Government incentives. January 2015

Government incentives January 2015

Firm's clients, Re: Summary of Government incentives In recent years, the Israeli Ministry of Economy has expanded the financial support package that is offered to certain companies as part of various national programs defined by the Ministry. Moreover, in January 2011, a significant reform was introduced to the Law for the Encouragement of Capital Investments, 1959 ("the Law") which materially changes the financial support and assistance opportunities prescribed under the Law. In view of the large variety of encouragement programs featured in the Law and in the Law for the Encouragement of Industrial Research and Development, 1984 ("the R&D Law"), this circular provides a condensed presentation of the various government support programs as discussed above. Incentives practice, EY Israel

Key government support tracks 1 Tax benefits 1.1 Beneficiary enterprise Tourism enterprise Base turnover reduction 1.2 Preferred enterprise Industrial enterprises Companies that perform R&D for a foreign resident 1.3 Additional tax benefits Residential rental buildings Approval regarding section 20a to the Income Tax Ordinance Approval regarding section 104 to the Income Tax Ordinance The Angels Law Amoritization of share purchase expenses 2 Support and grant programs 2.1 Industrial enterprises Grants to exporting industrial enterprises Grants for the establishment of industrial buildings 2.2 Tourism Establishment/expansion/renovation/conversion of hotels Tourist attractions 2.3 R&D related grants and financial aid 2.3.1 Generic R&D grants The generic program The MAGNET program MAGNETON 2.3.2 Competitive R&D financial aid The competitive program The traditional program Tnufa fund Pre-seed and seed companies Technological incubators KIDMA - cyber security R&D program Space program Meimad - Dual R&D program

2.3.3 Assisted funding of joint R&D with a foreign company bi-national collaborations EUREKA 2.3.4 Assisted funding of R&D by bi-national funds BIRD CIIRDF KORIL RDF SIIRD 2.3.5 EU R&D grants 2.3.6 Additional OCS grants Jerusalem Development Authority 2.4 Employment tracks Employment track Employment track for populations with low employment rates High income track Cyber track Ogen track Integrating interns from minority sectors in high-tech industries Increasing employment rates in Noam Ind. Park On-the-job training 2.5 Grants and financial aid for energy efficiency Ministry of Energy and Water programs Pilot projects Heznek Fund Installation of energy efficiency technology Grants for connecting to the natural gas distribution grid 2.6 Support tracks for exporters and international projects Setting up a marketing representation in India or China "Smart Money" program The fund for supporting international projects and tenders 3 Loans Encouragement of investments in VC backed companies in the alternative oil sector Government secured loans

1Tax benefits

Beneficiary enterprise Tourism enterprise - a tourist facility in which at least 25% of the accommodation arrangements are made for foreign residents is entitled to grants (see below) and tax benefits detailed above on income from the provision of accommodation services, subject to completing the establishment or expansion of the hotel and to making a minimum qualifying investment within a period of three years ending in the year of election. The tax benefits will be granted for the increase in the turnover arising from this program in relation to the base turnover. Reduction of base turnover - an approved enterprise (prior to Amendment No. 60) and a beneficiary enterprise are entitled to reduce their base turnover by 10% in each tax year starting from the record year provided that they meet certain cumulative conditions regarding the rate of R&D expenses, the percentage of employees with academic qualifications in engineering, computers, life sciences or exact sciences and products replacement or investments in productive assets. The benefit is contingent on demonstrating the enterprise's compliance with the base turnover reduction criteria pursuant to Regulation 1 to the Regulations for Encouragement of Capital Investments (Reduction of Base Turnover) ("Regulation 1"). Among others, Regulation 1 states that the total R&D expenses incurred by an enterprise in a tax year in respect of which the OCS approval was obtained or in the preceding year, will not be lower than 7% of the turnover in the tax year and the preceding year. Preferred enterprise Competitive industrial enterprises which have been established starting from January 1, 2011 and existing industrial enterprise which chose to have the provisions of Amendment No. 68 to the Law 1, will be entitled to preferred corporate tax rates as follows 2 : Year Development Rest of the Area A country 2011-2012 10% 15% 2013 7% 12.5% 2014 onwards 9% 16% Moreover, a preferred enterprise will be entitled to investment grants (see below), accelerated depreciation and reduced tax rates on dividend distribution from the preferred enterprise's earnings as follows: Between Israeli companies - withholding tax exemption. A foreign company or individual - withholding tax at a rate of 20%, subject to the relevant treaty for the avoidance of double taxation. Tax exempt earnings from previous programs - will be subject to the Law's transition provisions. Recognizing the company as performing R&D services for a foreign resident - an enterprise which performs R&D services for a foreign resident will be able to enjoy the tax benefits described aforementioned. The qualification is subject to an OCS approval and to compliance with other conditions prescribed in the Law. 1 Subject to compliance with the Law's requirements, including providing notice in a timely manner and completing forms. 2 The tax rate for a special preferred industrial enterprise will be 5% in Development Area A and 8% in the rest of the country. 7

