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 prospectus 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 or investments in the Middle East and Europe described below and elsewhere in this prospectus.

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.

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

        We extract potash and sodium chloride 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 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 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 concession of Cleveland Potash is 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. The terms of all of these leases, concessions, easements and rights of way extend for periods ranging from 2015 to 2038. See "Business—Mineral Extraction and Mining Operations—Concessions and Mining Rights."

        Furthermore, we mine phosphate rock from phosphate deposits in the Negev Desert in accordance with three concessions from the State of Israel valid up to the end of 2021. In exchange for these concessions, we are required to pay royalties to the Israeli government.

        In addition to our existing phosphate mines in the Negev Desert, which we estimate have up to approximately eight years of remaining reserve life for phosphate rock and phosphoric acid production, our plan for mining phosphates in Barir field (South Zohar) in the Negev is in the planning approval stages, and it has not yet been decided whether to file the plan with the proper authorities. Residents of the surrounding towns and villages and the Bedouin settlement in the area have objected to the filing of the plan and continuation of the related planning stages, due to the fear of environmental and health dangers they contend will be caused as a result of operation of the mine. While we believe the mining activities in Barir field do not involve any risks to the environment or to people, others may reach contrary conclusions. After an expert appointed by the Israeli Ministry of the Prime Minister expressed his opinion that there is no health hazard in the Barir field, the Israeli Ministry of Health appointed an expert on its behalf to examine the matter before the Israeli Ministry of Health formulates an opinion. On April 3, 2014, we learned that the Israeli Ministry of Health had received the opinion of its expert and, after reading the opinion, the Israeli Ministry of Health decided to oppose mining, including exploratory mining, in the Barir field. We disagree with the Israeli Ministry of Health's interpretation of this opinion. Based on our understanding of this opinion, we believe this opinion does not contradict our position that the mining activities in Barir field do not involve any risks to the environment or to people. The residents of nearby towns are continuing to object to advancement of the mining plan and even to mining tests. Non-receipt of approval to mine in the Barir field will significantly harm our future mining reserves in the medium and

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long term. If we fail to receive such approval and cannot find alternative sources of phosphates, our business, financial condition and results of operations may be materially and adversely affected.

        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 and the United Kingdom. A decision by a government authority to deny any of our permits applications may impair our business and operations.

        In addition, 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.

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, that may cause material damage to our business.

        In Israel, some of our plants are located on the African-Syrian Rift, a seismically active area. 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 is likely to cause structural damage to the foundations and the hotel buildings situated close to the water's edge and to other infrastructure 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. According to the Dead Sea Protection Company, the total cost of the salt harvesting is estimated, as of October 2010, to be an undiscounted amount of NIS 7 billion (a discounted amount of NIS 3.8 billion). The Israeli government will bear up to 20% of the cost of the salt harvesting. The Israeli government's maximum commitment (20% of NIS 3.8 billion, the discounted amount) is linked to the CPI and bears interest at the rate of 7%. See "Business—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

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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 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 of the Dead Sea, the water line is receding from the current pumping station and construction of a new pumping station is necessary. Construction of the new station depends on, among other things, 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. 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.

        In addition, as the water level 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 adverse 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 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.

As a multinational company, we are exposed to fluctuations in currency exchange rates.

        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. The portion of our sales made in currencies other than the U.S. dollar exposes us to fluctuations in the exchange rates of these currencies against the U.S. dollar. The functional currency of most of our foreign subsidiaries outside Israel and the United States is the local currency; therefore, the revenue and expenses of these companies in the local non-U.S. dollar currency do not represent exposure. On the other hand, revenues and expenses of these companies denominated in U.S. dollars expose these companies to fluctuations in currency exchange rates of the U.S. dollar against their functional currencies.

        A portion of our expenses in Israel are incurred and paid in NIS. Therefore, we are exposed to strengthening of the currency exchange rate of the NIS relative to the U.S. dollar (i.e., an appreciation of the NIS). Our strategy is to partially hedge against the exposure described above according to market conditions and projections regarding developments in currency exchange rates. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—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. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Quantitative and Qualitative Disclosures About Market Risk—Interest Rate Risk."

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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 or to support other corporate purposes.

        In 2013, we derived approximately 95% 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 we serve;



•

political and economic instability, including the possibility for 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 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.

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.

We could be adversely affected by price increases or shortages with respect to 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.

