EverGen Infrastructure Annual Report 2016

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549FORM 20-F ☐REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934OR☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2016OR☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934OR☐SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934Commission file number 001-36187 EVOGENE LTD.(Exact name of Registrant as specified in its charter)Israel(Jurisdiction of incorporation or organization)13 Gad Feinstein StreetPark Rehovot P.O.B 2100Rehovot 7612002, Israel(Address of principal executive offices) Ofer HavivPresident and Chief Executive OfficerTelephone: +972-8-931-1900Facsimile: +972-8-946-672413 Gad Feinstein Street, Park Rehovot P.O.B 2100Rehovot 7612002, Israel(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person) Securities registered or to be registered pursuant to Section 12(b) of the Act:Title of each className of each exchange on which registeredOrdinary shares, par value NIS 0.02 per shareNasdaq Stock Market LLCSecurities registered or to be registered pursuant to Section 12(g) of the Act: None.Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None.Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: As of December 31, 2016, theregistrant had outstanding 25,480,809 ordinary shares, par value NIS 0.02 per share.Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant toRule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐ No ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,”“accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.Large accelerated filer ☐Accelerated filer ☐Non-accelerated filer ☐Emerging Growth Company ☒If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition periodfor complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.Indicate by check mark which basis for accounting the registrant has used to prepare the financing statements included in this filing:U.S. GAAP ☐International Financial Reporting Standards as issued by theInternational Accounting Standards Board ☒Other ☐If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ☐ Item 18 ☐If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ 2 EVOGENE LTD. FORM 20-FANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 2016TABLE OF CONTENTS Introduction4Special Note Regarding Forward-Looking Statements5 PART I ITEM 1.Identity of Directors, Senior Management and Advisers6ITEM 2.Offer Statistics and Expected Timetable6ITEM 3.Key Information6Item 4.Information On The Company26Item 4A.Unresolved Staff Comments50Item 5.Operating and Financial Review and Prospects51ITEM 6.Directors, Senior Management and Employees70ITEM 7.Major Shareholders and Related Party Transactions84Item 8.Financial Information87Item 9.The Offer and Listing88Item 10.Additional Information89Item 11.Quantitative and Qualitative Disclosures About Market Risk100Item 12.Description of Securities other than Equity Securities101 PART II Item 13.Defaults, Dividend Arrearages and Delinquencies101Item 14.Material Modifications to the Rights of Security Holders and Use of Proceeds102Item 15.Controls and Procedures102Item 16.[Reserved]103ITEM 16A.Audit Committee Financial Expert103ITEM 16B.Code of Ethics103ITEM 16C.Principal Accountant Fees and Services103ITEM 16D.Exemptions from the Listing Standards for Audit Committees104ITEM 16E.Purchases of Equity Securities by the Issuer and Affiliated Purchasers104ITEM 16F.Change in Registrant’s Certifying Accountant104ITEM 16G.Corporate Governance104Item 16H.Mine Safety Disclosure104 PART III Item 17.Financial Statements104Item 18.Financial Statements104Item 19.Exhibits104 Signatures105Index to Consolidated Financial StatementsF-13 CERTAIN TERMS AND CONVENTIONSIn this annual report, unless the context otherwise requires:§references to “Evogene,” “we,” “us,” “our,” “our company” and “the company” refer to Evogene Ltd. and its subsidiaries, Evofuel Ltd. and Evogene Inc.;§references to “U.S. Dollars,” “$” or “dollars” are to U.S. dollars;§references to “NIS” or “shekels” are to New Israeli Shekels;§references to the “U.S. initial public offering” refer to the initial public offering of our ordinary shares in the United States and the listing thereof on the New York Stock Exchange, whichoffering was consummated on November 26, 2013;§references to “ordinary shares”, “our shares” and similar expressions refer to our Ordinary Shares, par value NIS 0.02 per share;§references to the “articles of association” or “amended articles” are to our Amended and Restated Articles of Association, which became effective upon the closing of the U.S. initialpublic offering, as subsequently amended;§references to the “Companies Law” are to the Israeli Companies Law, 5759-1999, as amended;§references to the “Securities Act” are to the Securities Act of 1933, as amended;§references to the “Exchange Act” are to the Securities Exchange Act of 1934, as amended;§references to the “NYSE” are to the New York Stock Exchange;§references to the “Nasdaq” are to the Nasdaq Stock Market LLC;§references to the “TASE” are to the Tel Aviv Stock Exchange;§references to the “SEC” are to the United States Securities and Exchange Commission.Unless derived from our financial statements or otherwise noted, amounts presented in this annual report are translated at the rate of $1.00 = NIS 3.845, the exchange rate between the NISand the U.S. dollar reported by the Bank of Israel as of December 31, 2016.This annual report includes other statistical, market and industry data and forecasts which we obtained from publicly available information and independent industry publications andreports that we believe to be reliable sources. Some data is also based on our good faith estimates, which are derived from management’s knowledge of the industry and independent sources.These publicly available industry publications and reports generally state that they obtain their information from sources that they believe to be reliable, but they do not guarantee the accuracyor completeness of the information. Although we believe that these sources are reliable and are not aware of any misstatements regarding the industry data presented in this annual report, wehave not independently verified the information contained in such publications. Certain estimates and forecasts involve uncertainties and risks and are subject to change based on variousfactors, including those discussed under the headings “—Special Note Regarding Forward-Looking Statements” and “Item 3.D—Risk Factors” in this annual report.Throughout this annual report, we refer to various trademarks, service marks and trade names that we use in our business. The “Evogene” design logo, “Evogene” and other trademarksor service marks of Evogene Ltd. appearing in this annual report are the property of Evogene Ltd. We have several other registered trademarks, service marks and pending applications relating toour computational technologies. Other trademarks and service marks appearing in this annual report are the property of their respective holders.4SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTSIn addition to historical facts, this annual report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the “SecuritiesAct”, Section 21E of the Securities Exchange Act of 1934, as amended, or the “Exchange Act,” and the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. We havebased these forward-looking statements on our current expectations and projections about future events. Forward-looking statements include information concerning our possible or assumedfuture results of our business, financial condition, results of operations, liquidity, anticipated growth strategies, anticipated trends in our industry, our potential growth opportunities, plans andobjectives. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “seeks,” “estimates,”“expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions that convey uncertainty of future events or outcomes and the negativesof those terms. These statements include but are not limited to: §our expectation that our discoveries will have the desired effect required in order to reach a commercial product; §Our ability, and the ability of our collaborators, to allocate the resources needed to develop products based on our discoveries; §Our expectation regarding the length and complexity of the process of developing products based on our discoveries and the probability of success of us and our collaborators indeveloping such products; §our expectation regarding the future growth of the seeds, ag-chemicals, and ag-biologicals markets and larger agriculture market; §our ability to maintain our business models, such as the business model in which our partners pay for our research and development costs or the business model in which we pay for ourown research and development costs and enter into collaboration agreements only in the later stages of product development; §our expectation regarding the commercial value of our key products, such as the trait value of our key seed traits products in yield and abiotic stress and biotic stress; §our expectation regarding regulatory approval of products developed by us or our collaborators; §our expectation that products containing or based on our discoveries will be commercialized and we will earn royalties from the sales of such products; §our ability to continue to successfully develop our newer operations, such as ag-chemicals operations, insect control operations, and ag-biologicals operations, enter into collaborationagreements to develop products in these fields and eventually commercialize products in the relevant markets; §our ability to maintain and recruit knowledgeable or specialized personnel to perform our research and development work; §our ability to successfully develop improved castor bean seed varieties that serve the current industrial markets and that can serve as a viable alternative source of feedstock for biofueland other industrial uses; §our ability to adapt to continuous technological change in our industry; §our ability to maintain our collaboration agreements with our current collaborators; §our ability to enter into new collaboration agreements and expand our research and development to new fields, traits and crops; §our ability to improve our existing computational technologies and our screening and validation systems and to develop and launch new computational technologies and screening andvalidation systems; and §our ability to patent our discoveries and to protect our trade secrets and proprietary know-how.The preceding list is not intended to be an exhaustive list of all of our forward-looking statements. The forward-looking statements are based on our beliefs, assumptions andexpectations of future performance, taking into account the information currently available to us. These statements are only predictions based upon our current expectations and projectionsabout future events. There are important factors that could cause our actual results, levels of activity, performance or achievements to differ materially from the results, levels of activity,performance or achievements expressed or implied by the forward-looking statements. A number of important factors could cause actual results to differ materially from those indicated by theforward-looking statements, including, but not limited to, those factors described in “Item 3.D—Risk Factors,” “Item 4—Information on the Company” and “Item 5—Operating and FinancialReview and Prospects.”5You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements arereasonable, we cannot guarantee that future results, levels of activity, performance and events and circumstances reflected in the forward-looking statements will be achieved or will occur. All ofthe forward-looking statements we have included in this annual report are based on information available to us on the date of this annual report. Except as required by law, we undertake noobligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changes in our expectations or otherwise. PART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSNot applicable.ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLENot applicable.ITEM 3.KEY INFORMATIONA. Selected Financial DataThe following tables set forth our selected consolidated financial data. You should read the following selected consolidated financial data in conjunction with “Item 5. Operating andFinancial Review and Prospects” and our consolidated financial statements and related notes included in this annual report. Historical results are not necessarily indicative of the results that maybe expected in the future. Our financial statements have been prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International AccountingStandards Board, or IASB.The selected consolidated statements of profit or loss and other comprehensive income (loss) data for each of the years in the three-year period ended December 31, 2016 and theconsolidated statements of financial position data as of December 31, 2015 and December 31, 2016 are derived from our audited consolidated financial statements appearing in this annual report.The consolidated statements of profit or loss and other comprehensive income (loss) data for each of the years ended December 31, 2012 and December 31, 2013 and the consolidated statementsof financial position data as of December 31, 2012, 2013 and 2014 are derived from our audited consolidated financial statements that are not included in this annual report. Year ended December 31,(in thousands, except share and per share data) 2012 2013 2014 2015 2016 Consolidated Statements of Profit or Loss and Other Comprehensive Income(Loss): Revenues: Research and development payments, including up-front payments $13,914 $15,028 $14,198 $10,956 $6,500 Share purchase related revenues 3,158 2,553 313 173 40 Total Revenues 17,072 17,581 14,511 11,129 6,540 Cost of revenues 9,552 10,114 9,709 8,255 5,639 Gross profit 7,520 7,467 4,802 2,874 901 Operating expenses: Research and development, net 7,252 11,107 14,022 14,449 16,405 Business development 1,159 1,517 1,851 1,964 1,696 General and administrative 2,235 3,564 4,185 4,382 3,889 Total operating expenses 10,646 16,188 20,058 20,795 21,990 Operating loss (3,126) (8,721) (15,256) (17,921) (21,089)Financing income 972 1,179 2,242 2,571 2,424 Financing expenses (294) (1,336) (1,516) (1,863) (891)Loss before taxes on income (2,448) (8,878) (14,530) (17,213) (19,556)Taxes on income 74 - - - 36 Net loss (2,522) (8,878) (14,530) (17,213) (19,592)Other comprehensive income (loss): Loss from cash flow hedges - - (222) (45) - Amounts transferred to the statement of profit or loss for cash flow hedges - - - 267 - Total comprehensive loss $(2,522) $(8,878) $(14,752) $(16,991) $(19,592)Basic and diluted net loss per share $(0.14) $(0.45) $(0.58) $(0.68) $(0.77)Weighted average number of ordinary shares used in computing basic anddiluted net loss per share (1) 18,421,568 19,532,010 25,100,556 25,378,325 25,444,733 6 As of December 31, 2012 2013 2014 2015 2016 Selected Consolidated Statements of Financial Position Data: Cash and cash equivalents $24,262 $95,454 $5,213 $10,221 $3,236 Marketable securities 30,868 31,452 80,040 71,807 71,738 Short-term bank deposits - - 30,046 18,603 13,137 Trade receivables 1,542 1,913 1,183 2,675 169 Total current assets 57,322 129,552 118,371 104,376 89,490 Deferred revenues and other advances 8,379 2,535 1,964 858 1,105 Total liabilities 16,596 12,564 11,504 8,843 8,697 Working capital (2) 47,823 120,978 110,452 98,737 84,265 Shareholders’ equity 48,259 124,747 116,082 103,752 87,289 The issued and outstanding share capital of the company is composed of 25,480,809 ordinary shares as of December 31, 2016._____________________ (1)Basic and diluted net loss per share is computed based on the weighted average number of ordinary shares outstanding during each period, in accordance with IAS 33, “Earnings perShare.” (2)Working capital is defined as total current assets less total current liabilities.B. Capitalization and Indebtedness Not applicable.C. Reasons for the Offer and Use of Proceeds Not applicable.D. Risk FactorsOur business faces significant risks. You should carefully consider all of the information set forth in this annual report and in our other filings with the SEC, including the followingrisk factors which we face and which are faced by our industry. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. Thisreport also contains forward-looking statements that involve risks and uncertainties. Our results could materially differ from those anticipated in these forward-looking statements, as a resultof certain factors including the risks described below and elsewhere in this report and our other SEC filings. See “Special Note Regarding Forward-Looking Statements and Industry Data”on page 4.7Risks Related to Our Business and IndustryOur discoveries may not have the desired effect required in order to reach a commercial product;Our success depends on our ability to develop products having a desired effect on plants. Research and development in the seed, ag-chemicals, ag-biologicals and larger agricultureindustries entails considerable uncertainty. We may spend many years developing products that will never be commercialized. The science underlying the development of our seed traits, ag-chemical products and ag-biological products is highly complex and although we use innovative approaches there is no certainty that our discoveries will result in products that satisfy marketrequirements. None of our discoveries has completed the development process and became commercially available so far. If our discoveries will not have the desired effect, our collaborators maynot develop commercial products that are based on them, which could materially and adversely affect our results of operations and our long-term growth strategy.Various factors may delay or prevent commercialization of our products.Our success depends in part on our ability to identify genes, genetic markers, ag-chemical compounds, and microbial, or collectively discoveries, that will improve crop performance.These discoveries are, or will be, licensed to collaborators to develop and commercialize seed traits, ag-chemical products and ag-biological products improving crop performance based on ourdiscoveries. Pursuant to our collaboration agreements, we are usually entitled, subject to certain conditions, to receive royalties on products that integrate our discoveries. In addition, certain ofour agreements entitle us to upfront fees, research and development payments and milestone payments in the event that specified milestones are met. While none of our discoveries hascompleted the development process and become commercially available so far and thus we currently do not earn royalties from the sale of products based on our discoveries, our long-termgrowth strategy is based in large part on the expectation that such royalties will comprise a significant portion of our revenues in the future. If our collaborators never commercialize productsbased on our discoveries, we will not receive revenues from royalties and may not earn a profit on our discoveries, which could materially and adversely affect our results of operations and ourlong-term growth strategy.The manner in which our collaborators develop their products, whether seeds, ag-chemical products or ag-biological products, including the development of the discoveries that arelicensed by us, affects the period that will pass until such products are commercialized, if ever. Products based on our discoveries may never become commercialized for any of the followingreasons: §our discoveries may not be successfully validated or may not have the desired effect required in order to reach a commercial product; §the process of developing products based on our discoveries is lengthy and expensive. We and our partners may not be able to allocate the resources needed to complete it within thedesired timelines; §our collaborators may decide to discontinue, pause, reduce, or alter the scope of the development efforts for the products on which we collaborate. §we may fail to satisfy, in a timely manner or at all, relevant milestones under our agreements with our collaborators; §regulatory conditions related to the products we develop may change in different territories, thus negatively affecting the relevant development processes and extending their length orlimiting the commercialization of such products. §our collaborators may be unable to obtain the requisite regulatory approvals for products based on our discoveries; §our competitors may launch competing or more effective products; §our collaborators may be unable to fully develop and commercialize products containing our discoveries or may decide, for whatever reason, not to commercialize, or to delay thecommercialization of such products; and §a market may not exist for products containing our discoveries or such products may not be commercially successful or relevant; and §we may be unable to patent our discoveries in the necessary jurisdictions.8Our product development cycle is lengthy and uncertain, and we may never earn royalties on the sale of products containing our discoveries.Research and development in the seed, ag-chemicals, ag-biologicals and larger agriculture industries is expensive and prolonged and entails considerable uncertainty. We may spendmany years and dedicate significant financial and other resources developing products that will never be commercialized. The process of discovering, developing and commercializing a seed trait,an ag-chemical product, or an ag-biological product involves several phases, and we estimate that it will take eight to sixteen years from discovery to commercialization of a product containingseed traits, ten to twelve years in the case of an ag-chemical product, and six to eight years in the case of an ag-biological product. The timelines for development of products by our collaboratorsmay extend beyond our expectations for many reasons, such as: §we and our partners may not be able to allocate the resources needed to develop products based on our discoveries §our partners may revise the process of product development or make other decisions regarding their product development pipelines that may extend the development period; §our partners may prioritize other development activities ahead of development activities with respect to the products on which we collaborate; §our discoveries (seed traits, ag-chemical compounds, or microbial) may not be successfully validated or may not have the desired effect sought by our collaborators; and §our collaborators may be unable to obtain the requisite regulatory approvals for the products based on our discoveries within expected timelines or at all.We currently have 31 products under development, of which 24 are developed with our collaborators, most of which are in Discovery and Phase I, with two products in Phase II. We havelittle to no certainty as to which and when, if any, of these products will eventually reach commercialization. Because of the long product development cycle and the complexities and uncertaintiesassociated with chemical and biotechnological research, there is significant uncertainty as to whether we will ever generate significant royalties, if any, from the products that we are developing.For more information on the product development cycle of the products we develop and a description of the phases of development, see “Item 4.B—Business Overview—Product DevelopmentCycle”.We derive substantially all of our current revenues from our strategic collaborations, most significantly with Monsanto, and the termination or non-renewal of this collaboration wouldhave a material adverse effect on our results of operations.We have entered into multiple collaboration agreements and related arrangements, most significantly with Monsanto Company, or Monsanto, and we have collaboration agreements withmost of the world’s leading seed and ag-chemical companies, including subsidiaries or affiliates of BASF, Bayer, DuPont and Syngenta, under which we generally generate revenues through up-front payments, research and development payments, and milestone payments. In particular, revenues from Monsanto accounted for 77%, 77% and 60% of our total revenues in the years endedDecember 31, 2016, 2015, and 2014, respectively. Our current agreement with Monsanto was signed in 2008 and was extended in November 2011 and again in October 2013. With respect to our CEseed traits activities under the extended agreement, the collaboration period (i.e., the period of active computational discovery efforts and in-planta validation efforts) is scheduled to expire at theend of 2017; for CP seed traits activities, the collaboration period, including validation efforts, is scheduled to expire in August 2019. See “Item 4.B. Business Overview—Key Collaborations.” Ourrevenues are substantially dependent on Monsanto and, to a lesser extent, on our other collaborators to pay us annual research and development fees and milestone fees upon the occurrence ofcertain milestone events. The termination or non-renewal of our agreement with Monsanto would have a material adverse effect on our results of operations.There are only a few companies in our seeds, ag-chemicals and ag-biologicals markets with which we can establish strategic partnerships, and we rely on a limited number of collaboratorsto develop and commercialize products containing our seed traits, ag-chemicals and ag-biologicals. The seeds and ag-chemicals market is highly consolidated and dominated by a relatively small number of large companies. For example, according to Phillips McDougall's 2015 IndustryPresentation on the Global Seed Market, in 2014, only seven agricultural and seed companies, Monsanto, E.I. du Pont de Nemours and Company, or DuPont-Pioneer, Syngenta AG, or Syngenta,Bayer, Limagrain Cereal Seeds, LLC, or Limagrain, Dow Agro Sciences and KWS controlled approximately 70% of market value in the global seed market. We are currently undertakingcollaborations with several of these companies to develop improved seeds and ag-chemical products. Due to the small number of companies in our market, there are limited opportunities for us togrow our business with new collaborators. In addition, if we fail to develop or maintain our relationships with any of our current collaborators, we could not only lose our opportunity to work withthat collaborator, but we could also suffer a reputational risk that could impact our relationships with other collaborators in what is a relatively small industry community. In 2015 and 2016, theseeds and ag-chemicals markets have undergone further consolidation. Bayer is in the process of acquiring Monsanto to form the largest player in the agricultural industry with approximately $23billion of crop protection, seeds and traits sales. In addition, Dow and DuPont are in the process of merging and ChemChina is in the process of acquiring Syngenta, forming two additionalsubstantial players with consolidated revenues of over $14.5 billion each. Those mergers may further limit the number of potential collaborators available for us to partner with.9We are currently working either with collaborators or on independent projects to research and develop 34 different seed traits, ag-chemical products and ag-biological products. Whilewe seek to expand our portfolio of seed traits and ag-chemical products in the future, the research and development required to discover and develop new seed traits, ag-chemical products andag-biological products is costly, time-intensive and requires significant infrastructure resources. Therefore, in order to discover and develop new seed traits, ag-chemical products and ag-biological products, we must either enter into new collaborations with seed, ag-chemicals and ag-biologicals companies or such products ourselves, independent of any collaborators. If we areunable to enter into new collaborations, or if we do not have the resources to develop the capabilities necessary to discover and develop such products independently, we may not be able toexpand our portfolio of these products, which could have a material adverse effect on our business prospects.A decrease in research expenditures in the seed, ag-chemicals and ag-biologicals markets may jeopardize the continuation, or scope, of our collaborations with seed, ag-chemicals and ag-biologicals companies and adversely impact our ability to continue or extend existing collaborations or enter into new collaborations on favorable financial terms.The research and development expenditures of our existing and potential collaborators may be reduced for reasons beyond our control. For example, a decrease in the prices ofagricultural commodities, such as the decrease in corn price from approximately US$7 per bushel in mid-2013 to less than US$4 per bushel in late 2014 and since or the consolidation trend in theseeds and ag-chemicals industries may result in decreased research and development expenditures in our relevant markets. This development may, in turn, adversely impact our ability to maintainor extend our existing collaborations or enter into new collaborations on favorable financial terms. For example, we may not be able to enter into new collaborations under which our collaboratorscover our expenses through research and development payments. We or our collaborators may fail to perform obligations under the collaboration agreements.We are obligated under our collaboration agreements to perform research activities over a particular period of time. If we fail to perform our obligations under these agreements, in somecases our collaborators may terminate our agreements with them and in other cases our collaborators’ obligations may be reduced and, as a result, our anticipated revenues may decrease. Inaddition, any of our collaborators may fail to perform their obligations, which may hinder development and commercialization of products containing the products we develop and materially andadversely affect our future results of operations. Furthermore, the various payments we receive from our collaborators are our primary source of revenues. If our collaborators do not make thesepayments, either due to financial hardship, disagreement under the relevant collaboration agreement or for any other reason, our results of operations and business could be materially andadversely affected. If disagreements with a collaborator arise, any dispute with such collaborator may negatively affect our relationship with one or more of our other collaborators and may hinderour ability to enter into future collaboration agreements, each of which could negatively impact our business and results of operations.Competition in the fields of our operations is