Exhibit 99.5

DEBT STRUCTURE as of DECEMBER 31, 2011 (NIS in thousands)

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

2011 ANNUAL REPORT

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

2011 ANNUAL REPORT

TABLE OF CONTENTS

AUDITORS’ REPORT

To the Board of Directors of

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

We have audited the consolidated statements of financial position of Gadot Chemical Tankers and Terminals Ltd. (hereinafter - the “Company”) as of December 31, 2011 and 2010 and the related consolidated statements of income, statements of comprehensive income, changes in equity and cash flows for each of the two years ended on those dates. These financial statements are the responsibility of the Company’s Board of Directors and management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in Israel, including those prescribed by the Israeli Auditors (Mode of Performance) Regulations, 1973. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Company’s board of directors and management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, based on our audits, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2011 and 2010 and the consolidated results of operations, changes in equity and cash flows for each of the two years ended on those dates, in accordance with International Financial Reporting Standards.

Tel Aviv, Israel	Kesselman & Kesselman
June 5, 2012	Certified Public Accountants (lsr.)
	A member firm of International PricewaterhouseCoopers Limited

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

CONSOLIDATED BALANCE SHEETS

Y. Maiman		E. Meltzer			S. Gilad
A Chairman of the Board		Chief Executive Officer			Chief Financial Officer
of Directors

Date of approval of the financial statements: June 5, 2012

The accompanying notes are an integral part of the financial statements

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

CONSOLIDATED INCOME STATEMENTS

The accompanying notes are an integral part of the financial statements

 GADOT CHEMICAL TANKERS AND TERMINALS LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

The accompanying notes are an integral part of the financial statements

(Continued) - 1

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(Concluded) - 2

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

The accompanying notes are an integral part of the financial statements

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

CONSOLIDATED CASH FLOWS STATEMENTS

The accompanying notes are an integral part of the financial statements

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - GENERAL:

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

a. Basis of preparation:

Unless otherwise stated, the significant accounting policies described below have been applied on a consistent basis in relation to all presented periods.

The consolidated financial statements have been prepared on the basis of historical cost convention, except for adjustments made for amounts funded to severance pay, available-for-sale financial assets and financial assets and liabilities (including derivatives) at fair value through profit or loss and subject to the discussion below on the period of hyperinflationary economy in Israel.

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

In December 2006, the Israel Accounting Standards Board determined that, as from December 31, 2003, the economy of Israel would no longer be regarded as a hyperinflationary economy, as that term is defined in International Accounting Standard No. 29, ‘Financial Reporting in Hyperinflationary Economies’ (hereinafter -IAS 29). Accordingly, and as required by the provisions of IAS 29, the adjustment of financial statements of entities and operations, the functional currency of which was the New Israel Shekel to reflect the change of the Israel Consumer Price Index (“CPI”), would cease as of December 31, 2003 (“the effective date”).

Accordingly, the amounts in the consolidated financial statements from companies whose functional currency is the New Israeli Shekel that are associated with non-cash assets (including depreciation and amortization there on) and equity items originating prior to the effective date are based on adjusted-for-inflation data (based on the Israel CPI for December 2003) as was previously reported. All amounts in the financial statements originating from Group companies whose operating currency is the New Israeli Shekel that have arose after the effective date are stated in the financial statements at nominal value.

The preparation of financial statements in conformity with IFRS requires Group management to make certain significant accounting estimates. It is also required that the Group management exercise discretion in the process of applying the accounting policies of the Group. Note 3 discloses those areas in which management is required to exercise a significant degree of discretion or which are marked by a considerable degree of complexity, as well as those areas where assumptions and estimates affect the financial statements to a considerable extent. Actual results could differ significantly from those derived from the use of estimates and assumptions by management.

b. Principles of consolidation:

Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are immediately exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date the control ceases.

The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination (except for certain exceptional items specified in IFRS 3 – “Business Combinations” (as amended), hereafter – IFRS 3R) are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognizes any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of the identifiable net assets acquired and the liabilities assumed is recorded as goodwill.

In cases the net amount at acquisition date of the identifiable assets acquired and of the liabilities assumed exceeds the overall consideration that was transferred, the amount of non controlling interest in the acquiree and the fair value as of date of acquisition of any previous equity interest in the acquiree as above, the difference is recognized directly in the income statement at the date of acquisition.

Inter-company transactions, balances and unrealized gains on transactions between Group companies are eliminated. Unrealized losses are also eliminated, unless there are circumstances indicating the impairment of the transferred asset.

Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

The Group treats transactions with non-controlling interests as transactions with equity owners of the group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

Put option granted to subsidiary non controlling interests share holders:

Subsidiary non controlling interests shareholders were granted with a Put option by the Company, entitling them the right to sell part of their interests, or entire of, in the subsidiary, for a limited term.

The ownership risks and rewards of the shares relating to the option should be analysed to determine whether they remain with the non-controlling interest or have transferred to the parent. The non-controlling interest is recognized to the extent the risks and rewards of ownership of those shares remain with them.

The company recognized this option liability by measuring it according to the option’s present value of its estimated compensation at the exercising date.

Where the risks and rewards of ownership remain with the non-controlling interest, the financial liability recognized is debited to controlling interest equity.

All subsequent changes to the liability are recognized in profit or loss.

When the group ceases to have control or significant influence, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognized in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognized in other comprehensive income are reclassified to profit or loss.

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

The group’s interests in jointly controlled entities are accounted for by proportionate consolidation. The group combines its share of the joint ventures’ individual income and expenses, assets and liabilities and cash flows on a line-by-line basis with similar items in the group’s financial statements. The group recognizes the portion of gains or losses on the sale of assets by the group to the joint venture that is attributable to the other ventures. The group does not recognize its share of profits or losses from the joint venture that result from the group’s purchase of assets from the joint venture until it re-sells the assets to an independent party. However, a loss on the transaction is recognized immediately if the loss provides evidence of a reduction in the net realizable value of current assets, or an impairment loss.

Joint ventures’ accounting policies have been changed where necessary to ensure consistency with the policies adopted by the Group.

c. Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker who is responsible for allocating resources and assessing performance of the operating segments of the Group, has been identified as the Group’s Board of Directors that makes strategic decisions.

d. Foreign currency translation:

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in NIS, which is the Group’s functional and presentation currency.

The change during reported years in the exchange rates of the US Dollar (hereinafter -the Dollar or $), the Euro (€) and the Israel Consumer Price Index (CPI) is as follows:

The exchange rate of the US Dollar as of December 31, 2011 is US$1 = NIS 3.821 The exchange rate of the Euro as of December 31, 2011 is €1 = NIS 4.9381

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement.

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the income statement within ‘financial income (expense)’.

Translation differences on non-monetary assets such as equity securities classified as available for sale financial instruments are included in other comprehensive income.

The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

a) Assets and liabilities for each balance sheet presented are translated at the closing rate at that balance sheet date;

c) All resulting exchange differences are recognized as a separate component in other comprehensive income (loss).

On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of borrowings and other currency instruments designated as hedges of such investments, are taken to other comprehensive income. When a foreign operation is partially disposed of or sold (other than transactions with non-controlling interests), exchange differences that were recorded in other comprehensive income are recognized in the income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising from the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

e. Property, plant and equipment

All property, plant and equipment is stated at historical cost. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.

When a part of property, plant and equipment is being replaced, its carrying value is derecognized. Repairs and maintenance are charged to the income statement during the period in which they are incurred.

 GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

Property, plant and equipment is recognized at cost less accumulated depreciation and impairment loss. Cost includes expenditure that is directly attributable to the acquisition of the items (including borrowing costs).

Depreciation and impairment on property, plant and equipment are carried to income statement.

Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost or revalued amounts to their residual values over their estimated useful lives, as follows:

Major renovations are depreciated over the remaining useful life of the related asset or to the date of the next major renovation, whichever is sooner.

Leasehold improvements are amortized by the straight-line method over the term of the lease, which is shorter than the estimated useful life of the improvements.

The assets’ useful lives and depreciation methods are reviewed, and adjusted if appropriate, at the end of each reporting period.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized within the relevant line items in the income statement.

f. Intangible assets:

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisition of subsidiaries is included in ’intangible assets’. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the said entity.

Goodwill is allocated to cash-generating units that are not larger than operating segments for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose and is identified.

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortized over their estimated useful lives (three to fifteen years).

Costs associated with maintaining computer software programs are recognized as an expense as incurred.

Contractual customer relationships and non-competition agreements acquired in a business combination are recognized at fair value at the acquisition date. The contractual customer relations have a definite useful life and are carried at cost less accumulated amortization. Amortization is calculated using the straight-line method over the expected life of the customer relationship, which is 15 years.

Licenses acquired in a business combination are recognized at fair value at the acquisition date. The licenses have a definite useful life and are carried at cost less accumulated amortization. Amortization is calculated using the straight-line method over the expected life of the licenses, which is 10 years.

