotem paid royalties
to Israeli government in the amounts of approximately $3.5 million, $3 million and $4 million, respectively.



Planning and building



The mining and quarrying activities require
zoning approval of the site based on a plan in accordance with the Israeli Planning and Building Law, 1965. These plans are updated,
as needed, from time to time. As at the date of the report, there are various requests at different stages of deliberations pending
before the planning authorities.



At the end of 2009, according to the recommendation
of a team accompanying preparation of a new site plan for the Zin-Oron area in Israel, the Local District Board approved extension
of the execution stages of the site plan from 1991, which zones the Zafir site (Zin-Oron) for mining up to the end of 2013. In
September 2013, the Local District Board approved extension of additional stages up to the end of 2015.



In August 2015, the District Committee
decided to deposit a new mining plan for the Zin Oron area, and also decided to further extend the stages for the plan in effect
up to the end of 2016, in order to provide a plan framework for the work being performed on the area for a period of time intended
for completion of the required processes for deposit of the new plan and its actual approval.



The Company is working to promote the
plan for mining phosphates in Barir field (which is part of Zohar South) in the Negev Desert.



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Note 23 - Commitments, Concessions and Contingent
Liabilities (cont’d)



B. Concessions (cont’d)





In December 2015, the
National Planning and Building Council approved the Policy Document regarding Mining and Quarrying of Industrial Minerals (the
"Policy Document"), which includes, among other things, a recommendation to permit phosphates mining including at Barir
field. The Policy Document that was approved will set the basis for preparation of a national outline plan (“the National
Outline Plan”) for mining and quarrying to also be approved by the National Planning and Building Council. Along with the
approval of the Policy Document, the National Planning and Building Council ordered the Planning Administration to raise the matter
of the order to prepare a detailed plan for Barir field (“the Barir Plan”) at one of its upcoming meetings.



In addition, in February 2016 the
municipality of Arad, together with several other plaintiffs, including, among others, residents of the town Arad, the
communities and Bedouin villages surrounding the area, filed a motion with the Israeli Supreme Court of Justice against the
approval of the Policy Document to authorize phosphate mining in the Zohar South area due to their fear from environmental
and health dangers. The Company believes that the mining activities in Barir field do not involve any risks to the
environment or to people.







There is no certainty that the
National Outline Plan and the Barir Plan will be approved at all or as will be submitted, in light of the opposing
position of the Health Ministry, among other things. Moreover, there is no certainty regarding the timelines for the submission of
the Plans, the approval thereof or of further developments with respect to Barir field.



If mining approval is not received for
the Barir field, this will significantly impact the Group’s future mining reserves in the medium and long term.



(3) A subsidiary in Spain from the ICL
Fertilizers segment (hereinafter – “ICL Iberia”) was granted mining rights based on legislation of Spain’s
Government from 1973 and the regulations accompanying this legislation. Further to the legislation, as stated, the Government of
the Catalonia region published special mining regulations whereby ICL Iberia received individual licenses for each of the 126 different
sites that are relevant to the current and possible future mining activities. Some of the licenses are valid up to 2037 while the
rest are effective up to 2067. Regarding “Reserva Catalana”, an additional site wherein mining has not yet been commenced,
it was clarified that in 2007 a process was commenced for extension of the concession period, which ended in 2012, for an additional
30 years. In light of the changeover of the governments in Spain, the administrative processes of the National Mining Authority
with respect to extending the concession period have not yet been completed. As at the reporting date, ICL Iberia is in the process
of renewing the rights. According to the Spanish authorities, the concession period is valid until a final decision is made regarding
renewal of the concession period.



(4) The mining rights of a subsidiary in
the United Kingdom, from the ICL Fertilizers segment (hereinafter—”ICL UK”) are based on approximately 114 mining
leases and licenses for extracting various minerals, in addition to numerous easements and rights of way from private owners of
land under which ICL UK operates, and mining rights in the North Sea granted by the British Crown (“Crown Estates”).
As at the date of the report, all the lease periods, licenses, easements and rights of way are effective – some of the said
periods will expire up to 2020 whereas some will continue up to 2038. In 2015, the mining royalties amounted to about $5 million.



(5) ICL UK has peat mines in the U.K. (Creca,
Nutberry and Douglas Water). Peat is used as a raw material for production of professional grade growing media for ornamental plants.



The Nutberry and Douglas Water mining sites
are owned by the ICL UK, while the Creca mine is held under a long-term lease. The mining permits are granted up to the end of
2024. The mining permits are granted by the local authorities and are renewed after examination of the local authorities. The last
time the mining permit for Creca was renewed was in 2010 (for a period of 14 years up to the end of 2024) whereas the mining permits
for Nutberry and Douglas Water were renewed in 2014 (for a period of 10 years up to the end of 2024).



(6) YPH JV, which is controlled by
ICL UK, holds two phosphate mining licenses that were issued in July, 2015, by the Division of Land and Resources of the
Yunnan district in China, with reference to the Haikou Mine (“Haikou”), which is valid up to January, 2043 and the Baitacun Mine
(“Baitacun”), which is valid up to November 2018.



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Note 23 - Commitments, Concessions and Contingent
Liabilities (cont’d)



B. Concessions (cont’d)











The
mining right of Haikou was previously owned by YPC. According to the Mining Concession Grant Contract of Haikou Mine entered into
by and between YPC and the Land and Resources Department of Yunnan Province (together with its local equivalents, "Resources
Department") in November 2012, the total price to be paid to the Resources Department in consideration for the mining concession
of Haikou was about $27 million which has been paid in full (not including mineral resources compensation fees and other charges
required by applicable PRC laws). The mining right of Baitacun was previously owned by YPC as well. However, YPC did not enter
into a concession agreement since the Baitacun mining right was obtained by YPC before the relevant PRC laws requiring the Resources
Department to sign such agreements were published. As part of the formation of YPH JV, in October 2015, the mining rights related
to Haikou and Baitacun were transferred to YPH JV.



Renewal
of Mining License - to retain the Haikou and Baitacun licenses, YPH JV has to comply with the provisions of the relevant Chinese
laws and regulations regarding mining activities. In particular, YPH JV has to conduct annual check with regard to its mining
licenses. The items to be examined in the annual check mainly include: whether the taxes, fees, premiums relating to the mining
license and mining activities conducted by a company have been paid in full; whether the annual reserve report (as applicable)
have been submitted; whether various mining parameters have met the standards required by law; whether land reclamation has been
conducted and whether there are any penalties imposed on the company or violation of laws by the company. In addition, YPH JV
has to submit the renewal application to the Resources Department 30 days prior to the expiry of the applicable mining license.





Additional
Payments - in respect of the mining rights, YPH JV is required to pay the authorities a “Mineral Resources Compensation
Fee” at the rate of 2% of YPH JV’s sales revenue of rock phosphate mined from Haikou and Baitacun. In addition, YPH
JV is required to pay a “Resource Tax”, which at the present time stands as 15 yuan per tonne of YPH JV’s sale
volume of rock phosphate mined from the Haikou Mine and the Baitacun Mine.



Grant
of Mining Rights to Lindu - according to a statement issued by YPC on February 29 ,2016, YPC entered in 2010 into agreements with
the local authority of Jinning County, Yunnan Province and Jinning Lindu Mining Development and Construction Co., Ltd. (“Lindu”),
according to which, Lindu can mine up to two million tons of phosphate rock from a certain area of 621 mu (equivalent to 0.414
km2), within the area of the Haikou (the “Daqing Area”) and sell such phosphate rock to any third party at its own
discretion. However, as of the date of such statement, YPC believes that Lindu has not conducted any mining or sale according
to such agreements. Prior to the formation of YPH JV, YPC proposed to the relevant local authority of Jinning County and Lindu
Company to swap the rights granted to Lindu in the Daqing Area with another area which is not a part of Haikou and have Lindu
Company mine in that area, so as to ensure that the interest of YPH JV would not be affected by the mining and sale conducted
by Lindu Company. However, due to personnel changes in the relevant local authority of Jinning County and Lindu Company, the negotiation
is still on-going. YPC undertakes to continue to promote the negotiation, so as to ensure that YPH JV’s mining right in
the Haikou will not be adversely affected by the above-mentioned arrangements regarding Lindu’s mining rights within the
Daqing Area.



(7)
The Company holds a potash mining license for the Danakhil mine in the Afar region in Northeast Ethiopia, through its acquisition
of Allana, which was granted on October 8, 2013 by the Ministry of Mines in Ethiopia. The mining license is valid for a period
of 20 years and may be renewed for an additional period of 10 years each.



Pursuant
to the Ethiopian Mining Proclamation and the mining agreement, Allana Potash Afar Plc (a subsidiary of Allana) was required to
complete the development stage and start the production stage no later than October 8, 2015 (within two years from the effective
date of the mining license).As at the date of
the report, the Company had not yet completed the development stage and, therefore, the Government of Ethiopia may revoke the
mining license. The Company is holding discussions with the Government of Ethiopia related to the application submitted by the
Company for the transfer of the mining license to a newly established company and extending the development period in light of
the Company’s takeover of Allana, which can result to additional payments. In the Company’s estimation, an arrangement
will be reached with the Ethiopian authorities for extension of the development period.





The Company is currently researching the project’s feasibility and technical and operating requirements, and initial
work has begun on preparing the site for further construction. Although the development program is still in the exploratory
stage, the Company estimates that production will commence in 2020. In addition, The Company intends to develop the mine for
production of potassium chloride (MOP) and potassium sulfate (SOP).







C. Contingent liabilities



(1)
As of December 31, 2015, the total guarantees provided by the Group to third parties amount to $78 million. The guaranties provided
by the Group in respect of loans taken out by the Group’s subsidiaries amount to about $1,996 million.



(2)
During the 1990s, several claims were made against a few of the Group’s subsidiaries in respect of plaintiffs from various
countries, who worked mostly as banana plantation workers, who allegedly have been injured by exposure to Di Bromo Chloropropane
(‘‘DBCP’’) produced, many years ago, by a number of manufacturers, including large chemical companies.
As at the date of the report, the Group’s subsidiaries are parties to one legal proceeding by 9 plaintiffs who are requesting
certification of their claim as a class action. The claim is for bodily injury and therefore the amount for the claims has not
been stated. In accordance with the Company’s management opinion, it is not possible, at this stage, to estimate the outcome
of the above claims due to their complexity and the multiple parties involved.



(3)
Environmental protection



a)
The Group companies manufacture, store and sell hazardous chemical products and, therefore, they are exposed to risks deriving
from harm caused to the environment. The companies invest significant amounts in order to comply with the environmental rules
and regulations. In the estimation of Company Management and on the basis of information in its possession, as at the signing
date of the financial statements, the provision existing in the financial statements covers the quantifiable liabilities in respect
of costs relating to environmental protection.



b)
Pending proceedings relating to the Kishon River, Israel



Between
2001 and 2005, a number of claims for monetary damages were filed in the Haifa District Court against the Company and a series
of other defendants (including the State of Israel) by 50 individuals (or their heirs or dependents), most of them fishermen who
worked, according to the claims, in the Kishon’s fishing harbor, claiming that the flowing of sewage into the Kishon River
by each of the chemical plants operating on the river banks caused the plaintiffs’ cancer and other illnesses. In 2013,
a court decision was issued rejecting all the claims. In 2014, a notice of appeal was filed by
seven plaintiffs that were subsequently rejected by the Supreme Court on September 2015.