intense and requires continuous technological development. If we are unable to compete effectively, our financial results will suffer.We currently face significant competition in the markets in which we operate. The markets for seeds, seed traits, ag-chemicals and ag-biologicals are intensely competitive and rapidlychanging. Many companies engage in research and development of such products, and speed in getting a new product to market can be a significant competitive advantage. As an example, overthe past decade some of our competitors have enhanced research and development budgets allocated for seeds that are more significant than our budget. In most segments of the seed, ag-chemicals and ag-biologicals market, the number of products available to the consumer is steadily increasing as new products are introduced. At the same time, an increasing number of productsare coming off patent and are thus available to generic manufacturers for production. We may be unable to compete successfully against our current and future competitors, which may result inlower prices and margins and the inability to achieve market acceptance for products containing our discoveries. In addition, many of our competitors have substantially greater financial,marketing, sales, distribution and technical resources than us and some of our collaborators have more experience in research and development, regulatory matters, manufacturing and marketing.We anticipate increased competition in the future as new companies enter the market and new technologies become available. Our technologies may be rendered obsolete or uneconomical bytechnological advances or entirely different approaches developed by one or more of our competitors, which will prevent or limit our ability to generate revenues from the commercialization of ourtechnologies.10Our collaborators have significant resources and development capabilities and may develop their own products that compete with or negatively impact the advancement or sale of productsbased on discoveries we develop and license to them.While we protect the discoveries we develop and license to our collaborators through both legal and contractual provisions, any of our collaborators could develop or pursue competingproducts that may ultimately prove more commercially viable those that we develop. Our collaborators are significantly larger than us and may have substantially greater resources anddevelopment capabilities. The development or launch of a competing product by a collaborator may adversely affect the advancement and commercialization of any competing products that wedevelop and any associated research and development payments, milestone and royalty payments.We are working to develop novel insect control products, and our efforts to enter this market may be unsuccessful.We are developing insect control products, where we fund early stages of research and development efforts ourselves in order to potentially capture more value. Our efforts to developnovel insect control products may fail for a variety of reasons, including:§Our failure to identify and develop toxin candidates having the desired effect on the target insects when inserted into the plants of interest;§Our failure to successfully complete development of insect control products; and§Our failure to meet regulation requirements for insect control productsFurthermore, even if we are able to discover and develop an effective product, it may not be successful if we are unable to find collaborators for industrialization and commercializationthe product. If our efforts to develop insect control products are unsuccessful, our results of operations could be negatively impacted.We are working to develop novel ag-chemical products, and our efforts may be unsuccessful.We are currently developing solutions for crop protection through chemistry, or ag-chemistry. We are developing these products through a novel approach, focused on biologicallysignificant proteins called “targets,” which is similar to certain approaches pharmaceutical companies undertake to develop new drugs. Our efforts to develop novel ag-chemical products may failfor a variety of reasons, including: §The failure of our relatively novel target-based approach to lead to an effective product or failure to identify chemical compounds that will display required level of performance; and §Our failure to obtain sufficient funding to fully execute our ag-chemical business plan.If our efforts to develop ag-chemical products are unsuccessful, our results of operations could be negatively impacted.We are working to develop novel ag-biologicals products, and our efforts to enter this market may be unsuccessful.We are developing ag-biologicals products, currently focused on microbial-based biostimulants through a novel approach, focused on plant-microbiome relationship which is similar tothe growing interest in human microbiome as an effective tool to impact health. We fund our data-collection and early stages of research and development efforts relating to our ag-biologicalproducts ourselves in order to potentially capture more value. Our efforts to develop novel ag-biological products may fail for a variety of reasons, including:§Our failure to establish the needed infrastructure to enable the discovery and development of microbial biostimulants;11§Our failure to identify and develop microbial candidates that enhance plant performance at the desired efficacy and stability;§Our failure to successfully complete development of microorganisms to achieve cost-effective products; and§Our failure to meet regulation requirements in case significant changes occur in the future.Furthermore, even if we are able to discover and develop an effective product, it may not be successful if we are unable to find collaborators for industrialization and commercializationthe product. If our efforts to develop ag-biological products are unsuccessful, our results of operations could be negatively impacted.Evofuel, our wholly owned subsidiary that develops seeds for biodiesel and other uses, may not be successful for a number of reasons.Our wholly owned subsidiary Evofuel is currently developing improved, high-yield castor bean seeds to be used as a source of non-edible feedstock for the existing industrial uses ofcastor oil and the biodiesel market. The renewable energy market in general and the biodiesel market more specifically are not well established and are evolving. Furthermore, the biodiesel marketfaces continuing competition from traditional petroleum-based fuels, and demand for biodiesel fluctuates with changing oil and gas prices. Specifically, crude oil prices have decreasedsubstantially. In order for our castor bean seeds to be an attractive feedstock for biodiesel, we will need to demonstrate on a commercial scale that castor beans can reliably be used as a cost-efficient feedstock for biodiesel production. We will also need to show that the production cost and sales price of castor bean-based biodiesel are competitive with those of traditional oil and gas.The success of these operations will largely depend on our ability to address several unique challenges, including: §the yields of our castor seed varieties on commercial scale under rain-fed conditions, securing economic viability as biodiesel feedstock; §the ability to harvest castor beans in an efficient mechanized manner; §the cost of producing castor bean grains, allowing grower profitability; §adoption on large scale by growers of castor, including the successful management of diseases, pets and castor volunteers; §the risk that farmers may decide not to grow “second season” replacement crops such as the castor bean; §the health and environmental risks posed by the castor bean seed, which contains a naturally occurring poison called ricin; §any regulatory concerns related to sales of castor beans, particularly related to the import of such beans and the potential effects of ricin; and §the sustainability of our production and the biodiesel end-product.In addition, we have no prior experience operating as a seed company. We are therefore operating in a new industry, with little knowledge of the dynamics involved in producing andselling seeds. In addition, we may be subject to claims of our partners concerning the quality or performance of the seeds we develop or from third parties concerning damages caused by ourseeds. Prior to addressing the biodiesel market, Evofuel expects to address other oil industries and take advantage of the premium oil prices paid by the existing industrial markets. Furthermore,we are working to design improved castor bean seeds and address each of these issues so that we are able to grow a sufficient and sustainable amount of castor bean plants at a low cost. Wehave entered into strategic collaborations with several agri-businesses such as Insolo Agroindustrial. In 2016, we entered into our first commercial sale of castor seeds, however, we are unable toforesee when significant sales will commence. Furthermore, there can be no assurance that our collaborations will ultimately result in a commercialized castor bean seed. If we are unable toadequately address any of these issues, we may not find a market for our castor bean seeds and our results of operations could be materially and adversely affected. 12Even if we are entitled to royalties from our collaborators, we may not actually receive these royalties, or we may experience difficulties in collecting the royalties that we believe we areentitled to.After our collaborators launch commercial products containing our licensed discoveries, we will rely on our collaborators to report to us the sales they earn from these products and toaccurately calculate the royalties we are entitled to, a process that will involve complicated and difficult calculations. Although we seek to address these concerns in our collaboration agreements,such provisions may not be effective. Additionally, we may not be able to achieve our long-term goal of generating revenues from royalties, and in the coming years our revenues will be entirelydependent on fees we earn for our research and development services and milestone payments from our collaborators.We depend on our key personnel and, if we are not able to attract and retain qualified scientific and business personnel, we may not be able to grow our business or develop andcommercialize our products.The vast majority of our workforce is involved in research and development. Our business is therefore dependent on our ability to recruit and maintain a highly skilled and educatedworkforce with expertise in a range of disciplines, including biology, chemistry, plant genetics, agronomics, entomology, mathematics, computer science and other subjects relevant to ouroperations. For example, approximately 28% of our staff holds a Ph.D. The number of qualified and highly educated personnel in Israel, where most of our operations are located, is limited andcompetition for the services of such persons is intense. Although we have employment agreements with all of our employees, most of these agreements may be terminated upon short notice. Thefailure to hire and retain skilled and highly educated personnel could limit our growth and hinder our research and development efforts.In recent years we have begun to develop certain discoveries (seed traits, ag-chemicals and ag-biologicals) independent of our collaborators, and we may need to finance the cost of theinitial development phase of such technologies ourselves. In the past, our business plan for our seed traits activity was based primarily on the development of seed traits in collaboration with our collaborators throughout the discovery-development-commercialization process. However, in recent years we have begun to develop certain seed traits, ag-chemicals and ag-biologicals independent of our collaborators and aredeveloping such discoveries on our own during the discovery phase, and may also undertake such independent discovery efforts towards the next development phases, with a goal of makingsuch discoveries available to collaborators in later phases, once we have identified what we believe to be promising discoveries. While we believe that this will allow us to negotiate morefavorable license terms with respect to such seed traits, the up-front cost to us of developing traits without a collaborator (and therefore without external funding for the research anddevelopment expenditures we incur) in these early phases involves higher risks, since we need to fund the research and development of such traits ourselves. If we are unsuccessful indiscovering promising traits after having invested significant funds, or if we are unable to find collaborators who are interested in such seed traits and willing to fund subsequent phases ofdevelopment and commercialization, such failures could have a material and adverse effect on our business, financial condition and results of operations. Our business is subject to various government regulations and, if we or our collaborators are unable to obtain the necessary regulatory approvals, we may not be able to continue ouroperations.Our business is generally subject to two types of regulations: regulations that apply to how we operate and regulations that apply to products containing our discoveries. We apply forand maintain the regulatory approvals necessary for our operations, particularly those covering our field trials, while our collaborators apply for and maintain regulatory approvals necessary forthe commercialization of products containing our discoveries. More recently, regulators have implemented delays in approving genetically engineered crops due to environmental concerns andnegative publicity. Field trials for our discoveries that are performed in Israel are subject to Israeli regulations, and field trials that are being executed in the U.S. by local subcontractors areregulated by local regulation. We believe that our current activities are compliant with all currently applicable Israeli regulations, however we may become subject to new or revised regulations orapprovals in the future. Furthermore, any violation of these regulations could expose us to civil and criminal penalties.The large-scale field trials that our collaborators conduct during advanced stages of product development are subject to regulations similar to those we are subject to. Pursuant to ourcollaboration agreements, our collaborators also apply for the requisite regulatory approvals prior to commercialization of products containing our discoveries. In most of our key target markets,including the United States and the European Union, regulatory approvals must be received prior to the importation of transgenic products. These regulatory regimes may be particularly onerous;for example, the U.S. federal government’s regulation of biotechnology is divided among the United States Environmental Protection Agency, which regulates activity related to the invention ofplant pesticides and herbicides, the United States Department of Agriculture, which regulates the import, field testing and interstate movement of specific technologies that may be used in thecreation of transgenic plants, and the United States Food and Drug Administration, which regulates foods derived from new plant varieties. None of our discoveries is currently being tested in alarge-scale field trial or is in the regulatory approval development stage. Once products containing our discoveries reach these stages, however, if our collaborators are unable to obtain therequisite regulatory approvals or there is a delay in obtaining such approvals as a result of negative market perception or heightened regulatory standards, such products will not becommercialized, which would negatively impact our business and results of operations.13Disruption to our IT system could adversely affect our reputation and have a material adverse effect on our business and results of operations.Our computational technologies rely on our IT system to collect and analyze the genomic and chemical data we collect and discover. We store significant amounts of data, and as ofDecember 31, 2016, we had compiled over 1,200 terabytes of data. Although we are developing back-up storage for our stored data, there can be no assurance that our back-up storagearrangements will be effective if it becomes necessary to rely on them. Furthermore, we can provide no assurance that our current IT system is fully protected against third-party intrusions,viruses, hacker attacks, information or data theft or other similar threats.As we continue to develop our computational technologies and expand our genomic and other datasets, we may need to update our IT system and storage capabilities. However, if ourexisting or future IT system does not function properly, or if the IT system proves incompatible with our new technologies, we could experience interruptions in data transmissions and slowresponse times, preventing us from completing routine research and business activities. Furthermore, disruption or failure of our IT system due to technical reasons, natural disaster or otherunanticipated catastrophic events, including power interruptions, storms, fires, floods, earthquakes, terrorist attacks and wars could significantly impair our ability to deliver data related to ourprojects to our collaborators on schedule and materially and adversely affect the outcome of our collaborations, our relationships with our collaborators, our business and our results ofoperations.Development of our products, particularly during our validation and testing activities, may be adversely affected by circumstances caused by us and those beyond our control.The seed, ag-chemicals and ag-biologicals industry is subject to various factors that make its operations relatively unpredictable from period to period. Our tests may be adverselyaffected by circumstances both caused by us and those beyond our control. Factors caused by us include any failure by us or our collaborators to follow proper agronomic practice or suggestedprotocols for growing the model validation plants and crops for our trials, and failure to identify and address diseases, insects and pests, such as birds that may eat the seeds we are evaluating.Factors beyond our control include weather and climatic variations, such as droughts or heat stress, or other factors we are unable to identify. For example, if there was prolonged or permanentdisruption to the electricity, climate control or water supply operating systems in our greenhouses or laboratories, the plants and pests on which we are testing our discoveries and the sampleswe store in freezers, both of which are essential to our research and development activities, would be severely damaged or destroyed, adversely affecting our research and development activitiesand thereby our business and results of operations. We have also experienced crop failures in the past for then-unknown reasons, causing delays in our achievement of milestones and deliveryof results, and necessitating that we re-start the trials. Any test failure we may experience is not covered by our insurance policy, and therefore could result in increased cost of the trials anddevelopment of our products, which may negatively impact our business and results of operations.Consumer and government resistance to genetically modified organisms may negatively affect our public image and reduce sales of plants containing our traits.We are active in the field of biotechnology research and development in seeds, including genetically modified, or "GM" seeds. Foods made from such seeds are not accepted by manyconsumers and in certain countries production of certain GM crops is effectively prohibited, including throughout the European Union, due to concerns over such products' effects on foodsafety and the environment. The high public profile of biotechnology in food production and lack of consumer acceptance of products to which we have devoted substantial resources couldnegatively affect our public image and results of operations. The prohibition on the production of certain GM crops in select countries and the current resistance from consumer groups,particularly in Europe, to GM crops not only limits our access to such markets but also has the potential to spread to and influence the acceptance of products developed through biotechnologyin other regions of the world and may also influence regulators in other countries to limit or ban production of GM crops, which could limit the commercial opportunities to exploit biotechnology.14GM crops are grown principally in the United States, Brazil and Argentina where there are fewer restrictions on the production of GM crops. If these or other countries where GM cropsare grown enact laws or regulations that ban the production of such crops or make regulations more stringent, we could experience a longer product development cycle for our products and mayeven have to abandon projects related to certain crops or geographies, both of which would negatively affect our business and results of operations. Furthermore, any changes in such laws andregulations or consumer acceptance of GM crops could negatively impact our collaborators, who in turn might terminate or reduce the scope of their collaborations with us or seek to alter thefinancial terms of our agreements with them.We have a history of operating losses and negative cash flow, and we may never achieve or maintain profitability.We have a history of losses, and incurred operating losses of $21.1 million, $17.9 million and $15.3 million for the years ended December 31, 2016, 2015, and 2014, respectively. Althoughwe are currently developing 31 distinct products, there can be no assurance that these efforts will result in commercially successful products. We expect to continue to incur losses in futureperiods, until we begin earning royalties on the products we are currently developing and any new products we develop in the future, if at all. Because we will incur significant costs and expensesfor these efforts before we obtain any incremental revenues from them, our losses in future periods could be significant. In addition, we may find that these efforts are more expensive than weanticipate or that they do not result in profitability in the time period we anticipate, which would further increase our losses. If we are unable to adequately control the costs associated withoperating our business, including our costs of development and sales, our business, financial condition, operating results and prospects will suffer.The licenses we grant to our collaborators to use our discoveries are exclusive. This limits our opportunities to license our discoveries to more than one collaborator.Most of the licenses we grant our collaborators to use our discoveries are exclusive. That means that once these discoveries are licensed to a collaborator, we are generally prohibitedfrom licensing those discoveries to any third party. In addition, under the Monsanto Collaboration Agreement, as defined herein, we are broadly prohibited from collaborating on certain GM traitsdiscovery for corn, soybean, cotton and canola with any party other than Monsanto. The limitations imposed by these exclusive licenses could prevent us from expanding our business andincreasing our exposure to new licensees, both of which could adversely affect our business and results of operations.We may be required to pay royalties to employees who develop inventions that have been or will be commercialized by us, even if the rights to such inventions have been assigned to us andthe employees have waived their rights to royalties or other additional compensation.A significant portion of our intellectual property has been developed by our employees in the course of their employment for us. Under the Israeli Patent Law, 5727-1967, or the PatentLaw, inventions conceived by an employee in the course and as a result of or arising from his or her employment with a company are regarded as “service inventions,” which belong to theemployer, absent a specific agreement between the employee and employer giving the employee proprietary rights. The Patent Law also provides under Section 134 that if there is no agreementbetween an employer and an employee as to whether the employee is entitled to consideration for service inventions, and to what extent and under which conditions, the Israeli Compensationand Royalties Committee, or the Committee, a body constituted under the Patent Law, shall determine these issues. Section 135 of the Patent law provides criteria for assisting the Committee inmaking its decisions. According to decisions of the Committee, an employee’s right to receive consideration for service inventions is a personal right and is entirely separate from the proprietaryrights in such invention. Therefore, this right must be explicitly waived by the employee. A decision handed down in May 2014 by the Committee clarifies that the right to receive considerationunder Section 134 can be waived and that such waiver can be made orally, in writing or by behavior like any other contract. The Committee will examine, on a case by case basis, the generalcontractual framework between the parties, using interpretation rules of the general Israeli contract laws. Further, the Committee has not yet determined one specific formula for calculating thisremuneration, nor the criteria or circumstances under which an employee’s waiver of his right to remuneration will be disregarded. Similarly, it remains unclear whether waivers by employees intheir employment agreements of the alleged right to receive consideration for service inventions should be declared as void being a depriving provision in a standard contract. All of ouremployees execute invention assignment agreements upon commencement of employment, in which they assign their rights to potential inventions and acknowledge that they will not be entitledto additional compensation or royalties from commercialization of inventions. Although our employees have agreed to assign to us service invention rights and have specifically waived theirright to receive any special remuneration for such service inventions beyond their regular salary and benefits, we may face claims demanding remuneration in consideration for assignedinventions.15Our success depends on our ability to protect our intellectual property and our proprietary technologies.Our commercial success depends in part on our ability to obtain and maintain patent protection and trade secret protection for our proprietary computational technologies, ourdiscoveries and their uses, as well as our ability to operate without infringing upon the proprietary rights of others. If we do not adequately protect our intellectual property, competitors may beable to use our technologies and erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability.If we are unable to protect the confidentiality of our trade secrets, the value of our technology could be materially adversely affected and our business would be harmed.We treat our proprietary computational technologies, including unpatented know-how and other proprietary information, as trade secrets. We seek to protect these trade secrets, in part,by entering into non-disclosure and confidentiality agreements with any third parties who have access to them, such as our consultants, independent contractors, advisors, corporatecollaborators and outside scientific collaborators. We also enter into confidentiality and invention or patent assignment agreements with employees and certain consultants. Any party withwhom we have executed such an agreement may breach that agreement and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remediesfor such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, ifany of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent such third party, or those to whom they communicate suchtechnology or information, from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, or if weotherwise lose protection for our trade secrets or proprietary know-how, the value of this information may be greatly reduced and our business and competitive position could be harmed.Changes in laws and regulations to which we are subject, or to which we may become subject in the future, may materially increase our costs of operation, decrease our operating revenuesand disrupt our business.Laws and regulatory standards and procedures that impact our business are continuously changing. Responding to these changes and meeting existing and new requirements may becostly and burdensome. Changes in laws and regulations may occur that could: §impair or eliminate our ability to research and develop our products, including validating our products through field trials; §increase our compliance and other costs of doing business through increases in the cost to patent or otherwise protect our intellectual property or increases in the cost to ourcollaborators to obtain the necessary regulatory approvals to commercialize and market the products we develop with them; §require significant product redesign or systems redevelopment; §render our products less profitable, obsolete or less attractive compared to competing products; §affect our collaborators’ willingness to do business with us; §reduce the amount of revenues we receive from our collaborators through milestone payments or royalties; and §discourage our collaborators from offering, and consumers from purchasing, products that incorporate our discoveries.Any of these events could have a material adverse effect on our business, results of operations and financial condition. Legislators and regulators have increased their focus on plantbiotechnology in recent years, with particular attention paid to GM crops as well as on ag-chemicals. Because our current products are primarily in the initial discovery and proof of conceptdevelopment phase, the only GM-related regulations that currently affect our business are related to our validation trials in Israel. We believe that we are currently in compliance with Israeliregulations related to growing GM crops in Israel; however, if these regulations change, our validation trials may become costly and burdensome and could require us to relocate our trials outsideof Israel or even change our business model to have our collaborators perform validation trials.16While none of our products are currently available for sale, our future growth relies on the ability of our collaborators to commercialize and market our products, and any restrictions onsuch activities could materially and adversely impact our business and results of operations. Any changes in regulations in countries where our products are used could result in ourcollaborators being unable or unwilling to develop, commercialize or sell products that incorporate our discoveries. In addition, we rely on patents and other forms of intellectual propertyprotection. Legislation and jurisprudence on patent protection in the key target markets where we seek patent protection, such as the United States and the European Union, is evolving andchanges in laws could affect our ability to obtain or maintain patent protection for our products. Any changes to these existing laws and regulations may materially increase our costs ofoperation, decrease our operating revenues and disrupt our business. See “Item 4.B. Information on the Company—Business Overview—Government Regulation” and “Item 4.B. BusinessOverview— Regulation of Products Containing Our Traits.”Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.As is the case with other biotechnology companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing biotechnology patentsinvolves technological and legal complexity, and is costly, time consuming, and inherently uncertain. In addition, the U.S. Supreme Court has ruled on several patent cases in recent years, eithernarrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to ourability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, thefederal courts, and the U.S. Patent and Trademark Office, the laws and regulations governing patents could change in unpredictable ways that may weaken or undermine our ability to obtain newpatents or to enforce our existing patents and patents we might obtain in the future.We may not be able to protect our intellectual property rights throughout the world.Filing, prosecuting, maintaining and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rightsin some countries outside the United States are less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to thesame extent as federal and state laws in the United States. Consequently, we are unable to prevent third parties from using our inventions in all countries outside the United States, or from sellingor importing products made using our inventions in and into the jurisdictions in which we do not have patent protection. Competitors may use our technologies in jurisdictions where we have notobtained patent protection to develop their own products, and we may be unable to prevent such competitors from importing those infringing products into territories where we have patentprotection but enforcement is not as strong as in the United States. These products may compete with our product candidates and our patents and other intellectual property rights may not beeffective or sufficient to prevent them from competing in those jurisdictions. Moreover, farmers or others in the chain of commerce may raise legal challenges against our intellectual propertyrights or may infringe upon our intellectual property rights, including through means that may be difficult to prevent or detect. For example, the practice by some farmers of saving seeds fromnon-hybrid crops (such as soybeans, canola and cotton) containing biotechnological traits has prevented and may continue to prevent us from realizing the full value of our intellectual propertyin countries outside of the United States.Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions, including China, where we have filed patentapplications. The legal systems of certain countries, including China, have not historically favored the enforcement of patents or other intellectual property rights, which could hinder us frompreventing the infringement of our patents or other intellectual property rights and result in substantial risks to us. Proceedings to enforce our patent rights in the United States or foreignjurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly andour patent applications at risk of not issuing and could provoke third parties to assert patent infringement or other claims against us. We may not prevail in any lawsuits that we initiate and thedamages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtaina significant commercial advantage from the intellectual property that we develop or license from third parties.17If we or one of our collaborators are sued for infringing the intellectual property rights of a third party, such litigation could be costly and time consuming and could prevent us or ourcollaborators from developing or commercializing our products.Our ability to generate significant revenues from our products depends on our and our collaborators’ ability to develop, market and sell our products and utilize our proprietarytechnology without infringing the intellectual property and other rights of any third parties. In the United States and abroad there are numerous third party patents and patent applications thatmay be applied toward our proprietary technology, business processes or developed products, some of which may be construed as containing claims that cover the subject matter of our productsor intellectual property. Because of the rapid pace of technological change, the confidentiality of patent applications in some jurisdictions, and the fact that patent applications can take manyyears to issue, there may be currently pending applications that are unknown to us that may later result in issued patents upon which our product candidates or proprietary technologies infringe.Similarly, there may be issued patents relevant to our product candidates of which we are not aware. These patents could reduce the value of the products we develop or, to the extent they coverkey technologies on which we have unknowingly relied, require that we seek to obtain licenses or cease using the technology, no matter how valuable to our business. We may not be able toobtain such a license on commercially reasonable terms. There is a substantial amount of litigation involving patent and other intellectual property rights in the biotechnology industry generally.If any third party patent or patent application covers our intellectual property or proprietary rights and we are not able to obtain a license to it, we and our collaborators may be prevented fromcommercializing products containing our discoveries.As the agricultural biotechnology industry continues to develop, we may become party to, or threatened with, litigation or other adverse proceedings regarding intellectual property orproprietary rights in our technology, processes or developed products. Third parties may assert claims based on existing or future intellectual property rights and the outcome of any proceedingsis subject to uncertainties that cannot be adequately quantified in advance. Any litigation proceedings could be costly and time consuming and negative outcomes could result in liability formonetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent. There is also no guarantee that we would be able to obtain a license undersuch infringed intellectual property on commercially reasonable terms or at all. A finding of infringement could prevent us or our collaborators from developing, marketing or selling a product orforce us to cease some or all of our business operations. Even if we are successful in these proceedings, we may incur substantial costs and the time and attention of our management andscientific personnel may be diverted as a result of these proceedings, which could have a material adverse effect on us. Claims that we have misappropriated the confidential information or tradesecrets of third parties could similarly have a negative impact on our business.We and our collaborators may disagree over our right to receive payments under our collaboration agreements, potentially resulting in costly litigation and loss of reputation.Our ability to generate royalty payments from our collaboration agreements depends on our ability to clearly delineate our intellectual property rights under those agreements. We oftenlicense patented genes or other intellectual property to our collaborators, who use or will use such intellectual property to develop and commercialize products with our discoveries. However, acollaborator may use our intellectual property without our permission, dispute our ownership of certain intellectual property rights or argue that our intellectual property does not cover theirmarketed product. If a dispute arises, it may result in costly litigation, and our collaborator may refuse to pay us royalty payments while the dispute is ongoing. Furthermore, regardless of anyresort to legal action, a dispute with a collaborator over intellectual property rights may damage our relationship with that collaborator, and may also harm our reputation in the industry.We may be required to pay substantial damages as a result of product liability claims for which insurance coverage is not available.Once products integrating our products reach commercialization, product liability claims will be a commercial risk for our business, particularly as we are involved in the supply ofbiotechnological, ag-chemical and ag-biological products, some of which can be harmful to humans and the environment. Courts have levied substantial damages in the United States andelsewhere against a number of companies in the agriculture industry in past years based upon claims for injuries allegedly caused by the use of their products. Product liability claims against usor our collaborators selling products that contain our products or allegations of product liability relating to products containing our discoveries could damage our reputation, harm ourrelationships with our collaborators and materially and adversely affect our business, results of operations, financial condition and prospects. We do not have product liability insurancecoverage. Furthermore, while our collaboration agreements typically require that our collaborators indemnify us for the cost of product liability claims brought against us, such indemnificationprovisions may not always be enforced, and we may receive no indemnification if our own misconduct led to the claims.18Our employment agreements with our employees and other agreements with our collaborators and third parties may not adequately prevent disclosure of trade secrets, know-how and otherproprietary information.A substantial portion of our technologies and intellectual property is protected by trade secret laws. We rely on a combination of patent and other intellectual property laws as well asour employment agreements with our employees and other agreements with our collaborators and third parties to protect and otherwise seek to control access to, and distribution of, ourproprietary information. These measures may not prevent disclosure, infringement or misappropriation of our confidential information. Our confidentiality, nondisclosure and assignmentagreements or covenants may be breached, and we may not have adequate remedies for such a breach that would effectively prevent the further dissemination of our confidential information. Wehave limited control over the protection of trade secrets used by our collaborators and could lose future trade secret protection if any unauthorized disclosure of such information occurs. Inaddition, others may independently discover our trade secrets and proprietary information, and in such cases we could not assert any trade secret rights against such parties. Laws regardingtrade secret rights in certain markets where we operate may afford little or no protection of our trade secrets. Failure to obtain or maintain trade secret protection could adversely affect ourbusiness, sales and competitive position.We may not be able to fully enforce covenants not to compete with our key employees, and therefore we may be unable to prevent our competitors from benefiting from the expertise of suchemployees.Our employment agreements with key employees, which include executive officers, contain non-compete provisions. These provisions prohibit our key employees, if they cease workingfor us, from competing directly with us or working for our competitors for one year. Under applicable U.S. and Israeli laws, we may be unable to enforce these provisions. If we cannot enforce thenon-compete provisions with our key employees, we may be unable to prevent our competitors from benefiting from the expertise of such employees. Even if these provisions are enforceable,they may not adequately protect our interests. The defection of one or more of our employees to a competitor could materially adversely affect our business, results of operations and ability tocapitalize on our proprietary information.The establishment of our new R&D facility in the U.S. signifies our entry into international operations, which will expose us to additional market and operational risks, and failure tomanage these risks may adversely affect our business and operating results. In 2015, we established a research and development facility in the Bio-Research and Development Growth (BRDG) Park on the campus of the Donald Danforth Plant Science Center in St.Louis, Missouri, as part of our entry into the field of advanced solutions for insect control under our CP seed traits operations. Our physical presence in, and the accompanying expansion of ouroperations into, the United States have exposed us and will expose us more significantly to some of the operational risks that accompany doing business internationally, including: §fluctuations in foreign currency exchange rates; §potentially adverse tax consequences; §difficulties in staffing and managing foreign operations; §hiring and retention of employees and/or consultants under foreign employment laws with which we are not familiar; §laws and business practices that sometimes favor local competition; §compliance with complex foreign laws, treaties and regulations; §tariffs, trade barriers and other regulatory or contractual limitations on our ability to develop (and, when applicable in the future, sell) our solutions in certain foreign markets; and §being subject to the laws, regulations and the court systems of multiple jurisdictions.Our failure to manage the market and operational risks associated with international operations effectively could limit the future growth of our business and adversely affect our operating results.19Our operations are subject to various health and environmental risks associated with our use, handling and disposal of potentially toxic materials.As part of our seed trait operations, we assist in the development of GM crops by inserting new genes into the genomes of certain plants. Though we introduce these genes in order toimprove plant traits, we cannot always predict the effect that these genes may have on the plant. In some cases, the genes may render the plant poisonous or toxic, or they may cause the plant todevelop other dangerous characteristics that could harm the plant’s surrounding environment. Furthermore, while we comply with relevant environmental laws and regulations, there is a risk that,when testing genetically modified plants, the seeds of these plants may escape the greenhouse or field in which they are being tested and contaminate nearby fields. Poisonous or toxic plantsmay therefore be inadvertently introduced into the wild, or possibly enter the food production system, harming the people and animals who come in contact with them.As part of our ag–biologicals operations, we develop novel product based on microbial in order to improve plants traits. Although microbial exist naturally in the environment, we cannotalways predict the effect that microbial have on the plant and its environment. There may be cases where the microbial render the plant poisonous or toxic, or they may cause the plant to developother dangerous characteristics that could harm the plant’s surrounding environment.Risks Relating to Our Incorporation and Location in IsraelConditions in Israel could adversely affect our business.We are incorporated under Israeli law and our principal offices and research and development facilities are located in Israel. Accordingly, political, economic and military conditions inIsrael directly affect our business. Since the State of Israel was established in 1948, a number of armed conflicts have occurred between Israel and its Arab neighbors. Although Israel has enteredinto various agreements with Egypt, Jordan and the Palestinian Authority, there has been an increase in unrest and terrorist activity, which began in September 2000 and has continued withvarying levels of severity into 2013. In mid-2006, Israel was engaged in an armed conflict with Hezbollah in Lebanon, resulting in thousands of rockets being fired from Lebanon and disruptingmost day-to-day civilian activity in northern Israel. Starting in December 2008, for approximately three weeks, Israel engaged in an armed conflict with Hamas in the Gaza Strip, which involvedrocket attacks against civilian targets in various parts of Israel and negatively affected business conditions in Israel. A similar conflict arose due to Hamas rocket attacks against Israeli civiliantargets in November 2012, and recently during July-August 2014, during which Israel responded to rocket attacks by engaging in an armed conflict with Hamas in the Gaza Strip. Our principalplace of business is located in Rehovot, Israel, which is approximately 30 miles from the nearest point of the border with the Gaza Strip. There can be no assurance that attacks launched from theGaza Strip will not reach our facilities, or that hostilities will not otherwise cause a significant disruption to our operations, such as preventing our employees from reaching our facilities andlimiting our ability to monitor and otherwise conduct the crop and other experiments we conduct at the facilities.Several countries, principally in the Middle East, still restrict doing business with Israel and Israeli companies, and additional countries may impose restrictions on doing business withIsrael and Israeli companies if hostilities in Israel or political instability in the region continues or increases. These restrictions may limit materially our ability to sell our products to companies inthese countries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners, or significant downturn in the economic or financialcondition of Israel, could adversely affect our operations and research and development, cause our revenues to decrease and adversely affect the share price of publicly traded companies havingoperations in Israel, such as ours. In addition, there have been increased efforts by activists to cause companies and consumers to boycott Israeli goods for political reasons. Such actions,particularly if they become more widespread, may adversely impact our ability to conduct business.Furthermore, our business insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East. Although the Israeligovernment currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure that this government coverage will be maintained. Anylosses or damages incurred by us could have a material adverse effect on our business and financial condition.20Our operations may be disrupted by the obligations of personnel to perform military service.As of December 31, 2016, we had 185 employees, of which 175 were based in Israel and ten were based in our U.S. research and development site. In addition, we had 55 part-timeemployees, all of whom were based in Israel. Our employees in Israel, including executive officers, may be called upon to perform up to 36 days (and in some cases more) of annual military reserveduty until they reach the age of 45 (and in some cases, up to 49) and, in emergency circumstances, could be called to active duty. In response to increased tension and hostilities, since September2000 there have been occasional call-ups of military reservists, and it is possible that there will be additional call-ups in the future. Our operations could be disrupted by the absence of asignificant number of our male employees related to military service or the absence for extended periods of one or more of our key employees for military service. Such disruption could materiallyadversely affect our operations, business and results of operations.The tax benefits that are available to us require us to continue to meet various conditions and may be terminated or reduced in the future, which could increase our costs and taxes.Our Israeli facilities have the status of an “Approved Enterprise” and “Beneficiary Enterprise” under the Israeli Law for the Encouragement of Capital Investments, 1959, or theInvestment Law, which makes us eligible for certain tax benefits under that law. For example, we are exempt from corporate tax for a period of two years and will be subject to a reduced corporatetax rate of between 10% to 25% for the remainder of the benefit period, depending on the level of foreign investment in the company in each year.In order to remain eligible for the tax benefits of an Approved Enterprise and Beneficiary Enterprise, we must continue to meet certain conditions stipulated in the Investment Law and itsregulations, as amended, and in a tax ruling we received in October 2010, or the Tax Ruling. If we do not meet these requirements, we may not be eligible to receive tax benefits and we could berequired to refund any tax benefits that we may receive in the future, in whole or in part, with interest. Further, the tax benefits available under the Investment Law may be terminated or reduced inthe future. If these tax benefits are terminated, our Israeli taxable income would be subject to regular Israeli corporate tax rates. The standard Israeli corporate tax rate was 25% in 2016 and 26.5% in2015 and 2014 tax year. See “Item 10.E. Taxation—Israeli Tax Considerations and Government Programs—General Corporate Tax Structure in Israel.”Additionally, if we increase our activities outside of Israel (for example, through acquisitions) our expanded activities might not be eligible for inclusion in future Israeli tax benefitprograms. Finally, in the event of a distribution of a dividend from the income that will be tax exempt under the Investment Law, in addition to withholding tax at a rate of 20% (or a reduced rateunder an applicable double tax treaty), we will be subject to tax at the corporate tax rate applicable to our Approved Enterprise’s and Beneficiary Enterprise’s income on the amount distributed inaccordance with the reduced corporate tax applicable to such profits. See “Item 10.E. Taxation—Israeli Tax Considerations and Government Programs—Law for the Encouragement of CapitalInvestments, 5719-1959.”Exchange rate fluctuations between the U.S. dollar and the NIS may negatively affect our earnings and we have only partially hedged against such fluctuations.Most of our revenues are denominated in U.S. dollars. As a result, any appreciation of the NIS relative to the U.S. dollar (as occurred in 2012 and 2013) would adversely impact ourprofitability due to the significant portion of our expenses that are incurred in NIS. As of December 31, 2016 we held forward currency contracts to protect against our exposure to NIS/USDcurrency fluctuations. If we continue to enter into hedging contracts in the future, we may be unsuccessful in protecting against currency exchange rate fluctuations. Future currency exchangerate fluctuations could adversely affect our profitability. See “Item 11. Quantitative and Qualitative Disclosure About Market Risk—Foreign Currency Risk.”Interest rate fluctuations may devalue our investments and could have a material adverse impact on our financial condition.We have a considerable investment in marketable securities that consist of corporate bonds and government treasury notes denominated in U.S. dollars having an aggregate value ofapproximately $71.7 million as of December 31, 2016. These investments expose us to the risk of interest rate fluctuations. An increase in U.S. interest rates could cause the fair value of theseinvestments to decrease. As of December 31, 2016, we did not have any hedge arrangements in place to protect our exposure to interest rate fluctuations. See “Item 11. Quantitative andQualitative Disclosure About Market Risk—Foreign Currency Risk.”21We have received Israeli government grants for certain of our research and development activities. The terms of these grants may require us to satisfy specified conditions in order todevelop and transfer technologies supported by such grants outside of Israel. In addition, in some circumstances, we may be required to pay penalties in addition to repaying the grants. Our research and development operations have been partly financed through certain governmental grants, which impose certain restrictions on the transfer outside of Israel of theunderlying know-how and the manufacturing or manufacturing rights of the underlying products and technologies. As of December 31, 2016, we had received approximately $6.2 million of suchgrants (including accrued interest). We may not receive the required approvals should we wish to transfer this know-how, technology or manufacturing rights outside of Israel in the future or, ifwe receive such required approvals, they may be subject to certain conditions and payment obligations. See "Item 5.B Liquidity and Capital Resources—Government Grants." It may be difficult to enforce a U.S. judgment against us, our officers and directors and the Israeli experts named in this annual report in Israel or the United States, or to assert U.S.securities laws claims in Israel or serve process on our officers and directors and these experts.We are incorporated in Israel. None of our directors and executive officers is a resident of the United States, and the Israeli experts named in this annual report are located in Israel. Themajority of our assets are located outside the United States. Therefore, it may be difficult for an investor, or any other person or entity, to enforce a U.S. court judgment based upon the civilliability provisions of the U.S. federal securities laws against us or any of these persons in a U.S. or Israeli court, or to effect service of process upon these persons in the United States.Additionally, it may be difficult for an investor, or any other person or entity, to assert U.S. securities law claims in original actions instituted in Israel. Israeli courts may refuse to hear a claimbased on a violation of U.S. securities laws on the grounds that Israel is not the most appropriate forum in which to bring such a claim. Even if an Israeli court agrees to hear a claim, it maydetermine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above.Your rights and responsibilities as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities of shareholders of U.S.corporations.Since we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by Israeli law and by our amended and restated articles of association, or our“articles of association,” approved by our shareholders in May 2014 at our general shareholders meeting. These rights and responsibilities differ in some respects from the rights andresponsibilities of shareholders of U.S.-based corporations. In particular, a shareholder of an Israeli company has a duty to act in good faith and in a customary manner in exercising its rights andperforming its obligations towards the company and other shareholders and to refrain from abusing its power in the company, including, among other things, in voting at the general meeting ofshareholders on certain matters, such as an amendment to the company’s articles of association, an increase of the company’s authorized share capital, a merger of the company and approval ofrelated party transactions that require shareholder approval. A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholderor a shareholder who knows that it possesses the power to determine the outcome of a shareholders’ vote or to appoint or prevent the appointment of an office holder in the company has a dutyto act in fairness towards the company. However, Israeli law does not define the substance of this duty of fairness. See “Item 6.C Board Practices—Approval of Related Party Transactions UnderIsraeli Law—Shareholder Duties.” Since Israeli corporate law underwent extensive revisions approximately 17 years ago, the parameters and implications of the provisions that govern shareholderbehavior have not been clearly determined. These provisions may be interpreted to impose additional obligations and liabilities on our shareholders that are not typically imposed on shareholdersof U.S. corporations.Provisions of Israeli law may delay, prevent or make undesirable an acquisition of all or a significant portion of our shares or assets.Israeli corporate law regulates mergers and requires that a tender offer be effected when certain thresholds of percentage ownership of voting power in a company are exceeded (subjectto certain conditions). Further, Israeli tax considerations may make potential transactions undesirable to us or to some of our shareholders whose country of residence does not have a tax treatywith Israel granting tax relief to such shareholders from Israeli tax. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on thefulfillment of numerous conditions, including a holding period of two years from the date of the transaction during which certain sales and dispositions of shares of the participating companiesare restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomes payable even if no actual disposition of theshares has occurred. See “Item 10.B. Memorandum and Articles of Association—Acquisitions Under Israeli Law.”22Furthermore, under the Encouragement of Research, Development and Technological Innovation in the Industry Law, 5744-1984 (formerly known as the Law for the Encouragement ofResearch and Development in Industry 5744-1984), and related regulations, or collectively, the Innovation Law, to which we are subject due to our receipt of grants from the Israeli NationalAuthority for Technological Innovation, or the Innovation Authority (previously known as the Israeli Office of the Chief Scientist), or OCS, a recipient of OCS grants such as our company mustreport to the applicable authority of OCS any change in the holding of the means of control of our company which transforms any non-Israeli citizen or resident into a direct interested party in ourcompany. The OCS Guidelines interpretation issued by the OCS provides that prior OCS approval is required for such change in the holding of the means of control.These provisions of Israeli law could have the effect of delaying or preventing a change in control and may make it more difficult for a third party to acquire us or our shareholders toelect different individuals to our board of directors, even if doing so would be beneficial to our shareholders, and may limit the price that investors may be willing to pay in the future for ourordinary shares.Risks Related to Our Ordinary Shares and the Trading of Our Ordinary SharesThe price of our ordinary shares may fluctuate significantly.Our ordinary shares were first offered publicly in the United States after our public offering in the United States in November 2013, at a price of $14.75 per share, and our ordinary shareshave subsequently traded on the NYSE (until December 2016) and on the Nasdaq (since December 2016) as high as $19.99 per share and as low as $4.95 and as of April 25, 2017 were trading at$5.10 per share.The market price of our ordinary shares could be highly volatile and may fluctuate substantially as a result of many factors, including: §actual or anticipated fluctuations in our results of operations; §variance in our financial performance from the expectations of market analysts; §announcements by us or our competitors of significant business developments, changes in relationships with our collaborators, acquisitions or expansion plans; §our involvement in litigation; §our sale, or the sale by our significant shareholders, of ordinary shares or other securities in the future; §failure to publish research or the publishing of inaccurate or unfavorable research; §market conditions in our industry and changes in estimates of the future size and growth rate of our markets; §changes in key personnel; §the trading volume of our ordinary shares; and §general economic and market conditions.Although our ordinary shares are listed on the Nasdaq, an active trading market on the Nasdaq for our ordinary shares may not be sustained. If an active market for our ordinary sharesis not sustained, it may be difficult to sell ordinary shares in the U.S.In addition, the stock markets have recently experienced extreme price and volume fluctuations. Broad market and industry factors may materially harm the market price of our ordinaryshares, regardless of our operating performance. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been institutedagainst that company. If we were involved in any similar litigation, we could incur substantial costs and our management’s attention and resources could be diverted.23Our ordinary shares are traded on more than one market and this may result in price variations.Our ordinary shares have been traded on the TASE since 2007, and are currently listed on Nasdaq. Trading in our ordinary shares on these markets will take place in different currencies(U.S. dollars on Nasdaq and NIS on the TASE), and at different times (resulting from different time zones, trading days and public holidays in the United States and Israel). The trading prices ofour ordinary shares on these two markets may differ due to these and other factors. Any decrease in the price of our ordinary shares on the TASE could cause a decrease in the trading price ofour ordinary shares on Nasdaq.We could become subject to parallel reporting obligations in Israel and the United States, which could increase compliance costs and divert management attention.On July 28, 2013, our shareholders approved our plan to transition solely to U.S. reporting standards under the rules and regulations of the SEC. However, should this change, in thefuture, we may become subject to parallel reporting obligations in Israel and the United States. While similar in many respects, certain differences between Israeli and U.S. reporting schemes mayimpose on us disclosure obligations that are more stringent than those generally applied to foreign private issuers whose securities are listed only in the United States. In addition, a requirementto comply with the separate reporting obligations under U.S. and Israeli securities laws would require additional management attention and could burden us with additional costs.The requirements of being a public company in the United States and Israel may strain our resources and distract our management, which could make it difficult to manage our business,particularly after we are no longer an “emerging growth company.”Changing laws, regulations and standards, in the United States or Israel, relating to corporate governance and public disclosure and other matters, may be implemented in the future,which may increase our legal and financial compliance costs, make some activities more time consuming and divert management’s time and attention from revenue-generating activities tocompliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related topractice, regulatory authorities may initiate legal proceedings against us and our business may be harmed. Being a publicly traded company in the United States and Israel and being subject toU.S. and Israeli rules and regulations make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantiallyhigher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our auditcommittee, and qualified executive officers.As a public company whose ordinary shares are listed in the United States, we will continue to incur significant accounting, legal and other expenses, including costs associated with ourreporting requirements under the Exchange Act. We also incur additional costs associated with corporate governance requirements, including requirements under Section 404 and otherprovisions of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, rules implemented by the SEC and the Nasdaq, and provisions of Israeli corporate and securities laws applicable topublic companies. The Exchange Act requires that we file annual and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires, among other things,that we maintain effective disclosure controls and procedures and internal controls over financial reporting. These rules and regulations could continue to increase our legal and financialcompliance costs, such as the cost of hiring consultants or testing compliance processes, and make some activities more time-consuming and costly. These activities may divert management’sattention from other business concerns, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.Under Section 404 of the Sarbanes-Oxley Act and as an emerging growth company, we are currently not required to obtain an auditor attestation regarding our internal control overfinancial reporting. Under Section 404 of the Sarbanes-Oxley Act and as an emerging growth company, we are currently not required to obtain an auditor attestation regarding our internal control overfinancial reporting.24We are required to comply with the evaluation and certification requirements of Section 404 of the Sarbanes-Oxley Act with respect to internal control over financial reporting as of thisannual report. Once we no longer qualify as an “emerging growth company” under the JOBS Act and lose the ability to rely on the exemptions related thereto discussed above, our independentregistered public accounting firm will need to attest to the effectiveness of our internal control over financial reporting under Section 404. To maintain the effectiveness of our disclosure controlsand procedures and our internal control over financial reporting, we may need to continue enhancing existing, and implement new, financial reporting and management systems, procedures andcontrols to manage our business effectively and support our growth in the future. Irrespective of compliance with Section 404, any failure of our internal controls could have a material adverseeffect on our stated results of operations and harm our reputation. If any such failure were to occur, we may be required to take remedial actions and make required changes to our internal controlover financial reporting and we may experience higher than anticipated operating expenses, as well as higher independent auditor fees during and after the implementation of these changes. If weare unable to implement any of the required changes to our internal control over financial reporting effectively or efficiently or are required to do so earlier than anticipated, it could adverselyaffect our operations, financial reporting and/or results of operations and could result in an adverse opinion on internal controls from our independent auditors.As an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, we take advantage of certain temporary exemptions from variousreporting requirements, including, but not limited to, not being required to have our auditor attest as to the effectiveness of our internal control over financial reporting under Section 404(b) of theSarbanes Oxley Act.We will remain an emerging growth company until the earliest of: (a) the last day of our fiscal year during which we have total annual gross revenues of at least $1.0 billion; (b) December31, 2018, the last day of our fiscal year following the fifth anniversary of the closing of our U.S. initial public offering; (c) the date on which we have, during the previous three-year period, issuedmore than $1.0 billion in non-convertible debt; or (d) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act. Unless we lose our status as an “emerging growthcompany” under the JOBS Act, we will not be required to obtain an auditor attestation under Section 404(b) of the Sarbanes-Oxley Act until the year ended December 31, 2018. If some investorsfind our ordinary shares less attractive as a result of our reliance on exemptions under the JOBS Act, there may be a less active trading market for our ordinary shares and our share price may bemore volatile. When these exemptions cease to apply, we expect to incur additional expenses and devote increased management effort toward ensuring compliance with them.As a foreign private issuer we are not subject to the provisions of Regulation FD or U.S. proxy rules and are exempt from filing certain Exchange Act reports.As a foreign private issuer, we are exempt from compliance with the rules and regulations under the Exchange Act related to the furnishing and content of proxy statements, and ourofficers, directors, and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are notrequired under the Exchange Act to file annual and current reports and financial statements with the SEC as frequently or as promptly as U.S. domestic companies whose securities are registeredunder the Exchange Act, we are permitted to disclose limited compensation information for our executive officers on an individual basis and we are generally exempt from filing quarterly reportswith the SEC under the Exchange Act. Despite this, we have undertaken to our shareholders to report our financial results on a quarterly basis. Moreover, we are not required to comply withRegulation FD, which restricts the selective disclosure of material nonpublic information to, among others, broker-dealers and holders of a company’s securities under circumstances in which it isreasonably foreseeable that the holder will trade in the company’s securities on the basis of the information. These exemptions and leniencies will reduce the frequency and scope of informationand protections to which you may otherwise have been eligible in relation to a U.S. domestic issuer.As a foreign private issuer, we follow home country corporate governance practices instead of certain Nasdaq corporate governance requirements, which may result in less protection thanis accorded to investors under rules applicable to domestic U.S. issuers.As a foreign private issuer whose shares are listed on the Nasdaq Global Market, we are permitted to follow certain home country corporate governance practices instead of thoseotherwise required under the corporate governance standards for U.S. domestic issuers listed on the Nasdaq. We currently follow Israeli home country practices, rather than the requirementsunder the NASDAQ corporate governance rules, with regard to the (i) quorum requirement for shareholder meetings, (ii) executive sessions for independent directors and non-managementdirectors and (iii) the requirements to obtain shareholder approval for certain dilutive events (such as for the establishment or amendment of certain equity-based compensation plans, issuancesthat will result in a change of control of the company, certain transactions other than a public offering involving issuances of a 20% or more interest in the company and certain acquisitions of thestock or assets of another company). See “ITEM 16G. Corporate Governance.” Furthermore, we may in the future elect to follow Israeli home country practices with regard to other matters such asthe requirement to have a majority independent board of directors, have a compensation committee and have a nominating committee. Accordingly, our shareholders may not be afforded the sameprotection as provided under Nasdaq corporate governance rules. Following our home country governance practices as opposed to the requirements that would otherwise apply to a UnitedStates company listed on Nasdaq may provide less protection than is accorded to investors of domestic issuers. For further discussion, see “Item 16G. Corporate Governance.”25We may lose our status as a foreign private issuer, which would increase our compliance costs and could thereby negatively impact our results of operations.We would lose our foreign private issuer status if (a) a majority of our outstanding voting securities were either directly or indirectly owned of record by residents of the United Statesand (b)(i) a majority of our executive officers or directors were United States citizens or residents, (ii) more than 50 percent of our assets were located in the United States or (iii) our business wereadministered principally outside the United States. Our loss of foreign private issuer status would make U.S. regulatory provisions mandatory. The regulatory and compliance costs to us underU.S. securities laws as a U.S. domestic issuer may be significantly higher. If we are not a foreign private issuer, we will be required to file periodic reports and registration statements on U.S.domestic issuer forms with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. We would also be required to follow U.S. proxy disclosurerequirements, including the requirement to disclose, under U.S. law, more detailed information about the compensation of our senior executive officers on an individual basis. We may also berequired to modify certain of our policies to comply with accepted governance practices associated with U.S. domestic issuers. Such conversion and modifications will involve additional costs. Inaddition, we would lose our ability to rely upon exemptions from certain corporate governance requirements on U.S. stock exchanges that are available to foreign private issuers, as described inthe previous risk factor above.We believe we were a passive foreign investment company for U.S. federal income tax purposes (PFIC) in 2016, and there is significant risk we will be a PFIC in 2017 as well. U.S.shareholders who held our ordinary shares at any time during a taxable year in which we are a PFIC may suffer adverse tax consequences.Generally, if for any taxable year 75% or more of our gross income is passive income, or at least 50% of the average quarterly value of our assets (which may be determined in part by themarket value of our ordinary shares, which is subject to change) are held for the production of, or produce, passive income, we would be characterized as a passive foreign investment company,or PFIC, for United States federal income tax purposes. According to these rules, a publicly traded non-U.S. corporation may treat the aggregate fair market value of its assets as being equal to thesum of the aggregate value of its outstanding shares (“Market Capitalization”) and the total amount of its liabilities. We intend to take the position that the excess of our Market Capitalizationplus liabilities over the book value of all of our assets may generally be treated as attributable to non-passive assets. Due to the decline in our Market Capitalization in 2016, we believe that we metthe PFIC asset test described above for 2016 and, as a result, we were classified as a PFIC in 2016. Furthermore, because we currently hold, and expect to continue to hold, a substantial amount ofcash and cash equivalents and other passive assets used in our business, and because our Market Capitalization is currently below the level necessary to avoid PFIC status for 2017, there issubstantial risk we will be classified as a PFIC for the 2017 taxable year as well. However, because PFIC status is determined after the close of each taxable year, we will not be able to determinewhether we will be a PFIC for the 2017 taxable year or for any future taxable year until after the close of such year.U.S. shareholders who held our ordinary shares at any time in 2016 or during any other taxable year in which we are a PFIC may suffer adverse tax consequences, including having gainsrealized on the sale of our ordinary shares treated as ordinary income, rather than capital gain, the loss of the preferential rate applicable to dividends received on our ordinary shares byindividuals who are U.S. Holders (as defined in “Item 10.E. Taxation—United States Federal Income Taxation”), and having interest charges apply to distributions by us and the proceeds of sharesales. Certain elections may be available that would alleviate some of the adverse consequences of PFIC status and result in an alternative treatment (such as mark-to-market treatment) of ourordinary shares; however, we do not intend to provide the information necessary for U.S. holders to make qualified electing fund elections. See “Item 10.E. Taxation—United States FederalIncome Taxation—Passive Foreign Investment Company Considerations.”ITEM 4.INFORMATION ON THE COMPANYA. History and Development of the CompanyOur HistoryOur company was founded on October 10, 1999 as Agro Leads Ltd., a division of Compugen Ltd. In 2002, our company was spun-off as an independent corporation under the laws of theState of Israel, and changed its name to Evogene Ltd.26We are a leading biotechnology company focused on the improvement of crop productivity and performance, addressing the world’s increasing demand for food, feed and fuel. We havedeveloped a proprietary innovative technology platform, leveraging scientific understanding and computational technologies to harness agriculture ‘Big Data’ in order to develop improved seedtraits, innovative ag-chemical products and novel ag-biological products.Our research and development activities, which focus on the early stages of product development, are performed either under our independent product development programs or as partof strategic collaborations with world-leading agricultural companies, which aim to further develop our discoveries into commercial products.Our shares have been trading on the TASE since 2007, on the NYSE from November 2013 until December 2016, and on the Nasdaq since December 2016.We are registered with the Israeli Registrar of Companies in Jerusalem. Our registration number is 51-283872-3. Our purpose as set forth in our articles of association is to engage in anylawful business.Our principal executive offices are located at 13 Gad Feinstein Street, Park Rehovot P.O.B 2100, Rehovot 7612002, Israel, and our telephone number is +972-8-931-1900.Our authorized representative in the United States and agent for service of process in the United States, Puglisi & Associates, is located at 850 Library Avenue, Suite 204, Newark,Delaware 19711. Our website address is www.evogene.com. Information contained on, or that can be accessed through, our website does not constitute a part of this annual report and is notincorporated by reference herein.Principal Capital ExpendituresOur capital expenditures for fiscal years 2016, 2015 and 2014 amounted to $0.6 million, $1.8 million and $3.8 million, respectively. Our capital expenditures during those years consisted ofinvestments in property, plant and equipment. We anticipate our capital expenditures in fiscal year 2017 to include payments for maintenance and improvements of our facilities in order to supportour activities.B. Business OverviewOverviewWe are a leading biotechnology company focused on the improvement of crop productivity and performance, addressing the world’s increasing demand for food, feed and fuel. We havedeveloped a proprietary innovative technology platform, leveraging scientific understanding and computational technologies to harness agriculture ‘Big Data’ in order to develop improved seedtraits, innovative ag-chemical products and novel ag-biological products.Our product development efforts are organized under two business divisions, the Crop Enhancement (CE) division, for the development of products enhancing plant yield and toleranceto abiotic stresses (such as improved tolerance to drought, heat and salinity), and the Crop Protection (CP) division, for the development of products improving plant resistance to biotic stresses(such as resistance to diseases, pests and insects). Currently, we are primarily developing seed traits for improved yield and abiotic stress tolerance, seed traits for biotic stress resistance, novel herbicides (or “weed killers”) and bio-stimulants, which are microbial-based ag-biological products, applied externally to the plant for yield improvement. The products we develop focus on essential crops, including corn, soybean,wheat, rice, and cotton.Furthermore, we operate a seed business under our wholly-owned subsidiary, Evofuel Ltd., or Evofuel, currently focusing on the development of improved castor bean seeds to serve asa feedstock source for biofuel and other industrial uses.27Our research and development activities, which focus on the early stages of product development, are performed either as internal product development programs or as part of strategiccollaborations with world-leading agricultural companies, including BASF, Bayer, DuPont, Monsanto, and Syngenta, which aim to further develop our discoveries into commercial products. Inrecent years our relative investment in internal research and development activities has gradually increased, from 59% of total research and development investment in 2014, to 64% in 2015 and to74% in 2016. We currently research and develop 31 different innovative crop enhancement and crop protection seed traits, ag-chemical products and ag-biological products either independentlyor as part of more than 10 strategic collaborations.We are still in the development stages and no product has been commercialized based on our discoveries. We generate substantially all of our revenues from research and developmentpayments under our strategic collaborations in the field of CE seed traits. In the future, we expect to receive milestone payments and royalty revenues under collaborations for the development ofseed traits as the traits we discover advance through the product development pipelines of our collaborators and upon commercialization by our collaborators of products containing such traits,as well as research and development, milestone payments and royalty payments under collaborations focused on herbicides and bio-stimulants. To date, we have identified and filed patent applications for over 4,000 novel genes and genomic elements for the improvement of key traits, hundreds of which are under development inour collaborators’ pipelines.Our future growth will depend, in part, on our ability to maintain and advance upon our technological competitive advantages and adapt to continuous technological change in ourindustry. It will also depend, in part, on our ability to maintain and advance upon our existing collaboration agreements as well as enter into new collaboration agreements and expand our researchand development initiatives to new technologies and areas of activity.In 2017, we expect to continue focusing on developing our discoveries towards commercialization, both under our independent product programs and our collaborations, with a view togenerating significant milestone and royalty revenues. In addition, we expect to maintain our focus on enhancing our competitive advantage by further investing in our technology infrastructureand research and development capabilities and further developing our ag-chemicals and ag-biologicals businesses. We also intend to complement our future revenue streams by continuing toselectively self-fund a larger portion of our research and development costs, with the goal of capturing a larger share of our collaborators' future revenues. Following are major occurrences and developments in the Company during 2016 and until the date of this report, presenting advancement in all areas of activity: §With respect to our most significant collaborator in our seed traits activity, Monsanto, in February 2016, we disclosed positive results from the testing of a set of our discovered genes incorn and soybeans in our collaboration utilizing novel "Trait-First" Methodology; §In November 2016, we announced positive field trial results from the Company's ag-biologicals program, which is currently focused on the development of bio-stimulant products. Inthese tests, candidate microbial strains, identified and predicted by Evogene for their ability to improve corn resistance to drought conditions, yielded positive efficacy and stabilityresults in the first year of field testing; §In February 2017, we entered a collaboration agreement in the area of ag-chemicals with ICL for the development of crop enhancers for the improvement of nutrient use efficiency; §In regards to our independent ag-chemical pipeline for the discovery of novel herbicides, in February 2017, we disclosed positive validation results for ten chemical compounds that havebeen computationally predicted to impact six of additional targets discovered by the Company.We have a history of losses, including incurring operating losses of $21.1 million, $17.9 million and $15.3 million, for the years ended December 31, 2016, 2015 and 2014 respectively. For abreakdown of total revenues by segment and by geographic market, see “Item 5.A. Operating Results—Key Measures of Our Performance—Segment Data” and “Item 5.A. Operating Results—Key Measures of Our Performance—Revenues—Geographical Breakdown of Revenues,” respectively.Industry BackgroundThe field of biotechnology to enhance crop performance and productivity continues to evolve. Agricultural product innovation is increasingly driven by the ability to analyze data, inorder to make direct discoveries and gain insights into key underlying biological phenomena of such products. The seeds, ag-chemicals and ag-biologicals industries have witnessed a dramaticincrease in the availability of genomic data. This is primarily a result of the introduction of new technologies that facilitate the rapid generation of such data at a significantly lower cost. As aresult, the key opportunity, and challenge, for enhancing crop productivity has shifted from data generation to data integration and the analysis of large volumes of data.28We believe that our competitive advantage is based on continuously advancing our proprietary discovery and development infrastructure. This infrastructure is capable of integratingand analyzing vast amounts and multiple types of biological and chemical data, or big data, through the use of proprietary computational technologies comprised of advanced algorithms andpredictive methodologies. Our computational technologies are a key part of our broad technology infrastructure that further integrates extensive scientific expertise, public and proprietarygenomic, chemical and microbial data, as well as plant, insect and microbial validation and screening systems. Our proprietary discovery and development capabilities, which are scalable andadaptable to a large variety of crops and traits, together with our highly educated and experienced multidisciplinary team of scientists, are, we believe, unique in the industry. Crop Enhancement (CE) DivisionOverviewThe CE division develops products to increase crop performance and productivity with its main focus on enhancing yield, tolerance to abiotic stresses such as drought, heat andsalinity and fertilizer use efficiency in key commercial crops, or target crops, such as corn, soy, wheat, rice and cotton.The CE division is currently active in developing two types of products: (i) CE seed traits, which are seed traits having improved yield, abiotic stress tolerance and fertilizer use efficiency,mainly through biotechnology as well as using advanced breeding methods and (ii) ag-biologicals, currently focusing on microbial-based bio-stimulants, which are microbial-based products toserve as externally-applied treatments for improving yield and abiotic stress tolerance.In the CE division, we currently generate revenues from research and development payments for discovery and optimization activities under the CE seed traits activity. In the future wealso expect to receive milestone payments upon advancement of our seed traits through the product development pipelines of our collaborators and royalties from sales of products by ourcollaborators. (i) CE seed traitsOverviewInitiated in 2004, our CE seed traits activity focuses on important seed traits that have a direct impact on crop productivity. Under these programs we seek to identify and prioritize genesand other genetic elements capable of increasing crop yield per acre of land, improving yield, abiotic stress tolerance (i.e., yield stability over varying environmental conditions and tolerance toenvironmental stress factors, such as drought) and fertilizer utilization. Major seed companies have declared their goal to significantly increase crop yield to meet the growing needs of the worldpopulation. We believe that improved seeds will play an important role in supporting the ambitious goal of substantially increasing crop yields in the future. The size of the seed industry isestimated at $37B (Phillips McDougal 2015), and we estimate that the potential value of improving traits such as yield, drought or fertilizer utilization in the major crops of corn and soybean alonecould be billions of U.S. dollars. In this field, we use our expertise in plant understanding and genomics to improve plant performance through biotechnology and advanced breeding, utilizing our predictive biologycomputational platform. Our proprietary computational technologies, validation techniques and other capabilities enable us to identify promising candidate genes and other genetic elements(such as genetic markers or precise edits of the crop's genes) that have the potential to improve our traits of interest in target crops. The most promising candidates will be used to developimproved seeds, whether via biotechnology (or transgenic approaches), genome editing technologies or advanced breeding methods. The use of biotechnology, or the genetic modification of plants, involves the direct manipulation of a plant’s genome by inserting a gene into the plant’s DNA. This method of plantimprovement provides for a wider range of traits in a plant and may result in more substantial seed trait improvement compared to advanced breeding. In the last few years we