Trademark sublicensing rights and Distribution rights acquired in a business combination are measured at fair value at the acquisition date. These licenses have a finite useful life and are carried at the recognized amount less accumulated amortization. Amortization is calculated using the straight-line method over the expected life of the rights, which is 20 months from the date of the acquisition.

g. Impairment of non-financial assets

Goodwill is not subject to amortization and is tested annually for impairment.

Assets that are subject to depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less its costs to sell and its value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non - financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. For additional information, see Note 11.

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

h. Borrowing costs

Borrowing costs that are directly allocated to acquisition, construction or production of any qualifying asset (one that takes a substantial period of time to get ready for its designated use or sale) are capitalized and included as part of the costs of the asset during the period of time that is required to complete and prepare the asset for its intended use or for sale.

Borrowing costs directly attributable to acquisition, construction or production of a qualifying asset are the same borrowing costs that would have been prevented had the expense in respect of the qualifying asset not been incurred. Other borrowing costs are carried to income statement.

i. Financial assets:

The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, available for sale and held-to-maturity financial investments. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

Financial assets at fair value through profit or loss are financial assets held for trading or financial assets designated to fair value through profit or loss. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term or if it has been designated by management.

Derivatives are also categorized as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if they are held for trading, or expected to be exercised within a year from balance sheet date.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. The Group’s loans and receivables are stated in “accounts receivable”, “cash and cash equivalents” and “long-term receivables” on the balance sheet (see k and l below).

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the end of the reporting period.

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

Regular purchases and sales of financial assets are recognized on the settlement date, which is the date on which the asset is delivered to the Group or delivered by the Group. Investments are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognized at fair value and transaction costs are expensed in the income statement. Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are carried at amortized cost using the effective interest method.

Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are presented in the income statement within ‘financial expenses - net’ in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognized in the income statement as part of financial income when the Group’s right to receive payments is established.

Changes in the fair value of monetary and non-monetary securities classified as available for sale are recognized in other comprehensive income.

When securities classified as available for sale are sold or impaired, the accumulated fair value adjustments recognized in the past in other comprehensive income are included in the income statement as ’financial income/expenses’.

Interest on available-for-sale securities calculated using the effective interest method is recognized in the income statement as part of other expenses.

Dividends on available-for-sale equity instruments are recognized in the income statement as part of other income when the Group’s right to receive payments is established.

As to measurement of fair value of Group’s financial instruments, see note 4 below.

Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.

The Group assesses at the each balance sheet date whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

The criteria that the Group uses to determine that there is objective evidence of an impairment loss include:

The Group first assesses whether objective evidence of impairment exists. Should such evidence exist, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e., the effective interest rate computed for this asset upon initial recognition). The asset’s carrying amount of the asset is reduced and the amount of the loss is recognized in the income statement. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized (such as an improvement in the debtor’s credit rating), the reversal of the previously recognized impairment loss is recognized in income or loss.

(b)    Assets classified as available for sale

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. For debt securities, the Group uses the criteria described in (a) above. In the case of equity investments classified as available-for-sale, in addition to the criteria presented in (a) above, information regarding significant changes having adverse effect on the technological, economical or legal environment in which the issuer operates implicating that the cost of the equity investment might not be recovered as well as significant or prolonged decline in the fair value of the security below its cost is also evidence that the assets are impaired.

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

If any such evidence exists for available-for-sale financial assets, the cumulative loss (recognized in other comprehensive income) - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in profit or loss - is reclassified from equity and recognized in income or loss.

If, in a subsequent period, the fair value of a debt instrument classified as available- for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss is reversed through the income statement.

j. Derivative financial instruments and hedging activities

Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.

Changes in the fair value of derivative instruments that do not qualify for hedge accounting are charged to income statement.

The financial statements do not include derivatives which are designated as a hedging instrument.

k. Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is determined using the moving average basis method. The cost of goods comprises direct costs. It excludes borrowing costs.

Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale

l. Trade receivables

Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection is expected in one year or less, they are classified as current assets. If not, they are presented as non-current assets.

Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for doubtful accounts (hereinafter - “provision for impairment” or “provision for doubtful accounts”).

As to the method of determining the amount of the provision for impairment and the accounting treatment applied thereto in subsequent periods, see i(4) above.

m. Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less.

n. Share capital

Ordinary shares are classified as equity.

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

o. Trade payables

Trade payables are obligations of the Group to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.

Trade payables balances are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.

p. Borrowings 

Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the income statement over the period of the borrowings using the effective interest method.

Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a pre-payment for liquidity services and amortized over the period of the facility to which it relates.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period.