Additional tax benefits Residential rental buildings - an individual or a company which constructs a building or part of a building with at least six residential apartments and in which at least half of the area is designated for residential rent, which is rented for a period of at least five years out of the seven first years following the termination of construction, will be entitled to the following benefits: (1) accelerated depreciation at a rate of 20% per annum; (2) tax on taxable income or real betterment from sale or rent at a rate of 11% for a company and 20% for an individual 3. Amortization of share purchase expenses - The Law of Economic Policy for 2011 and 2012 offers a benefit for a company that purchases shares of a qualifying company whereby the purchase amount will be deductible for a period of five years starting from the year following the year of purchase. The aforesaid Law prescribes the conditions and limitations for qualifying for such a benefit. Approval for the purpose of section 20a to the Income Tax Ordinance - Section 20a to the Income Tax Ordinance allows deducting a company's R&D expenses incurred for the purpose of promoting and developing the company for tax purposes. According to this section, under the conditions prescribed therein, expenses incurred in scientific research in industry, agriculture, transportation or energy approved by the OCS will be deductible on a current basis in the tax year in which they are paid. As for expenses incurred in scientific research that is not approved by the OCS, they will be deductible in three annual installments starting from the tax year in which they are paid. Approval for the purpose of section 104 to the Income Tax Ordinance - Section 104 to the Income Tax Ordinance provides reliefs in the transfer of control in R&D intensive companies in return for the raising capital for R&D activity. The Angels Law - in order to make it easier for seed stage companies to raise capital, an incentive is offered to investors by deducting of the investment amount (up to NIS 5 million) out of their taxable income produced from any source for a period of up to three years. Section 20a to the Law of Economic Policy for 2011 and 2012 (Legislative Amendments), 2011 ("the Angels Law") and Income Tax Circular 12/2011 allow certain target companies to recognize their investments in shares performed by individuals as an expense 4. 3 Subject to a rental fee ceiling of NIS 6,200 a month. 4 Subject to OCS approval and to filing the appropriate forms in the company's and the investor's tax returns. 9