witnessed thematuration of genome editing technologies, which enable deletion or modification of specific genomic regions in the crop's genome. This method provides for an expanded technological toolboxfor genomic manipulation, allowing for a broad variety of changes potentially resulting in trait improvement without inserting foreign DNA to the plant. Under advanced breeding methods, plantswith favorable characteristics are selectively crossed through genomic-guided breeding schemes, with the goal of eventually improving seed traits.29Since we initiated our CE seed trait activity, we have assembled a substantial scientific knowledge center on plant mechanisms and biological pathways associated with yield, abioticstress and fertilizer use efficiency traits. Currently, we maintain proprietary genomic data from over 200 different plant species, and have two model validation plants that can validate over 1,000genes annually under different greenhouse and tissue culture validation assays (i.e. tests designed to analyze plant performance under specific growth conditions, for instance, measuring aplant’s greenhouse seed yield under simulated drought conditions).The product development cycle for seed traits via biotechnology is comprised of five phases. See "—Product Development Cycle—Seed Trait Product Development Cycle." Currently,we specialize in the upstream portion of the development cycle, particularly in the discovery phase (i.e., when candidate genes are identified and validated in model plants), as well as in Phase Isupporting development activities via gene optimization and stacking activities to increase trait efficacy, stability and avoid unintended effects, aiming to increase probability to reach product. In the field of CE seed traits, we collaborate with world leading seed companies, including Biogemma, DuPont and Monsanto, which license the trait-improving genes or other geneticelements that we discover with the goal of introducing them into the seeds of commercial crops, covering a portfolio of 14 key product programs. The products are tailored to address specificmarket needs across various traits. Under these agreements, hundreds of genes or genetic elements that we have discovered are currently undergoing Phase I testing in our collaborators'pipelines. Generally, under these collaboration agreements, we expect to be entitled to milestone payments when our products reach significant milestones at our partners' development pipelines,and royalties, which we expect to be entitled to once our products are sold to farmers. In addition, under certain of our collaboration agreements we are entitled to research and developmentpayments for our activities under the collaborations. A substantial majority of our collaborations currently focus on improving traits through biotechnology. For more information on ourcollaborations in this field, see "—Key Collaboration—CE & CP Seed Traits—CE Seed Traits." All of our products under our CE seed traits activity are currently either in the Discovery, Phase I, orPhase II stages. Product programsThe following table sets forth our key product programs currently under development with our collaborators in the CE seed traits activity: Program Trait (GM and/or non-GM) Crop Collaborator 1 Yield Corn Monsanto, Biogemma (1), DuPont2 Yield Soybean Monsanto3 Yield Cotton Monsanto4 Yield Canola Monsanto5 Yield (2) A consumer goods company (2)6 Abiotic Stress Tolerance Corn Monsanto, Biogemma, DuPont7 Abiotic Stress Tolerance Soybean Monsanto8 Abiotic Stress Tolerance Cotton Monsanto9 Abiotic Stress Tolerance Canola Monsanto10 Nitrogen Use Efficiency Corn Monsanto11 Nitrogen Use Efficiency Cotton Monsanto12 Nitrogen Use Efficiency Canola Monsanto13 Promoters Wheat Bayer (3)14 Promoters Cotton IMA__________ (1)The shareholders of Biogemma SAS are Vilmorin & Cie (Limagrain Group), Euralis and RAGT, See "—Key Collaborations—CE & CP seed traits—CE seed traits—Biogemma". (2)Crop and collaborator name not disclosed. (3)According to the 2014 amendment to the Bayer Wheat Collaboration Agreement, the collaboration's current focus is on promoters discovery. For more information on the BayerWheat Collaboration, please see “—Key Collaborations—CE & CP seed traits—CE seed traits—Bayer”.30Our most significant collaboration in the CE seed traits is with Monsanto, addressing yield, drought tolerance and fertilizer utilization in corn, soybean, cotton and canola throughbiotechnology. The collaboration, initiated in 2008, originally focused on gene discovery using our ATHLETE™ computational technology. A 2011 expansion of the agreement added new researchactivities, including the use of our proprietary computational technology, Gene2Product™, for increased trait efficacy, mainly applied in Phase I development activities. The collaboration wasextended and expanded for a second time in October 2013, further enlarging the scope of our research activities, including application of our computational technologies in the field of CP seedtraits to improve corn resistance to Fusarium, a fungus responsible for Stalk Rot disease in corn. With respect to our CE seed traits activities under the extended agreement, the collaborationperiod (i.e., the period of computational discovery and in-planta validation efforts) is approximately nine years, scheduled to expire at the end of 2017, entitling us to approximately $62.4 million inup-front and research and development payments throughout the collaboration period. In February 2015 we disclosed that more than 1,000 candidate genes that we identified and validated entered into Monsanto's yield and abiotic stress product development pipeline andthat our new gene optimization program was being incorporated into the collaboration, and in February 2016 we disclosed positive results from the testing of a set of our discovered genes in cornand soybeans in our collaboration with Monsanto utilizing novel "Trait-First" methodology. Following these achievements, in mid-2016, the collaboration shifted its focus to gene advancementactivities, aimed at using computational approaches to optimize performance of genes showing positive impact in Monsanto target crop trials. In the future, our agreements in the field of CE seed traits could lead to substantial milestone and royalty payments if our partners commercialize products that incorporate genes or othergenetic elements that we license to them. (ii) Ag-biologicalsOverviewIn mid-2015, we initiated our ag-biologicals activity for developing ag-biological products. Ag-biologicals are externally-applied products from biological sources, such as microbial(micro-organisms) and naturally derived biochemistries, improving crop productivity. The market for ag-biological products is approximately $3 billion, and is believed to demonstrate a substantialannual growth rate of 10-15% year over year (PiperJaffray, Industry Note, August 27, 2013). Ag-biological products are generally divided into two key segments: (i) biostimulants – ag-biologicalsfor crop enhancement, directly impacting crop yield or abiotic stress tolerance, and (ii) biopesticides – ag-biologicals for crop protection, addressing biotic stresses such as insects, diseases andweeds. The ag-biologicals market is attracting interest from industry leading players owing to its potential impact by providing a new type of product to improve crop productivity, as well as therelatively inexpensive and rapid regulatory process. The product development period is estimated at six to eight years. Our ag-biologicals operations are mainly focused on biostimulants withinitial activity in the area of biopesticides, with current biopesticides efforts focusing on infrastructure establishment and product concept assessments.The “plant microbiome”, meaning the microbial population living close or within the plant, is a promising source for novel biostimulants, contributing to its performance and assisting theplant in addressing threats from its surrounding.Our activity is focused on discovery and development of next generation microbial based ag-biologicals, converging the plant and microbial worlds to decipher plant-microbiome complexinteraction and “cross talk” and, as a result, identify and enhance positive plant-microbiome interactions, resulting with trait improvement. This activity relies on two major scientific andtechnological developments of recent years, namely: (i) the evolution in understanding of microbiome science, obtained originally in humans and translated into the plant kingdom, and (ii) theestablishment of technologies to generate relevant genomic data in a cost effective manner (both in plants and microbial).Our technological platform includes a proprietary computational platform, validation techniques, formulation and fermentation technologies and other capabilities to enable us to identifyand optimize microbial strains, or microbial strain teams, having the potential to improve crop traits of interest, such as yield and drought tolerance, in target crops (for biostimulants products) orfight devastating diseases or insects (for biopesticides products).31To date, we have assembled a broad microbiome-derived strain collection, identified tens of microbial strains validated to improve traits and or yield of a target crop in greenhouse or fieldexperiments. The best performing microbial strains are currently undergoing pre-development activities such as optimization, formulation and fermentation development.The product development cycle for ag-biological products is comprised of five phases. See "—Product Development Cycle—Ag-biologicals Product Development Cycle." We areengaged in the development cycle from upstream discovery activity through Pre-Development and Development phases. We expect to license leads following the Development stage to potentialpartners that will complete the development process and commercialize the products. We have not yet entered into collaborations in this field. During 2016, we have extended our Pre-developmentand Development capabilities to include relevant fermentation and formulation technologies and capabilities in-house. Product programsCurrently, our ag-biologicals activity is mainly focused on biostimulant products aimed at improving yield and abiotic stress tolerance in corn, soy and wheat and are all at discovery orpre-development phase.The following table sets forth our current product programs in the CE ag-biologicals activity:Program Ag-biological product Crop Development Phase 1 Biostimulants - Yield & abiotic stress tolerance Corn Pre-Development2 Biostimulants - Yield & abiotic stress tolerance Soy Discovery3 Biostimulants - Yield & abiotic stress tolerance Wheat Pre-Development Crop Protection (CP) DivisionThe CP division develops products to address weed control, insect control and disease control for target crops. The CP division is currently active in developing two types of products:(i) CP seed traits, or biotic stress seed traits, meaning seed traits having improved resistance or tolerance to biotic stresses such as diseases and insects, and (ii) ag-chemicals, focusing ondiscovery of novel herbicides.In the CP division, we currently generate revenues mainly from research and development payments for discovery activities under the CP seed traits activity, and expect to receivemilestone payments under both the CP seed traits and ag-chemicals activities as our deliverables advance in our collaborators' pipelines. In the future we expect to receive research anddevelopment payments for new collaborations under our CP seed traits activities and under our ag-chemicals activities, as well as milestone payments as our discoveries advance in our partners'pipelines and royalty payments from sales of products by our collaborators.(i) CP seed traitsOverviewInitiated in 2007, our CP seed traits activity focuses on improving plant resistance or tolerance to insects and plant diseases. In this field, we use our expertise in genomics andcomputational biology to improve plant performance through biotechnology. Our proprietary computational technologies, validation techniques and other capabilities enable us to identifycandidate genes that have the potential to improve traits of interest in target crops. The most promising candidate genes are used to develop improved biotechnology seeds. In this field we haveentered into collaboration agreements with some of the world’s leading seed and ag-chemical companies, including DuPont, Monsanto and Syngenta, which license the trait-improving genes thatwe identify with the goal of introducing them into the seeds of commercial crops. The market potential for traits addressing plant insects and diseases is estimated at between $7.5 billion to $8.5billion, out of which the commercial value of insect resistance products available in the market today is approximately $4.5 billion (source: Context Network, Cropnosis, internal analysis).The product development cycle for CP seed traits is similar to that of the CE seed trait activity under our crop enhancement division and is comprised of five phases. See "—ProductDevelopment Cycle—Seed Trait Product Development Cycle." Currently, we specialize in the upstream stage of the development cycle, particularly in the Discovery phase (i.e. when candidategenes are identified and validated in model plants), as well as in Phase I in optimizing the utilization of discovered genes and stacking activities to increase trait efficacy and probability to reachproduct.32In the field of CP seed traits, our collaborations cover a portfolio of six products and additional four product programs are developed independently and not under collaborations. Theproducts are tailored to address specific market needs across various traits. Generally, under our collaboration agreements, we expect to be entitled to milestone payments when our productsreach significant milestones at our partners' development pipelines, and royalties, which we expect to be entitled to once our products are sold to farmers. All of our existing product programs andcollaborations in this field currently focus on improving seed traits through biotechnology. Product ProgramsThe following table sets forth our key product programs in the field of CP seed traits under development with our collaborators or as internal product programs: Program Trait (GM and/or non-GM) Crop Collaborator / Internal Product Program 1 Fusarium Corn Monsanto2 Lygus Hesperus Cotton Marrone Bio Innovations3 Asian Soybean Rust Soybean DuPont4 Soy Cyst Nematode Soybean Syngenta5 Beet Armyworm Corn Marrone Bio Innovations6 Corn Rootworm Corn Internal product program7 Hemiptera Soybean Internal product program8 Lepidoptera Corn Internal product program9 Lepidoptera Soybean Internal product program10 Black sigatoka Banana Rahan Meristem To perform research activities relating to biotic stress, we leverage the expertise and know-how that was generated in our CE seed traits activity. At the same time, we seek to developunique technological tools and capabilities aimed specifically at biotic stress traits. As the resistance of pests, insects and diseases to existing products that address biotic stress increases, theseed industry seeks more advanced technological solutions to address these resistance issues. We believe that our cutting-edge technologies, expertise and know-how position us to play animportant role in assisting the seed and ag-chemical industry in addressing these resistance issues. During the last three years, we expanded our offering and capabilities with the entry into the field of insect resistance traits. Enhancement of our capabilities in this field includes theincorporation of large amounts of microbial genomic data to our databases, including metagenomics microbial data that represents an untapped diversity of uncultured bacteria, in order to enablediscovery of microbial genes that may assist plants to cope with insects. Following the launch in 2015 of BiomeMiner, our dedicated computational technology infrastructure consisting of aproprietary microbial-based database and a dedicated analysis platform for identifying microbial insecticidal toxins, during 2016 we have completed several discovery rounds and have set up ourinsect validation capabilities at our U.S. site. To date, we have discovered hundreds of candidate toxin genes and tens of such genes have already been successfully validated for having toxicactivity, representing potential new toxin families.Overall, we have established six discovery programs for toxins predicted to provide resistance to three key insect orders, Coleoptera, Lepidoptera and Hemiptera, including ourcollaboration with Marrone Bio Innovations Inc., or MBI, addressing Lygus Hesperus and Beet Armyworm. For more information on our collaboration with MBI, please see "—Key Collaborations—CE & CP seed traits—CE seed traits—Marrone Bio-Innovations" In February 2015, we announced the establishment of our U.S. R&D site at the Bio-Research and Development Growth (BRDG) Park in the campus of the Donald Danforth Plant ScienceCenter in St. Louis, Missouri. During 2016 our activities at the site, which features state-of-the-art validation infrastructure and new capabilities for targeting main insect orders and other highimpact pests, have significantly scaled-up.In the coming years, we plan to expand our presence in the field of diseases, nematode resistance and insect resistance through new collaboration agreements. As we undertake newcollaborations under this activity, some potentially involving target crops, we expect to broaden our genomic datasets, improve our scientific know-how, update our computational technologies,and develop additional tailored validation assays. 33(ii) Ag-ChemistryOverviewInitiated in 2012, our ag-chemistry activity utilizes our core competency in plant genomics, computational chemistry, structural biology and ‘big data’ integration and analysis to developnovel ag-chemical products. We currently focus on the early stages of the product development pipeline, specifically on the discovery and validation of new herbicides with novel biologicalmechanisms (or modes of action, MOA). The global market for herbicides is estimated at $25B, out of a total estimated market of $56B for agrochemicals (Source: Phillips McDougall, 2014).During the last years, we made significant progress in developing the required infrastructure for herbicide discovery: (i) the launch in 2014 of our PoinTar discovery platform, aimed atidentifying targets responsible for essential biological processes in weeds, (ii) establishment of a target validation system in plants, (iii) establishment of a chemical database, currentlyencompassing over 150 million chemical molecules, (iv) the launch in 2015 of our PointHit platform, aimed at discovering new herbicidal chemistries inhibiting the targets in the weed to result inweed mortality, and (v) establishment of a robust high-throughput set of chemical screens in plants to test the predicted chemical compounds for herbicidal activity. During 2016 we madesignificant progress in achieving successful proof of concept for these technologies. During 2016, we broadened the scope of our ag-chemistry activity to two additional market segments. First, we began generating basic assets and capabilities in the area of chemicalinsecticides, which are chemical compounds that prevent key insects from damaging crop yields, and we plan to initiate a small scale R&D effort in this area during 2017. In addition, we initiatedactivity in the field of crop enhancers, which are chemical compounds that enhance key plant traits (such as yield, drought tolerance, nitrogen utilization etc.), and in January 2017 we entered afirst collaboration in this area with ICL, focusing on development of chemical crop enhancers that will enhance nutrient use efficiency in key crops. For more information on our collaboration withICL, please see "—Key Collaborations—Ag-Chemical Products—ICL"Product ProgramsInvasive plants, such as weeds, are a major cause of crop yield loss as they outgrow the target crops and deprive crops of large amounts of water and nutrients. Extensive use ofherbicides, however, results in accelerated weed resistance, creating substantial weed-management problems for growers.Our herbicide discovery program is designed to assist ag-chemical producers in moving beyond the traditional methods of herbicide discovery by implementing a target-based approachfor identifying and developing novel herbicides with new MOA's to address the growing resistance of weeds to existing herbicides. We utilize our expertise in plant genomics, as well as ouradvanced technologies and know-how, leveraging biology to drive chemical discovery with the target of ultimately developing new herbicides that display new MOA's.Our process for developing novel herbicides begins with the identification of protein “targets” in plants, meaning proteins that are essential to the plant function and performance,utilizing our proprietary computational platform, PoinTar and our chemical database. The targets we seek are those that, when inhibited (for instance by a chemical), lead to plant death. Thecandidate targets are then validated in model plants to confirm their essentiality. We then identify “hits”, which are chemical compounds that inhibit these targets, through our PointHitcomputational platform and screen candidate chemical compound hits to identify those capable of achieving the desired impact on plants. For more information on PoinTar and PointHitcomputational platforms, see “Item 5. Operating and Financial Review and Prospects—C. Research and Development, Patents and Licensing—Computational Technologies—ComputationalAnalysis Platforms.”In July 2015, we announced the discovery and validation of several novel plant targets for herbicides. Our discovered targets have then become the subject of a unique methodology forthe discovery of chemical molecules that can inhibit their functionality, resulting in weed death. These chemical molecules would then serve as the basis for the development of active ingredientsin commercial herbicide products.34In December 2015, we entered into our first collaboration agreement in the ag-chemical space with BASF, focusing on discovering novel herbicides. Under the terms of the agreement,Evogene utilizes its biology-driven computational discovery approach to identify candidate chemical hits for novel herbicides, while BASF utilizes its proprietary advanced plant platform toscreen the candidate chemical hits validate their biological effects on weeds. Successful candidate chemical hits from this collaboration will be further developed by BASF. For more informationon our collaboration with BASF, please see “—Key Collaborations—Ag-Chemical Products—BASF”.In parallel to the collaboration with BASF, we are working on a set of targets originating from our internal herbicide discovery programs, and we have recently announced that tenchemical compounds that we have identified and that are computationally linked to six of such targets have displayed herbicidal activity on plants. These hits are being advanced in ouroptimization pipeline.In January 2017, we entered a first collaboration in the field of crop enhancers with ICL, focusing on development of chemical crop enhancers that will enhance nutrient use efficiency inkey crops. This activity brings together the capabilities we have established in the area of ag-chemistry together with the established capabilities and assets we have generated in the area of seedtraits. For more information on our collaboration with ICL, please see “—Key Collaborations—Ag-Chemical Products—ICL”Currently, our product development pipeline includes the following four main product programs:Product Product Crop Collaborator 1 Non-selective herbicide All crops BASF / Internal2 Grasses selective herbicide Broadleaves BASF / Internal3 Broadleaf selective herbicide Grasses BASF / Internal4 Chemical crop enhancers Not disclosed ICLSeedsOur wholly owned subsidiary, Evofuel Ltd., or Evofuel, develops seeds for crops with high acreage potential, which have been overlooked by the multinational seed companies. Wecurrently focus on the development of advanced high-yielding castor bean varieties that are non-GM and that can serve as a feedstock source for biofuel and other industrial uses, such as bio-polymers and lubricants. We initiated these operations in 2007, which were spun-off from Evogene in January 2012 to operate as a separate company. Our initial target market is Latin America,particularly Brazil, Mexico and Argentina, where large scale agriculture is well established. Brazil and Argentina also have established markets for biofuels. We have entered into collaborationagreements with leading domestic companies in these markets, and expect to benefit from their established agriculture production models. In March 2016, we entered an agreement with CastorFields, S.A.P.I. de C.V., or Castor Fields, a Mexican corporation focused on growing castor in Mexico, as well as producing and commercializing castor oil, under which we have agreed to sellcastor seeds to Castor Fields. Our revenues with respect to this initial commercial sale are not significant. Castor bean is grown today for its high-quality oil, which is used for various products in the bio-polymers and lubricants industries. Though treated as a "low-tech" crop in its keyproduction areas around the world (for example, the castor bean is grown using traditional techniques such as hand picking), the castor bean plant may hold great promise as a source for thealternative fuel industry: oil comprises nearly 50% of the castor bean seed, and the plant itself contains innate characteristics of heat and drought tolerance. We believe that by leveraging ouradvanced breeding capabilities and methods we can turn castor into a modern crop, having attractive economics as feedstock source for biofuel and other industrial uses, such as bio-polymersand lubricants. Our offering includes a "full package" to the grower for castor: (i) high yielding varieties with plant structure suitable for mechanized harvest; and (ii) best practices andrecommendations to growers on how to grow castor efficiently in large scale. In addition, we collaborate with Case New Holland (CNH), a global leader in designing, producing and sellingagricultural and construction equipment, and with the Brazilian Agricultural Research Corporation, EMBRAPA, in customizing solutions for combine harvest. We anticipate that in the first yearsof commercialization our improved castor bean varieties will address the existing traditional castor oil markets, where the oil is used in a range of industrial products such as bio-polymers,lubricants, paints and cosmetics, and it could be used for the biofuel market beyond that. For the last few years we have been testing our castor varieties in Latin America, mainly in Brazil, Argentina, and Mexico. Since we are attempting to turn castor into a modernized cropand introducing new protocols for growth, our path to commercialization requires collaborating with domestic companies in Latin America that have local agricultural production operations.Under these collaborations, we provide seeds and growth protocols to integrate castor into their growth cycle. Pre-commercial activities also included validation by Azevedo, a leading castorseed crusher in Brazil, that the grain harvested meets customer requirements for the down-stream industrial process. 35In multiyear and multisets field trials conducted in recent years, our castor varieties have demonstrated the ability to produce castor as a row crop. In 2017 we are continuing the fieldtrialing activity with our different collaborators in the region. Product development cycle(i) CE seed traits & CP seed traitsDeveloping and integrating seed traits into commercial seeds using biotechnology, genome editing or advanced breeding takes, on average, between eight and sixteen years. The lengthof the process may vary depending on both the complexity of the trait and the type of crop involved. The length of the process of developing seed traits affects the uncertainty of productdevelopment; for example, during the development process, the gene may fail to address the performance criteria required to advance to later development stages, changes in the competitivelandscape may occur that could affect development and alternative methods of seed improvement may advance.The development process for seed traits is divided into several discrete steps, or phases, which generally include discovery, validation and development, and end with regulatoryapproval and commercial launch of a seed product containing the trait. The process for developing seed traits is similar in some aspects for biotechnology and advanced breeding, however, thetwo differ significantly in later phases of development. For example, receiving regulatory approval for biotechnology seeds is a far more comprehensive and lengthy process than doing the samefor advanced breeding seeds. For seed traits developed via genome editing, the technology is in its rather early stages of adoption, with remaining uncertainties regarding certain regulatory andother aspects of product development. The product development process is relatively similar for CE and CP seed traits, thus the description below applies for seed traits developed under both ourCrop Enhancement and Crop Protection divisions. The development process of biotechnology seed traits and their integration into commercial seeds is generally divided into five key phases, as described below. Based on industrybenchmarks, analyst assessments and the company's internal estimations, the process typically ranges between ten and sixteen years. This process may vary among different companies anddepending on the specific crop and trait of interest. For example, with respect to development phase I ("Proof of Concept", as further detailed below), in our experience, the process of testinggenes and other genetic elements by our partners may vary in terms of experimental set up, scope of activity, success criteria, and other aspects, which ultimately have an effect on the duration ofsuch phase. §Discovery: The identification of candidate genes potentially capable of enhancing specified plant traits. These genes are usually introduced into model plants to determine whether thegene (or gene combination) will enhance the specified trait. We usually employ our own advanced greenhouse facilities in Israel to perform model plant validation utilizing Arabidopsisfor dicots, such as soybean, canola, cotton and sunflower, and Brachypodium for monocots, such as corn and wheat. In our experience, the Discovery phase typically lasts approximately18-24 months. §Phase I, or "Proof of Concept": Promising candidate genes are advanced to Phase I, or "proof of concept." In this phase, the genes or gene combinations are inserted into target plantsand their efficacy in improving plant performance, including specific plant attributes or target traits such as yield, is tested through greenhouse trials, field trials, or both. During thisphase, the genes are also optimized to improve their efficacy, with improved gene constructs then tested again in target crops. Phase I is typically conducted by our collaborators in theirown facilities, although we conduct certain proof of concept tests in some of our projects, and in our experience, typically lasts between four to six years. §Phase II, or "Early Development": In this phase, the field tests are expanded, and our collaborators evaluate various modes of use of the genes as well as other characteristics in order tooptimize performance on a large scale across various geographical locations and varieties, to reach commercially viable success rates. We expect Phase II to last between two to fouryears. §Phase III, or “Advanced Development and Regulation”: In Phase III, extensive field tests are used to demonstrate the effectiveness of selected genes in enhancing particular traits, andthe process for obtaining regulatory approvals from government authorities is initiated, including conducting tests for potential environmental impact assessments of possible toxicityand allergenicity. Based on current available estimates, we expect Phase III to last between one to two years. 