The Company measures its borrowings in accordance with Application Guidance 7 to IAS 39. In each reporting period, the Company calculates the effective interest rate, based on the expected cash flows of the borrowings and the anticipated interest rates through the period until the maturity of the borrowings. The effective interest rate is used in order to determine the interest expenses in the coming reporting period.

q. Current and deferred income tax 

The tax expense for the period comprises current and deferred tax. Tax is recognized in the income statement, except to the extent that it relates to items recognized directly in other comprehensive income or in other equity accounts. In this case, the tax is also recognized in other comprehensive income or in equity, respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or sub stantively enacted at the statement of financial position date in the countries where the Company and/or its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

Deferred income tax is fully recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred taxes are determined based on tax rates and tax laws that have been enacted or substantially enacted by the statement of financial position date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.

Deferred income tax is not calculated on temporary differences arising on investments in subsidiaries, as long as the timing of reversal of the differences is controlled by the Group and it is expected that no such reversal will take place in the foreseeable future.

Deferred income tax assets and liabilities are offset only if:

r. Employee benefits:

Group companies operate various pension schemes. The schemes are generally funded through payments to insurance companies or trustee-administered funds. These plans constitute defined contribution plans since the Group pays fixed contributions into a separate and independent entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.

Labor laws, labor agreements and the practice in the Group’s companies require companies in the Group to pay severance pay to employees dismissed or retiring from their employ in certain other circumstances. The obligation of the Group’s companies for severance pay is treated as a defined contribution plan, and for some of the employees, it is treated as a defined benefit plan.

Under the obligation of the Group’s companies to employees with defined benefits plans, the amounts of benefits an employee receives is based on the number of service years and his/her last salary.

The Company’s obligation to the remaining employees, who are part of the defined contribution plan, is to make regular contributions to a separate and independent entity.

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

The liability recognized in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets, together with adjustments for unrecognized past- service costs. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method.

The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability.

Under IAS 19 - “Employee Benefits” (hereinafter - IAS 19), the discount rate used for computing actuarial liability will be determined using market yields of high-quality corporate bonds at statement of financial position date. However, IAS 19 points out that in countries where there is no deep market in such bonds, the yield of government bonds at the balance sheet date should be used instead.

As stated above, the interest rate used by the Company to capitalize expected future cash flows for the purpose of computing the actuarial commitment is determined based on the interest rates of government bonds in a high rank, since the Group’s management is in the opinion that Israel does not have a deep market for corporate bonds.

The Company carries to income statement actuarial gains or losses resulting from changes in actuarial valuation and differences between past assumptions and actual results, in the period in which they arise.

As mentioned above, the Group purchases insurance policies and makes deposits with pension and severance pay fund to cover its pension and severance pay liability constituting a defined contribution plan. The Group has no further payment obligations once the contributions have been paid. The contributions are recognized as employee benefit expense when they are due. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available.

Every employee is legally entitled to vacation and recreation benefits, both computed on an annual basis. This entitlement is based on the term of employment. The contributions are recognized as expenses in respect of the Group charges a liability and expense due to vacation and recreation pay, based on the benefits that have been accumulated for each employee.

Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognizes termination benefits when it is demonstrably committed to either: terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after the statement of financial position date are discounted to their present value.

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

The Group recognizes a liability and an expense for bonuses and profit-sharing, based on a formula that takes into consideration the profit attributable to the Company’s shareholders after certain adjustments. The Group recognizes a provision where contractually obliged or where there is a past practice that has created a constructive obligation.

s. Provisions 

Provisions for restructuring costs and legal claims are recognized when: the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Restructuring provisions comprise lease termination penalties and employee termination payments. Provisions are not recognized for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognized as interest expense.

t. Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the Group.

The Group recognizes revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the Group’s activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

The Group sells a wide range of liquid chemicals (hereinafter - products). Revenues from selling products are recognized by the Group upon delivering to the customer.

The Group does not operate any loyalty programs.

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

The Group provides a number of  different services.

Marine transportation services - These services are provided based on specific orders or three-year contracts. This revenue is recognized using the percentage of completion method. Under this method, revenue is recognized on a prorate basis over the term of the marine transportation services.

Storage services - Revenue from providing storage services is carried on a prorate basis over the term of storage.

Land transportation - The revenue from providing land transportation services are recognized as the transportation is provided.

If circumstances arise that may change the original estimates of revenues, costs or extent of progress toward completion, estimates are revised. These revisions may result in increases or decreases in estimated revenues or costs and are reflected in income in the period in which the circumstances that give rise to the revision become known by management.