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Liabilities (cont’d)



C. Contingent liabilities (cont’d)







Between 2000 and 2007, a number of claims
were filed in the District Court at Haifa against a list of defendants by former soldiers (and their heirs and dependents). The
plaintiffs claim that contact with toxic substances in and around the Kishon River caused them cancer and other diseases (“the
Claims of the Soldiers”).



In June 2013, a court decision was rendered
rejecting the claim for damages of 72 former soldiers (and their heirs and dependents) in the consolidated cases, with no order
for expenses, except for one claim made by 17 soldiers. On September 24, 2015, the Supreme Court completely rejected the appeals
of the soldiers, and also rejected the counter-appeal regarding not charging the soldiers for expenses.



c) On June 7, 2015, a request was
filed for its certification of a claim as a class action, in the District Court in Tel Aviv–Jaffa, against eleven
defendants, including a subsidiary, Fertilizers and Chemical Ltd (ICL Haifa), in respect of claims relating to air
pollution in Haifa Bay and for the harm allegedly caused from it, to the residents of the Haifa Bay area. The amount of the
claim is about NIS 14.4 billion (about $3.8 billion). A preliminary hearing was scheduled for June 15, 2016. The Company is
studying the request. In light of the complexity of the process and the early stage of the proceeding, as well as the fact
that opinions have not yet been received from the various experts, it is difficult to predict the outcome of the proceeding.
Nonetheless, in the Company’s estimation, based on the initial factual data provided to it and the relevant court
decisions, the chances that the plaintiffs’ contentions will be rejected exceed the chances that they will be
accepted.



(4) Increase in level of Pond 5, Israel



The minerals from the Dead Sea are extracted
by way of solar evaporation, whereby salt precipitates onto the bed of one of the evaporation ponds at Sodom, in one of the sites
of Dead Sea Works (hereinafter – “DSW”). The precipitated salt creates a layer on the pond bed of approximately
20 million tons annually. The process of production of the raw material requires that a fixed brine volume is preserved in the
pond. To this end, the water level of the pond is raised by approximately 20 centimeters annually.



The Ein Boqeq and Hamei Zohar
hotels, the town of Neve Zohar and other facilities and infrastructures are located on the western beach of this pond.
Raising the water level of the pond above a certain level is likely to cause structural damage to the foundations and the
hotel buildings situated close to the water’s edge, to the settlement of Neve Zohar and to other infrastructure on the
western shoreline of the pond. This situation requires establishment of defenses for the facilities and infrastructures
of the hotels located on the shores of Pond 5.



In December 2007, an agreement was signed
between the State and the Company and in July 2012 an appendix was added thereto, addressing the urgent shoreline protections the
purpose of which is to permit raising the water level while protecting the structures and infrastructures located along the shoreline
of Pond 5, this being up to the time of stabilization of the water level in this pond as part of the Salt Harvesting Project (see
below). DSW will bear 39.5% of the financing and the government of Israel will bear the remaining cost.



In July 2012, an agreement was
signed with the Government of Israel, regarding “Execution and Funding of the Dead Sea Works Protection Project and
Increase of the Royalties Paid to the State” (hereinafter – “the Salt Harvesting Project”).



The
purpose of the Salt Harvesting Project is to constitute a solution for the raising of the water level in the Pond and
stabilizing of the water therein at a fixed level by harvesting of the salt from this pond and transferring it to the
Northern Basin of the Dead Sea. The highlights of the agreement are set forth below:



A. The planning and execution of the Salt
Harvesting Project will be performed by DSW.



B. The Salt Harvesting Project as well
as the project for the new pumping station that is to be constructed, constitute an Israeli national infrastructure project that
will be promoted by the Israeli Committee for National Infrastructures.



C. Starting from January 1, 2017, the water
level in Pond 5 will not rise above 15.1 meters in DSW’s network (about 390 meters below sea level). DSW will be required
to pay compensation in respect of any damages caused as a result of a rise of the water level beyond the level determined. If there
is a material deviation from the timetables for construction of the Salt Harvesting Project as a result of a requirement for changes
by the planning institutions, as a result of which the Plan is not approved on time, or due a decision of a judicial tribunal that
caused a delay of at least one year in provision of effect to the Salt Harvesting Project by the planning institutions, without
the Company having
violated its obligations, the Company will be permitted to request raising of the water level above that stated above.



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Liabilities (cont’d)



C. Contingent liabilities (cont’d)



In December 2015, National Infrastructures Plan 35A (“the Plan”), which includes the statutory infrastructure
of the Salt Harvesting project in the evaporation ponds through, among other things, the construction of a new pumping station
in the northern basin of the Dead Sea, was approved by the plenary National Infrastructures Committee. Following the above
approval, in March 2016, the Government also approved the Plan.



D. According to the Dead Sea Protection
Company Ltd., as at October 2010, the total cost of the Salt Harvesting Project was estimated to be in a nominal amount of NIS
7 billion (a discounted amount of NIS 3.8 billion – hereinafter – “the Discounted Amount”) (a discounted
amount of about $1 billion). The Company will bear 80% and the Government will bear 20% of the cost of the Salt Harvesting Project,
however the Government’s share will not exceed the Discounted Amount, linked to the CPI and bearing interest of 7%.



E. Increase in the rate of the royalties
from 5% to 10% of sales, for quantities of chloride potash DSW sells in excess of 1.5 million tons annually. This increase applies
to sales starting January 1, 2012. In addition, in respect of the period January 1, 2010 through January 1, 2012, the Company
agreed to an additional royalty charge, at the rate of 5%, only on annual sales exceeding 3.0 million tons.





F. In July 2012, the Government committed that at this time it sees no need to make additional changes to its specific fiscal
policy regarding mining from the quarries at the Dead Sea, including the commercial utilization thereof and, accordingly,
at this time, it will not initiate and will not object to, as applicable, proposed laws regarding this matter. The Company’s
consent to the increase of the rate of the royalties, as stated in E above, is contingent on implementation of the Government
of Israel’s decision, as stated in this Section. The agreement further provides that if legislation is enacted that
changes the specific fiscal policy in connection with profits or royalties deriving from mining of quarries from the Dead
Sea, the Company’s consent will not apply regarding an increase in the rate of royalties on the surplus quantities referred
to above, commencing from the date on which additional tax is collected as stated in the legislation. On November 30, 2015,
the Economic Efficiency Law was published, including the implementation of the Sheshinski recommendations, which address royalties
and taxation of excess profits from Dead Sea minerals. The law entered into effect on January 1, 2016. For further details
see – Note 20(5) above.





(5) The subsidiary in Spain (hereinafter
– "ICL Iberia") has two potash production centers in Spain in the towns of Suria and Sallent. As a by-product
of the potash production process, salt is produced and heaps up in piles, most of which, at the present time, is not usable. To
operate in Spain, an environmental license and an urban license are required.



Regarding the Sallent site,
in October 2013, the regional court issued a judgment disqualifying ICL Iberia's environmental mining license, contending
that there were defects in provision of the license by the Government of Catalonia. On September 25, 2015, the Supreme Court
affirmed this judgment. In February 2014, the regional court also disqualified the urban license, contending that the license does
not comply with the required conditions for piling up salt on the site. In connection with the validity of the urban license after
issuance of the decision of the Supreme Court, the local planning board (CUCC) of Catalonia determined new provisions, including
limitation of the height of the salt pile and temporary extension of the salt piling activities up to the earlier of June 30,
2017 or when the salt pile reaches a height of about 538 meters. As at the date of the report, the height of the salt pile is 509
meters. In November 2015, the regional court confirmed that the new provisions conform to the provisions of the court's decision.



As at the date of the report,
ICL Iberia's environmental mining license, from the Government of Catalonia, had not yet been renewed. Nonetheless, in November
2015, ICL Iberia and the Government of Catalonia signed a cooperation agreement memorandum of understanding that defines ICL Iberia’s
activities in the country as preferential activities and the potash industry as a public strategic interest. The purpose of the
agreement is to arrange all the mining activities, including environmental protection and support for the matter of regulation,
transportation and infrastructures. Furthermore, the agreement relates to the matter of ICL Iberia’s obligation to removal
the salt pile on the Sallent site, including completion of the restoration plan of the site, all of which is to be completed no
later than 2070 (the removal of the salt pile should be completed by 2065). This agreement foresees transitory measures constituting
an interim solution to allow ICL Iberia to continue its activities at the Sallent site.



ICL Iberia’s estimation, when negotiations
on the detailed agreement are concluded, the agreement should advance the procurement of the environmental permit to allow pile
up salt after June 30, 2017, which is currently invalid, and will settle ICL Iberia’s obligations to subsequently restore
the site.



Regarding the Suria site, in April 2014,
after a favorable survey was received from the Environmental Protection Authority in Catalonia, ICL Iberia received an environmental
license that complies with the new environmental
protection regulations in Spain (autoritzacio substantive), this being after ICL Iberia received the municipal license.



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Note 23 - Commitments, Concessions and Contingent
Liabilities (cont’d)



C. Contingent liabilities (cont’d)





In
January 2016, following complaints from competitors in the salt market in Spain, the European Commission announced that it will
investigate whether ICL Iberia received illegal aid from the Spanish authorities regarding two issues:



|(1) | whether
                                         the guarantee amounts related to environmental protection (the guarantees that are supposed
                                         to cover the potential cost of rehabilitation of the land), which were originally set
                                         at $2 million, are lower than the amount required by the EU and national and regional
                                         environmental rules; and
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | whether
                                         ICL Iberia should bear the cost of the environmental protection measures, in the amount
                                         of about $9 million, which was financed by the Spanish authorities.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Company disagrees with the above claims and given the preliminary stage of these proceedings, the legal measures that
need to be taken are still being examined. However, in the Company’s estimation, based on its preliminary discussions
with the Spanish authorities, the chances that the above claims will be rejected are higher than the chances that they will
be accepted.





(6)In August 2013, a request for certification of a claim as a class action against the Company, Israel Corporation Ltd.,
Potashcorp Cooperative Agricultural Society Ltd., the members of the Company’s Board of Directors and its CEO, was filed
in the District Court in Tel-Aviv, on the grounds of a misleading detail, deception and non-disclosure of a material detail in
the Company’s reports, this allegedly being in violation of the provisions of the Securities Law and the general laws in
Israel. The aggregate amount of the damage claimed is $0.70 billion (NIS 2.75 billion) or $0.84 billion (NIS 3.28 billion) (the
amount of the claim depends on the share price used for calculating the alleged damages). In November 2014, a hearing on the motion
to certify a class action was held. During the year 2015, proceedings took place to advance a compromise agreement that were later
discontinued by the parties. As at the date of the report, a court decision on the request had not yet been rendered. In the Company's
estimation, the chances that the allegations against the Company will be dismissed exceed the chances that the allegations will
be accepted. Accordingly, no provision was included in the financial statements.



(7) In 2014, ICL received a petition submitted
to the District Court in Israel in respect of a purported class action against its subsidiary, Dead Sea Works. According to the
petition, the plaintiff is a farmer who has bought and currently buys potash in Israel, which is produced by Dead Sea Works, for
fertilization purposes and seeks to represent a group of class members that would include all purchasers of potash or products
containing potash since 2006, when potash prices were deregulated, through the date of the action. The plaintiff alleges that Dead
Sea Works charged an excessive price for potash, contrary to the Israeli business practices laws, and seeks damages in the amount
of approximately NIS 96.4 million (approximately $24.7 million). In February 2016, the parties submitted a request to the Court
for approval of a compromise arrangement, the results of which are not expected to be significant with respect to the financial
statements. As at the date of the report, the proceedings are continuing with respect to approval of the compromise agreement by
the Court. In the Company’s estimation, the chances that approval of the compromise arrangement will be confirmed exceed
the chances it will be rejected. The Company has a sufficient provision in the financial statements.