36§Phase IV, or “Pre-Launch”: Involves finalizing the regulatory approval process and preparing for the launch and commercialization. The range of activities here includes preparing theseeds for commercial sales, formulation of a marketing strategy and preparation of marketing materials. Based on current available estimates, we expect Phase IV to last between one totwo years.As indicated, the estimated timeframes of phase duration and probability of success are mainly based on our experience and estimates according to available information. Thedevelopment phases may overlap during the product development cycle, and the total development time for a particular product may be longer or shorter than the duration presented abovedepending on a range of factors, including the type of crop and trait involved, the specifics of the development process undertaken by our partner, the amount of resources available, or devotedto, particular research or collaboration projects, and changes to the product development process implemented by our partner.(ii) Ag-chemical productsOur activities for the development of ag-chemical products are still in early stages. We are advancing in the process of developing the technologies and platforms that will support ourdevelopment activities. We plan to pursue a streamlined product development cycle that will improve upon the traditional development models used in the ag-chemical industry.We expect, based on our expertise, that our activities will focus on the early stages of the development cycle. Specifically, we use our PoinTar and PointHit proprietary computationalplatforms to identify plant targets and chemical hits that inhibit these targets.We expect that our collaborators will perform the remaining steps in the product development cycle. Screening resulting with herbicidal hits delivered to partners will be followed by a“hit-to-lead” optimization process, in which the most promising chemical molecules are further assessed and optimized. If this process successfully indicates that certain chemical molecules havea desired effective impact on plants, these molecules may be developed and commercialized into herbicides. In the final phases, any new chemical product will be registered with the properregulatory authorities and then launched for commercialization. According to publications of key industry players, such development process is likely to last 10-12 years.(iii) Ag-biological productsWe estimate that developing ag-biologicals products based on microbial sources, aiming to achieve a broad range of activity, takes, on average, between six and eight years. The lengthof the process may vary depending on various factors, including the target market (with each region currently applying different regulatory or registration procedures), the type of application(with different regulatory requirements for biostimulants and biopesticides), the type of natural source serving as active ingredient (microbial and plant extracts, for instance, undergo differentupscaling and formulation procedures) as well as the number of active ingredients within the final products, which impacts the development activities required to reach a commercially viableproduct. As our current focus is microbial-based biostimulants, primarily for the U.S. market, the development cycle presented herein below aims to depict the relevant process. The development process for microbial-based biostimulants is divided into five discrete steps, or phases, which generally include discovery, pre-development, development, pre-commercialization, ending with registration approval and commercial launch. As this is a relatively young industry, the process is not yet well established and standardized and the below outlinewas structured based on our experience and internal activities. §Discovery: The first step in the microbial ag-biologicals development process is Discovery, or the identification of candidate microbial strain, or microbial strain teams, having thepotential to improve crop traits of interest. A collection of selected microbial strains, or strain teams, is typically tested on the crop(s) of choice in greenhouse screens (for biostimulants),followed by limited field experiments. Based on industry benchmarks and internal estimations, the Discovery phase typically lasts approximately 12-18 months. §Pre-development: Upon successful validation of the candidate microbial strains, or strain teams, promising candidates are advanced to Pre-development. In this phase, initial fermentationand formulation processes are developed and the microbial strains are further tested in greenhouse and field trials, including in the target territory, to examine their efficacy in improvingplant performance. The goal of this phase is to determine whether a commercially viable procedure to grow and formulate the microbial stains can be developed, and which candidateshave the greatest potential to improve plant performance. Based on industry benchmarks and internal estimations, we expect this stage to last between 18-24 months. 37§Development: In this phase, the fermentation and formulation procedures are further optimized to allow for commercial scale production, considering other parameters such as relevantstability and shelf life. Field tests commenced in pre-development are expanded and repeated aiming to test efficacy and stability of the candidate product. Based on industry benchmarksand internal estimations, we expect this stage to last between approximately 18-24 months. §Pre-commercialization: In this phase, extensive field tests are undertaken to demonstrate the effectiveness of a candidate product in enhancing particular traits. Additional activitiestowards launch are performed, including packaging development, registration and go-to-market strategy. Based on industry benchmarks and internal estimations, we expect this stage tolast approximately 24 months. We anticipate that this phase would be performed by a collaborator or commercialization partner that will take the lead on product commercialization.Key CollaborationsCE & CP seed traitsOur seed trait projects are conducted through collaborations with leading seed and ag-chemical companies, with whom we share the development process of improving plantperformance. In most cases, we generate revenue from our collaboration agreements at two different points: first, we receive milestone payments when certain specified results are achieved, suchas when a candidate gene progresses to a later phase in the product development cycle, or when a product containing our traits is submitted for regulatory approval; Second, we expect to receiveroyalty payments once a commercial product containing our traits is launched into the market. Royalty payments will generally be made for the longer of a specified number of years after productlaunch, or for the duration of our applicable patents in the United States. Under several collaboration agreements, we also receive research and development services payments to cover the costsof our research, including our discovery and validation efforts.CE seed traitsMonsanto2008 Collaboration Agreement, Amended and Restated in 2011 and 2013Background and DutiesIn August 2008, we entered into a Collaboration and License Agreement with Monsanto. This agreement was amended and restated on two occasions, first in November 2011 and againin October 2013, in both cases extending and expanding the original agreement executed in 2008. We refer to this agreement, as amended, as the Monsanto Collaboration Agreement. With respectto our CE seed traits activities under the Monsanto Collaboration Agreement, the collaboration period (i.e., the period of computational discovery and in-planta validation efforts) isapproximately nine years, scheduled to expire at the end of 2017, and for CP seed traits activities, the collaboration period is scheduled to expire in August 2019. Pursuant to the terms of theMonsanto Collaboration Agreement, Monsanto funded a research program in which we applied two different proprietary computational technologies: (i) ATHLETE used to identify genes with thepotential to improve yield, nitrogen use efficiency and abiotic stress tolerance in corn, soybean, cotton and canola, and (ii) Gene2Product used to optimize gene performance. Overall, the discovery phase of the collaboration is now completed, with more than 1,000 genes we identified entering Phase I in Monsanto's product development pipeline for yield andabiotic stress traits, in target crops, a subset of which is now being tested. As part of these efforts, in February 2016, we announced positive results from the testing of a set of our discoveredgenes conducted by Monsanto, tested pursuant to a recently implemented "trait-first" methodology, according to which genes are first identified and tested for impacting key trait attributes, andthen combined to potentially lead to yield improvement. Following these achievements, the collaboration shifted its focus to gene advancement activities, aimed at using computationalapproaches to optimize performance of genes showing positive impact in Monsanto target crop trials.38Furthermore, under the October 2013 amendment and restatement of the Monsanto Collaboration Agreement, we have agreed to apply our computational technologies in the field of CPseed traits to identify and offer optimization recommendations for genes providing resistance to Fusarium, a type of fungi that is a main pathogen responsible for Stalk Rot disease in corn (awidespread, yield-reducing condition). All of the genes that we discover are to be tested and validated by us in our model plants.License GrantsUnder the terms of the Monsanto Collaboration Agreement, we have granted Monsanto an exclusive, royalty-bearing, worldwide license under our patents and know-how tocommercially exploit and conduct research on (i) the genes we discover and patent under the collaboration, and (ii) the recommendations stemming from our gene-optimization activity under thecollaboration, each solely for transgenic applications in the specified crops. As part of its consideration for these license grants, Monsanto agreed to provide us with research and developmentservices payments, development milestone payments upon the occurrence of certain milestone events, and royalties based on the value added to each product as a result of either incorporatingour licensed genes, or of applying our licensed recommendations under the gene-optimization activity. Royalty payments will generally be made for a specified number of years after productlaunch, or for the duration of our applicable patents in the United States.In addition, we have agreed, for a certain duration, to abide by certain exclusivity provisions concerning our activities and grant of licenses in the specified traits and crops.Diligence ObligationsWe and Monsanto both have minimum diligence obligations under the Monsanto Collaboration Agreement: our diligence obligations surround (i) the discovery and research ofcandidate genes, and (ii) the discovery and research of recommendations supporting gene-optimization and advancement, while Monsanto is obligated to test a specified number of these genesand recommendations for the purpose of ultimately developing and commercializing products containing the genes. A failure by us to meet our diligence obligations may have the effect of eliminating or reducing certain Monsanto diligence obligations, and diligence failure by Monsanto may result inthe termination of certain of its licenses. While Monsanto has certain diligence obligations under the Monsanto Collaboration Agreement, there is no express requirement that it actuallycommercialize any products using the genes that we license to it.The effects of failures by either party to perform other obligations under the Monsanto Collaboration Agreement are limited to impacts on particular rights and obligations under theagreement, and do not give rise to a general right to terminate the agreement entirely. Change in ControlIn the event that we experience a change of control, the majority of provisions under the Monsanto Collaboration Agreement would remain in full force and effect. However, if we comeunder the control of one of Monsanto’s competitors: (i) the research portion of the Monsanto Collaboration Agreement may be terminated either fully or in part by Monsanto, and if it is notterminated, we become subject to increased diligence obligations; and (ii) the timing of certain milestone payments and the duration of certain royalty payments due to us under the agreementmay also be affected.Consideration and CostsAs of December 31, 2016, we had received approximately $61.6 million in research payments under the CE seed traits part of the Monsanto Collaboration Agreement. This includes an up-front payment of $5 million paid upon entering into the agreement as well as annual data generation and periodic research and development service payments. Between December 31, 2016 and thecompletion of our research and development activities under the collaboration, which is scheduled to occur in 2019, we have received and expect to receive an additional $0.8 million in researchand development services payments from Monsanto. In addition, under the Monsanto Collaboration Agreement, Monsanto is obligated to provide us with milestone payments, which we areentitled to when our products reach significant milestones at Monsanto's development pipeline, as well as royalty payments on any sales or other transfers of products it develops containing ourlicensed genes. These royalty payments are generally calculated as a percentage of the premium charged on the sale of the seeds containing our licensed genes compared to the sale of similarseeds without the genes. 39In August 2008, Monsanto purchased 1,636,364 of our ordinary shares at a price per share of $11.00, for an aggregate investment of $18.0 million. In addition, as a condition to executingthe October 2013 amendment and restatement of the Monsanto Collaboration Agreement, we and Monsanto entered into a Put Option Agreement pursuant to which we can require Monsanto topurchase additional amounts of our ordinary shares up to an aggregate amount of $12.0 million. In November 2013, Monsanto purchased 813,560 of our ordinary shares in our U.S. initial publicoffering at the public offering price of $14.75, for an aggregate investment of $12.0 million. As a result of this investment, the Put Option Agreement was terminated upon the closing of our U.S.initial public offering. For more information on Monsanto's holdings of our share capital see “Item 7.A. Major Shareholders.”BayerBackground and DutiesIn December 2010 we entered into a collaboration agreement with Bayer CropScience LP, an affiliate of Bayer CropScience AG, or Bayer, which we refer to as the Bayer Wheat Agreement.In July 2014, we have announced an amendment to the Bayer Wheat Agreement. This amendment's main purpose was to shift the collaboration work plan from focusing on theimprovement of yield, nitrogen use efficiency, and abiotic stress tolerance of wheat through computational gene and genetic markers discovery, to discovery of genomic promoters predicted toenable desired traits in wheat when used with appropriate genes (promoters are segments of DNA that determine how a gene will be expressed in the plant). License GrantsUnder the Bayer Wheat Agreement, as amended, we granted Bayer an exclusive, worldwide, royalty-bearing license under our patents and know-how to use, solely in wheat, geneticelements we identified during the collaboration in order to grow, commercialize and sell wheat products containing those elements. Diligence ObligationsPursuant to the Bayer Wheat Agreement, as amended, we are subject to diligence obligations with respect to the discovery of candidate promoters, including computationalidentification and model plant validation.Change in ControlIf we experience a change of control, the Bayer Wheat Agreement would remain in effect. However, if we come under the control of a Bayer competitor, Bayer may elect to terminate thecollaboration.Consideration and CostsUnder the Bayer Wheat Agreement, Bayer paid us periodic research and development payments to cover our research and development efforts. Recognition of these periodic researchand development payments was substantially completed by year-end 2016. In addition, in connection with entering into the original Bayer Wheat Agreement, in January 2011 Bayer purchased863,310 of our ordinary shares at a price per share of $13.90, for an aggregate investment of approximately $12.0 million. Under the amended agreement, which focuses on promoters’ discovery,Bayer has agreed to make certain milestone payments subject to the achievement of agreed-upon results. BiogemmaBackground and DutiesIn 2006, we entered into a joint research and collaboration agreement with Biogemma SAS, a subsidiary of Limagrain, focusing on improving yield and abiotic stress tolerance in corn. In2010, we signed a license agreement, replacing the commercialization provisions of the 2006 agreement, and enabling Biogemma and its shareholders (Limagrain, RAGT, Euralis, Sofiproteol andUnigrain) to pursue commercialization of corn products containing our licensed genes. This later agreement remains in effect. The license agreement with Biogemma is our only current agreementpursuant to which a gene we licensed to a collaborator has advanced to Phase II of the product development cycle.40In the early stages of the 2006 agreement, we provided Biogemma with candidate genes that we identified using our ATHLETE™ computational technology, as well as data regardingthose genes. We and Biogemma then jointly selected the most promising candidate genes for further validation and testing. At present, the teams focus on optimizing gene performance.License GrantsUnder the 2010 license agreement, we granted Biogemma an exclusive, worldwide, royalty-bearing license to (i) transgenically introduce specified genes into Biogemma corn products forresearch and development purposes to test the impact of the licensed genes in its own research and development program, and (ii) commercialize and sell corn products containing our licensedgenes.Diligence ObligationsUnder the 2010 license agreement, Biogemma is required to use its best efforts to develop, launch and market corn products containing our licensed genes and must achieve certainmilestone events within specified timeframes. If it fails to meet those obligations, it may forfeit its license for the relevant gene.TerminationIn addition to each party's right to terminate the 2010 license agreement upon a material breach by the other party or upon the commencement of bankruptcy proceedings against theother party, Biogemma has the right to terminate the 2010 license agreement at any point, if Biogemma determines that the licensed genes will not result in a commercially viable product. ShouldBiogemma exercise this right, Biogemma would forfeit its licenses. Consideration and CostsThe license agreement provides for several one-time research and development services payments to cover our prior research and development efforts, which have already been paid byBiogemma, milestone payments, and royalty payments.A Multinational Consumer Goods CompanyBackground and DutiesIn October 2014, we entered into a Collaboration Agreement with a multinational consumer goods company, focusing on improving yield in a certain field crop through non-GM methods.This is our first collaboration with a consumer goods company and it differs in certain commercial aspects from the typical model of our collaborations with seed companies. The agreementsignificantly limits the parties' freedom to disclose information on the nature of and the parties to the agreement.In the framework of the collaboration, we utilize ATHLETE™, our computational gene discovery technology, to identify genes with the potential to improve the desired trait in the targetcrop when the expression of such genes in the plant is modified. Unlike other collaborations where typically our partners test the performance of our genes in the target crops, under thiscollaboration we generate new varieties of the target crop using a molecular biology method known as TILLING, and further test the performance of these new varieties before we deliver them toour partner for further development as part of their breeding pipeline. It is expected that our activities under the collaboration will be performed over a period of approximately four years.License GrantsUnder the agreement, we grant the partner an exclusive worldwide license to our patents and know-how with respect to the genes we identify under the collaboration and to our rights inthe varieties of the target crop we deliver under the collaboration, to develop and commercialize varieties of the target crop through non-GM methods.41Diligence ObligationsThe agreement sets forth a scheme for the development by our partner of the varieties we generate. If our partner fails to achieve the milestones required under such scheme, we mayrequire it to forfeit its licenses to the relevant genes and varieties.TerminationIn addition to each party’s right to terminate the agreement upon a material breach by the other party, or upon the commencement of bankruptcy proceedings against the other party,either party may terminate the agreement at any point, at its discretion. Upon termination, our partner would forfeit its licenses.Consideration and CostsThe agreement provides for several one-time research and development payments to cover our research and development efforts, payable in increments subject to our deliveries underthe collaboration as well as for milestone payments by partner upon achievement of certain development milestones. The agreement does not provide for payment of royalties to us followingcommercialization of a product containing our trait.CP seed traitsMonsantoAs part of the October 2013 amendment and restatement of the Monsanto Collaboration Agreement, we have agreed to apply our computational technologies in the field of biotic stressto identify and offer optimization recommendations for genes providing resistance to Fusarium, a type of fungus that is a main pathogen responsible for Stalk Rot disease in corn (a widespread,yield-reducing disease). All of the genes that we discover are to be tested and validated by us in our model plant systems. Under the Monsanto Collaboration Agreement, the collaboration periodfor the biotic stress activities (i.e., the period of computational discovery and in-planta validation efforts) is six years, scheduled to expire in August 2019.For more information on the Monsanto Collaboration Agreement, please see “Item 4. Information on the Company—Business Overview—Key Collaborations—CE & CP seed traits—CE seedtraits—Monsanto”.DuPontBackground and DutiesIn 2011, we entered a multi-year research and development collaboration with DuPont to improve resistance to Asian Soybean Rust, or ASR, a devastating fungal disease in soybean. Weamended and expanded the agreement with DuPont in October 2013. Pursuant to this collaboration, we applied our proprietary ATHLETE™ computational discovery technology to identifyrelevant genes having the potential to improve in-plant resistance to ASR. Under the October 2013 amendment, we also added the application of our Gene2Product™ computational technology,enabling us to improve the efficacy of desired traits. The collaboration period under this agreement, including the stages of data generation, gene discovery, and preliminary testing by DuPont, isexpected to continue throughout 2018. License GrantsUnder the 2011 agreement, we granted DuPont a worldwide, royalty-bearing, exclusive license to develop and commercialize soybean products containing our licensed genes. We alsogranted DuPont an option, limited in time, to obtain an exclusive license to use the licensed genes for certain products other than soybean.Diligence ObligationsThe research program under this agreement is to be carried out in accordance with agreed timelines set forth in a project plan. In addition, we had diligence obligations that required us toidentify a minimum number of genes intended to improve the target trait (i.e., ASR in-plant resistance), and to provide DuPont with a minimum number of reports describing such identified genes.DuPont’s diligence obligations, on the other hand, require it to test a specified number of genes before advancing any qualified genes through its product development pipeline. If DuPont fails tomeet its obligations, some or all of the licenses it received under the agreement may terminate. In addition, under the 2011 agreement, DuPont is also obliged to use commercially reasonable effortsto advance, develop and commercialize products containing our licensed genes. However, at all times, DuPont retains the discretion to stop advancing or developing any products that itdetermines are not commercially viable, but only at the possible cost of losing some or all of the licenses it was granted.42Termination and Change in ControlEither party has the right to terminate the research project, with or without cause. The precise effects of such a termination depend on the point in time at which the right is exercised, butgenerally, the agreement allows the non-terminating party to continue with the project alone and at its own cost.The 2011 agreement with DuPont does not automatically terminate upon our undergoing a change in control. However, if we experience a change in control to one of DuPont’s majorcompetitors, DuPont may elect to terminate the agreement entirely, or terminate certain unexercised co-investment options (described below). If the agreement is terminated as a result of ourchange in control, DuPont’s licenses relating to genes that confer ASR-tolerance would terminate. Nevertheless, even following a change of control to a competitor, DuPont would retain a non-exclusive, royalty bearing, worldwide license to the genes discovered under the collaboration for traits other than ASR in certain specific crops.Consideration and CostsAs with our other research and development collaborations, our compensation under the 2011 agreement with DuPont is in the form of milestone payments and royalty payments basedon the sales of resulting products. According to the agreement, each party funds its expenses in performing its activities using its own resources and a grant from the Israel-U.S. BinationalIndustrial Research and Development Foundation, or BIRD. This arrangement likely provides us with higher milestone and royalty payments than in other collaborations where our collaboratorsfund both our research and their own development costs. In addition, we hold a contractual option to co-invest in the development costs for greater royalty percentages downstream if a productis successfully commercialized.SyngentaBackgroundOur multi-year collaboration with Syngenta, commenced in June 2009 and amended and restated in September 2013 and in August 2015, focuses on another highly sought soybean trait:soybean cyst nematode, or SCN, resistance, along with resistance to other nematode species. The nematode is a soil parasite that attacks the roots of developing plants with significant yield-limiting results. The agreement is focused on identifying and developing genes targeting this trait in soybeans.AmendmentIn August 2015, we announced an amendment to the Syngenta Collaboration Agreement, pursuant to which we undertake certain validation activities originally mandated to Syngenta.DutiesUnder the collaboration agreement, we use our ATHLETE™ computational analysis platform to assemble and mine our genomic database in order to identify and prioritize genes with thepotential to improve nematode tolerance. According to the amended collaboration agreement, we undertake validation activities for the candidate genes discovered.License GrantsPursuant to the agreement, Syngenta holds an option to obtain an exclusive license to develop and commercialize, solely for transgenic applications, soybean products containing genesidentified under the collaboration.Diligence ObligationsSyngenta is required to use reasonable efforts to evaluate and progress in its product development programs genes that it opts to license. However, at all times, Syngenta retains thediscretion not to advance any gene, at the possible cost of losing its rights to such genes.43Termination and Change in ControlIn addition to each party’s right to terminate the agreement upon a material breach by the other party, Syngenta may terminate the agreement (i) at any time without cause or (ii) if weexperience a change of control to certain identified Syngenta competitors, provided, however, that the termination right in respect of a change of control is subject to certain exceptions. In bothsuch cases, if Syngenta exercises its termination right, it must assign all of its rights in certain intellectual property to us, and we will then have the exclusive right to develop and commercializethe licensed genes in any crop, without any obligation to Syngenta.Consideration and CostsAccording to the collaboration agreement, Syngenta funded part of our research costs under the collaboration. In case Syngenta exercises its option to continue and develop the genes,it will pay us milestone payments and royalty