        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 higher cost.

        Our plants consume large amounts of energy. Significant price increases for energy, or energy shortages, in Israel would affect 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—there is no assurance that power supply from these two sources could not both be damaged. Prolonged damage to the regular supply of electricity may damage the plants and the environment. In addition, the current supply of

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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 (fuel oil and/or diesel), an increase in our energy costs, or energy shortages could materially and adversely affect our business, financial condition and results of operations.

        In addition, 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 through increased costs relating to water, energy or other raw materials, such as sulfur, that we must source from third parties. Our inability to efficiently and effectively pass through 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.

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

        A draft of the final World Bank report evaluating the feasibility of a canal from the Red Sea to the Dead Sea in order to address the shrinking of the Dead Sea was recently published and Israel, the Palestinian Authority and Jordan have signed an agreement to implement a similar but much smaller project involving construction of a pipeline from the Red Sea. The objective of the canal is to desalinate water for countries in the region (mainly Jordan), stabilize the level of the Dead Sea and contribute to regional peace. Such a canal would likely change the composition of the Dead Sea, which could negatively impact the production of our plants.

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, we recently underwent a strike at our Rotem subsidiary in Israel. We may face additional labor disputes in the future, particularly if we seek to reduce costs or shut down certain plants or assets as part of our review of our plans in Israel, as described under "Prospectus Summary—Recent Developments," or other initiatives. For example, we are aware that unionized employees at certain of our facilities object to some of our existing cost cutting initiatives and are seeking to challenge such initiatives. Most of our employees are subject to collective bargaining agreements. Lengthy slowdowns or strikes at any of our plants could disrupt production and prevent delivery of products that had already been ordered, and it takes time to return to full capacity production in all facilities. 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 to enhance our efficiency. Moreover, due to the interdependency of our plants, slowdowns or strikes in any one of our plants could have a material impact on us. See "Business—Employees."

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 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 companies. Some of these companies are state-owned or government-subsidized. The primary competitive factor with respect to our products is price. Our prices for our products are impacted by the prices prevailing in the market. 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,

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it was reported in the media that Uralkali would implement a new policy in potash sales of preferring quantity over price. We believe this announcement led to a fall in potash 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 adversely affected.

A committee established by the Israeli finance minister is currently considering higher taxes and royalties on our operations.

        The Israeli Minister of Finance, Mr. Yair Lapid, has established a public committee, headed by Prof. Eytan Sheshinski, for examination of the policy with respect to the royalties received by the State of Israel from private entities, including us, for use of national natural resources such as potash and phosphate. The committee is required, among other things, to examine the royalties policy from a broad perspective, while making reference to the impacts on the present agreements between the various parties engaged in these matters and the State of Israel. A similar committee established in 2011 for the oil and gas industries concluded that the tax and royalty rates should be increased significantly. If the committee determines that the taxes and royalties we pay should be increased and the Israeli government agrees, it could have a material adverse effect on us. On November 4, 2013, we submitted our position in writing to the committee. Our request, dated December 3, 2013, to exclude this matter from the committee's jurisdiction was denied by the Minister of Treasury. On May 18, 2014, the committee released its draft recommendations for public comment. The principal draft recommendations are as follows:

•

The government take on natural resources should include royalties, a tax on natural resources and regular corporate tax;



•

The unified royalty rate for natural resources in Israel should be 5% from the sales ex plant (compared to the current phosphate royalty rate of 2% ex mine and the potash royalty rate of 5% on the first 1.5 million tons sold and 10% on any additional quantities sold; the bromine royalty rate would remain unchanged at the current 5%); the basis for the calculation of the royalties (which is not identical for each product) will be determined by the State of Israel;



•

The new "natural resources tax" would apply to the operating profit of each company that exploits natural resources in Israel (according to the adjusted accounting profit and loss statement) at the suggested rate of 42%, which would be fixed after the deduction of an 11% return on the book value (after depreciation) of the Company's fixed assets; and



•

The changes with respect to Dead Sea Works would require legislation, which would come into effect no earlier than January 1, 2017, although the taxes applicable to phosphate and bromine operations could be implemented sooner.

On July 17, 2014, we submitted our response, in writing, to the Committee's Interim Recommendations, and on August 4, 2014, we orally presented our position to the Sheshinski Committee. See "Prospectus Summary—Recent Developments" and "Business—Mineral Extraction and Mining Operations—Concessions and Mining Royalties." We intend, with the assistance of our legal advisors, to take all necessary legal actions in order to protect our rights. On August 6, 2014, our Board of Directors discussed the impact of the Committee's Interim Recommendations and the Royalties Arbitration, as well as the need to implement cost-cutting and efficiency plans, and resolved to take certain actions described in "Prospectus Summary—Recent Developments."

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        For information regarding Dead Sea Works's commencement of an arbitration proceeding in connection with what we view as the Israeli government's breach of our concession agreement with respect to the Dead Sea due to its convening of this committee, see note 23 to our audited financial statements. On March 27, 2014, the Israeli Ministry of Finance notified Dead Sea Works that it has rejected its request to appoint an arbitrator on behalf of the State of Israel. The Israeli Ministry of Finance contends that the establishment of the committee falls with the State of Israel's administrative authorities and does not constitute a disagreement or dispute between the parties according to the concession agreement. The State of Israel further argues that an arbitration panel is not the appropriate forum for challenging the establishment of the committee and its work and that the establishment of the committee does not fall under the relevant clause in respect of which the parties may turn to arbitration. On April 30, 2014, Dead Sea Works filed a request in the Jerusalem District Court that such court order the appointment of an arbitrator on behalf of the State of Israel for the purpose of managing the arbitration process between Dead Sea Works and the State of Israel in accordance with the binding arbitration arrangements between the parties. A court hearing was held on July 10, 2014 but the Court's decision has not yet been received. See "Business—Legal Proceedings—Dead Sea Works Proceedings."

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

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

•

geological and mining conditions and/or effects from prior mining that may not be fully identified by available data or that may differ from 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.

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

We intend to expand our business through acquisitions and various initiatives to increase production and reduce costs at 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 acquisitions of businesses or to enter into joint ventures. 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. There is no guarantee that the acquired businesses or joint ventures will be successfully integrated with our products and operations and we may not realize the intended benefits of the acquisition or joint venture.

        Future acquisitions could result in:

•

substantial cash expenditures;



•

potentially dilutive issuances of equity securities;

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•

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



•

amortization of intangibles and impairment of goodwill.

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

        In addition, we are working on a number of initiatives to improve our existing operations, including initiatives to increase production in Spain and Israel and reduce operating costs at our facilities. These initiatives may cost more or take longer than we anticipate and we may not be able to achieve our goals. If we cannot do so, our competitive position could be adversely affected. See "Prospectus Summary—Our Strategy—Continuously improve the cost position of our distinctive mineral asset base" and "—Streamline and integrate our global processes."

Our tax liabilities may be higher than expected.

        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 tax authorities in many different jurisdictions. As part of these examinations, the relevant tax authorities may disagree with the amount of taxable income, as stated, deriving from our inter-company agreements and may also dispute our interpretation of the applicable tax legislation. For example, the tax authorities in Israel issued an assessment to us demanding that we pay additional tax in the amount of approximately $230 million in respect of the years 2009 to 2011. See note 20 to our audited financial statements. Even though we believe our estimates are reasonable, the final outcome of these examinations and any related legal proceedings may be different than the provisions that we record in respect of our tax liability and may have a significant impact on our results of operations. No tax expenses were included in our financial statements in connection with this assessment.

Risks Related to Our Industry

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

        We are a multinational 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.

Sales of our fertilizer products are subject to the condition of 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 volumes of fertilizer products have been volatile. This price and volume volatility may cause our results of operations to fluctuate and potentially 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. In contrast, high prices may lead our customers to delay purchasing decisions in anticipation of future lower prices, thereby decreasing

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our sales volumes. These phenomena 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 20.7% of our sales (before set-offs of inter-segment sales) in 2013. 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. The European Union has already banned the bromine-based flame retardant DECA for use in electrical and electronic applications, and it is likely that DECA will be prohibited for all uses in the European Union in 2017 at the earliest. See "Business—Regulatory and Environmental, Health and Safety Matters." Sale of completion fluids 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.

        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 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 general economic conditions in the markets where 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, the revaluation of the euro exchange rate vis-à-vis the U.S. dollar increases the competitive advantage of these competitors.

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As an industrial chemicals company, we are subject to various legislative and licensing restrictions in Israel and throughout the world in the areas of environmental protection and safety. Related compliance costs and hazards inherent to the nature of our business 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, in Israel and throughout the world, and the cost of 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 "Business—Regulatory and Environmental, Health and Safety Matters."