Commission revenue stems from brokerage transaction on chemicals is recognized when the entitlement to earn it is established.

The Dutch subsidiary derives revenues from acquisition of sale of commodities positions in respect of aromatic chemicals of various types. The income/loss arising from the difference from the price of acquisition of the contract and the selling price of the contract is presented under the revenues item in the statement of income in their net amount in the period during which the transactions were made (revenues from sale of the inventory contract net of expenses arising from the acquisition of the corresponding counter contract).

u. Leases 

The Group leases certain property, plant and equipment. Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalized at the lease’s commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments.

Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The financing costs are allocated to each of the periods over the term of the lease in order to create a fixed periodic interest rate in respect of the balance of the remaining liability.

Property, plant and equipment acquired under finance lease is depreciated over the shorter of the useful life of the asset and the lease term.

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases (net of any incentives received from the lessor). Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease.

When assets are leased out under a finance lease, the present value of the lease payments is recognized on the balance sheet and depreciated over their expected useful lives, consistently to similar assets owned by the Group. Lease revenue is recognized over the term of lease using the straight-line method. As of December 31, 2011, the Company has no assets under financial lease arrangement.

v. Dividend distribution

Dividend distribution to the Company’s shareholders is recognized as a liability in the Group’s financial statements in the period in which the dividends are approved by the Company’s shareholders.

w. New international Standards, amendments to standards and new interpretations:

IFRS 9 Financial instruments, addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 was issued n November 2009 and October 2010. It replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories: those measured as at fair value and those measured at amortized cost. The determination is made at initial recognition. The classification depends on the Group’s business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. The standard is not applicable until January 1, 2015 but is available for early adoption. The standard was not early adopted. The Group is yet to assess the full impact of the standard.

IFRS 10, Consolidated financial statements’ builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess. The group is yet to assess IFRS 10’s full impact and intends to adopt IFRS 10 no later than the accounting period beginning on or after 1 January 2013.

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

In May 2011 the IASB issued IFRS 11 replaces IAS 31, Interests in Joint Ventures, and SIC-13, Jointly Controlled Entities - Non Monetary Contributions by Venturers. IFRS 11 defines a joint arrangement as an arrangement where two or more parties contractually agree to share control. Joint control exists only when the decisions about activities that significantly affect the returns of an arrangement require the unanimous consent of the parties sharing control. IFRS 11 eliminates the existing policy choice of proportionate consolidation for jointly controlled entities. In addition, the standard categorizes joint arrangements as one of the following: Joint operations or Joint ventures.

IFRS 11 is effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted .The standard was not early adopted. The Group is yet to assess the full impact of the standard.

IFRS 12, ‘Disclosures of interests in other entities’ includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. The group is yet to assess IFRS 12’s full impact and intends to adopt IFRS 12 no later than the accounting period beginning on or after 1 January 2013.

IFRS 13, ‘Fair value measurement’, aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements, which are largely aligned between IFRSs and US GAAP, do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs or US GAAP. The group is yet to assess IFRS13’s full impact and intends to adopt IFRS 13 no later than the accounting period beginning on or after 1 January 2012.

IAS 19, ‘Employee benefits’ was amended in June 2011. The impact on the group will be as follows: to eliminate the corridor approach and recognize all actuarial gains and losses in OCI as they occur; to immediately recognize all past service costs; and to replace interest cost and expected return on plan assets with a net interest amount that is calculated by applying the discount rate to the net defined benefit liability (asset). The group is yet to assess the full impact of the amendments.

There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 3 - CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

Estimates and judgments are continuously tested, based on past experience and other factors, including expectations about future events that are deemed probable in light of the existing circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below.

Assets that have an indefinite useful life, for example goodwill, are not subject to amortization and are tested annually for impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The recoverable amounts of cash generating units and of depreciable assets were determined based on value in use. Value in use is computed based on economic models and evaluation techniques requiring use of assumptions and estimates. The Group’s financial statements include impairment loss in respect of depreciable assets, the recoverable amounts of which were computed as described above. Changes in the assumptions and estimates used for computation could have a material effect on the Company’s results of operations.

In 2011, the Group had a NIS 4,542 thousands impairment loss in respect of a cash generating unit in the Commercial segment, a NIS 689 thousands impairment loss in respect of a cash generating unit in the Operating segment and a NIS 17,272 thousands impairment loss in respect of a cash generating unit in the Marine transportation segment. As a result, the carrying amount of these cash generating units was reduced to its recoverable amount.