payments based on sales.Marrone Bio Innovations (MBI)Background and DutiesIn 2014, we entered a multi-year collaboration with MBI targeting the joint discovery of novel modes of biological action for insect control, utilizing MBI's expertise in the microbial-basedsolutions for pest control and plant health and our computational gene discovery capabilities, followed by the independent development and commercialization of new insect control products byeach of the companies. The research program under the agreement is to be carried out in accordance with a project plan, which sets forth the respective activities to be performed by us and MBIunder agreed timelines.In May 2016 the parties announced that certain proteins identified as part of the collaboration demonstrated control activity in diet-based insect assays against several target pestinsects and that based on these results, selected bioactive proteins are advanced to plant validation. In March 2017 the parties announced that MBI will advance certain novel bacteria and relatedproteins that we have identified into MBI's bioinsecticide product development pipeline, representing the completion of the collaboration's discovery phase.License GrantsUnder the agreement, we and MBI obtain a worldwide, royalty-bearing, exclusive license to use genes and bio-chemicals identified under the collaboration, for us to develop andcommercialize biotechnology seed products and for MBI to develop and commercialize ag-biological products.TerminationEither party has the right to terminate the research project, with or without cause. The precise effects of such a termination depend on the point in time at which the right is exercised.Consideration and CostsEach of MBI and us bears its costs in performing its activities under the research program, using its own resources and a grant from the Israel-U.S. Binational Industrial Research andDevelopment Foundation, or BIRD. Under the terms of the agreement, either party is entitled to royalty payments from sales by the other party of commercial products containing genes or bio-chemicals identified under the collaboration. Ag-chemical productsBASF SE (BASF)Background and DutiesIn December 2015, we entered into a three-year collaboration with BASF for the discovery and development of novel herbicides. Under the terms of the collaboration agreement, weutilize our biology-driven computational discovery approach to identify potential candidate chemicals for novel herbicides while BASF use its proprietary advanced plant platform to screen thecandidate chemicals in order to experimentally validate their biological effects on weeds. Successful candidates from this collaboration will be further developed by BASF.44License GrantsPursuant to the agreement, BASF obtains a worldwide, royalty-bearing, exclusive license to use and modify chemical compounds that we identify under the collaboration to develop andcommercialize weed control products containing such compounds.TerminationEither party may terminate the agreement upon a material breach by the other party, whereupon the licenses granted to BASF shall terminate.Consideration and CostsUnder the terms of the agreement, we are entitled to milestone payments upon achievement of certain development milestones as well as royalty payments from sales of productsdeveloped under the collaboration.ICLBackground and DutiesIn January 2017, we entered into a collaboration with ICL Innovation, a subsidiary of ICL, for the discovery and development of chemical crop enhancers to enhance nutrient utilization inkey crops. Under the terms of the collaboration agreement, we utilize our chemistry and seed trait computational discovery analysis platforms to identify candidate chemicals for cropenhancement while ICL uses its development pipeline to develop successfully validated candidate chemicals towards commercial crop enhancer products.License GrantsPursuant to the agreement, ICL holds an option to obtain a worldwide, royalty-bearing, exclusive license to use and modify chemical compounds that we identify under the collaborationto develop and commercialize products containing such crop enhancer compounds.Consideration and CostsUnder the terms of the agreement, we are entitled to research and development payments. In case ICL exercises its option to obtain research and commercial license to the compoundsidentified under the collaboration to develop crop enhancer products, we will be entitled to royalty payments from sales of such products.SeedsInsolo AgroindustrialIn early 2015, we entered into a collaboration agreement with Insolo Agroindustrial S.A., a Brazilian agribusiness and producer of soybean in Piaui state in the northeastern part of Brazil.In December 2016, the collaboration agreement was extended by an additional two years with the target of evaluating the agronomic and economic benefits of growing Evofuel's castorvarieties for Insolo farms located in the Cerrado, while developing the agronomic know-how to integrate castor into Insolo's production system. According to the collaboration agreement, Evofuelwill provide Insolo with castor bean seeds as well as technical growth protocols and agronomic guidance. Insolo, on its part, will provide the land, employees, equipment and other infrastructurerequired for growing the castor bean crops. All intellectual property rights relating to the castor varieties vest solely with us. Both parties may terminate the agreement at will, other than during the growing season.45Castor FieldsIn 2015 and the first quarter of 2016 we entered into two agreements with Castor Fields, a Mexican corporation that is focused on growing castor in North-West Mexico, as well asproducing and commercializing castor oil. The target of the first agreement with Castor Fields was to evaluate the performance of Evofuel's castor varieties in Castor Field's fields in NorthwestMexico, as well as share agronomic know-how. Under such agreement, the seeds were supplied to Castor Fields by Evogene at no cost. Under the second agreement, Evofuel agreed to selladditional castor seeds to Castor Fields during 2016 for commercial use. Revenues to be received by Evofuel with respect to this initial commercial sale are not be significant. In 2017 we arecontinuing the evaluation of Evofuels castor varieties performance in Mexico. Castor Oil ArgentinaIn October 2016, we entered into a three-year collaboration agreement with Castor Oil Argentina S.A., or CASA, an Argentinian corporation aiming to establish a castor oil industry inArgentina to evaluate the performance of Evofuel's castor varieties in CASA's fields in Argentina, as well as share agronomic know-how. Domrep EnergiaIn March 2017, we entered into a three-year collaboration agreement with Domrep Energia srl, or DRE, a Dominican Republic corporation engaged in the development of conventional andrenewable energy projects in Latin America and Caribbean regions to evaluate the performance of Evofuel's castor varieties in DRE's fields in the Dominican Republic, as well as share agronomicknow-how.EmbrapaIn October 2014, we entered a joint research agreement with the Brazilian Agricultural Research Corporation (Embrapa), Brazil's leading agricultural research institution, for theadvancement of castor cultivation in Brazil. The cooperation primarily focuses on technologies for controlling castor-specific diseases as well as practices for castor cultivation in rotation withsoybean. We expect the joint research agreement to be extended for an additional two years.Raw MaterialsWe do not significantly rely upon any sources of raw materials for our operations.SeasonalityOur business in general, and our revenues in particular, which are generated almost entirely from our strategic collaborations, based on research and development and milestonepayments as the seed traits we discover advance in the product development pipeline of our collaborators, are not subject to variations based on seasonality.CompetitionOur market is characterized by intense commercial and technological change, and we face significant competition in many aspects of our business. The seed and ag-chemicals markets inparticular are highly consolidated and dominated by a relatively small number of large companies. In order to provide their end-clients (mostly farmers) with cutting-edge products, thesecompanies invest substantial resources in the development of seeds, traits, ag-chemical products and agronomic methods and products. Part of these companies' research and developmentactivity is conducted in-house and part of it is outsourced. Generally, the competitors in our industry can be divided into three groups: (i) seed and ag-chemical companies, including BASF, Bayer,Dow, DuPont, Monsanto, Syngenta and others, with internal research and development units dedicated to development of seed traits and seed external products; (ii) small- to mid-size biotechcompanies specializing in plant trait enhancement with their own seed trait development programs, such as AgBiome and Keygene and Targeted Growth; and (iii) academic and agriculturalresearch institutions that grant licenses to third parties for the use of identified genes and other DNA fragments. The ag-biologicals market is an emerging segment, where on the one hand manysmall-mid size companies are active in research, development and commercialization and on the other hand, a significant trend of consolidation activities is taking place by the seed and ag-chemical companies.46We believe that our competitive advantage lies in our ability to assemble large amounts of genomic and phenotypic data and to analyze that data using our key computationaltechnologies, enabling us to identify and prioritize genes, targets, chemical compounds and microbial more accurately, efficiently and quickly than is common in our industry. We also utilize ourproprietary tools to enable the support along the development process through optimization of genes, chemistries and microbial product candidates. In addition, we continue to accumulate andexpand our plant genomic database, drawing partly on publicly available data, partly on our plant experiments and field trials, and partly on research and experimentation results from ourcollaborators. Certain seed and ag-chemical companies specializing in seed traits may, however, have candidate hits or leads that are in more advanced stages of product development andcommercialization, and these relate to or directly compete with the same type of products we are currently developing. To remain competitive in our industry, we pursue three main strategies: first,we invest in the improvement of our key technologies, focusing especially on our proprietary computational technologies. Second, we focus on increasing our discovery and developmentcapabilities, including by on-going feedback from validation results in our different areas of activity, as well as improving our validation systems, thus enhancing our ability to discover andclassify new product candidates in greater numbers. Finally, we seek to protect our intellectual property rights through patent application and prosecution in the jurisdictions where we operate,including the United States, India, China, Brazil, Argentina and Canada.Intellectual PropertyOur intellectual property rights are important to our business, as they generally determine our eligibility to receive royalties for seed traits. We actively seek to protect the intellectualproperty and proprietary technology that we believe is important to the development of our business.Our success will depend on our ability to obtain and maintain patent and other proprietary protection for commercially important technology, inventions and know-how related to ourbusiness, defend and enforce our patents, preserve the confidentiality of our trade secrets and operate without infringing the valid and enforceable patents and proprietary rights of third partiesTo date, we have identified and sought patent protection for over 4,600 plant genes linked to traits such as improved yield and drought tolerance. These genes are currently protectedthrough more than 90 patents and 222 national patent applications.Our patenting process involves four stages as follows:Provisional Filing. In most cases, soon after using ATHLETE™, our computational technology for gene discovery, we file a provisional application in the United States covering all thegenes we have identified that we believe are likely to convey a specific trait in plant species. The number of genes covered in each provisional application ranges between 50 and 200 genes.PCT Filing. A PCT provisional is filed under the Patent Cooperation Treaty, or PCT, one year from the U.S. provisional filing. During this one-year period, we insert the identified genesinto model plants and test whether the genes actually improve target traits. This validation data is added to the PCT provisional and provides the “reduction to practice” required to advance theapplication.National Filing. National filing is conducted for most countries a year and a half after the PCT filing. For Argentina, which has not signed the PCT, a national filing is made at the sametime as the PCT filing. Either we or our collaborators determine in which countries patent applications should be filed. If a collaborator requests that we file and prosecute a patent in a particularcountry, the collaborator will usually pay for the filing fee and any associated costs. The main countries in which we file are the United States, Brazil, Argentina, Canada, Australia, India, andcertain other countries in Asia, South America and Europe.Prosecution. In the countries in which we file national phase applications, we prioritize the prosecution of genes identified as the most likely commercial candidates based on discussionswith our collaborators.Our in-house know-how is another important element of our intellectual property. Our employment and consulting agreements include undertakings regarding confidentiality andassignment of inventions. Furthermore, the daily work at our various greenhouse sites, tissue culture facilities, and molecular labs involves the use of advanced mechanical tools, imagingdevices, and computer hardware and software. We have established closed networks and physical security systems to prevent unapproved access.47In addition to seeking patent applications, we obtained trademark registrations for ATHLETE™, Gene2Product™ and EvoBreed™, which we consider material to the marketing of ourproprietary computational technologies.While we expect our patent applications to receive approval, and our trademark applications to mature into registrations, we cannot be certain that we will obtain such results. Despiteour efforts to protect our proprietary rights, unauthorized third parties may attempt to use, copy or otherwise obtain and market or distribute our intellectual property rights or technology orotherwise develop products or solutions with the same functionality as our solutions. In addition, the laws of some foreign countries provide less protection for proprietary rights than U.S. law.We face the occasional risk, moreover, that third parties may assert copyright, trademark and other intellectual property rights against us. Such claims may result in direct or indirect liability as wehave contractually agreed to indemnify certain parties for any damages suffered as a result of infringement by us of any third-party intellectual property rights.Government RegulationSeed traitsOur business is subject to regulation related to agriculture, health and the environment. To operate, we must obtain various permits and licenses from government authorities andmunicipalities in our active jurisdictions, and we must maintain our compliance with the terms of those permits, licenses and other government standards as necessary. These laws andregulations, particularly in relation to biotechnology, are not fully settled, but continue to evolve in order to keep pace with technological advances.While our expertise may contribute to the downstream commercialization of enhanced seeds, we are not in the process of obtaining regulatory approvals required for thecommercialization of biotechnologically improved seeds. These approvals, when needed, will be obtained by our collaborators according to our collaboration agreements. Most of the key targetmarkets where we anticipate our collaborators will sell seeds containing our traits, including the United States, Brazil and Argentina, will require such regulatory approvals prior to thecommercialization of such products.As an Israeli company, our activities in the fields of biotechnology and plant genomics are regulated by the Israel Ministry of Agriculture and Rural Development, or ISARD, and morespecifically by the ISARD’s Plants Protection and Inspection Services, or PPIS. Our activities are subject to various laws, regulations, orders and procedures, which require us, among otherthings, to obtain permits for conducting experiments on genetically enhanced plants and to satisfy special conditions determined by the ISARD regarding the growing procedures of such seedsand plants. Violation of these regulations may expose the company to criminal penalties. Pursuant to these regulations, we are also obligated to obtain separate permits to own and operate ourgreenhouses and testing fields in Israel and we are routinely inspected by ISARD.Our activities, as well as those of our subsidiary, Evofuel, in the field of seeds and biofuels, are regulated by the Ministry of Environmental Protection. Pursuant to these regulations, weare required, among other things, to (i) obtain toxins permits, which allow us to conduct experiments using “hazardous materials,” as such term is defined in the applicable regulations, and (ii)follow special rules regarding waste disposal. Violation of these regulations may expose the company to criminal penalties, administrative sanctions and responsibility to compensate thoseinjured for any environmental damages.Ag-chemicalsOur Activities in the area of ag-chemicals are performed at our labs in Israel and are regulated by the provisions of several Israeli governmental agencies. Violation of these regulationsmay expose us to criminal or civil actions and may impose liability on us. Our current activities in ag-chemicals does not subject us to further government regulation beyond that which applies tous due to our seed traits.48Ag-biologicalsAg-biologicals is a new and evolving sector and as a result the regulation framework is changing rapidly in recent years and may change further in the coming years.As an Israeli company, our activities in the fields of microorganisms are regulated by ISARD, which are responsible for product registration and regulation. Our activities are subject tovarious laws, regulations, orders and procedures. Violation of these regulations may expose the company to criminal penalties. Pursuant to these regulations, we may be obligated to obtainseparate permits to own and operate our experimental activities in Israel, and we are routinely inspected by ISARD.Regulation of ProductsSeed traitsRegulatory approvals are required prior to the commercialization and importation of biotechnologically enhanced seeds in most countries. Most of the key target markets where weanticipate our collaborators will sell seeds containing our traits, including the United States, European Union, Brazil and Argentina, will require such regulatory approvals prior to thecommercialization of such products. Additional regulatory approvals will be required for countries importing grain produced from seeds containing our traits, such as China, India and certaincountries in the European Union. Pursuant to our collaboration agreements in the field of seed traits, our collaborators will apply for all requisite regulatory approvals prior to commercialization ofthe products we are developing with them.Examples of regulations our collaborators may need to apply for include, in the United States, approvals required by the United States Department of Agriculture, or USDA, prior to thecommercial sale of genetically modified products. The USDA’s review and deregulation process for biotech products is costly and time-intensive, with no guarantee of success. In the UnitedStates, collaborators may also need to seek regulatory approval from the United States Environmental Protection Agency, or EPA, which regulates the marketing and use of new plant pesticidesand herbicides. In addition, in Brazil, the commercialization of biotech products is regulated by the National Technical Commission of Biosafety, Comissão Técnica Nacional de Biossegurança, orCTNBio under the Ministry of Science and Technology. The approval process involves data collection and analysis, environmental impact assessments and public hearings on certain products,and is similarly costly and time-intensive.Ag-chemicalsRegulatory approvals are required prior to the commercialization and importation of ag-chemical products in most countries. Most of the key target markets where we anticipate ourcollaborators to sell ag-chemical products containing our compounds, including the United States, European Union, Brazil and Argentina, will require such regulatory approvals prior to thecommercialization of such products. Pursuant to our collaboration agreement in the field of ag-chemicals, our collaborators will apply for all required regulatory approvals prior tocommercialization of the products we develop with them.Examples of regulations our collaborators may need to apply for include numerous tests assessing the potential effects of the new active ingredient on mammals. These include tests onacute toxicity, carcinogenicity, mutagenicity and reproduction. Results from this stage will be fed into the chemistry and formulation development stages. In order to sell a crop protection ag-chemical product in most countries, both the product and its active ingredient first need to be registered. This process may require the submission of over 100 toxicology and ecotoxicologystudies, as well as detailed information on the chemistry of the active ingredient and the product. In the United States, collaborators may need to seek regulatory approval from the EPA, whichregulates the marketing and use of new plant pesticides and herbicides. In addition, in Brazil, the commercialization of ag-chemical products is regulated also among Anvisa, the federal agency incharge of evaluating pesticide health risks. The approval process involves data collection and analysis, environmental impact assessments and public hearings on certain products, and issimilarly costly and time-intensive.Ag-biologicalsIn general, the regulatory landscape in the relatively fast evolving field of ag-biological products is developing and may change in the next few years. In most countries regulatoryapprovals for ag-biologicals (biostimulants and biopesticides) are required for three main activities: (i) importation of microbial into a commercially relevant country, (ii) field testing in acommercially relevant countries, (iii) commercialization of ag-biological end-products.Complexity of regulatory processes vary between biostimulants and biopesticides and between regulatory organizations. The key target markets where we anticipate to commercialize ourproducts, the U.S. and the EU, will require such regulatory approvals. We are familiar with the relevant requirement needs (if needed, we use external consultancy) and apply required ag-biologicals regulatory approvals for the activities we perform.49In the United States, the key focus market at our current activity, the USDA's Animal and Plant Health Inspection Service, or APHIS, is responsible for importation and field releasepermits for ag-biological products and the EPA leads the approval process of commercial products. Most US states also require registration process for commercial products.Under current EPA guidance, biostimulants are regarded as plant inoculants, which currently does not require any regulatory action at the federal level, but require registration andapprovals at the state level. Biopesticides require regulation approvals both at the federal and the state level. State level regulation processes vary between states.In the EU, biostimulants are currently regarded as part of the fertilizer regulation, and biopesticides are regarded as part of the plant protection regulation.C. Organizational StructureAs of the date of this report, we held directly and indirectly the percentage indicated of the outstanding capital stock of the following subsidiaries: Name of Subsidiary Jurisdiction Ownership InterestEvofuel Ltd. Israel 100%Evogene Inc. Delaware 100%Leviev-Evogene Namibia (PTY) Ltd. Namibia 100%Biomica Ltd. Israel 100%D. Property, Plants and EquipmentOur principal facility is located in Rehovot, Israel and consists of 3,209 square meters (approximately 34,500 square feet) of leased office space accommodating our corporate offices, ourmolecular and microbial labs and our crop protection labs. The lease for these offices and labs expires on December 31, 2018.We perform most of our research and plant validation work at our “Evogene Farm,” located on two adjacent lots we lease outside Rehovot. The first lease covers approximately 13,500square meters (or approximately 145,000 square feet) of land, and expires on July 21, 2018. The second lease covers approximately 10,000 square meters (approximately 108,000 square feet) of landand expires on May 14, 2021, and we hold an option to renew such lease for an additional 60 months. The Evogene Farm contains 37 greenhouses, which are used for gene validation in model andtarget plants, plant propagation, and plant nurseries. In addition, the Evogene Farm contains warehouses, office facilities and seed banks.In 2015, we established a research and development facility in the Bio-Research and Development Growth (BRDG) Park, developed by Wexford Science & Technology, a BioMed RealtyCompany, in the campus of the Donald Danforth Plant Science Center in St. Louis, Missouri. We signed a 6 years lease agreement, expiring November 1, 2021 and covering approximately 5,753square feet lab facility to accommodate our insect resistance research.Unless otherwise stated, all of our facilities are fully utilized. We have no material tangible fixed assets apart from the leased properties described above.ITEM 4A.UNRESOLVED STAFF COMMENTSNot applicable.50ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTSThe information contained in this section should be read in conjunction with our consolidated financial statements for the year ended December 31, 2016 and related notes and theinformation contained elsewhere in this annual report. Our financial statements have been prepared in accordance with IFRS as issued by the IASB. This discussion contains forward-lookingstatements that are subject to known and unknown risks and uncertainties. As a result of many factors, such as those set forth under “Item 3.D. Risk Factors” and “Special Note RegardingForward-Looking Statements,” our actual results may differ materially from those anticipated in these forward-looking statements. SummaryWe are a leading biotechnology company focused on the improvement of crop productivity and performance, addressing the world's increasing demand for food, feed and fuel. We havedeveloped a proprietary innovative technology platform, leveraging scientific understanding and computational technologies to harness agriculture 'Big Data' in order to develop improved seedtraits, innovative ag-chemical products and novel ag-biological products.Our product development efforts are organized under two business divisions, the Crop Enhancement division, for the development of products enhancing plant yield and tolerance toabiotic stresses (such as improved tolerance to drought, heat and salinity), and the Crop Protection division, for the development of products improving plant resistance to biotic stresses (suchas resistance to diseases, pests and insects).Currently, we are primarily developing seed traits for improved yield and abiotic stress tolerance, seed traits for biotic stress resistance, novel herbicides (or "weed killers") and bio-stimulants, which are microbial-based ag-biological products, applied externally to the plant for yield improvement. The products we develop focus on essential crops, including corn, soybean,wheat, rice, and cotton.Furthermore, we operate a seed business under our wholly-owned subsidiary, Evofuel Ltd., or Evofuel, currently focusing on the development of improved castor bean seeds to serve asa feedstock source for biofuel and other industrial uses.Our research and development activities, which focus on the early stages of product development, are performed either as internal product development programs or as part of strategiccollaborations with world-leading agricultural companies, including BASF, Bayer, DuPont, Monsanto, and Syngenta, which aim to further develop our discoveries into commercial products. Inrecent years our relative investment in internal research and development activities has gradually increased, from 59% of total research and development investment in 2014, to 64% in 2015 and to74% in 2016. We currently research and develop 31 different innovative crop enhancement and crop protection seed traits, ag-chemical and ag-biological products either independently or as partof more than 10 strategic collaborations. We are still in the development stages and no product has been commercialized based on our discoveries. Key Measures of Our PerformanceRevenuesOur revenues are principally derived from research and development payments under our collaboration agreements and related arrangements with our collaborators under our CP and CEseed traits operations, Revenues from our collaboration with Monsanto accounted for approximately 77% of our revenues for the year ended December 31, 2016. See "Item 4.B. Business Overview—Key Collaborations." We have not yet generated any revenues from our ag-chemicals and ag-biologicals businesses. We expect our revenues to decrease due to net decrease in the researchand development payments we receive in accordance with the work plans under our various collaboration agreements, including changes in the scope and nature of our activities as part of itsyield and stress collaboration with Monsanto, whereby resource intensive activities, such as novel gene discovery and validation, increasingly evolve to optimization activities supportingMonsanto's ongoing development of our genes. Under our collaboration agreements and related arrangements, our revenues are paid to us in one or more of the following four different forms of payments:Periodic Payments for Research and Development ServicesPeriodic payments for research and development services are payments we receive primarily on a