        In addition, 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 related to these circumstances.

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 in and outside Israel. See "Business—Legal Proceedings."

        Furthermore, we are from time to time 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 done jointly with others and at times by others. We may also be found liable for claims related to land that we mined or activities that we conducted within our premises, 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. In August 2013, a request was filed in the District Court of Tel Aviv for certification of a claim as a class action against us, Israel Corporation, PotashCorp Cooperative Agricultural Society Ltd., the members of our Board of Directors

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and our Chief Executive Officer. The aggregate amount of the damages claimed is NIS 2.75 billion or NIS 3.28 billion (depending on the share price used to calculate the alleged damages). We have not made a provision for this claim in our audited financial statements. See note 23 to our audited financial statements and "Business—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 a number of claims alleging bodily injury as a result of discharges to the Kishon River and of various pollutants in the vicinity of our Neot Hovav plants. We are also 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(C) 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 recall of products by us or by our customers that used the products.

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

        We maintain 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.

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 are more likely to 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 (including the recent conflict between Israel and Hamas in Gaza), but we can provide no assurance that we will not be subject to any such interruptions in the future.

        Our computer network 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, 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.

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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 make it more difficult for us to raise capital (although the recent conflict between Israel and Hamas in Gaza has not had a material effect on our business, financial condition or results of operations). 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 have 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. Iran is also believed to have 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.

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. In response to terrorist activity, there have been periods of significant call-ups of military reservists. It is possible that there will be military reserve duty call-ups in the future. Our operations could be disrupted by such call-ups (although we did not have material disruptions from the recent call-ups of military reservists relating to the conflict with Hamas in Gaza).

It may be difficult to enforce a U.S. judgment against us and our directors and executive officers named in this prospectus, 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 prospectus 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 U.S. securities law claims in original actions instituted in Israel. See "Enforcement of Judgments."

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

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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 and the Offering

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

        Immediately prior to this offering, Israel Corporation holds approximately 52.38% of our outstanding ordinary shares. With respect to any ordinary shares Israel Corporation sells directly to the underwriters, it will cease to have voting rights. With respect to any ordinary shares subject to the forward sale agreements, and made available to the forward counterparties under these agreements, Israel Corporation will cease to have voting rights with respect to these ordinary shares and will, at the relevant settlement dates, regain voting rights with respect to all or a portion of the ordinary shares it makes available to the forward counterparties under these agreements if it elects cash settlement or net physical settlement. Following this offering, Israel Corporation will still have voting control over 46.68% of our ordinary shares.

        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 "Management—External Directors");



•

mergers or other business combinations;



•

certain future issuances of ordinary shares or other securities; and



•

amendments to our Articles of Association.

        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.

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

        Israel holds a Special State Share in our Company and in some of our Israeli subsidiaries. The Special State Share entitles 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. See "Description of Share Capital—The Special State Share" for a further discussion of these restrictions. 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.

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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.

There has been no prior public market in the United States for our ordinary shares, and an active trading market in the United States may not develop.

        Prior to this offering, there has been no public market in the United States for our ordinary shares. An active trading market in the United States may not develop following completion of this offering or, if developed, may not be sustained. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair market value of your shares.

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 will rely 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.

        We have approximately 190 million ordinary shares authorized but unissued. We may choose to raise substantial equity capital in the future: (1) to acquire or invest in businesses, products or technologies and other strategic relationships and (2) 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. In addition, 11,993,400 options for our ordinary shares were outstanding as of June 30, 2014. See "Management—Incentive Compensation Plans." Any ordinary shares that we issue, including under any options plans, would dilute the percentage ownership held by the investors who purchase ordinary shares in this offering.

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If our existing shareholders sell additional ordinary shares, or if these shares are sold by others, either on the TASE or the NYSE, after this offering, or if the forward counterparties or their affiliates sell additional ordinary shares to adjust their respective hedge positions during the terms of the forward sale agreements, the market price of our ordinary shares could decline.

        The sale of substantial amounts of our ordinary shares in the public market, or the perception that such sales could occur, could harm the prevailing market price of our ordinary shares on the TASE or the NYSE. These sales, or the perception that these sales could occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. We have a total of 1,295,015,589 ordinary shares outstanding. All of our outstanding shares will be freely tradable without restriction or further registration under the Securities Act, except that any shares held by our affiliates, including Israel Corporation, may be sold only in compliance with the limitations described in "Shares Eligible for Future Sale."