Deferred tax is recognized on temporary differences arising between the carrying amounts of assets and liabilities and their amounts for tax purposes. The Group is continuously testing the recoverability of deferred tax assets on its accounts based on historical taxable income, projected taxable income, the timing of reversing temporary differences and the application of tax planning strategies. If the Group cannot generate sufficient future taxable income, or in case of a material change in the effective tax rates for the period, in which the relevant temporary differences become taxable or may be deductible, the Group may be required to eliminate some of the deferred tax assets or to increase its deferred tax liabilities, which may raise its effective tax rate and negatively impact its results of operations.

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 3 - CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (continued):

Provisions for legal claims are recognized based on the Group’s management judgment as to the probability that cash flows will be diverted to settle the liabilities, and based on an estimate by management concerning the present value of cash flows that are expected to be needed to settle the existing liabilities.

The present value of the Group’s retirement benefits obligations depends on a number of factors that are determined on an actuarial basis, based on various assumptions. The assumptions used to compute the net cost (income) include long-term return on relevant amounts funded and discount rates. Changes in these assumptions impact the carrying amount of assets and liabilities related to the retirement obligations.

The expected return on the amounts funded for retirement obligation is uniformly determined, based on historical long-term returns.

The appropriate discount rate is determined each year-end. This discount rate is used to determine the present value of future cash flows estimates that are expected to be needed to cover the retirement benefit obligation. The Group’s management is in the opinion that the market for high-quality corporate bonds in Israel is not sufficiently liquid for use in determining the above discount rate. Therefore, it is determined by the Group using market returns on government bonds, denominated in the same currency in which such benefits will be paid, with similar term as the relevant obligation.

Other key assumptions related to retirement benefit obligation, such as future pay raises and turnover rate, are partially based on market conditions at that point in time as well as past experience. Additional information is available in note 15.

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 4 - FINANCIAL INSTRUMENTS AND FINANICAL RISK MANAGEMENT:

a. Financial risk management:

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, price risk, fair value interest rate risk and cash flow interest rate risk), credit risk and liquidity risk. The Group’s position on risk management is that financial markets are inherently unpredictable and it is therefore seeking to minimize potential adverse effects on the Group’s financial performance. In certain cases, the Group uses derivative financial instruments to hedge certain risk exposures.

Risk management is carried out by a finance department of the Group under policies approved by Group management and by the Board of Directors. Group’s finance department identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units. The board of directors provides principles for overall risk management, as well as policies covering specific areas, such as credit risk, and investment of excess liquidity.

(a) Market risks:

The Group operates internationally and is exposed to foreign exchange risks arising from exposures to various currencies, primarily with respect to the US Dollar and the Euro. Foreign exchange risk arises when future commercial transactions, recognized assets and liabilities are denominated in a currency other than the entity’s functional currency.

As of December 31, 2011, if the reporting currency had strengthened by 10% against the US Dollar with all other variables held constant, net income would have been higher by NIS 27,672 thousands (2010 - NIS 37,988 thousands), mainly as a result of foreign exchange losses on translation of balance sheet items (erosion of US Dollar denominated liabilities).

As of December 31, 2011, if the reporting currency had strengthened by 5% against the Euro with all other variables held constant, net income would have been higher by NIS 5,817 thousands (2010 - NIS 1,820 thousands lower), mainly as a result of foreign exchange losses on translation of balance sheet items.

The Group classifies most of its investments in financial instruments as available for sale. To manage its price risk arising from investments in equity securities, the Group diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the parent company’s board of directors.

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 4 - FINANCIAL INSTRUMENTS AND FINANICAL RISK MANAGEMENT (continued):

Loans issued at variable rates (0.5%-3%) expose the Group to cash flow interest rate risk, while loans issued at fixed rates (3.25%-11.42%) expose the Group to fair value interest rate risk. In 2011 and 2010, the Group’s loans were at variable rates and denominated in the NIS, US Dollar and the Euro.

The Group analyzes its interest rate exposure on an ongoing basis. Various scenarios are simulated taking into consideration refinancing, renewal of existing positions, alternative financing and hedging. Based on these scenarios, the Group calculates the impact on profit and loss of a defined interest rate shift. For each simulation, the same interest rate shift is used for all currencies. The scenarios are run only for liabilities that represent the major interest-bearing positions.

Based on the simulations performed, the impact on post tax profit of a 0.1% shift in interest rate would be a maximum increase of NIS 269 thousands (2010 - NIS 660 thousands) or decrease of NIS 269 thousands (2010 - NIS 660 thousands). The simulation is done on a quarterly basis to verify that the maximum loss potential is within the limit given by management.