2 Grant and support programs

Grants to exporting industrial enterprises Industrial enterprises located in Development Area A may apply to the Investment Center for receiving grant 5 in respect of investments in fixed assets (equipment, buildings, furniture etc.) for the establishment or expansion of their enterprise over a period of five years. The grant is at a rate of 20% 6 of the approved investment provided that at least 25% of the sales turnover increasment from the enterprise arises from sales to a market that consists of more than 14 million residents (namely - export). The investment program comprises additional conditions and obligations such as hiring employees, issuing capital, achieving an increase in sales turnover etc. Grants for the establishment of industrial buildings A company that establishes an industrial building in Development Area A in which at least 50% of its area is leased to approved/beneficiary enterprises and the remaining area is designed to industrial crafts may apply to the Investment Center for grants at a rate of 20% 7. Grants to tourism enterprises Establishment, expansion, renovation or conversion of hotels - a hotel located in Development Area A on the tourism map will be eligible for a grant at a rate of 20% 8 of its investments in construction and accommodation equipment for the purpose of the enterprise's establishment or expansion provided that 25% of all accommodations at this hotel are by foreign residents. Applications will be reviewed subject to the Ministry of Tourism's procedures regarding application dates, budgets and ranking as they will be published from time to time. Grants to tourist attractions - the Ministry of Tourism encourages the establishment of tourist attractions through a procedure which offers financial aid for setting up tourist attractions with preference to popular tourist areas, subject to the Law. The rate of the grant for fixed assets in an approved project is 10%. Applications will be reviewed subject to the Ministry of Tourism's procedures regarding application budgets and ranking as they will be published from time to time. Grants for generic R&D (subject to the R&D Law, non-royalty bearing) The Generic Program - large companies with annual sales scopes in excess of US$ 100 million which employ more than 200 R&D professionals in Israel (or alternatively, with an R&D budget in Israel that exceeds US$ 20 million) are eligible for grants for generic (precompetitive) R&D expenses of up to 20% of their annual R&D budget. MAGNET instruments - development instruments that consist of industrial companies, academic institutions and potential users of the technology under development may apply for a grant of 66% of the R&D budget in an industrial company and of 80% of the R&D budget in a research institution. The objective of these programs is to provide pre-competitive generic development support when the development timeframe ranges between three to five years (in order to enable a long-term R&D process). MAGNETON - a program that promotes technology transfer from academic research institute to industry with the objective of technological commercialization. The program offers support for pre-competitive, generic stages of development. The maximum budget per program is NIS 3.4 million and the grant is at a rate of up to 66% of the approved budget. The timeframe in the MAGNETON program is a maximum of 24 months. Applications for the program may be submitted twice a year, usually on April 15 and October 15 of each year. Nitzan Fund - for encouragement of Technological collaboration between the research institutes and Israeli companies in the fields of Agriculture. The objective of Nitzan fund is to elaborate the applied research, in the different Agriculture fields, which haven't been acknowledge by the industry as having commercial potential. Basic researches or preliminary researches are not suitable for this program as they are in very early stage and can't integrate immediately on commercials channels. The Technology or the developed knowledge has to be innovative and to lead to IP formation and very attractive to the business sector. 5 Subject to the Investment Center's approval. 6 Addition of up to 8% to enterprises in the Negev. 7 Subject to the Investment Center's approval and to issuing capital. 8 An additional grant of 8% will be offered in Jerusalem, according to the relevant temporary provision. 11

The support is granted subject to collaboration between research institutes and industrial corporation who is willing to pay 10% of the research costs, which will be approved by the Chief Scientist of the Ministry Of Agriculture. This program offers budget approval for a maximum of 18 month and a grant of up to 90% of the approved budget. Noffar - Noffar program is designed to support applied academic research in varied themes/topics in order to approve the feasibility of a technology in the academia. The objective of this program is to reach to significant milestones at the end of the project, which will enable to elements in the industry to sign a contract with the Academy for the commercialization of the Technology. Grants under this program constitute up to 90% of the budget approved by the OCS (up to $140,000). There are no royalty payments under this program. Competitive R&D financial aid (subject to the R&D Law, royalty-bearing after commercialization) The Competitive Program - supports companies at the competitive stage of development. The grants are not limited in amount but companies whose annual development program budget exceeds NIS 10 million are required to submit their application for financial aid at the beginning of the calendar year. Programs are measured according to several criteria, the principal of which being the level of technological innovation, business potential and the applicant's capability. The duration of an approved development program is generally up to one year and the scope of support ranges between 20% and 50% of the approved development budget. The Traditional Industry Program - designed for companies in the traditional industries such as plastic, rubber, metal, glass, ceramics, hardware, textile, wood, leather, paper, metalwork and food which are interested in upgrading their coping capacity in the local and global markets by conducting innovative R&D. These companies are eligible for funded expenses that are not approved under the competitive program and are defined by the nature of their industry (such as deduction of manufacturing expenses and not only development expenses). Companies that are considered as early-stage traditional industry companies may benefit from a grant of 50% of the approved budget. TNUFA Fund - a fund for pre-seed entrepreneurs and startups that wish to bring a novel technological idea to business fruition. The support is granted subject to producing proof of technological feasibility and business viability of the idea in question in an aim to promote the project to a stage in which significant funds may be raised for the continued development and commercialization. The support granted at the lower rate of up to 85% of the budget or NIS 200 thousand. Pre-seed Companies Program - pre-seed companies that have yet received any OCS support (other than in the technological incubator programs or the TNUFA Fund) and that have raised relatively small amounts of capital from private investors are eligible for support at a rate of 50% of the approved budget. Among others, this program enables obtaining the OCS' contingent approval for the development program before the supplementary capital needed for conducting the project is raised. This program offers budget approval for a maximum period of 24 months. Technological Incubators - the technological incubator program offers a support framework for early-stage R&D that allows turning innovative technological ideas into startups that will develop the technology until private equity can be raised. The incubator operators are selected through competition which evaluates, among others, the nature and experience of the operator's team, the quality of the business plan and the available financial resources. KIDMA - an aid program designed for cyber-security companies which offers preferred competitive terms that include a grant of up to 50% of the approved budget and participation in marketing expenses. Budget approval may be obtained for this program for a maximum period of 24 months. The Space Program - a program designed to encourage R&D for finding various space related technological solutions such as business space R&D and development or upgrading of space related products. This development program cannot exceed a period of 36 months with maximum financial aid offered in an amount of NIS 20 million (50% of the approved budget for large companies and 60% or 85% for small companies). 12