(8) Haifa Chemicals acquires potash from Dead Sea Works Ltd. (hereinafter – "DSW") as part of its manufacturing inputs.
Pursuant to the agreement between DSW and Haifa Chemicals, the price for which Haifa Chemicals was charged was based on the
average price, FOB, of DSW for its two largest customers in the preceding quarter. In 2008, an agreement between Haifa Chemicals
and DSW was cancelled and the parties did not succeed in reaching a new agreement. Haifa Chemicals contends that the price
DSW demanded in exchange for potash was unfair and that it was unable to operate at this price level. In May 2009, arbitration
proceedings between the parties commenced with respect to the potash price and in March 2014, the arbitration decision was
issued, which included a price formula on the basis of which the selling price of potash between Dead Sea Works and Haifa
Chemicals will be determined for a period of ten years from the date of the decision and with respect to the period from the
commencement of arbitration. The price formula provides that the selling price during a quarter will be based on a price equal
to the lower of the weighted average of the lowest three FOB selling prices of potash sold by Dead Sea Works in the prior
quarter and the average of the two lowest FOB selling prices of potash sold by Dead Sea Works to large buyers (foreign buyers
who purchase 150,000 or more tons per year) in the prior quarter, less certain expenses and a discount of 2% (hereinafter
– "the Base Price"). Based on the price formula, the possibility exists that under certain circumstances, an adjusted
price will be determined that is based on the production cost plus a certain margin.This adjusted price will apply to a quantity
of 270 thousand tons of potash, while the Base Price will continue to apply to the remainder of the potash but without the
2% discount. The arbitrator appointed an examiner whose job it is to ascertain whether Haifa Chemicals and DSW are in compliance
with a number of tests, and in accordance therewith, to determine whether the price will be based on the Base Price or on
DSW’s production costs plus a certain margin. Haifa Chemicals gave notice that it is interested in an examination for
the years 2011, 2012 and 2013, where the meaning of this is that in respect of 2009 and 2010, the price will be the Base Price,
in accordance with that stated above. On May 31, 2015, the examiner published the results of his examination in respect of
2011–2013, regarding which Haifa Chemicals met the threshold test only for the years 2012 2013 and, accordingly, the
examination process will continue regarding DSW's costs in respect of these years.



Regarding 2011, Haifa Chemicals did not pass the examination of the threshold test and, therefore, for this year the price
will be the Base Price. In 2015, Haifa Chemicals gave notice that it is interested in an examination for 2014 and in February
2016, the examiner's decision was issued whereby Haifa Chemicals passed the threshold test with respect to 2014 and, accordingly,
the process of examining the costs of DSW for this year will continue. Regarding
the decision of the examiner with respect to 2012-2013, a legal proceeding has been submitted by DSW, alleging that the decision
of the examiner deviates from the provisions of the arbitration decision, if the legal process is postponed, the price in all
or any of those years will be based on the production costs plus a certain margin
relating to a quantity of 270,000 tons per year. In the Company’s estimation, based on its contentions included as part
of the legal proceeding and the chances thereof to be accepted and given the production costs in DSW, the Company will not pay
and will not receive significant amounts in respect of the past period (2009–2014). Accordingly, no provisions or income
receivable were recorded in the financial statements.



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Note 23 - Commitments, Concessions and Contingent
Liabilities (cont’d)



C. Contingent liabilities (cont’d)



(9)
In August 2015, as further updated in September 2015, the Israeli Public Utilities Authority – Electricity (hereinafter
– "the Electricity Authority") resolved to impose certain electricity system management services charges also
on private electricity producers as opposed to only on private consumers, this being retroactively from June 2013. On September
13 2015, ICL, DSW and Rotem filed a petition against the Electricity Authority's resolution claiming that it suffers from fundamental
flaws. During December 2015, DSW and Rotem received charges from the Electric Company relating to the said matter whereby the
companies are required to pay about $35 million for the period from June 2013 up to 2015. There is a significant disagreement
between DSW, Rotem and the Electric Company with respect to some of the elements in the demand payments provided (about $12.5
million). DSW expressed the arguments before the Electricity Authority which responded that it is reviewing the arguments and
that at this time DSW should pay the amount that is not in contention. As at the reporting date, the Company recorded a provision
for the full amount, while the amount of $20 million relating to prior periods was recorded in the "other expenses"
category while the amount of about $15 million relating to 2015 was recorded in the "cost of sales" category.





(10)
On June 16, 2015, a petition was filed in the Israeli Court for Water Matters, wherein the Government Water Authority is
requested to act to regulate and supervise the use of water sources by DSW, this being, among other things, by means of determining
pumping limits as part of the production licenses and imposition of production levies. The Company estimates that the chances
that the petition will be accepted are lower than chances its will be rejected.



(11)
In June 2015, a fire broke out in one of the facilities of the subsidiary, Rotem Amfert, in Israel. The Company has appropriate
insurance coverage and, therefore, during 2015, based on its estimates, the Company recognized a net insurance receivable, in
the total amount of about $19 million (net of the Company's $10 million deductible, and the disposal of the depreciated
cost of the property, plant and equipment appearing in the Company’s books, in the amount of about $9 million).



(12)
In addition to the contingencies referred to in the above sections, various claims are pending against the Group (including lawsuits).
In respect of claims for an amount of up to about $21 million as of December 31, 2015, the Group has recorded a provision
as at that date in the amount of about $5 million. In addition, part of the above claims is covered by insurance. In the estimation
of Company Management, based on opinions of its legal advisors, the provision recognized is sufficient to cover the exposure in
respect of the above-mentioned claims.



Note 24 – Equity



A. Composition



|                                                           |  | As at December 31, 2015 |            | As at December 31, 2014
|---------------------------------------------------------- |  | ----------------------- | ---------- | -----------------------
|                                                           |  |                         | Authorized |                        
|Number of Ordinary shares of NIS 1 par value (in millions) |  |                         | 1,485      |                        
|Number of  Special State share of NIS 1 par value          |  |                         | 1          |                        



The reconciliation of the number of shares
outstanding at the beginning and at the end of the period is as follows:



|Period                            |  | Number of Outstanding Shares
                                                                                (in millions)
|--------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------
|As at January 1, 2014             |  |                                                                                                                           
|Options exercised during the year |  |                                                                                                                           
|As at December 31, 2014           |  |                                                                                                                           
|Issuance of  shares               |  |                                                                                                                           
|As at December 31, 2015           |  |                                                                                                                           



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Note 24 – Equity (cont’d)





A. Composition (cont’d)





In
March 2015, the Company signed an agreement to acquire the shares of Allana Potash (hereinafter – "Allana"), a
company that focuses on acquisition and development of potash assets, the shares of which were traded on the Toronto Stock Exchange.
On June 22, 2015, the Company acquired the balance of Allana’s shares (83.78%) for a total consideration of approximately
$112 million, of which approximately $96 million was in cash, and approximately $16 million was by means of issuance of 2.2 million
ordinary shares of the Company. For additional information – see Note 10 “Investments in Subsidiaries and Investee
Companies”.



As
of December 31, 2015, the number of shares reserved for issuance under the Company’s optionPlans were 23.7
million.





B.
Rights conferred by the shares



The
ordinary shares confer upon their holders voting rights (including appointment of directors by a simple majority at shareholders’
meetings), the right to participate in shareholders’ meetings, the right to receive profits and the right to a share in
excess assets upon liquidation of ICL.



The
Special State of Israel Share, held by the State of Israel in order to safeguard matters of vital interest of the State of Israel
, confers upon it special rights to make decisions among other things on the following matters:



| | – | Sale
                                         or transfer of Company assets, which are “vital” to the State of Israel not
                                         in the ordinary course of business.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | – | Voluntary
                                         liquidation, change or reorganization of the organizational structure of ICL or merger
                                         (excluding mergers of entities controlled by ICL that would not impair the rights or
                                         power of the Government, as holder of the Special State Share).
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | – | Any
                                         acquisition or holding of 14% or more of the issued share capital of ICL.
| | - | ----------------------------------------------------------------------------------------------------------------------



| | – | The
                                         acquisition or holding of 25% or more of the issued share capital of ICL (including augmentation
                                         of an existing holding up to 25%), even if there was previously an understanding
                                         regarding a holding of less than 25%.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | – | Any
                                         percentage of holding of the Company’s shares, which confers upon its holder the
                                         right, ability or actual possibility to appoint, directly or indirectly, such number
                                         of the Company’s directors equal to half or more of the Company’s directors
                                         actually appointed.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



C.
Share-based payments to employees



1.
On January 7, 2010, ICL’s Board of Directors approved issuance of 10,930,500 non-marketable options for no consideration
to 318 ICL executives and senior employees in Israel and overseas. The issuance included a significant private placement of 1,100,000
options to former Chief Executive Officer and 800,000 options to the Company’s Chairman of the Board. On February 15,
2010, an extraordinary general meeting of ICL’s shareholders approved the issuance to the Chairman of the Board. The 2010
plan options vested in three equal annual installments as follows: one-third at the end of 12 months from the date of the
Board’s approval; one-third at the end of 24 months from the date of the Board’s approval; and one-third at the
end of 36 months from the date of the Board’s approval. As at December 31, 2014, all the options had expired.





2.
On November 26, 2012, the Company’s Board of Directors approved an issue of up to 12,000,000
non-marketable options for no consideration to 416 ICL officers and senior employees in Israel and overseas. On
December 27, 2012, 11,999,400 options were issued. The issuance included a material private placement of 1,190,000
options to the Company’s Chief Executive Officer. This plan includes a “cap” for the value of the shares
where if as at the exercise date the closing price of an ordinary share is higher than twice the exercise price (the
“Share Value Cap”), the number of the exercised shares will be reduced so that the product of the exercised
shares actually issued to an offeree multiplied by the share closing price will equal to the product of the number of
exercised options multiplied by the Share Value Cap. The options may be exercised in three equal tranches on November 26,
2013, 2014, and 2015. The expiration date of the options for the first and second tranches is at the end of 48 months from
the issuance date, and the expiration date of the options for the third tranches is at the end of 60 months from the issuance
date.



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Note 24 – Equity (cont’d)



C.
Share-based payments to employees (cont’d)



3.	Following the approval of the Company’s Board of Directors on August 6, 2014, under the 2014 Equity Compensation Plan,
ICL issued, for no consideration, 4,360,073 non marketable options, exercisable for up to 4,360,073 of the Company’s
ordinary shares, and 1,007,651 restricted shares, to approximately 450 of the Company’s officers and senior employees.
The issuance includes a significant private placement of 367,294 options and 85,907 restricted shares to the Company’s
Chief Executive Officer, which was approved by the General Meeting of the Company’s shareholders. This grant format
of the options plan includes a “cap” for the value of a share where if, as at the exercise date, the closing price
of an ordinary share is higher than twice the exercise price (the “Share Value Cap”), the number of the exercised
shares will be adjusted so that the product of the exercised shares actually issued to the offeree multiplied by the share
closing price will equal the product of the number of exercised options multiplied by the Share Value Cap.



The options and restricted shares will
vest in three equal tranches: one-third at the end of 24 months from December 1, 2014, one-third at the end of 36 months from December
1, 2014 and one-third at the end of 48 months from December 1, 2014. The expiration date of the options in the first tranche is
at the end of 48 months from December 1, 2014, the expiration date of the options in the second tranche is at the end of 60 months
from December 1, 2014 and the expiration date of the options in the third tranche is at the end of 72 months from December 1, 2014.