At December 31, 2011, if interest rates on NIS-denominated borrowings had been 0.1% lower with all other variables held constant, post-tax profit for the year would have been NIS 142 thousands (2010 - NIS 306 thousands) higher, mainly as a result of lower interest expense on variable interest rate borrowings.

At December 31, 2011, if interest rates on US Dollar borrowings had been 0.1% lower with all other variables held constant, post-tax profit for the year would have been NIS 15 thousands (2010 - NIS 253 thousands) higher, mainly as a result of lower interest expense on variable interest rate borrowings.

At December 31, 2011, if interest rates on Euro borrowings had been 0.1% lower with all other variables held constant, post-tax profit for the year would have been NIS 112 thousands (2010 - NIS 101 thousands) higher, mainly as a result of lower interest expense on variable interest rate borrowings.

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 4 - FINANCIAL INSTRUMENTS AND FINANICAL RISK MANAGEMENT (continued):

Credit risk is managed on a group basis. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and other financial institutions, as well as credit exposures to wholesale and retail customers, including outstanding receivables and committed transactions. For banks and financial institutions, only independently rated parties with a minimum rating of 'A' are accepted.

If retail customers are independently rated, these ratings are used. If there is no independent rating, risk control assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the Group’s credit committee. The utilization of credit limits is regularly monitored (see note 4b3) for further disclosure on credit risk.

No credit limits were exceeded during the reporting period, and management does not expect any losses from non-performance by these counterparties.

Cash flow forecasting is performed in the operating entities of the Group and aggregated by Group finance department. Group finance department monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the Group does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities. as for information of covenants as of the balance sheet date, see Note 13 d.

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, the Group maintains flexibility in funding by maintaining availability under committed credit lines.

Management monitors rolling forecasts of the Group’s liquidity reserve (composed of undrawn borrowing facility) on the basis of expected cash flow. This is generally carried out at local level in the operating companies. In addition, the Group’s liquidity management policy involves projecting cash flows in major currencies and considering the level of liquid assets necessary to meet these cash flows.

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 4 - FINANCIAL INSTRUMENTS AND FINANICAL RISK MANAGEMENT (continued):

The table below analyses the Group’s financial liabilities and net-settled derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows:

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital.

Net debt is calculated as total borrowings (including ‘current and non-current borrowings’ as shown in the consolidated balance sheet) less cash and cash equivalents. Total capital is calculated as ‘equity’ as shown in the consolidated balance sheet plus net debt.

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 4 - FINANCIAL INSTRUMENTS AND FINANICAL RISK MANAGEMENT (continued):

The gearing ratios at December 31, 2011 and 2010 were as follows:

The increase in gearing ratio during 2011 was mainly due to increase in working capital needs.

b. Fair value estimation

The fair value of financial instruments traded in active markets (such as trading and available-for-sale securities) is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the Group is the balance sheet date bid price.

The fair value of derivatives financial instruments (that are not traded in active market) is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity specific estimates.

The accounting policy applied for accounting for financial instruments was applied for the following items:

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 4 - FINANCIAL INSTRUMENTS AND FINANICAL RISK MANAGEMENT (continued):

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 4 - FINANCIAL INSTRUMENTS AND FINANICAL RISK MANAGEMENT (continued):

The credit quality of financial assets that are not impaired can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates:

Group A - new customers/related parties (less than 6 months).

Group B - existing customers/related parties (more than 6 months) with no defaults in the past.

Group C - existing customers/related parties (more than 6 months) with some defaults in the past. All defaults were fully recovered.

None of the financial assets that are fully performing has been renegotiated in the years ended December 31, 2011 and 2010.

As for information regarding allowance for doubtful debts and bad debts, see Note 8 a.

Group’s sales are made to a large number of customers in Europe and Israel. The sales in Israel are to the private market, which consists of a large number of customers. Accordingly, the Group’s trade balances do not represent a substantial concentration of credit risks at December 31, 2011.

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 5 - COMPANIES CONSOLIDATED AND JOINT VENTURES:

a. Joint ventures

For these companies there is a contractual understanding between the Group and the other shareholders to jointly control them. These companies are accounted for using the proportionate consolidation method, as explained in note 2b(3).

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 5 - COMPANIES CONSOLIDATED AND JOINT VENTURES (continued):

b. Companies consolidated for the first time:

The following table summarizes the consideration paid for ACE and the fair value of the assets acquired and liabilities assumed at the acquisition date:

Intangible assets include goodwill of NIS 2,901 thousands and amortizable intangibles of NIS 1,594 thousands. Goodwill consists of assembled workforce, entering into new markets (agriculture) and synergistic opportunities created by the incorporation of the operations of ACE and the other subsidiaries of the Company. All of the goodwill was assigned to the Company’s commercial division. None of the goodwill recognized is expected to be deductible for income tax purposes.