MEIMAD - a support program aimed at encouraging the development of dual use technologies that can benefit the State's national security and at the same time form a basis for potential global civilian and military marketing. The maximum per project is NIS 5 million and the grant rate is 50%-66% for industrial companies and 50%-90% for research institutions. The program is operated in the framework of the MAGNET instruments and the OCS in collaboration with the Ministry of Defense's Administration for the Development of Weapons and Technological Infrastructure. Programs that consist of the transfer of technology from research institutions to Israeli companies are exempt from paying any royalties. Bi-National collaboration agreements (royalty-bearing commercialized products) Bi-national collaborations - programs that finance Israeli companies that collaborate with foreign companies in joint R&D projects. Financing is at a maximum rate of 50% of the budget approved by the OCS and is repaid through royalties. The programs apply to countries that have signed R&D bi-national collaboration agreements with Israel and Europe - Denmark, Finland, France, Germany, Italy, Slovenia, Spain, Sweden, the Czech Republic, Switzerland, Greece and Turkey; Australia and the Far East - China, India, Taiwan, Victoria (Australia); n North America - Maryland, Virginia (USA); n South America - Brazil and Argentina. EUREKA - a pan-european network of market-oriented industrial research. The projects sponsored by the network enjoy access to national financial resources. Israeli companies that take part in this program are entitled to receive royalty-bearing R&D grants from the OCS, constituting up to 50% of the OCS' approved budget. EUREKA has over 40 members and includes several subprograms as follows: Specific R&D projects that support collaborations between members from different countries; EUREKA Clusters which support a group of companies in specific predefined technological areas; Eurostars which support collaborations between small and medium-sized entities; EUREKA Umbrellas which focus on specific technological areas and the business sector. Bi-National joint R&D support funds - Israeli and foreign companies Four bi-national funds that are not subject to the R&D Law (but are royalty-bearing in commercialization stages of the technology) provide an opportunity for receiving financial support for R&D activities of Israeli companies that carry out joint R&D projects with foreign companies as follows: BIRD (US-Israel Bi-National Research and Development) Foundation - the Foundation encourages collaborations between the US private sector and industrial companies in Israel by offering support in the form of the lower of up to 50% of the product's development and commercialization costs or US$ 1 million. In addition, BIRD Energy provides support in financing the expenses of joint Israel-US renewable energy development projects sponsored by the US DOE, the Israeli Ministry of National Infrastructures and the BIRD Foundation. CIIRDF (Canada-Israel Industrial R&D Foundation) - the Foundation aims to promote and sponsor R&D collaborations between these two countries. This support consists of a grant of up to 50% of R&D costs up to a total of C$ 800,000. The grant bears royalties that are contingent on product commercialization. KORIL (Korea-Israel Industrial R&D Foundation) - the Foundation encourages R&D collaborations between Israeli and South Korean corporations. Financial aid for joint R&D projects is provided through three categories: technological feasibility studies, full scale projects and mini scale projects. Full scale projects are sponsored at a rate of up to 50% of joint R&D expenses up to a ceiling of US$ 1 million. The grant bears royalties that are contingent on product commercialization. SIIRD (Singapore-Israel Industrial R&D Foundation) - tthe Foundation aims to promote and support joint industrial R&D ventures between Singapore and Israeli companies by financing up to 50% of the joint venture's approved costs up to a ceiling of US$ 1 million (and not more than US$ 500,000 in one year). The grant bears royalties that are contingent on product commercialization. 13