        We, our directors and officers, and Israel Corporation will sign lock-up agreements with the underwriters that will, subject to certain exceptions, including with respect to sales by pledgees under margin loans, restrict the sale of ordinary shares held by them for 180 days following the date of this prospectus. Upon the expiration of the lock-up agreements, all of such shares will be eligible for resale in a public market, subject, in the case of shares held by our affiliates, to volume, manner of sale and other limitations under Rule 144. Morgan Stanley & Co. LLC may, in its sole discretion, release all or any portion of the shares subject to lock-up agreements. See "Underwriting" for a description of these lock-up agreements.

        As of September 10, 2014, Israel Corporation has pledged approximately 372 million ordinary shares, or approximately 55.9% of the total ordinary shares it holds, to secure certain liabilities, almost entirely comprised of margin loans with an aggregate outstanding principal amount of $1.034 billion. As of that date, the ordinary shares pledged by Israel Corporation represent approximately 29.3% of the total ordinary shares outstanding and was in an amount equal to approximately 87% of ordinary shares held by non-affiliates. Each margin loan requires Israel Corporation to pledge additional ordinary shares or cash collateral if certain loan-to-value ratios are greater than the maximum ratios agreed upon with the lender of the applicable margin loan. In accordance with the loan-to-value ratios, based on the aggregate principal amount of loans outstanding as of September 10, 2014, Israel Corporation would be required to pledge additional ordinary shares or cash collateral if the price of our ordinary shares were to decline to prices ranging from $4.39 to $6.24, with the weighted average trigger price being approximately $5.84. See "Price Range of Our Ordinary Shares" for more information about the historical price ranges of our ordinary shares. One or more of the margin loans also contain provisions that, subject to their terms, effectively require prepayment if certain events or circumstances occur, including any that have a material adverse effect on Israel Corporation, Israel Corporation ceasing to control us, a decline in the price of our ordinary shares below a specified level, Israel Corporation's failure to comply with specified financial ratios or a requirement of prepayment is triggered under any other material indebtedness. The only liabilities of Israel Corporation that are secured by ordinary shares, and that are not margin loans, relate to cross-currency interest rate swaps. At June 30, 2014, Israel Corporation had, on an unconsolidated basis, approximately $2.424 billion of total indebtedness, of which approximately 43% is comprised of the margin loan indebtedness described above. If Israel Corporation fails to pledge additional ordinary shares or cash collateral when it is required to do so or otherwise fails to comply with the respective terms of the margin loans and the lender accelerates payment of all amounts outstanding under these loans as a result of this non-compliance, then the lender could sell the ordinary shares pledged thereunder. In addition, certain lenders under the margin loans may elect at any time to hedge their exposure to the ordinary shares in transactions that could directly or indirectly impact the price of ordinary shares.

        Pursuant to the terms of its lock-up agreement, Israel Corporation may during the lock-up period (1) pledge additional ordinary shares under its existing margin loans and cross-currency interest rate swaps, whether required to do so to comply with the respective terms of the margin loans or otherwise, and

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(2) enter into new pledge agreements and pledge additional shares to finance existing margin loan indebtedness, so long as in any such case the aggregate principal amount of debt under its margin loans would not be greater (after giving effect to the financing or additional pledge) than $1.14 billion. The lock-up agreement does not otherwise impose any limitations on the terms of any such financing arrangements or on Israel Corporation's ability to renegotiate any of the terms of its existing margin loan arrangements or cross-currency interest rate swaps.

        As described under "Prospectus Summary—The Offering," Israel Corporation expects to enter into forward sale agreements pursuant to which it will agree to sell, and the forward counterparties will agree to purchase from Israel Corporation, up to 36,207,128 ordinary shares, subject to the terms and conditions of the forward sale agreements. Israel Corporation will have the right to elect cash settlement or net physical settlement under the forward sale agreements in lieu of delivering all the ordinary shares. To the extent Israel Corporation elects cash settlement or net physical settlement under the forward sale agreements, the forward counterparties will return to Israel Corporation all or a portion of the ordinary shares it previously made available to the forward counterparties. Subsequent to the sale of the ordinary shares covered by this prospectus to establish their respective initial hedge positions in respect of the forward sale agreements, the forward counterparties or their affiliates may make additional sales and purchases of ordinary shares to adjust their respective hedge positions during the terms of the forward sale agreements. Neither we, Israel Corporation nor the forward counterparties make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the ordinary shares, but any selling activities could depress the price of our ordinary shares. In addition, neither we, Israel Corporation nor the forward counterparties make any representation that the forward counterparties or any of their affiliates will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.