Amortizable intangibles consist of trademark sublicensing rights and distribution rights of certain products in Europe. These licenses have a weighted average useful life of 20 months from the date of the purchase.

The Group recognizes the non-controlling interest in the acquiree at the non-controlling interest’s proportionate share of the acquiree’s net assets.

The Company expensed a total of approximately NIS 223 thousands of acquisition- related costs during the year ended December 31, 2011, which were recorded as general and administrative expenses in the consolidated income statements.

The revenue included in the consolidated income statement since November 1, 2011 contributed by ACE was NIS 19,467 thousands. ACE also contributed profit of NIS 2,387 thousands over the same period.

GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 5 - COMPANIES CONSOLIDATED AND JOINT VENTURES (continued):

Had ACE been consolidated from January 1, 2011 the consolidated income statement would show revenue of NIS 2,006,924 thousands and a loss of NIS 8,548 thousands.

The Adjustments that was made to the pro forma information above are as follows:

a.     Borrowings incurred to finance the acquisition -

Finance charge included for the pre-acquisition period in order to reflect what the effect of the business combination had been if the acquisition occurred at the beginning of the year.

b.     Fair value adjustments -

The adjustments reflect the impact of the increase of intangible assets on the acquisition as if they had occurred at the beginning of the reporting period, and increased the depreciation charge for the full period.

NOTE 6 - CASH AND CASH EQUIVALENTS:

The fair value of the cash and cash equivalents does not differ significantly from its carrying amount.

  GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 7 - AVAILABLE-FOR-SALE FINANCIAL ASSETS:

The changes in securities that were classified as “available-for-sale” during the reported periods are as follows:

The available-for-sale financial assets are composed of the following:

The available-for-sale financial assets are denominated in the following currencies:

The maximum exposure to credit at the reporting date is the carrying value of the debentures classified as available-for-sale.

 GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 8 - TRADE AND OTHER RECEIVABLES:

a. Trade Receivables:

As of December 31, 2011, a debit balance of NIS 95,385 thousands (2010 - NIS 52,886 thousands) had remained outstanding beyond the contractual due date, but the Group has not made any allowance for doubtful account in relation to these accounts. All these balances are associated with a number of unrelated customers, and based on the Group’s experience in recent years, these customers has paid their debts in full. The aging analysis of the above debts beyond the contractual due date is as follows:

As of December 31, 2011, the Group provided to an allowance for doubtful accounts in an amount of NIS 547 thousands (December 31, 2010 - 955 thousands).

As of December 31, 2011, the balance of the allowance for doubtful accounts was NIS 9,628 thousands (2010 - NIS 7,367 thousands). The receivables in question relate primarily to customers who have encountered unexpected financial difficulties. The aging analysis of the above debts is as follows:

 GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 8 - TRADE AND OTHER RECEIVABLES:

The movements in the Group’s allowance for doubtful accounts are as follows:

Amounts carried to or from the allowance for doubtful accounts are recorded in “General and administrative expenses” in the income statement (see Note 21).

The carrying amounts of the net trade receivables are denominated in the following currencies:

b. Other:

The monetary items classified under other receivables do not include doubtful accounts or past-due amounts.

 GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 8 - TRADE AND OTHER RECEIVABLES (continued):

c. The carrying value of other receivables was denominated in the following currencies:

The fair value of trade and other receivables that constitute financial assets approximate their carrying value.

As of the date of the balance sheet, the maximum exposure to credit risk with respect to trade and other receivables, in the amount of NIS 486,048 thousands, is equivalent to the fair value of the entire group of receivables less non-monetary items (arising from advance payments). The Group does not hold securities of any kind in relation to these receivables.

NOTE 9 - INVENTORY

The Company’s inventory in 2011 amounted to NIS 144,295 thousands (2010 - NIS 123,580 thousands), is composed of goods to be sold.

The cost of inventories recognized as expense and included in “cost of revenues” amounted to NIS 1,192,747 thousands (2010 - NIS 1,146,356 thousands).

Amounts of impairment totaled NIS 3,731 thousands and NIS 979 thousands for the years ended December 31, 2011 and 2010, respectively, are included in the “cost of revenues” account in the income statement.

 GADOT CHEMICAL TANKERS AND TERMINALS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 10 - PROPERTY, PLANT AND EQUIPMENT: