PROVISIONS OF FOREIGN LAW – TAX ASPECTS

Bank Discount and Discount Group are engaged in various fields of activity which are subject to Israeli and foreign regulatory provisions, which are updated from time to time. These said regulations may likewise apply to customers of the Bank, for example, by way of imposing reporting and tax payment obligations, and influence on their rights in the assets deposited with the Bank.
In this memo we wish to bring to your attention several matters and to recommend that you consider receiving outside and independent advice in this regard:

1. Further to the American legislation Hiring Incentives to Restore Employment Act ["HIRE Act"], and regulations under the law*, commencing on 01.01.2017 an American tax obligation may apply to a customer regarding the holding of specific assets based on American securities and/or based on indexes which include American securities, including, among other things, indexes on the Tel Aviv Stock Exchange, which include American securities above a specific percentage. The Act applies, among other things on Equity Linked Swaps, marketable derivative products based on American securities, ETN, and the like. The tax will apply on a dividend distribution for a specific asset.
   Therefore, the Bank might perform a deduction transaction in your account, if and as far as the Bank will be required to deduct the said American tax at source, for dividend distributions for the base assets of relevant products. This tax obligation might be added to the tax obligation pursuant to the Israeli law or pursuant to the foreign law relevant to the customer.
2. The trading and holding of securities issued outside of Israel are subject to the provisions of the foreign law which applies to the securities, and this includes, among other things, tax provisions, which might apply to the holder of the securities, even if he is not a resident of that state. For example, according to the provisions of current American law, Estate Tax applies to the assets of the estate of a deceased which are located in the Unites States, even if the deceased is not American, this being subject to certain exemptions under the law. Therefore, American Estate tax may apply to securities issued by an American company, even if the owner of the assets (the deceased) is not a resident or citizen of the United States.
   Therefore, as far as your holdings in your account at the Bank include, or might include, securities issued outside of Israel, we recommend that you consider receiving outside, independent advice regarding the tax consequences as a result of holding these securities and/or regarding exemptions that might apply to you in this matter. Please note, the Bank reserves its right, according to its discretion and as far as the law so requires, to demand to receive a confirmation regarding the payment of the tax to the foreign authority (or that there is an exemption from tax) as a condition to perform transactions on the assets in the account.
3. The extent of the tax obligation for holding securities, and in various circumstances, the benefits which are available in this regard, might change according to the provisions of the tax treaty which applies to you by virtue foreign citizenship or residence, or by virtue of the state in which the securities which you hold are registered. As far as you might be entitled to benefits by virtue of a tax treaty between the State of Israel and another country, we recommend that you consider receiving outside, independent advice regarding the possibility to exhaust tax benefits as a result of the implementation of the said tax treaty.
4. This memo does not deviate from the prohibition that applies to employees of the Bank from granting tax advice or tax planning to customers or to refer customers to attorneys or other advisers, and it does not constitute legal advice or a substitute to legal advice in general, and in relation to the provisions of the American law or any foreign law in particular.

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Section 871(m) of the US Internal Revenue Code*