4.	On January 25 and 26, 2015, the Company’s Remuneration and Human Resources Committee and the Board of Directors, respectively,
and on February 26, 2015 the General Meeting of the Company’s shareholders, approved the issuance, under the 2014 Equity
Compensation Plan, for no consideration, of 99,858 restricted shares to Company directors (excluding the Company’s Chief
Executive Officer, Mr. Stefan Borgas). The restricted shares will vest in three tranches, subject to the directors continuing
to serve in their positions on the vesting date, as follows: (1) 50% vested on August 28, 2015; (2) 25% will vest at the end
of two years from the date of the General Meeting, on February 26, 2017, and (3) 25% at the end of three years from the date
of the General Meeting, on February 26, 2018.



5.	On May 10, 2015 and June
1, 2015, and on May 12, 2015 and June 5, 2015, the Company’s Compensation Committee and Board of Directors,
respectively, under the Equity Compensation Plan 2014, approved the issuance of up to 7,931,500 non-marketable and
non-transferrable options, for no consideration, exercisable for up to 7,931,500 of the Company’s ordinary shares, and
up to 1,397,302 restricted shares, to approximately 550 of the Company’s officers and senior employees. The said
allocation includes a private placement of 404,220 options and 68,270 restricted shares to the Chairman of the
Company’s Board of Directors and of 530,356 options and 89,574 restricted shares to  the Company’s Chief
Executive Officer, which was approved by the General Meeting of the Company’s shareholders by special majority on June
29, 2015.



The options and restricted shares will
vest in three equal tranches: one-third at the end of 12 months after the grant date, one-third at the end of 24 months after the
grant date and one third at the end of 36 months after the grant date. The expiration date of the options in the first and second
tranches is at the end of 36 months after the grant date and the expiration date of the options in the third tranche is at the
end of 48 months after the grant date.



6.	On November 8 and 11, 2015, the Compensation
Committee and the Board of Directors, respectively, and on December 23, 2015, the general shareholders meeting, under the 2014
Equity Compensation Plan, approved the issuance, for no consideration, of 120,920 restricted shares to the Company’s directors
(excluding the President & CEO, Mr. Stefan Borgas and the Executive Chairman of the Board, Mr. Nir Gilad). The restricted shares
will vest in three equal tranches, as follows: (i) 33.33% will vest at the end of 12 months from the date of the annual general
shareholders meeting; (ii) 33.33% will vest at the end of 24 months from the date of the annual general shareholders meeting; and
(iii) 33.33% will vest at the end of 36 months from the date of the annual general shareholders meeting. Vesting of the Restricted
Shares would fully accelerate if the holder thereof ceases to serve as a director of the Company, unless he ceased to hold office
due to those certain circumstances regarding early termination of office or imposition of enforcement measures, as set forth in
section 231-232a and 233(2) of the Israeli Companies Law.



Upon exercise, each option may be converted
into one ordinary share of NIS 1 par value of the Company. The ordinary shares issued as a result of exercise of the options have
the same rights as the Company’s ordinary shares, immediately upon their issuance. The options issued to the employees in
Israel are covered by the provisions of Section
102 of the Israeli Income Tax Ordinance (New Version) and the regulations promulgated thereunder. The Company elected to perform
the issuance through a trustee, under the Capital Gains Track. The exercise price is linked to the CPI that is known as of the
date of payment, which is the exercise date. In a case of distribution of a dividend by the Company, the exercise price is reduced
on the “ex-dividend” date, by the amount of the dividend per share (gross), based on the amount thereof in NIS on
the effective date. The options are not marketable and are not transferable.



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Note 24 – Equity (cont’d)



C.
Share-based payments to employees (cont’d)



The fair value of the options
granted under the 2010 equity compensation plan as stated above was estimated on the basis of the Black & Scholes model
for the pricing of options. The fair value of the options granted under the 2012 and 2014 equity compensation plans was
estimated using the binomial model for pricing options. The parameters used in applying the models are as follows:



|                                                         |  |               |       |               |  | 2014
    Plan   
|-------------------------------------------------------- |  | ------------- | ----- | ------------- |  | ----------------
|                                                         |  | 2010
    Plan |       | 2012
    Plan |  | Granted
    2014
|Share price (in $)                                       |  |               | 14.3  |               |  |                 
|CPI-linked exercise price (in $)                         |  |               | 14.3  |               |  |                 
|Expected volatility:                                     |  |               |       |               |  |                 
|First tranche                                            |  |               | 54.98 | %             |  |                 
|Second tranche                                           |  |               | 54.98 | %             |  |                 
|Third tranche                                            |  |               | 48.45 | %             |  |                 
|Expected life of options (in years):                     |  |               |       |               |  |                 
|First tranche                                            |  |               | 2.5   |               |  |                 
|Second tranche                                           |  |               | 2.5   |               |  |                 
|Third tranche                                            |  |               | 3.5   |               |  |                 
|Risk-free interest rate:                                 |  |               |       |               |  |                 
|First tranche                                            |  |               | 0.59  | %             |  |                 
|Second tranche                                           |  |               | 0.59  | %             |  |                 
|Third tranche                                            |  |               | 1.29  | %             |  |                 
|Fair value (in $ millions)                               |  |               | 54.3  |               |  |                 
|Weighted average grant date fair value per option (in $) |  |               | 5.0   |               |  |                 



The expected volatility was determined
on the basis of the historical volatility in the Company’s share prices. For every tranche shown in the above table, the
vesting period is different. Since the expected life for each tranche is different, the Company used different expected volatility
and risk-free interest rates for each tranche.



The expected life of the options was determined
on the basis of Management’s estimate of the period the employees will hold the options, taking into consideration their
position with the Company and the Company’s past experience regarding the turnover of employees.



The risk-free interest rate was determined
on the basis of the yield to maturity of shekel-denominated Israeli Government debentures, with a remaining life equal to the anticipated
life of the option.



The total fair value of the restricted
shares allotted pursuant to the approval of the Board of Directors on August 6, 2014, is approximately $8.4 million as at the grant
date. The value of the restricted shares was determined according to the closing price on the TASE on the most recent trading day
preceding the date of the approval of the Board of Directors, with the exception of the restricted shares issued to our CEO, the
value of which was determined according to the closing price on the TASE on the most recent trading date preceding the date of
the approval of the General Meeting.



The total fair value on the grant date
of the restricted shares that were allotted to directors (excluding the Company CEO, Mr. Stefan Borgas) pursuant to the approval
of the Board of Directors on January 26, 2015, is approximately $0.7 million. The value of the restricted shares offered to offerees
was determined according to the closing price on the TASE on the most recent trading day preceding the date of the approval of
the General Meeting.



The total fair value on the grant date
of the restricted shares that were allotted pursuant to the approval of the Board of Directors on May 12, 2015, is approximately
$9.7 million, of which approximately $0.5 million relates to the Chairman of the Company’s Board of Directors, and approximately
$0.6 million relates to the Company’s CEO. The value of the restricted shares offered to offerees was determined according
to the closing price on the TASE on the
most recent trading day preceding the date of the approval of the Board of Directors, except for the Company’s CEO, Mr.
Stefan Borgas, and the Chairman of the Board of Directors, Mr. Nir Gilad, regarding which the value of the restricted shares was
determined according to the closing price on the TASE on the most recent trading day preceding the date of the approval of the
General Meeting.



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Note 24 – Equity (cont’d)



C.
Share-based payments to employees (cont’d)





The total fair value on the grant date
of the restricted shares that were allotted to Directors (except for the Company’s CEO, Mr. Stefan Borgas, and the Chairman
of the Board of Directors, Mr. Nir Gilad) pursuant to the approval of the Board of Directors on November 11, 2015, is approximately
$0.5 million. The value of the restricted shares offered to offerees was determined according to the closing price on the TASE
on the most recent trading day preceding the date of the approval of the General Meeting.



The cost of the benefit embedded in the
options and shares from the Equity Compensation Plans (2010, 2012 and 2014) is recognized in the statement of income over the vesting
period of each portion. Accordingly, in 2015, 2014 and 2013, the Company recorded expenses of about $16 million, $12 million
and $22 million, respectively.



The movement in the options during 2015
and 2014 are as follows:



|                                                  |  | Number
    of options (in millions) |    | Number
    of options (in millions) |  | Number
    of options (in millions)
|------------------------------------------------- |  | ----------------------------------- | -- | ----------------------------------- |  | -----------------------------------
|                                                  |  | 2010
    Plan                       |    | 2012
    Plan                       |  | 2014
    Plan                      
|Balance as at January 1, 2014                     |  |                                     | 4  |                                     |  |                                    
|Movement in 2014:                                 |  |                                     |    |                                     |  |                                    
|Allocated during the year                         |  |                                     | –  |                                     |  |                                    
|Expired during the period                         |  |                                     | (4 | )                                   |  |                                    
|Total options outstanding as at December 31, 2014 |  |                                     | –  |                                     |  |                                    
|Movement in 2015:                                 |  |                                     |    |                                     |  |                                    
|Allocated during the year                         |  |                                     | –  |                                     |  |                                    
|Forfeited during the year                         |  |                                     | –  |                                     |  |                                    
|Total options outstanding as at December 31, 2015 |  |                                     | –  |                                     |  |                                    



The exercise price for options outstanding
at the beginning and end of each period are as follows:



|                             |  | December 31, 
2015 |       | December 31, 
2014 |  | December 31, 
2013
|---------------------------- |  | ------------------ | ----- | ------------------ |  | ------------------
|2010 Plan US$                |  |                    | N/A   |                    |  |                   
|2012 Plan US$                |  |                    | 10.44 |                    |  |                   
|2014 Plan - Granted 2014 US$ |  |                    | 6.90  |                    |  |                   
|2014 Plan - Granted 2015 US$ |  |                    | 6.98  |                    |  |                   



The number of options vested at the end
of each period and the weighted average exercise price for these options are as follows:



|                                            |  | December
31, 
2015 |       | December
31, 
2014 |  | December
31, 
2013
|------------------------------------------- |  | ------------------ | ----- | ------------------ |  | ------------------
|Number of options exercisable (in millions) |  |                    | 11    |                    |  |                   
|Weighted average exercise price NIS         |  |                    | 40.74 |                    |  |                   
|Weighted average exercise price US$         |  |                    | 10.44 |                    |  |                   



The range of exercise prices for the options
outstanding at the end of each period are as follows:



|                               |  |  | December
                                                                                                                                                                                31, 2015 |  |  |  | December
                                                                                                                                                                                31, 2014 |  |  |  | December
                                                                                                                                                                                31, 2013 | 
|------------------------------ |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|Range of exercise price in NIS |  |  | 26.92-40.74                                                                                                                                                                                       |  |  |  | 28.24-42.18                                                                                                                                                                                       |  |  |  | 44.59-45.66                                                                                                                                                                                       | 
|Range of exercise price in US$ |  |  | 6.9-10.44                                                                                                                                                                                         |  |  |  | 7.26-10.85                                                                                                                                                                                        |  |  |  | 12.85-13.16                                                                                                                                                                                       | 



The average remaining contractual life
for the outstanding vested options at the end of each period are as follows:





F-83


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Note 24 – Equity (cont’d)



C.
Share-based payments to employees (cont’d)



|                                                                                                |  |  | December 31, 2015 |  |  |  | December 31, 2014 |  |  |  | December 31, 2013 | 
|----------------------------------------------------------------------------------------------- |  |  | ----------------- |  |  |  | ----------------- |  |  |  | ----------------- | 
|Average remaining contractual life for the outstanding vested options at the end of each period |  |  | 1.24              |  |  |  | 1.91              |  |  |  | 1.51              | 



D. Dividends distributed to the Company’s
Shareholders



|Date of decision of the Board of Directors to distribute the dividend |  | Actual date of distribution of the dividend |                    | Gross amount of the dividend distributed (in millions of $) |  | Net amount of the distribution (net of the subsidiary’s share) (in millions of $) |     | Amount of the dividend per share
|--------------------------------------------------------------------- |  | ------------------------------------------- | ------------------ | ----------------------------------------------------------- |  | --------------------------------------------------------------------------------- | --- | --------------------------------
|March 12, 2013                                                        |  |                                             | April 25, 2013     |                                                             |  |                                                                                   | 147 |                                 
|May 12, 2013                                                          |  |                                             | June 20, 2013      |                                                             |  |                                                                                   | 213 |                                 
|August 6, 2013                                                        |  |                                             | September 16, 2013 |                                                             |  |                                                                                   | 221 |                                 
|November 12, 2013                                                     |  |                                             | December 18, 2013  |                                                             |  |                                                                                   | 54  | .5                              
|February 11, 2014                                                     |  |                                             | March 26, 2014     |                                                             |  |                                                                                   | 500 |                                 
|March 18, 2014                                                        |  |                                             | May 27, 2014       |                                                             |  |                                                                                   | 83  |                                 
|May 14, 2014                                                          |  |                                             | June 25, 2014      |                                                             |  |                                                                                   | 91  | .5                              
|August 6, 2014                                                        |  |                                             | September 17, 2014 |                                                             |  |                                                                                   | 47  |                                 
|November 11, 2014                                                     |  |                                             | December 17, 2014  |                                                             |  |                                                                                   | 125 |                                 
|March 19, 2015                                                        |  |                                             | April 29, 2015     |                                                             |  |                                                                                   | 59  | .5                              
|May 12, 2015                                                          |  |                                             | June 23, 2015      |                                                             |  |                                                                                   | 151 |                                 
|August 11, 2015                                                       |  |                                             | September 10, 2015 |                                                             |  |                                                                                   | 52  | .5                              
|November 11, 2015                                                     |  |                                             | December 16, 2015  |                                                             |  |                                                                                   | 84  |                                 





Subsequent to the balance
sheet date, on March 15, 2016, the Company’s Board of Directors decided to distribute a dividend in the amount of $67 million,
about $0.05 per share. The dividend will be distributed on 18 April, 2016.



E. Cumulative translation adjustment



The translation reserve includes all translation
differences arising from translation of financial statements of foreign operations.



F. Capital reserves



The capital reserves include expenses for
share based compensation to employees against a corresponding increase in equity (see C. above).



G. Treasury shares



1)	On August 4, 2014, the Company
received 2.2 million ordinary shares of NIS 1 par value of the Company, for no consideration, which were held by a wholly
controlled subsidiary of the Company.



2)	On September 3, 2008, the
Company’s Board of Directors decided to authorize the Company, to acquire from time to time, up to June 30, 2009,
ordinary shares of the Company up to 5% of the Company’s issued and paid  share capital – out of the
Company’s distributable earnings in accordance with the Israeli Companies Law. In total, 22.4  million shares were
acquired by the Company under this purchase plan, constituting approximately 1.74% of the Company’s issued and paid
share capital, for a total consideration of approximately $258 million.



3)	In determining the amount of retained
earnings available for distribution as a dividend pursuant to the Israeli Companies Law, a deduction must be made from the balance
of the retained earnings the amount of self-acquisitions (that are presented separately in the “treasury shares” category
in the equity section).



Note 25 - Pledges and Restrictions Placed in Respect of
Liabilities



The Group has undertaken various obligations
in respect of loans and credit received from non-Israeli banks, including a negative pledge whereby the Group, committed, among
other things, in favor of the lenders, to limit guarantees
and indemnities to third parties (other than the guarantees in respect to subsidiaries) up to an agreed amount for $550 million.
The Group has also undertaken to grant loans only to subsidiaries and to associated companies in which it holds at least 25% of
the voting rights – not more than stipulated by the agreement with the banks. ICL has further committed not to grant any
credit, other than in the ordinary course of business, and not to register any charges, including rights of lien, except those
defined in the agreement as “liens permitted to be registered” on its existing and future assets and income. For details
with regards to the covenants in respect of these loans, see Note 17.



F-84


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Note 26 - Details of Income Statement Items



|                                                                                       |  | For
    the year ended December 31
|-------------------------------------------------------------------------------------- |  | ----------------------------------
|                                                                                       |  | 2015                              
|                                                                                       |  | $
    millions                    
|Sales                                                                                  |  |                                   
|Sales                                                                                  |  |                                   
|                                                                                       |  |                                   
|Cost of sales (1)                                                                      |  |                                   
|Materials and spare parts                                                              |  |                                   
|Power and energy                                                                       |  |                                   
|Labor and related expenses                                                             |  |                                   
|Subcontracted work                                                                     |  |                                   
|Depreciation and amortization                                                          |  |                                   
|Other production expenses                                                              |  |                                   
|Logistics and port expenses                                                            |  |                                   
|                                                                                       |  |                                   
|Decrease in inventories of finished products
    and work in progress                  |  |                                   
|                                                                                       |  |                                   
|(1) Net of amounts capitalized to property,
    plant and equipment under construction |  |                                   



|                                          |  | For
    the year ended December 31
|----------------------------------------- |  | ----------------------------------
|                                          |  | 2015                              
|                                          |  | $
    millions                    
|Selling, transport and marketing expenses |  |                                   
|Transport and insurance                   |  |                                   
|Salaries and related expenses             |  |                                   
|Lease and Office expenses                 |  |                                   
|Depreciation and amortization             |  |                                   
|Agents’ commissions                       |  |                                   
|Other                                     |  |                                   
|                                          |  |                                   
|General and administrative expenses       |  |                                   
|Salaries and related expenses             |  |                                   
|Professional Services                     |  |                                   
|Office expenses                           |  |                                   
|Depreciation and amortization             |  |                                   
|Travel and Transportation                 |  |                                   
|Doubtful debts                            |  |                                   
|Other                                     |  |                                   
|                                          |  |                                   
|Research and development expenses, net    |  |                                   
|Salaries and related expenses             |  |                                   
|Other                                     |  |                                   
|                                          |  |                                   



F-85


Table of Contents


Note 26 - Details of Income Statement Items (cont’d)



|                                                                             |  | For
    the year ended December 31
|---------------------------------------------------------------------------- |  | ----------------------------------
|                                                                             |  | 2015                              
|                                                                             |  | $
    millions                    
|Other income and expenses                                                    |  |                                   
|Gain on achievement over control of an associated
    company                |  |                                   
|Capital gains from sale of fixed assets, net                                 |  |                                   
|Capital gain from divestitures of subsidiaries                               |  |                                   
|Past service cost                                                            |  |                                   
|Other                                                                        |  |                                   
|Other income recorded
    in the income statements                           |  |                                   
|Arbitrtaion expenses in respect of prior years’ royalties
    (1)            |  |                                   
|Expenses in respect of early retirement and dismissal
    of employees (2)   |  |                                   
|Expenses in relation to the Company’s strategy update and
internal processes |  |                                   
|Provision for treatment of waste                                             |  |                                   
|Retroactive electricity charges                                              |  |                                   
|Impairment of assets                                                         |  |                                   
|Compensation to  contractors due to the strike                               |  |                                   
|Provision for legal claims                                                   |  |                                   
|Other                                                                        |  |                                   
|Other expenses recorded
    in the income statements                         |  |                                   



________________________

| | (1) | See Note 23.
| | --- | ------------



|( | 2) | See Note 21.
|- | -- | ------------



|                                                              |  | For
    the year ended December 31
|------------------------------------------------------------- |  | ----------------------------------
|                                                              |  | 2015                              
|                                                              |  | $
    millions                    
|Financing income and expenses                                 |  |                                   
|Financing income recorded in the income statements:           |  |                                   
|Interest income from bank deposits                            |  |                                   
|Financing income recorded in relation to employee benefits    |  |                                   
|Net change in fair value of derivative financial instruments  |  |                                   
|Net gain from changes in exchange rates                       |  |                                   
|                                                              |  |                                   
|Financing expenses recorded in the income statements:         |  |                                   
|Interest expenses to banks and others                         |  |                                   
|Financing expenses in relation to employee benefits           |  |                                   
|Bank commissions                                              |  |                                   
|Net change in fair value of derivative financial instruments  |  |                                   
|Net loss from changes in exchange rates                       |  |                                   
|                                                              |  |                                   
|Financing expenses                                            |  |                                   
|Net of borrowing costs capitalized                            |  |                                   
|                                                              |  |                                   
|Net financing expenses recorded in the  income
    statements |  |                                   



F-86


Table of Contents




Note 27 - Financial Instruments and Risk Management



A. General



The Group has extensive international operations
wherein it is exposed to credit, liquidity and market risks (including currency, interest and other price risks). In order to reduce
the exposure to these risks, the Group holds financial derivative instruments, (including forward transactions, SWAP transactions,
and options) for purposes of economic (non-accounting) hedging of foreign currency risks, commodity price risks, and interest risks.
Furthermore, the Group holds derivative financial instruments to hedge the exposure and changes in the cash flows.



The transactions in derivatives are executed
with large Israeli and non-Israeli financial institutions, and therefore Group management believes the credit risk in respect thereof
is low.



This Note presents information about the
Group’s exposure to each of the above risks, and the Group’s objectives, policies and processes for measuring and managing
risk.



The Group companies monitor on a regular
basis the extent of the exposures and the hedges in respect thereof. The hedging policies of all the types of exposures are discussed
by the Company’s Board of Directors in the framework of the annual budget. The Finance Committee of the Company’s Board
of Directors receives a report every quarter in the framework of the discussion of the quarterly results, as a means of controlling
implementation of the policies and for purposes of updating the policies, where necessary. The Group’s management implements
the policies that are determined, while taking into consideration the actual and anticipated developments in the various markets.



B. Groups and measurement bases of financial
assets and financial liabilities



|                                         |  | As
    at December 31, 2015                               
|---------------------------------------- |  | ----------------------------------------------------------
|                                         |  | Financial
    assets                                      
|                                         |  | Measured
    at fair value through the statement of income
|                                         |  | $
    millions                                            
|Cash and cash equivalents                |  |                                                           
|Short-term investments and deposits      |  |                                                           
|Trade receivables                        |  |                                                           
|Derivatives and other receivables        |  |                                                           
|Deposits and other long term receivables |  |                                                           
|Total financial assets                   |  |                                                           
|Short term credit from banks and others  |  |                                                           
|Trade payables                           |  |                                                           
|Derivatives and other payables           |  |                                                           
|Long-term loans from banks and others    |  |                                                           
|Long term derivatives instruments        |  |                                                           
|Total financial liabilities              |  |                                                           
|Total financial instruments,
    net     |  |                                                           



C. Credit risk



(1)	General



a)	Customer credit risks



Credit risk is the risk of financial loss
to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises mainly
from the Group’s receivables from customers and from other receivables as well as from investments in securities.



F-87


Table of Contents


Note 27 - Financial Instruments and Risk Management (cont’d)



C. Credit risk (cont’d)



The Company sells to a wide range and large
number of customers, including customers with material credit balances. On the other hand, the Company does not have a concentration
of sales to individual customers.



