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Financial Statements Unaudited As of September 30, 2017 Delek Group | FINANCIAL STATEMENTS STATEMENTS | FINANCIAL UNAUDITED AS OF SEPTEMBER 30, 2017 UNAUDITED FINANCIAL STATEMENTS AnnualUNAUDITED Report 2013 AS OF SEPTEMBER 30, 2017 Annual Report 2013 Official Sponsor of the Israeli Delegation to the Olympic Games, Rio 2016 Delek Group Ltd 19 Abba Eban Blvd, P.O. Box 2054, Herzliya 4612001, Israel Tel: 972 9 8638444, Fax: 972 9 8854955 www.delek-group.com WorldReginfo - c16fd361-de53-4169-8c2c-61d95bc8d7cf Official Sponsor of the Israeli Delegation to the Olympic Games, Rio 2016 IMPORTANT This document is an unofficial translation for convenience only of the Hebrew original of September 30, 2017 financial report of Delek Group Ltd. that was submitted to the Tel-Aviv Stock Exchange and the Israeli Securities Authority on November 29, 2017. The Hebrew version submitted to the TASE and the Israeli Securities Authority shall be the sole binding legal version. WorldReginfo - c16fd361-de53-4169-8c2c-61d95bc8d7cf FINANCIAL STATEMENTS UNAUDITED AS OF SEPTEMBER 30, 2017 Table of Contents Chapter A | Corporate Description Chapter B | Board of Directors Report on the State of the Company’s Affairs Chapter C | Financial Statements Chapter D | Report on the Effectiveness of Internal Controls for Financial Reporting and Disclosure WorldReginfo - c16fd361-de53-4169-8c2c-61d95bc8d7cf Chapter A Corporate Description WorldReginfo - c16fd361-de53-4169-8c2c-61d95bc8d7cf Update of Chapter A (Description of the Company’s Business) to the Board of Directors’ Report of the Delek Group Ltd. (“The Company”) for 20161 Part One – Description of the General Development of the Company's Business: Referring to Section 1.3 of the Periodic Report - Investments in Company Equity Subsequent to the financial position statement date, on October 24, 2017, the Company's Board of Directors decided to buy back up to NIS 100 million in Company shares in the period up to December 31, 2017. As of the publication date of this report, the subsidiary partnership, Delek Financial Investments (2012) Limited Partnership, which is wholly-owned (100%) by the Company bought 89,923 Company shares on the TASE in consideration for NIS 51 million. For more information, see the Company’s immediate report of October 24, 2017 (ref. no. 2017-01-093313), included herein by way of reference. Referring to Section 1.4 to the Periodic Report - Distribution of Dividends On August 29, 2017, the Company’s Board of Directors decided to distribute a dividend of NIS 260 million. This dividend was paid on September 26, 2017. For more information, see the Company’s immediate report of August 30, 2017 (ref. no. 2017-01-075715), included herein by way of reference. Part Three – Description of the Company’s Business by Operating Segment: 1. Energy A. Referring to Section 1.7.4(d) to the Periodic Report - Planned Work Plan for the Tamar Project For information concerning the identification of a crack in the exhaust pipe used to discharge natural gas and pressure from the Tamar platform ("the Malfunction") during upgrade and improvement works on the Tamar platform and the receiving facility ("the Upgrade Works") conducted by Noble Energy Mediterranean Ltd. ("the Operator") in September-October 2017, following which the supply of natural gas from the Tamar Reservoir was stopped in a controlled manner on September 21, 2017, and for information concerning renewal of natural gas supply from the reservoir upon completion of the Malfunction's repair by the Operator on September 27, 2017, see the Company's immediate reports of September 24, 2017 and September 27, 2017 (ref. no. 2017-01-083272 and 2017-01-084964, respectively), included herein by way of reference. It is noted that on October 10, 2017, the Upgrade Works were completed as planned. B. Referring to Section 1.7.5(j) to the Periodic Report - Reserves and Contingent Resources Report and Discounted Cash Flow Data for the Leviathan Leases For information concerning a reserves and contingent resources report and discounted cash flow data for the Leviathan leases, following preliminary analysis of results from the Leviathan-5 assessment and production well, see the Company's immediate report of September 26, 2017 (ref. no. 2017-01-084235), included herein by way of reference. 