EU Framework R&D programs (not subject to the R&D Law and non-royaltybearing) The EU is currently in the process of completing the new EU Framework Program for Research and Innovation known as Horizon 2020. This program is expected to supersede the EU Framework Program 7 which will be coming to an end in the next few months by consolidating the three main R&D initiatives and financing resources: (1) the Framework Program; (2) the CIP (Competitiveness and Innovation Framework Program); and (3) the EIT (European Institute of Innovation and Technology). The objective of Horizon 2020 is to enhance the EU's positioning in the various science fields, promote issues that are of global concern such as climate change, sustainable transport and mobility, development of cheaper renewable energy, food security, social and political security and the challenges of aging populations, enhance leading industries in terms of innovation and ley technologies and support small and medium-sized companies. This program also emphasizes the support of international and multidisciplinary collaborations which will be expressed in diverse activities such as: Proposing methods for dealing with and bridging gaps between research and market towards application and commercialization Encouraging market-driven technologies Supporting R&D or innovation projects of small and medium - sized companies, including specific milestone financing, while contributing to social challenges and to the development and foundation of competitive key technologies Supporting innovation ventures by startups, spinoffs and young companies Encouraging small and medium-sized companies to lead projects or play a crucial role in technological innovative development Additional OCS grants The Jerusalem Development Authority - the Authority encourages the establishment of high-tech and bio-med ventures in Jerusalem, entitling startup companies that have 3-20 employees to grants based on the OCS' recommendation. Employment tracks Employment track - for companies that are planning to establish, expand or relocate an enterprise in or to support areas (such as national preference areas, Sderot, Gaza envelope settlements and the Jerusalem district) and recruit at least five new employees for that purpose with an average monthly salary of NIS 6,160 (linked to the increase in the minimum wage) for a period of at least 30 months. A business that is located in the city of Sderot is eligible for alternative support for recruiting two new employees but in such case, no support will be provided for recruiting more than four employees. The average support ranges from 8% to 15% of the salary cost to the employer (up to a maximum salary of NIS 15,000 per employee) for a period of 2.5 years based on the size of the enterprise and the date of recruitment. Employees that entitle the company to such grant must live in the national preference areas. Employment track for populations with low employment rates - for companies that are planning to establish, expand or relocate an enterprise in any area in Israel, provided that at least 90% of the additional employees in the program are from populations with low employment rates (including disabled people, single parents, orthodox Jews and Israeli Arabs, Druze, Bedouins and Circassians). For that purpose, a company is required to hire at least five new employees at a minimum wage. The average support ranges from 20% to 25% of the salary cost to the employer (up to a maximum salary of NIS 15,000 per employee) based on the enterprise's location, the type of population employed at the enterprise and the date of recruitment. As mentioned above, this program addresses employees living in all areas of Israel. 14

High income track - a track designed for enterprises with a consolidated income turnover (including a foreign parent company) in excess of NIS 100 million which are located in national preference areas and are planning to recruit at least 15 new employees with a salary cost of at least 2.5 times the average salary in the market. The average grant is 25% of the salary cost to the employer (up to a maximum monthly salary of NIS 30,000 per employee) for a period of four years. The track is contingent on at least 60% of the new employees residing in national preference areas. Cyber track - a track designed for enterprises with a consolidated income turnover (including a foreign parent company) in excess of NIS 100 million which are involved in development of products and/or services in cyberspace, in the following designated areas: Beer-Sheva, Ofakim, Dimona, Netivot, Arad, Yerucham and Mehavim regional council. The enterprises are requried to recruit at least 15 new employees with a salary cost of at least 2.5 times the average salary in the market. The average grant is 33.75% of the salary cost to the employer (up to a maximum monthly salary of NIS 30,000 per employee) for a period of four years. The track is contingent on at least 60% of the new employees residing in national preference areas. Ogen track - a track designed for enterprises with a consolidated income turnover (including a foreign parent company) in excess of NIS 100 million which are located in national preference areas and are planning to recruit at least 100 new employees with a salary of at least 1.5 times the average salary in the market (the employer's cost). The average grant ranges from 20% to 27.5% of the salary cost to the employer (up to a maximum monthly salary of NIS 20,000 per employee) for a period of four years based on the number of newly recruited employees in the context of the program and the year of employment. The track is contingent on at least 60% of the new employees residing in national preference areas. Track for integrating interns from minority sectors in high-tech industries - a track designed for high-tech industries that hire interns from minority sectors for a gross hourly rate of NIS 30 and provided that these interns are employed for a period of at least 12 months (a maximum of 24 months). The support rate is up to 40% of the salary cost to the employer (up to a gross maximum monthly salary of NIS 13,000 per employee). Program for increasing employment rates in Noam Ind. Park - a program designed for enterprises that are relocated from the center of Israel to the Noam Ind. Park and for new enterprises that will be constructed in the Noam Ind. Park according to the following tracks: Enterprise relocation - a grant of up to NIS 2.5 million for the relocation of an existing enterprise and payment of the land price to the Israel Lands Administration. Enterprise construction - a grant of NIS 117,000 for each thousand sq. m approved in the program and participation in 50% of the planning and construction costs. Both tracks are eligible for participation in expenses relating to employee transportation, municipal fees and employee training. On-the-job training for Israeli employees in the industrial and service sectors - a track designed for enterprises that hire new unprofessional Israeli employees (or employees with training in different fields) and provide them with on the-job training in various segments such as printing, photography and production, administration, nursing, water and energy, rescue, metals and machinery, automobiles, accommodation, electricity and electronics, fashion and textiles, wood and furniture and jewelry (support may be provided in other segments subject to obtaining special approval). The support consists of a grant of up to NIS 2,000 per trainee and up to NIS 1,000 per trainer for a period of 3-6 months. The track is limited to five training groups in a specific segment (with 3-10 trainees per group and possible individual training) in the same corporation. 15

Support tracks in the energy and energy efficiency sector Programs by the Ministry of Energy and Water - the Chief Scientist of the Ministry of Energy and Water is in charge of R&D support programs while retaining a critical mass of knowhow and activities in Israel, developing and retaining Israeli knowhow and conducting techno-economic studies. The Ministry of Energy and Water's support tracks are as follows: Financing and supervising R&D in energy related areas (academia and industry) and promoting international technological collaborations in the following segments: Enterprise projects Energy efficiency Smart networks Oil alternatives Treatment of waste and sewage Specific technological projects Renewable energy (solar, wind, biomass) Energy industry supporting studies Annual programs (the program's terms must be confirmed annually): Pilot projects - support of projects for areas testing and examining innovative technological components before commercial application, with/without reference to their interface with other necessary components. At the conclusion of the project, no scale-up will be needed of more than two orders of magnitude until the commercial stage. Preference will be given to international collaboration projects with real benefits of project promotion and/ or program commercialization. Projects for reducing oil dependency in the transportation and energy sectors will be supported. A grant of 50% of the approved budget up to NIS 1.5 million will be provided. Projects for installing energy efficiency technologies participation in costs of installing energy efficiency technologies. Grants will be provided to energy consumers (industrial, public, commercial) which will install technologies that are included in the list of approved technologies (including water cooling units, air compressors, residual heat utilization systems and lighting fixture upgrades) and will be able to demonstrate compliance with specific saving targets. The grant amount is up to NIS 300,000 per project. Academic research fund - for researchers that pitch projects in the various areas that are published by the Ministry every year with applied outlook (in the present or future). Up to 100% financing may be obtained for a period of three years in an indefinite amount. Support in financing costs of connection to the natural gas distribution grid and in financing costs of conversion of internal systems to natural gas operation - support is offered to gas consumers that connect to the natural gas distribution grid in specific areas and are defined as medium/large consumers (whose expected annual natural gas consumption exceeds 100,000 cm a year and are defined as medium/large consumers in the natural gas distribution agreements they signed with the license owners). The grant rate ranges from 50% to 75% of deductible expenses up to a maximum amount of NIS 700,000. 16 Heznek Fund - a program for proof of technological feasibility or business viability of an idea for the development and manufacture of a new product or the development of a new process, or for significant improvement of an existing product or process, provided that the product or process are in the fields of alternative energy, renewable energy, oil alternatives or energy efficiency. The ideas must contain components of technological development, be solidly formed and have firm scientific foundations. The Ministry offers support at a rate of 62.5% of the approved budget up to NIS 625,000.