The Company has a regular policy of insuring
the credit risk of all its customers by means of purchasing credit insurance with insurance companies, other than sales to government
agencies and sales in small amounts. All other sales are executed only after receiving approval of coverage in the necessary amount
from an insurance company or other collaterals of a similar level.



The use of an insurance company as aforementioned
ensures that the credit risk is managed professionally and objectively by an expert external party and transfers most of the credit
risk to third parties. Nevertheless, the common deductible in credit insurances is 10% (even higher in a small number of cases)
thus the Group is still exposed to part of the risk, out of the total insured amount.



In addition, the Group has an additional
deductible of a cumulative annual of approximately $5 million through a wholly-owned captive reinsurance Company. In addition the
Group has a credit insurance provided by the government of Israel’s foreign trade risks insurance company.



Most of the Group’s customers have
been trading with the Group for many years and only rarely have credit losses been incurred by the Group. The financial statements
include specific allowance for doubtful debts that appropriately reflect, in Management’s opinion, the credit loss in respect
of accounts receivables is doubtful.



b)	 Credit risks in respect of deposits



The Group deposits its balance of liquid
financial assets in bank deposits and in securities. All the deposits are with a diversified group of leading banks preferably
with banks that provide loans to the Group.



(2)	Maximum Exposure to credit risk



The carrying amount of financial assets
represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:



|                                    |  | As
    at December 31           
|----------------------------------- |  | --------------------------------
|                                    |  | Carrying
    amount ($ millions)
|                                    |  | 2015                            
|Cash and cash equivalents           |  |                                 
|Short term investments and deposits |  |                                 
|Trade receivables                   |  |                                 
|Derivatives and other receivables   |  |                                 
|Long term receivables and deposits  |  |                                 
|                                    |  |                                 



The maximum exposure to credit risk for
trade receivables, at the reporting date by geographic region was:



|               |  | As
    at December 31           
|-------------- |  | --------------------------------
|               |  | Carrying
    amount ($ millions)
|               |  | 2015                            
|Eastern Europe |  |                                 
|Western Europe |  |                                 
|North America  |  |                                 
|South America  |  |                                 
|India          |  |                                 
|China          |  |                                 
|Israel         |  |                                 
|Other          |  |                                 
|               |  |                                 



F-88


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Note 27 - Financial Instruments and Risk Management (cont’d)



C. Credit risk (cont’d)



(3)	Aging of debts and impairment losses



The aging of trade receivables at the reporting
date was:



|                          |  | As
    at December 31
|------------------------- |  | ---------------------
|                          |  | 2015                 
|                          |  | Gross                
|                          |  | $
    millions       
|Not past due              |  |                      
|Past due up to 3 months   |  |                      
|Past due 3  to 12  months |  |                      
|Past due over 12 months   |  |                      
|                          |  |                      



The movement in the allowance of doubtful
accounts during the year was as follows:



|                                           |  | 2015           |    | 2014
|------------------------------------------ |  | -------------- | -- | ----
|                                           |  | $
    millions
|Balance as at January 1                    |  |                | 8  |     
|Additional allowance                       |  |                | 5  |     
|Reversals                                  |  |                | (1 | )   
|Changes due to translation differences     |  |                | (1 | )   
|Transfer to the group assets held for sale |  |                | –  |     
|Balance as at December 31                  |  |                | 11 |     



D. Liquidity risk



Liquidity risk is the risk that the Group
will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure,
as far as possible, that it will always have sufficient liquidity to timely meet its liabilities, under both normal and stressed
conditions, without incurring unwanted losses.



The Company manages the liquidity risk
by holding cash balances, short-term deposits and secured bank credit facilities.



The following are the contractual maturities
of financial liabilities, including estimated interest payments:



|                                                                                 |  | As
    at December 31, 2015
|-------------------------------------------------------------------------------- |  | ---------------------------
|                                                                                 |  | Carrying
    amount        
|                                                                                 |  | $
    millions             
|Non-derivative financial liabilities                                             |  |                            
|Short term credit (not including current maturities)                             |  |                            
|Trade payables                                                                   |  |                            
|Other payables                                                                   |  |                            
|Non-convertible debentures (including current maturities)                        |  |                            
|Long-term bank loans (including current
    maturities)                          |  |                            
|                                                                                 |  |                            
|Financial liabilities – derivative instruments
    utilized for economic hedging |  |                            
|Interest rate swaps and  options                                                 |  |                            
|Foreign exchange derivatives                                                     |  |                            
|Derivative instruments on energy and marine
    transport                        |  |                            
|                                                                                 |  |                            



F-89


Table of Contents


Note 27 - Financial Instruments and Risk Management (cont’d)



D. Liquidity risk (cont’d)



|                                                                                                |  | As
    at December 31, 2014
|----------------------------------------------------------------------------------------------- |  | ---------------------------
|                                                                                                |  | Carrying
    amount        
|                                                                                                |  | $ millions                 
|Non-derivative financial liabilities                                                            |  |                            
|Short term credit (not including current maturities)                                            |  |                            
|Trade payables                                                                                  |  |                            
|Other payables                                                                                  |  |                            
|Non-convertible debentures (including current maturities)                                       |  |                            
|Long-term bank loans (including current maturities)                                             |  |                            
|                                                                                                |  |                            
|Financial liabilities – derivative instruments
    utilized for economic and accounting hedging |  |                            
|Interest rate swaps and  options                                                                |  |                            
|Foreign exchange derivatives                                                                    |  |                            
|Derivative instruments on energy and marine
    transport                                       |  |                            
|                                                                                                |  |                            



E. Market risk



Market risk is the risk that changes in
market prices, such as foreign exchange rates, interest rates and equity prices will affect the fair value or future cash flows
of a financial instrument.



1.	Interest risk



The Group has loans bearing variable interests
and therefore its financial results and cash flows are exposed to fluctuations in the market interest rates.



ICL uses financial instruments, including
derivatives, in order to hedge this exposure. The Group uses interest rate swap contracts and interest options mainly in order
to reduce the exposure to cash flow risk in respect of changes in interest rates.



(a)	Interest Rate Profile



Set forth below is detail regarding the
type of interest on the Group’s non-derivative interest-bearing financial instruments:



F-90


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Note 27 - Financial Instruments and Risk Management (cont’d)



E. Market risk (cont’d)



|                          |  | As
    at December 31
|------------------------- |  | ---------------------
|                          |  | 2015                 
|                          |  | $
    millions       
|Fixed rate instruments:   |  |                      
|Financial assets          |  |                      
|Financial liabilities     |  |                      
|                          |  |                      
|Variable rate instruments |  |                      
|Financial assets          |  |                      
|Financial liabilities     |  |                      
|                          |  |                      



(b)	Sensitivity analysis for fixed rate
instruments



Most of the Group’s instruments bearing
fixed interest are not measured at fair value through the statement of income. Therefore, changes in the interest rate as at the
date of the report would not be expected to have any impact on the profit or loss in respect of changes in the value of assets
and liabilities bearing fixed interest.



(c)	Sensitivity analysis for variable
rate instruments



The below analysis assumes that all other
variables (except for the interest rate), in particular foreign currency rates, remain constant



|                           |  | As
    at December 31, 2015 Impact on profit (loss)
|-------------------------- |  | ---------------------------------------------------
|                           |  | Decrease
    of 1% in interest                     
|                           |  | $
    millions                                     
|Changes in Dollar interest |  |                                                    
|Non-derivative instruments |  |                                                    
|SWAP instruments           |  |                                                    
|                           |  |                                                    
|Changes in Shekel interest |  |                                                    
|SWAP instruments           |  |                                                    
|Changes in Euro interest   |  |                                                    
|Non-derivative instruments |  |                                                    



(d)	Terms of derivative financial instruments
used to hedge interest risk



|                                                        |  | As
    at December 31, 2015     
|------------------------------------------------------- |  | --------------------------------
|                                                        |  | Carrying
    amount (fair value)
|Dollar                                                  |  |                                 
|SWAP contracts from variable interest to fixed interest |  |                                 
|Cylinder instruments                                    |  |                                 



|                                                        |  | As at December 31, 2014     
|------------------------------------------------------- |  | ----------------------------
|                                                        |  | Carrying amount (fair value)
|                                                        |  | $ millions                  
|Dollar                                                  |  |                             
|SWAP contracts from fixed interest to variable interest |  |                             
|SWAP contracts from variable interest to fixed interest |  |                             
|Cylinder instruments                                    |  |                             



F-91


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Note 27 - Financial Instruments and Risk Management (cont’d)



E. Market risk (cont’d)



2.	Currency risk



The Group is exposed to currency risk with
respect to sales, purchases, assets and liabilities that are denominated in a currency other than the functional currency of the
Group. The main exposure is the NIS, Euro, British Sterling, Chinese Yuan, Japanese Yen and Brazilian Real.



The Group enters into foreign currency
derivatives – forward exchange transactions and currency options – all in order to protect the Group from the risk
that the eventual cash flows, resulting from existing assets and liabilities, and sales and purchases of goods within the framework
of firm or anticipated commitments (based on a budget of up to one year), denominated in foreign currency, will be affected by
changes in the exchange rates.



(a)	Sensitivity analysis



A 10% strengthening at the rate of the
US$ against the following currencies would have increased (decreased) profit or loss by the amounts shown below. This analysis
assumes that all other variables, in particular interest rates, remain constant.



|                                     |  | As
    at December 31  Impact on profit (loss)
|------------------------------------ |  | ----------------------------------------------
|                                     |  | 2015                                          
|                                     |  | $ millions                                    
|Non-derivative financial instruments |  |                                               
|Dollar/Euro                          |  |                                               
|Dollar/NIS                           |  |                                               
|Dollar/British Pound                 |  |                                               
|Dollar/Japanese Yen                  |  |                                               



A 10% weakening of the US$ against the
above currencies at December 31 would have the same effect but in the opposite direction.



Presented hereunder is a sensitivity analysis
of the Group’s foreign currency derivative instruments as at December 31, 2015. Any change in the exchange rates of the principal
currencies shown below as at December 31 would have increased (decreased) profit and loss and equity by the amounts shown below.
This analysis assumes that all other variables remain constant.



|                     |  | As
    at December 31, 2015
|-------------------- |  | ---------------------------
|                     |  | Increase
    10%           
|                     |  | $
    millions             
|Euro/Dollar          |  |                            
|Forward transactions |  |                            
|Options              |  |                            
|                     |  |                            
|Dollar/NIS           |  |                            
|Forward transactions |  |                            
|Options              |  |                            
|SWAP                 |  |                            
|                     |  |                            
|GBP/Dollar           |  |                            
|Forward transactions |  |                            
|                     |  |                            
|GBP/Euro             |  |                            
|Forward transactions |  |                            
|Options              |  |                            

F-92


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Note 27 - Financial Instruments and Risk Management (cont’d)



E. Market risk (cont’d)



(b)	Terms of derivative financial instruments
used to economically hedge foreign currency risk



|                            |  | As
    at December 31, 2015
|--------------------------- |  | ---------------------------
|                            |  | Carrying
    amount        
|                            |  | $
    millions             
|Forward contracts           |  |                            
|NIS/Dollar                  |  |                            
|Dollar/Euro                 |  |                            
|Dollar/JPY                  |  |                            
|Euro/GBP                    |  |                            
|Dollar/GBP                  |  |                            
|Dollar/CNH                  |  |                            
|Other                       |  |                            
|Currency and interest SWAPs |  |                            
|Shekel to Dollars           |  |                            
|Put options                 |  |                            
|NIS/Dollar                  |  |                            
|Dollar/Euro                 |  |                            
|Dollar/JPY                  |  |                            
|Euro/GBP                    |  |                            
|Dollar/GBP                  |  |                            
|Dollar/CNH                  |  |                            
|Call options                |  |                            
|NIS/Dollar                  |  |                            
|Dollar/Euro                 |  |                            
|Dollar/JPY                  |  |                            
|Euro/GBP                    |  |                            
|Dollar/GBP                  |  |                            

|                            |  | As
    at December 31, 2014
|--------------------------- |  | ---------------------------
|                            |  | Carrying
    amount        
|                            |  | $
    millions             
|Forward contracts           |  |                            
|NIS/Dollar                  |  |                            
|Dollar/Euro                 |  |                            
|Dollar/JPY                  |  |                            
|Euro/GBP                    |  |                            
|Dollar/GBP                  |  |                            
|Other                       |  |                            
|Currency and interest SWAPs |  |                            
|Shekel and CPI to Dollars   |  |                            
|Put options                 |  |                            
|NIS/Dollar                  |  |                            
|Dollar/Euro                 |  |                            
|Dollar/JPY                  |  |                            
|Euro/GBP                    |  |                            
|Dollar/GBP                  |  |                            
|Call options                |  |                            
|NIS/Dollar                  |  |                            
|Dollar/Euro                 |  |                            
|Dollar/JPY                  |  |                            
|Euro/GBP                    |  |                            
|Dollar/GBP                  |  |                            



The maturity date of all of the derivatives
used to economically hedge foreign currency risk is up to a year.



F-93


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Note 27 - Financial Instruments and Risk Management (cont’d)



E. Market risk (cont’d)



(c)	Linkage terms of monetary balances
– in millions of Dollars



|                                                |  | As at December 31, 2015
|----------------------------------------------- |  | -----------------------
|                                                |  |                        
|Non-derivative instruments:                     |  |                        
|Cash and cash equivalents                       |  |                        
|Short term investments and deposits             |  |                        
|Trade receivables                               |  |                        
|Other receivables                               |  |                        
|Deposits and other long term receivables        |  |                        
|Total financial assets                          |  |                        
|Credit from banks and other credit providers    |  |                        
|Trade payables                                  |  |                        
|Other payables                                  |  |                        
|Long term loans from banks and others           |  |                        
|Total financial liabilities                     |  |                        
|Total non-derivative financial instruments, net |  |                        
|Derivative instruments:                         |  |                        
|Forward transactions                            |  |                        
|Cylinder                                        |  |                        
|SWAPS – dollar into shekel                      |  |                        
|Total derivative instruments                    |  |                        
|Net exposure                                    |  |                        



F-94


Table of Contents


Note 27 - Financial Instruments and Risk Management (cont’d)



E. Market risk (cont’d)



|                                                |  | As at December 31, 2014
|----------------------------------------------- |  | -----------------------
|                                                |  |                        
|Non-derivative instruments:                     |  |                        
|Cash and cash equivalents                       |  |                        
|Short term investments and deposits             |  |                        
|Trade receivables                               |  |                        
|Other receivables                               |  |                        
|Deposits and other long term receivables        |  |                        
|Total financial assets                          |  |                        
|Credit from banks and other credit providers    |  |                        
|Trade payables                                  |  |                        
|Other payables                                  |  |                        
|Long term loans from banks and others           |  |                        
|Total financial liabilities                     |  |                        
|Total non-derivative financial instruments, net |  |                        
|Derivative instruments:                         |  |                        
|Forward transactions                            |  |                        
|Cylinder                                        |  |                        
|SWAPS – dollar into shekel and CPI              |  |                        
|Total derivative instruments                    |  |                        
|Net exposure                                    |  |                        



F-95


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Note 27 - Financial Instruments and Risk Management (cont’d)



E. Market risk (cont’d)



3. Other price risk



A. Investment in securities



The Group companies have an investment
in marketable securities, in the amount of approximately $26 million. The impact of the change in the fair value of this investment
will be recorded in the statement of income in “financing expenses” category.



B. Hedging of marine shipping and energy
transactions



The Company is exposed to risk in respect
of marine shipping and energy costs. The Company uses marine shipping and energy derivatives to hedge the risk that its cash flows
will be affected by changes in marine shipping and energy prices. As at December 31, 2015, the fair value of the marine shipping
and energy derivatives was approximately $9.9 million (liability).



F. Fair value of financial instruments



The carrying amounts in the books of certain
financial assets and financial liabilities, including cash and cash equivalents, investments, short-term deposits and loans, receivables
and other debit balances, long-term investments and receivables, short-term credit, payables and other credit balances, long-term
loans bearing variable interest and other liabilities, and derivative financial instruments, correspond to or approximate their
fair value.



The following table details the book value
and the fair value of financial instrument groups presented in the financial statements not in accordance with their fair value:



|                                  |  | As
    at December 31, 2015 |       | As
    at December 31, 2014
|--------------------------------- |  | --------------------------- | ----- | ---------------------------
|                                  |  | Carrying
    amount         |       | Fair
    value             
|                                  |  | $
    millions             
|Loans bearing fixed interest (1)  |  |                             | 391   |                            
|Debentures bearing fixed interest |  |                             |       |                            
|Marketable (2)                    |  |                             | 793   |                            
|Non-marketable (3)                |  |                             | 281   |                            
|                                  |  |                             | 1,465 |                            



(1) The fair value of the shekel, euro,
dollar and yuan loans issued bearing fixed interest is based on calculation of the present value of the cash flows in respect of
the principal and the interest and is discounted at the market interest rates on the measurement date for similar loans having
similar characteristics and is classified as Level 2 in the fair value hierarchy. The average discount interest as at December
31, 2015 for the shekel, euro, dollar and yuan loans was 2.79%, 1.35%, 3.1% and 5.20% respectively (December 31, 2014 for the shekel,
euro, and dollar loans – 3.22%, 1.53% and 3.18%, respectively).



(2) The fair value of the marketable debentures
is based on the quoted stock exchange price and is classified as Level 1 in the fair value hierarchy.





(3) The fair value of the non marketable
debentures is based on calculation of the present value of the cash flows in respect of the principal and the interest and is
discounted at the Libor rate customary in the market for similar loans having similar characteristics and is classified as Level
2 in the fair value hierarchy. The average discount interest as at December 31, 2015 was 4.85% (December 31, 2014 – 4.04%).



G. Hierarchy of fair value



The following table presents an analysis
of the financial instruments measured by fair value, using the valuation method. (See Note 4 for more details regarding the valuation
method).



The following levels were defined:



F-96


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Note 27 - Financial Instruments and Risk Management (cont’d)



G. Hierarchy of fair value (cont’d)



Level 1: Quoted (unadjusted) prices in
an active market for identical instruments



Level 2: Observed data (directly or indirectly)
not included in Level 1 above.



|                                     |  | As
    at December 31, 2015
|------------------------------------ |  | ---------------------------
|                                     |  | Level
    1                
|                                     |  | $
    millions             
|Securities held for trading purposes |  |                            
|Derivatives used for hedging, net    |  |                            
|                                     |  |                            



F-97


Table of Contents




Note 28 - Earnings per Share



Basic earnings per share



Calculation of the basic earnings per share
for the year ended December 31, 2015, is based on the earnings allocated to the holders of the ordinary shares divided by the weighted-average
number of ordinary shares outstanding, calculated as follows:



|                                                               |  | For
    the year ended December 31
|-------------------------------------------------------------- |  | ----------------------------------
|                                                               |  | 2015                              
|                                                               |  | $ millions                        
|Earnings
    attributed     to the shareholders of the Company |  |                                   



Weighted-average number of ordinary shares
in thousands:



|                                                                                                   |  | For
    the year ended December 31
|-------------------------------------------------------------------------------------------------- |  | ----------------------------------
|                                                                                                   |  | 2015                              
|                                                                                                   |  | Shares thousands                  
|Balance as at January 1                                                                            |  |                                   
|Shares issued during the year                                                                      |  |                                   
|Shares vested                                                                                      |  |                                   
|Options exercised for shares                                                                       |  |                                   
|Weighted average number of ordinary shares used in computation
    of the basic earnings per share |  |                                   



F-98


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Note 28 - Earnings per Share (cont’d)



Diluted earnings per share



Calculation of the diluted earnings per
share for the year ended December 31, 2015, is based on the earnings allocated to the holders of the ordinary shares divided by
the weighted-average number of ordinary shares outstanding after adjustment for the number of potential diluted ordinary shares,
calculated as follows:



|                                                                          |  | For
    the year ended December 31
|------------------------------------------------------------------------- |  | ----------------------------------
|                                                                          |  | 2015                              
|                                                                          |  | $ millions                        
|Earnings
    attributed     to the  shareholders of the Company (diluted) |  |                                   



Weighted average number of ordinary shares
(diluted) in thousands:



|                                                                                                         |  | For
    the year ended December 31
|-------------------------------------------------------------------------------------------------------- |  | ----------------------------------
|                                                                                                         |  | 2015                              
|                                                                                                         |  | Shares thousands                  
|Weighted average number of ordinary
    shares used in the computation of the basic earnings per share   |  |                                   
|Effect of stock options and restricted shares                                                            |  |                                   
|Weighted average number of ordinary shares
    used in the computation of the diluted earnings per share |  |                                   



At December 31, 2015, 24 million options
(at December 31, 2014 and 2013, 16 million options), were excluded from the diluted weighted average number of ordinary shares
calculation as their effect would have been anti-dilutive.



The average market value of the Company’s
shares, for purposes of calculating the dilutive effect of the stock options, is based on the quoted market prices for the period
in which the options were outstanding.



F-99


Table of Contents




Note 29 - Related and Interested Parties



Related parties within its meaning in IAS 24 (2009), “Related Parties Disclosure”; Interested parties within their
meaning in Paragraph 1 of the definition of an “interested party” in Section 1 of the Israeli Securities Law,
1968.



A. Parent company and subsidiaries





The Group's parent company
is Israel Corporation Ltd. (“Israel Corp.”). Israel Corp. is a public company listed for trading on the Tel Aviv Stock
Exchange (TASE). Based on the information the Company received from Israel Corp. Millenium Investments Elad Ltd. (“Millenium”)
and Mr. Idan Ofer are considered as controlling shareholders jointly of Israel Corp., for purposes of the Securities Law (each
of Millenium and Mr. Ofer hold shares in Israel Corp. directly, and Mr. Idan Ofer serves as a director of Millenium and
has an indirect interest in it as the beneficiary of the foreign discretionary trust that has indirect control of Millenium). Millenium
holds approx. 46.94% of the share capital in Israel Corp.
which holds approx. 46.04% of the voting rights and 48.88% of the issued share capital of the Company. Millenium is held by Mashat
Investments Ltd. (“Mashat”) and by XT Investments Ltd. (“XT Investments”), with 80% and 20% holdings,
respectively. Mashat is a private company, wholly owned by a Dutch company, Ansonia Holdings Singapore B.V. (“Ansonia”).
Ansonia is a wholly-owned subsidiary of Jelany Corporation N.V. (registered in Curaçao), which is a wholly-owned subsidiary
of the Liberian company, Court Investments Ltd. (“Court”). Court is wholly owned by a foreign discretionary trust,
in which Mr. Idan Ofer is the beneficiary. XT Investments, which directly holds approximately 1.24% of the share capital of
Israel Corp., is a shareholder in Millenium as stated. XT Investments is a private company, wholly owned by XT Holdings Ltd.
(“XT Holdings”), a private company whose ordinary shares are held in equal shares by Orona Investments Ltd. (which
is indirectly controlled by Mr. Ehud Angel) and by Lynav Holdings Ltd., a company that is controlled by a foreign discretionary
trust in which Mr. Idan Ofer is a prime beneficiary. Mr. Ehud Angel holds, among other things, a special share that grants
him, inter alia, under certain limitations and for certain issues, an additional vote on the board of directors of XT Holdings.
In addition, Kirby Enterprises Inc., which is indirectly held by the same trust that holds Mashat, in which, as stated, Mr. Idan
Ofer is the beneficiary, holds approximately 0.74% of the share capital of Israel Corp. Furthermore, Mr. Idan Ofer holds directly
approximately 3.85% of the share capital of Israel Corp. Furthermore, XT Investments directly holds approximately 0.03% of
the Company's capital (namely, 377,662 Ordinary Shares). Regarding the group subsidiaries – see Note 30, regarding the Group
entities.