1 The update contains material changes or developments in the Company’s business in the third quarter of 2017 and up to immediately prior to the date of this report, in any matter which must be disclosed in the periodic report. The updated refers to the section numbers in Chapter A (Description of the Company’s Business) of the periodic report for 2016 (ref. no. 2016-01-033078), and supplements the content disclosed therein. A-1 WorldReginfo - c16fd361-de53-4169-8c2c-61d95bc8d7cf C. Referring to Section 1.7.6 to the Periodic Report - License 399/Roy ("the Roy License") On November 15, 2017, Ratio Oil Exploration (1992) Limited Partnership ("Ratio") announced that the Ministry of National Infrastructures, Energy and Water's Oil Commissioner ("the Commissioner"), had approved the updated work plan for the Roy License, as follows: Term Key Milestones in the Work Plan 2017 onwards The binding work plan for the Roy License requires the following actions be carried out: • By March 15, 2018 - signing a contract with a drilling contractor and submitting such contract to the Commissioner. • By September 15, 2018 - start of drilling in the Roy License. • Three months from completion of drilling - submitting a summary report of drilling results. It is clarified, that in light of the fact that Delek Drilling Limited Partnership ("the Partnership") is only granted an option in the Roy License, and it does not have access to information concerning the joint endeavor, the description of the work plan and schedule for the above activities is based solely on publicly available information published by Ratio. Warning concerning forward-looking information - The above description concerning planned activities in the Roy License, including corresponding schedules, constitutes forward- looking information as defined in the Securities Law, 1968, and is based solely on publications made by Ratio. Actual implementation of the work plan, including its associated timeframes, may differ materially from the above and depends, among other things, on applicable regulation, technical ability, and economic viability. D. Referring to Section 1.7.7(k) to the Periodic Report - Development Plan for the Aphrodite Reservoir in Cyprus On September 21, 2017, the partners in the Aphrodite reservoir in Cyprus submitted to the Cypriot government updated chapters from the Aphrodite reservoir's development plan submitted for the Cypriot government's approval on engineering and technical issues. It is noted, that as of the date of this report, the Partnership, together with its partners in the Aphrodite reservoir, continues to conduct various stages of inquiries and/or negotiations concerning the export of significant quantities of natural gas from the Aphrodite reservoir, to regional markets including the Egyptian market. E. Referring to Section 1.7.11 and 1.7.38(e)(1) to the Periodic Report - License 353/Eran ( "the Eran License") In accordance with the decision of the Supreme Court of Israel ("the Supreme Court') from June 2, 2016, in the petition filed by the partners in the Eran License with the Supreme Court against the Energy Minister and the Commissioner, concerning the Energy Minister's decision to deny an appeal filed by the partners in the Eran License against the Commissioner's decision not to extend the Eran License, the parties have pursued mediation. Currently, mediation proceedings are still underway, and at the parties' request the Court has permitted them to update on the results of these proceedings no later than January 4, 2018. F. Referring to Section 1.7.13(e)(2)a to the Periodic Report - Contracts for Exporting Natural Gas from the Leviathan Project Referring to the fulfillment of the preconditions stipulated in the natural gas supply agreement between NBL Jordan Marketing Limited ("the Distributor") and Jordan's national power utility A-2 WorldReginfo - c16fd361-de53-4169-8c2c-61d95bc8d7cf (NEPCO), it is noted that in June 2017, the Distributor signed a transportation agreement with Israel Natural Gas Lines (INGL), after the agreement was approved by NEPCO. As a result, as of the date of this report, all preconditions have been met and the parties need only sign the transportation agreement between NEPCO and the Jordanian transportation company (FAJR). It is further noted, that in July 2017, the Leviathan partners approved a budget for completing the Israeli pipeline up to the Israel-Jordan boarder, to the amount of USD 111 million (100%). G. Referring to Section 1.7.14(b)(1)3 to the Periodic Report - Description of Key Target Markets Available for Exporting Natural Gas by Pipe from the Tamar and Leviathan Projects Concerning the Partnership's response to media reports on options for exporting natural gas from Israel to Egypt, the Partnership noted that no change has transpired in the Partnership’s assessment concerning options for exporting natural gas from Israel to Egypt. For more information, see the Company's immediate report of November 16, 2017 (ref. no. 2017-01- 100711), included herein by way of reference. H. Referring to Section 1.7.21(g)(10) to the Periodic Report – Investment in Ithaca – Financing The financial debt of Ithaca Energy Inc. (“Ithaca”) mainly comprised a bank borrowing facility based on the Company’s oil and gas reserves (Reserves Based Lending – “RBL”) to the amount of USD 375 million, and senior debentures of USD 300 million, payable in June 2019. As of the financial statements’ publication date and subsequent to the financial position statement date, Ithaca completed the refinancing of its bank debt (RBL) to align it with the repayment date of said senior debentures, providing Ithaca with flexibility in financing its development and growth targets.
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