Support tracks for exporters and international projects Support in setting up a marketing representation in China or India - this program is designed for Israeli corporations with sales turnovers of NIS 15-200 million which are planning to set up a marketing representation in China or India. The program offers a grant of 50% of the costs of stationing a company employee in the target market, hiring a local advisor, operating an office and setting up a beta site for proof of local application of the technology/product in the target market. The support will be repaid through royalties from sales in the target market. "Smart Money" program - the program is designed for corporations that operate in different sectors (including professional services, software and industrial subcontractors), export more than 250,000 USD per year and are interested in increasing their total export or in beginning to export to foreign markets by investing in promoting marketing in target markets. The grant rate is 50% of approved expenses (including data collection, advertising, conventions and exhibits, business travels, regulation and insurance) up to an amount of NIS 0.5 million 9. The Fund for Supporting International Projects and Tenders - the Fund offers support for Israeli companies 10 which participate in international projects and/or tenders in the context of which the corporations provide services and/or products overseas. The support is at a rate of 50% 11 of the expenses, up to NIS 100 - NIS 400 thousand for preparing a tender proposal and NIS 800 thousand for a feasibility study. The prerequisite for submitting an application is a project value of at least US$ 500 thousand for preparing a tender proposal and at least US$ 2 million for a feasibility study. The project must also have added value of at least 35% in Israel. The grant will only be repaid if the company wins the tender/project. 9 According to the Program's terms, an exporter will pay royalties at a rate of 3% on sales in the target market over a period of five years but not more than the total linked amount of the grant received. 10 With a sales turnover of up to NIS 400 Million. 11 60 % for companies located in the south of Israel and in GAZA envelope settelments 17

3 Loans

Program for encouraging investments in VC backed companies in the oil alternative sector - a program for encouraging investments in venture capital backed companies in the sector of oil alternatives for transportation purposes. The objective of the program is to provide government support for the risk embedded in financing R&D of innovative oil alternative technologies for transportation. The program is designed for both local and foreign investors and for Israeli tech companies operating in this sector. Support will be provided in the format of a loan granted to the company simultaneously with a private investor's cash capital investment in the company. Government support will be at a rate of 50% of the amount of the private investor's investment in the company. The companies will receive financial aid in the form of a loan covering 50% of the total private investment amount and the investors will receive a warrant from the company that entitles them to receive additional shares in the company under the original investment terms in return for the repayment of the entire loan amount to the OCS instead of to the company. Government secured loans - the Fund for Supporting Small and Medium-Sized Businesses grants government secured loans to Israeli corporations with a sales turnover of up to NIS 100 million under several tracks: investments, working capital, business under construction and the small business fast track 12. The loans are granted by the banks assigned by the Fund and are contingent on the provision of a personal guarantee by the corporation's shareholders that hold more than 5% in the corporation. The amount of the loans that are offered by the Fund are as follows: New businesses or businesses with a maximum sales turnover of NIS 6.25 million - NIS 500,000. Businesses with a sales turnover in excess of NIS 6.25 million - up to 8% of the business' overall turnover. Businesses on the fast track - up to NIS 100,000 EY's Government Incentives Practice focuses, in a professional and exclusive manner, on the issue of government incentives in Israel. The practice operates with a broad perspective of the client's needs according to a business plan and in compliance with the local and international tax laws applicable to the client and the nature of the client's development, manufacturing and marketing activities in Israel and abroad. The Government Incentives Practice will be glad to assist you maximize the prospective government support opportunities and handle all program applications through the stage of actual receipt of financial assistance. Our professionalism is expressed by our ability to remain constantly informed of all program manifestos/budgets/ updates that are made public and in our understanding of and familiarity with the various programs which allows us to assess the chances of success of the process and ways of improving these chances. We are able to provide clients tailored one-stop-shop solutions that optimize the potential integration of the different incentive programs.. 12 A sales turnover that does not exceed NIS 3 million. 19

The contents of this circular represent a condensed summary of the details of the various programs as they are to date. We shall be happy to be at your disposal for providing detailed information. Please contact: Sigal Griba 03-6278250 sigal.griba@il.ey.com Itay Zetelny (Global Incentives) 03-6276181 itay.zetelny@il.ey.com Gal Ginat (Global Incentives, Haifa) 04-8654089 gal.ginat@il.ey.com EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization and/or one or more of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. 2014 Kost Forer Gabbay & Kasierer All Rights Reserved. ED None This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Neither EYGM Limited nor any other member of the global Ernst & Young organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate advisor.