B. Benefits to key management personnel
(including directors)



The senior managers, in addition to their salaries, are entitled to non-cash benefits (such as vehicle and telephone etc.).
The Group contributes to a post-employment defined benefit plan on their behalf. In accordance with the terms of the plan,
the retirement age of senior managers is 67. Senior managers and directors also participate in the Company's incentive and
equity remuneration plans (options for Company shares and restricted shares (see Note 24 – Share-Based Payments).



Benefits for key management personnel (in
total 25 and 23 key management personnel including directors, in 2015 and 2014, respectively) comprised:







|                                                        |  | For
    the year ended December 31
|------------------------------------------------------- |  | ----------------------------------
|                                                        |  | 2015                              
|                                                        |  | $
    millions                    
|Short-term benefits                                     |  |                                   
|Post-employment benefits                                |  |                                   
|Share-based payments                                    |  |                                   
|Total*                                                  |  |                                   
|* To interested parties employed by the Company         |  |                                   
|* To interested parties not employed by the
    Company |  |                                   



Subsequent to the balance sheet date,
the Company announced that Mr. Nir Gilad will retire from the company’s BOD at September 1, 2016. The BOD has formed a Search
Committee that will identify suitable candidates and propose the nomination to the full Board for election, no later than May
1, 2016.



The company intends to invite a special
shareholders meeting in August 2016 to approve appointment of the newly elected candidate as well as his terms of tenure, and by
this allow an orderly overlap between Mr. Gilad and the new elected Chairman.







F-100


Table of Contents


Note 29 - Related and Interested Parties   (cont’d)



C. Ordinary transactions that are not
exceptional





The Company’s Board
of Directors, with the agreement of the Audit Committee, decided that a transaction with related and interested parties will be
considered a “Negligible” transaction for public reporting purposes if all the following conditions have been met:



(1) It is not an “extraordinary transaction”
within the meaning thereof in the Companies Law.



(2) The effect of each of the parameters
listed hereunder is less than one percent (hereinafter – “the Negligibility Threshold”):



For every transaction or
arrangement that is tested for the Negligibility Threshold, the parameters will be examined, to the extent they are relevant,
on the basis of the Company’s condensed or audited consolidated financial statements, as applicable, prior
to the transaction, as detailed below:



| | · | Assets ratio – the amount of the assets in the transaction (assets acquired or sold) divided by total assets.
| | - | -------------------------------------------------------------------------------------------------------------



| | · | Equity ratio – the increase or decrease in equity divided by the total equity.
| | - | ------------------------------------------------------------------------------



| | · | Revenue ratio – estimated revenue from the transaction divided by the annual revenue.
| | - | -------------------------------------------------------------------------------------



| | · | Manufacturing expenses ratio – the amount of the expenses in the transaction divided by the annual cost of sales.
| | - | -----------------------------------------------------------------------------------------------------------------



| | · | Profit ratio – the profit or loss attributed to the transaction divided by total annual comprehensive income or loss
during the period.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------



(3) The transaction is negligible also
from a qualitative point of view. For the purpose of this criterion, it shall be examined whether there are special considerations
justifying a special report on the transaction, even if it does not meet the quantitative criteria described above.



(4) In examining the negligibility of a
transaction expected to occur in the future, among other things, the probability of the transaction occurring is to be examined.



D. Transactions with related and interested
parties



|                                          |  | For
    the year ended December 31
|----------------------------------------- |  | ----------------------------------
|                                          |  | 2015                              
|                                          |  | $
    millions                    
|Sales                                     |  |                                   
|Cost of sales(1)                          |  |                                   
|Selling, transport and marketing expenses |  |                                   
|Financing expenses (income), net          |  |                                   
|Management fees to the parent company(2)  |  |                                   



(1)	A subsidiary in
the Performance Products segment entered into a long-term agreement with an interested party of the Company for the
acquisition of food quality phosphoric acid. The agreement was signed before the subsidiary was acquired by the Company and
is in effect until 2018. Additionally, on February 28, 2013, the Company’s Audit Committee and Board of Directors authorized
to the certain of Group subsidiaries in Israel from the Industrial Products segment to purchase electricity from OPC Rotem (a
company related to the Company’s controlling shareholder). During 2013, additional companies from the Fertilizers
segment entered into an agreement with OPC Rotem to purchase electricity in accordance to the amended agreement authorized
on February 28, 2013.





F-101


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Note 29 - Related and Interested Parties   (cont’d)



D. Transactions with related and interested
parties (cont’d)



(2)	On October 5, 2011, the General
Meeting of the Company’s shareholders approved a management agreement between Israel Corporation Ltd. and its subsidiary,
on the one hand, and the Company, on the other hand, for the years 2012 until 2014, whereby the Company will pay Israel Corporation
annual management fees, in the amount of $3.5 million, plus VAT as per law. In January 2015, the Remuneration Committee and the
Board of Directors approved, and on February 26, 2015, the General Meeting of the Company’s shareholders also approved extension
of the management agreement for the years 2015 through 2017, on the same terms, except for the following changes: (1) upon approval
of the service conditions of the Chairman of the Company’s Board of Directors, as Acting Chairman, the management fees will
be reduced to $1 million, plus VAT as per law. If the Chairman of the Company’s Board of Directors is appointed as Acting
Chairman, and thereafter he ceases to serve and to receive remuneration as Acting Chairman, commencing from that time the management
fees will return to $3.5 million, plus VAT as per law; and (2) the management agreement was amended such that it permits the Company
to provide equity remuneration to directors that serve and/or will serve from time to time and that are employed by Israel Corporation
(such directors do not receive cash remuneration in respect of their service). It is noted that the Remuneration Committee, the
Board of Directors and the General Meeting of the Company’s shareholders approved that equity remuneration that will be
granted to directors, as stated, or the economic benefit in respect thereof, shall be transferred to Israel Corporation.



E. Balances with interested parties



1) Composition:



|                                                  |  | As
    at December 31
|------------------------------------------------- |  | ---------------------
|                                                  |  | 2015                 
|                                                  |  | $
    millions       
|Long-term deposits, net of current
    maturities |  |                      
|Long term loans                                   |  |                      
|Other current assets                              |  |                      
|Other current liabilities                         |  |                      



2) The Company declares a dollar dividend
that is paid partly in NIS, according to the exchange rate on the effective date. The Company enters hedging transaction in order
to hedge the exposure to changes in the dollar/shekel exchange rate. The dividend paid to the Company’s controlling shareholder,
Israel Corporation, is made partly based on the exchange rate on the effective date and partly based on the exchange rate on the
date of distribution. In addition, the dividend paid to an interested party is made according to the exchange rate on the date
of distribution.



F-102


Table of Contents


Note 30 - Group Entities





|                                                |                                                 | The Group’s ownership interest in its significant subsidiary and investee companies for the year ended December
31
|----------------------------------------------- | ----------------------------------------------- | ------------------------------------------------------------------------------------------------------------------
|Name of
        company                         | Principal
    location of thecompany’s activity | 2015                                                                                                              
|ICL Israel Ltd.                                 | Israel                                          | 100.00%                                                                                                           
|Dead Sea Works Ltd.                             | Israel                                          | 100.00%                                                                                                           
|Dead Sea Bromine Company Ltd.                   | Israel                                          | 100.00%                                                                                                           
|Rotem Amfert Negev Ltd.                         | Israel                                          | 100.00%                                                                                                           
|Mifalei Tovala Ltd.                             | Israel                                          | 100.00%                                                                                                           
|Dead Sea Magnesium Ltd.                         | Israel                                          | 100.00%                                                                                                           
|Ashli Chemicals (Holland) B.V.                  | Israel                                          | 100.00%                                                                                                           
|Bromine Compounds Ltd.                          | Israel                                          | 100.00%                                                                                                           
|Tetrabrom Technologies Ltd.                     | Israel                                          | 100.00%                                                                                                           
|Fertilizers and Chemicals Ltd.                  | Israel                                          | 100.00%                                                                                                           
|I.D.E. Technologies Ltd.*                       | Israel                                          | 50.00%                                                                                                            
|Iberpotash S.A.                                 | Spain                                           | 100.00%                                                                                                           
|Fuentes Fertilizantes S.L.                      | Spain                                           | 100.00%                                                                                                           
|ICL Europe Coöperatief U.A.                     | The Netherlands                                 | 100.00%                                                                                                           
|ICL-IP Europe B.V                               | The Netherlands                                 | 100.00%                                                                                                           
|ICL IP Terneuzen B.V                            | The Netherlands                                 | 100.00%                                                                                                           
|ICL Fertilizers Europe C.V.                     | The Netherlands                                 | 100.00%                                                                                                           
|ICL Finance B.V                                 | The Netherlands                                 | 100.00%                                                                                                           
|Everris International B.V.                      | The Netherlands                                 | 100.00%                                                                                                           
|Clearon Corp.                                   | United States of America                        | 100.00%                                                                                                           
|Phosphorus Derivatives Inc.                     | United States of America                        | 100.00%                                                                                                           
|ICL Performance Products LP                     | United States of America                        | 100.00%                                                                                                           
|ICL-IP America Inc                              | United States of America                        | 100.00%                                                                                                           
|Everris N.A. Inc.                               | United States of America                        | 100.00%                                                                                                           
|BK Giulini GmbH                                 | Germany                                         | 100.00%                                                                                                           
|ICL Holding Germany GmbH                        | Germany                                         | 100.00%                                                                                                           
|ICL IP Bitterfeld GmbH                          | Germany                                         | 100.00%                                                                                                           
|Prolactal GmbH                                  | Germany                                         | 100.00%                                                                                                           
|ICleveland Potash Ltd.                          | United Kingdom                                  | 100.00%                                                                                                           
|ICL Brasil, Ltda.                               | Brazil                                          | 100.00%                                                                                                           
|ICL Performance Products Jiangyin
    Co., Ltd. | China                                           | 0.00%                                                                                                             
|ICL (Shanghai) Investment Co.
    Ltd.          | China                                           | 100.00%                                                                                                           
|Yunnan Phosphate Haikou Co. Ltd.                | China                                           | 50.00%                                                                                                            
|ICL France S.A.S                                | France                                          | 100.00%                                                                                                           
|ICL Asia Ltd                                    | Hong Kong                                       | 100.00%                                                                                                           
|Allana
    Potash Afar PLC                      | Ethiopia                                        | 100.00%                                                                                                           



* Investee company

F-103