        We intend to file one or more registration statements on Form S-8 under the Securities Act to register our ordinary shares or securities convertible into or exchangeable for our ordinary shares issued pursuant to our equity incentive plans. The ordinary shares registered under such registration statements will be available for sale in the open market. We expect that the initial registration statement on Form S-8 will cover approximately 16.5 million ordinary shares.

        As restrictions on resale end, the market price of our ordinary shares could drop significantly if the holders of these restricted shares sell them or are perceived by the market as intending to sell them. These factors could also make it more difficult for us to raise additional funds through future offerings of our ordinary shares or other securities.

We may not be able to fulfill our dividend policy in the future.

        Our Board of Directors has adopted a dividend policy to pay quarterly dividends of up to 70% of our net income. Any 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 dividends on an ad-hoc basis or to adopt a share buyback program.

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

        Our ordinary shares have traded on the TASE since 1992 and will be listed on the NYSE following this offering. Trading in our ordinary shares on these markets will be made in different currencies (U.S. dollars on the NYSE and NIS on the TASE) and take 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.

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We will incur additional costs as a result of this offering, and our management will be required to devote substantial time to new compliance initiatives as well as to compliance with ongoing U.S. and Israeli reporting requirements.

        As a public company in the United States, we will incur additional significant accounting, legal and other expenses that we did not incur before the offering of our ordinary shares on the NYSE, including costs associated with complying with the requirements under Section 404 and other provisions of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"). We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time consuming and costly. The implementation and testing of new compliance processes and systems may require us to hire outside consultants and incur other significant costs. In addition, any future changes in the laws and regulations affecting public companies in the United States and Israel, including Section 404 and other provisions of the Sarbanes-Oxley Act, the rules and regulations adopted by the SEC and the NYSE, as well as applicable Israeli reporting requirements, for so long as they apply to us, could result in increased costs to us as we respond to such changes.

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 will be permitted to follow certain home country corporate governance practices instead of those otherwise required by the NYSE for domestic issuers. For instance, we may 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 will be 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 will be exempt from the reporting and short-swing profit recovery provisions of Section 16 of the Exchange Act. In addition, we will not be 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.

You will incur immediate and substantial dilution in the net tangible book value of the ordinary shares you purchase.

        The assumed initial public offering price of $7.41 per ordinary share (which was the last reported sale price of our ordinary shares on the TASE on September 11, 2014, based on the exchange rate reported by the Bank of Israel on such date) will be substantially higher than the net tangible book value of our outstanding ordinary shares as of June 30, 2014. Accordingly, if you purchase our ordinary shares at the assumed initial public offering price, you will incur immediate and substantial dilution (based on such assumed price) of $5.61 per ordinary share.

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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.

Although we do not expect to be a passive foreign investment company, or a PFIC, for U.S. federal income tax purposes in the foreseeable future, no assurance can be given in that regard, and if we were a PFIC for any taxable year, certain adverse U.S. federal income tax consequences could apply to U.S. investors.

        In general, a non-U.S. corporation will be a PFIC for any taxable year if either (i) at least 75% of its gross income is "passive income" or (ii) at least 50% of the average quarterly value of its assets consists of assets that produce, or are held for the production of, passive income. 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 do not expect to be a PFIC for our current taxable year or in the foreseeable future. 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. investor owned our ordinary shares, such U.S. investor may be subject to certain adverse U.S. federal income tax consequences, including increased tax liability on gains from dispositions of the ordinary shares and certain excess distributions, and a requirement to file annual reports with the U.S. Internal Revenue Service. U.S. investors should note that we do not intend to provide shareholders with the information that would enable them to make a qualifying electing fund ("QEF") election, which, if available, would result in alternative treatment (which alternative treatment could, in certain circumstances, mitigate the adverse tax consequences of owning shares in a PFIC). See "Tax Considerations—Material U.S. Federal Income Tax Considerations for U.S. Holders—Passive Foreign Investment Company Rules."

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