quarterly basis from our collaborators as consideration for the research anddevelopment services we provide them. These payments are recognized as revenues over the duration of the relevant contract based on the proportion of actual costs incurred for each reportingperiod to the estimated total costs of the collaboration. Revenues from periodic payments for research and development services performed under our collaboration agreements, all of which underthe CE and CP seed traits operations, amounted to $6.3 million and accounted for approximately 96.3% of our total revenues for the year ended December 31, 2016.Up-front PaymentsWe also derive a portion of our revenues from up-front payments made under our agreements with Monsanto and Bayer. Up-front payments primarily represent payments we receivedupon entering into collaboration agreements for research and development services. These up-front payments are recognized as revenues over the duration of the relevant contract based on theproportion of actual costs incurred for each reporting period to the estimated total costs of the collaboration. Revenues derived from up-front payments under our agreements with Monsanto andBayer amounted to approximately $0.2 million and accounted for approximately 3.1% of our total revenues for the year ended December 31, 2016.Share PurchasesWe also entered into share purchase agreements with Monsanto and Bayer, which were signed in contemplation of our collaboration agreements with them. We attribute the proceedsfrom arrangements under these agreements to the value of our ordinary shares issued to Monsanto and Bayer at the time of the investments as well as to the services we perform under thecollaboration agreements. As a result, we recognize as revenues the excess payment, which is the consideration investors paid for our ordinary shares over the market value of our ordinaryshares traded on the TASE at the time of the investment. This excess payment is recognized as revenues beginning on the date of the investment, for the duration of the contract based on theproportion of actual costs incurred for each reporting period to the estimated total costs of the collaboration. We also recorded revenues with respect to Monsanto's put option. We recognized asrevenues the fair value of the put option with Monsanto throughout the term of the agreement, based on the proportion of actual costs incurred for each reporting period to the estimated totalcosts of the collaboration. Total revenues from the excess amounts on the purchase of our ordinary shares by Monsanto and Bayer as well as the Monsanto put option amounted to $0.04 millionand accounted for approximately 0.6% of our total revenues for the year ended December 31, 2016.51Milestone and Royalty PaymentsWe also derive, to a lesser extent at this stage of our business, a portion of our revenues from milestone payments paid by our collaborators upon the occurrence of certain specifiedevents pursuant to the agreements with our collaborators. We did not record revenues for the year ended December 31, 2016 from milestone payments.Most of our agreements with collaborators also provide for royalty payments based on the sales or transfer of products our collaborators develop that contain the traits we discover andlicense to them. The calculation of royalties varies by collaboration, and is typically based on the value that the trait we provide adds to the end product. For example, the royalties we expect to beentitled to receive pursuant to our collaboration with Monsanto will be a percentage of the commercial value conferred by the trait we provide on the end product Monsanto sells. We have notyet generated revenues from royalty payments.Geographical Breakdown of RevenuesThe following table presents net revenues by geographic breakdown of customers as a percentage of net revenues for the periods indicated. This data refers to the location of thecustomer and does not take into consideration the location of the end-user (to the extent it is different). Year ended December 31, Geographical Region: 2016 2015 2014 United States 89% 86% 73%Germany 11% 14% 27%Total 100% 100% 100%Cost of RevenuesCost of revenues primarily consists of development costs incurred in conjunction with our collaborations, which include salaries and related personnel costs (including share-basedcompensation) for our research and development employees working on the collaborations, payments to third party suppliers that assist us in producing genomic data and the cost of disposablematerials (such as seeds, laboratory supplies, fertilizer, water and soil). Cost of revenues also includes operational overhead costs such as depreciation of our property, plant and equipment, costsrelated to leasing and operating our office and laboratory facilities and greenhouses and expenses related to retaining advisors, which primarily consist of biological experts. We expect our cost ofrevenues to decrease due to changes in the scope and nature of activities performed under our collaborations, in accordance with the work plans under those collaborations. Operating ExpensesResearch and Development Expenses: Research and development expenses primarily consist of costs related to our internal or independent research and development activities, asopposed to development costs incurred in connection with our collaborations (which are included in cost of revenues). These activities include developing and improving our computational,scientific and validation technologies, know-how and capabilities used by our product divisions as well as research and development conducted mainly under our ag-chemicals, ag-biologicals,and seeds operations. Research and development costs include salaries and related personnel costs (including share-based compensation), payments to third party suppliers mainly with respectto producing genomic data, cost of disposable materials, operational overhead costs, which include costs related to leasing and operating our office, laboratory facilities and greenhouses, anddepreciation of property, plant and equipment. Expenses related to our intellectual property, such as legal and other costs associated with patent applications, are also included as research anddevelopment expenses. We expect that our research and development expenses will remain at the current level.Business Development Expenses: Business development expenses consist of costs primarily related to maintaining our relationships with our collaborators and establishing newcollaborations. These costs include salaries and related personnel costs (including share-based compensation), expenses incident to business travel, legal and professional services. We expectour business development expenses will increase as we pursue additional collaborations for our key growth segments.52General and Administrative Expenses: General and administrative expenses mainly include salaries and related personnel costs (including share-based compensation) for our generaland administrative employees, HR activities and employee benefits and welfare, consulting, insurance, legal and professional services and other expenses associated with being a U.S. listedentity. We expect that our general and administrative expenses will remain at the current level.Financing Income and ExpensesFinancing income consists primarily of interest income on our cash bank deposits and securities, income related to a revaluation of the marketable securities we hold, which consist ofcorporate bonds and government treasury notes, and foreign currency exchange income. Financing expenses consist primarily of expenses related to bank charges and commissions, expensesrelated to a revaluation of the marketable securities we hold, and foreign currency exchange expense. The interest due on government grants is also considered a financial expense, and isrecognized beginning on the date on which we receive the grant until the date on which the grant is expected to be repaid.Taxes on IncomeWe do not generate taxable income in Israel, as we have historically incurred operating losses resulting in carryforward tax losses totaling approximately $55 million as of December 31,2016, to be carried forward indefinitely to future tax years. Accordingly, we do not expect to pay taxes in Israel until we have taxable income after the full utilization of our carryforward tax losses.Our U.S. subsidiary, Evogene Inc., is subject to U.S. income taxes. In 2016 the weighted tax rate applicable to Evogene Inc. was approximately 26% (federal tax and state tax where thecompany operates).Segment DataStarting January 1, 2012, following the establishment of our Evofuel subsidiary, we split our operations into two operating segments: Evogene and Evofuel. The two segments performthe following operations: §Evogene: Our Evogene segment develops seed traits, ag-chemical products and ag-biological products to improve plant performance, utilizing our proprietary innovative technologyplatform. Our seed traits operations utilize our expertise to develop seed traits enhancing plant yield and tolerance to abiotic stresses (such as improved tolerance to drought, heat, and salinity), orCrop Enhancement, as well as seed traits for improving plant resistance to biotic stresses (such as resistance to diseases, pests, and insects), or Crop Protection. Currently, our ag-chemical operations utilize our expertise to develop novel herbicides (or new "weed killers") and our ag-biological operations focus on development of bio-stimulants (microbial-basedproducts applied externally to the plant for yield improvement). §Evofuel: Our Evofuel segment develops improved species of the castor bean plant to serve as a source of feedstock for biofuel and other industrial uses.The following table presents our revenues and operating loss by segment for the period presented: Evogene Evofuel Total (in thousands) Year ended December 31, 2016 Revenues $6,540 $- $6,540 Operating loss $(20,168) $(921) $(21,089) Year ended December 31, 2015 Revenues $11,129 $- $11,129 Operating loss $(16,146) $(1,775) $(17,921) Year ended December 31, 2014 Revenues $14,511 $- $14,511 Operating loss $(13,078) $(2,178) $(15,256)Our revenues for the years ended December 31, 2016, 2015 and 2014 were generated entirely from the Evogene segment. Both operating segments recorded losses in 2016.53A. Operating ResultsComparison of Period-to-Period Results of OperationsThe following table sets forth our results of operations as a percentage of revenues for the periods indicated: Year Ended December 31, 2014 2015 2016 Amount % of Revenues Amount % of Revenues Amount % of Revenues (in thousands) Consolidated Statements of Comprehensive loss: Total Revenues $14,511 100% $11,129 100% $6,540 100%Cost of revenues 9,709 66.9 8,255 74.2 5,639 86.2 Gross profit 4,802 33.1 2,874 25.8 901 13.8 Operating Expenses: Research and development, net 14,022 96.6 14,449 129.8 16,405 250.8 Business development 1,851 12.8 1,964 17.6 1,696 25.9 General and administrative 4,185 28.8 4,382 39.4 3,889 59.5 Total operating expenses 20,058 138.2 20,795 186.9 21,990 336.2 Operating loss (15,256) (105.1) (17,921) (161.0) (21,089) (322.5)Financing income 2,242 15.5 2,571 23.1 2,424 37.1 Financing expenses (1,516) (10.4) (1,863) (16.7) (891) (13.6)Loss before taxes on income (14,530) (100.1) (17,213) (154.7) (19,556) (299.0)Taxes on income - - - - 36 0.6 Net loss (14,530) (100.1) (17,213) (154.7) (19,592) (299.6)Other comprehensive income (loss): Loss from cash flow hedges (222) (1.5) (45) (0.4) - - Amounts transferred to the statement of profit orloss for cash flow hedges - - 267 2.4 - - Total comprehensive loss $(14,752) (101.7)% $(16,991) (152.7)% $(19,592) (299.6)% Year Ended December 31, 2016 Compared to Year Ended December 31, 2015RevenuesOur total revenues decreased by $4.6 million, or 41.2%, to $6.5 million for the year ended December 31, 2016 from $11.1 million for the year ended December 31, 2015.Revenues primarily consisted of research and development payments, reflecting R&D cost reimbursement under certain of our collaboration agreements. The majority of theseagreements also provide for development milestone payments and royalties or other forms of revenue sharing from successfully developed products, and therefore, longer term, we anticipate thatour future revenues and profitability will largely reflect the receipt of such payments from existing and future collaborations. This decline reflects the net decrease in such research and development payments in accordance with the work plans under our various collaboration agreements. It includes changes inthe scope and type of activities undertaken by us as part of our yield and stress collaboration with Monsanto, whereby resource intensive activities, such as novel gene discovery and validation,evolved to focus increasingly on optimization activities supporting Monsanto's ongoing development and advancement efforts of our discovered genes. Cost of RevenuesCost of revenues decreased by $2.7 million, or 31.7%, to $5.6 million for the year ended December 31, 2016 from $8.3 million for the year ended December 31, 2015. The net decreaseprimarily related to the change in the scope and type of activities performed under our collaboration with Monsanto.54Gross ProfitGross profit decreased by $2.0 million, or 68.6%, to $0.9 million for the year ended December 31, 2016 from $2.9 million for the year ended December 31, 2015. This decrease was mainly aresult of the decrease in the activity under our collaborations, as described above.Operating ExpensesResearch and Development Expenses, net. Research and development expenses increased by $2.0 million, or 13.5%, to $16.4 million for the year ended December 31, 2016 from $14.4million for the year ended December 31, 2015. The increase in these expenses largely related to the expansion of activities, primarily focused on the development of computational platforms, aswell as discovery and validation activities in our key growth segments (insect control activity under our seed traits segment, ag-chemicals and ag-biologicals).Business Development Expenses. Business development expenses decreased by $0.3 million, or 13.6%, to $1.7 million for the year ended December 31, 2016 from $2.0 million for the yearended December 31, 2015. The decrease mainly related to a decrease in non-cash share-based compensation expenses and to a decrease in salaries and benefits.General and Administrative Expenses. General and administrative expenses decreased by $0.5 million, or 11.3%, to $3.9 million for the year ended December 31, 2016 from $4.4 million forthe year ended December 31, 2015. This decrease was primarily attributable to a decrease in non-cash share-based compensation expenses.Financing Income and ExpensesFinancing Income. Financing income decreased by $0.2 million, or 5.7%, to $2.4 million for the year ended December 31, 2016 from $2.6 million for the year ended December 31, 2015. Thisdecrease was primarily attributable to a decrease in interest income.Financing Expenses. Financing expenses decreased by $1.0 million, or 52.2% to $0.9 million for the year ended December 31, 2016 from $1.9 million for the year ended December 31, 2015.This decrease was primarily attributable to the changes in the fair value of marketable securities that we hold and to devaluation of investments we made in 2015.Taxes on IncomeWe did not record or pay taxes on income for the year ended December 31, 2016 in Israel due to our net loss for the year. We recorded taxes in the amount of $0.04 million with respect toEvogene Inc.Year Ended December 31, 2015 Compared to Year Ended December 31, 2014RevenuesOur total revenues decreased by $3.4 million, or 23.3%, to $11.1 million for the year ended December 31, 2015 from $14.5 million for the year ended December 31, 2014.Total revenues included (i) research and development payments, including up-front payments, and (ii) share purchase related revenues.(i) Revenues from research and development payments included periodic payments for research and development services generated under our collaboration agreements primarily withseed companies, as well as up-front payments received under these agreements, which are recognized as revenues over the duration of the relevant agreement. R&D revenues for 2015 were $11million, compared to $14.2 million for 2014. The decline was primarily related to the amendment to our collaboration work plans with Bayer and Syngenta.(ii) Share purchase related revenues result from the required accounting treatment for the past acquisitions of Evogene ordinary shares by Monsanto and Bayer, as well as the put optionagreement that we entered into with Monsanto, all in conjunction with the research and development collaboration agreements signed with these partners. Share purchase related revenues for2015 were $0.2 million, compared to $0.3 million in 2014.55Cost of RevenuesCost of revenues decreased by $1.4 million, or 15%, to $8.3 million for the year ended December 31, 2015 from $9.7 million for the year ended December 31, 2014. The decline primarilyrelated to the reduced levels of activity as a result of the amendments in the work plans under our collaborations with Bayer and Syngenta, as described above.Gross ProfitGross profit decreased by $1.9 million, or 40.1%, to $2.9 million for the year ended December 31, 2015 from $4.8 million for the year ended December 31, 2014. This decrease was mainly aresult of the decrease in the activity under our collaborations, as described above.Operating ExpensesResearch and Development Expenses, net. Research and development expenses increased by $0.4 million, or 3.0%, to $14.4 million for the year ended December 31, 2015 from $14.0 millionfor the year ended December 31, 2014. The increase in these expenses largely derives from (i) the expansion in self-funded activities, mainly in our key growth engines – insect control includingour new U.S. site expenses, ag-chemicals, and ag-biologicals and (ii) an increase in non-cash share-based compensation expenses. These increases were partially offset by the increase in theexchange rate USD/ILS reducing the company’s ILS expenses in terms of USD.Business Development Expenses. Business development expenses increased by $0.1 million, or 6.1%, to $2.0 million for the year ended December 31, 2015 from $1.9 million for the yearended December 31, 2014. The increase mainly related to an increase in non-cash share-based compensation which was offset in part by a decrease in salaries and benefits.General and Administrative Expenses. General and administrative expenses increased by $0.2 million, or 4.7%, to $4.4 million for the year ended December 31, 2015 from $4.2 million forthe year ended December 31, 2014. This increase was primarily attributable to an increase in professional fees.Financing Income and ExpensesFinancing Income. Financing income increased by $0.4 million, or 14.7%, to $2.6 million for the year ended December 31, 2015 from $2.2 million for the year ended December 31, 2014. Thisincrease was primarily attributable to an increase in interest income.Financing Expenses. Financing expenses increased by $0.4 million, or 22.9% to $1.9 million for the year ended December 31, 2015 from $1.5 million for the year ended December 31, 2014.This increase was primarily attributable to the changes in the fair value of marketable securities that we hold.Taxes on IncomeWe did not record or pay taxes on income for the year ended December 31, 2015 due to our net loss for the year.Application of Critical Accounting Policies and EstimatesOur accounting policies affecting our financial condition and results of operations are more fully described in our consolidated financial statements included elsewhere in this annualreport. The preparation of our financial statements requires management to make judgments, estimates and assumptions that affect the amounts reflected in the consolidated financial statementsand accompanying notes, and related disclosure of contingent assets and liabilities. We base our estimates upon various factors, including past experience, where applicable, external sources andon other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that arenot readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, and could have a material adverse effect on our reported results.56In many cases, the accounting treatment of a particular transaction, event or activity is specifically dictated by accounting principles and does not require management’s judgment in itsapplication, while in other cases, management’s judgment is required in the selection of the most appropriate alternative among the available accounting principles, that allow different accountingtreatment for similar transactions.We believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance as these policies relate to themore significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) it requires us to make assumptions because information wasnot available at the time or it included matters that were highly uncertain at the time we were making our estimate; and (2) changes in the estimate or different estimates that we could have selectedmay have had a material impact on our financial condition or results of operations.Revenue RecognitionWe recognize revenues when such revenues and the costs incurred or to be incurred in respect of the transaction can be measured reliably and when it is probable that the economicbenefits associated with the transaction will flow to us.We have entered into collaboration agreements under which we grant to our collaborators an exclusive license to intellectual property rights for the development and commercializationof our proprietary products. The agreements contain multiple elements, including funding from periodic payments for research and development services, up-front payments, payments based onachievement of specified milestones and royalties on sales of products sold by our collaborators that include the licensed traits.Revenues from periodic payments for research and development services are recognized throughout the services period based on the proportion of actual costs incurred for eachreporting period to the estimated total costs of the collaboration, subject to the enforceable rights. Up-front payments received upon entering into the license and collaboration agreements, inexchange for the transfer of our patented genes to licensees, are also recognized as revenues over the duration of the relevant contract based on the proportion of actual costs incurred for eachreporting period to the estimated total costs of the collaboration.Revenues from milestone events, which are contingent upon the occurrence of certain events specified in the collaboration agreement, are recognized as revenues when the milestones,as defined in the particular agreement, are achieved.Share-Based CompensationWe account for share-based compensation in accordance with the fair value recognition provision of IFRS guidance on share-based compensation. Under these provisions, share-basedcompensation is measured at the grant date based on the fair value of the award and is recognized as an expense, net of estimated forfeitures, over the requisite service period, which is generallythe vesting period of the respective award. Share-based compensation expense was $2.9 million in 2016. We selected the binomial option-pricing model as the most appropriate method fordetermining the estimated fair value of our share-based compensation. The determination of the grant date fair value of options using an option-pricing model is affected by estimates andassumptions regarding a number of complex and subjective variables. These variables include the estimated period of time that we expect employees to hold their options, the expected volatilityof our share price over the expected term of the options (estimated using historical data from prior years, including historical forfeiture rates), share option exercise and cancellation behaviors,risk-free interest rates, expected dividend yields (assumed to be zero as we have historically not paid and do not intend to pay dividends on our ordinary shares) and the price of our ordinaryshares. Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value. If such factors change and we employ differentassumptions for future grants, our compensation expense, in connection with future grants, may differ significantly from the amounts that we have recorded in the past. In addition, ourcompensation expense is affected by our estimate of the number of awards that will ultimately vest. In the future, if the number of equity awards that are forfeited by employees is lower thanexpected, the expense recognized in future periods will be higher.Government GrantsGovernment grants received from the OCS, BIRD and CIIRDF are recognized as a liability if future economic benefits are expected from the projects that will result in royalty-bearingsales.57A liability for the grant is first measured at fair value using a discount rate that reflects a market rate of interest. The difference between the amount of the grant received and the fair valueof the liability is accounted for as a government grant and recognized as a reduction of research and development expenses. After initial recognition, the liability is measured at amortized costusing the effective interest method. Royalty payments we make to repay the grant are treated as a reduction of the liability. If no economic benefits are expected from the research activity, thegrant receipts are recognized as a reduction of research and development expenses, in which case, the royalty obligation is treated as a contingent liability.There is uncertainty regarding the estimates of future cash flows and the estimate of the capitalization rate that is used for determining the amount of the liability recognized. At the endof each reporting period, we evaluate whether there is reasonable assurance that the liability recognized, in whole or in part, will not be repaid (since we will not be required to pay royalties) basedon the best estimate of future sales, and if so, the appropriate amount of the liability is recognized as a reduction of research and development expenses.Recently Issued Accounting StandardsA number of new standards, amendments to standards and interpretations were not yet in effect for the year ended December 31, 2016, and have not been applied in preparing ourconsolidated financial statements as of that date. For more information on these accounting standards, please see Note 4 to the financial statements.Impact of Israeli Tax Policies and Government Programs on our Operating ResultsTax regulations have a material impact on our business, particularly in Israel where we have our headquarters. The following summary describes the current tax structure applicable tocompanies in Israel, with special reference to its effect on us.General Corporate Tax Structure in IsraelIsraeli companies are generally subject to corporate tax on their taxable income. In 2016, the corporate tax rate was 25% (in 2014 and 2015, the corporate tax rate was 26.5%, in 2017, thecorporate tax rate is 24% and as of 2018, the corporate tax rate will be 23%). However, the effective tax rate payable by a company that derives income from an Approved Enterprise, a BeneficiaryEnterprise, a Preferred Enterprise or a Technology Enterprise (as discussed below) may be considerably less. Capital gains derived by an Israeli company are generally subject to tax at theprevailing regular corporate tax rate.Law for the Encouragement of Industry (Taxes), 5729-1969The Law for the Encouragement of Industry (Taxes), 5729-1969, generally referred to as the Industry Encouragement Law, provides several tax benefits for “Industrial Companies”.The Industry Encouragement Law defines an “Industrial Company” as an Israeli resident company which was incorporated in Israel, of which 90% or more of its income in any tax year,other than income from certain government loans, is derived from an “Industrial Enterprise” owned by it and located in Israel. An “Industrial Enterprise” is defined as an enterprise whoseprincipal activity in a given tax year is industrial production.The following tax benefits, among others, are available to Industrial Companies: §amortization over an eight-year period of the cost of purchased know-how and patents and rights to use a patent and know-how which are used for the development or advancement ofthe Industrial Enterprise, commencing in the year in which such rights were first exercised; §under limited conditions, an election to file consolidated tax returns together with Israeli Industrial Companies controlled by it; and §expenses related to a public offering are deductible in equal amounts over a three-year period, commencing in the year of the offering.Eligibility for benefits under the Industry Encouragement Law is not contingent upon the approval of any governmental authority. We believe that we currently qualify as an IndustrialCompany within the meaning of the Industry Encouragement Law. There can be no assurance that we will continue to qualify as an Industrial Company or that the benefits described above willbe available in the future.58Law for the Encouragement of Capital Investments, 5719-1959The Law for the Encouragement of Capital Investments, 5719-1959, generally referred to as the Investment Law, provides certain incentives for capital investments in production facilities(or other eligible assets) by “Industrial Enterprises” (as defined under the Investment Law).The Investment Law was significantly amended effective April 1, 2005 (the “2005 Amendment”), further amended as of January 1, 2011 (the “2011 Amendment”) and further amended asof January 1, 2017 (the “2017 Amendment”). Pursuant to the 2005 Amendment, tax benefits granted in accordance with the provisions of the Investment Law prior to its revision by the 2005Amendment remain in force but any benefits granted subsequently are subject to the provisions of the 2005 Amendment. Similarly, the 2011 Amendment introduced new benefits to replace thosegranted in accordance with the provisions of the Investment Law in effect prior to the 2011 Amendment. However, companies entitled to benefits under the Investment Law as in effect prior toJanuary 1, 2011 were entitled to choose to continue to enjoy such benefits, provided that certain conditions are met, or elect instead irrevocably to forego such benefits and have the benefits ofthe 2011 Amendment apply. The 2017 Amendment introduces new benefits for Technological Enterprises, alongside the existing tax benefits.Tax Benefits Prior to the 2005 AmendmentAn investment program that is implemented in accordance with the provisions of the Investment Law prior to the 2005 Amendment, referred to as an “Approved Enterprise”, is entitled tocertain benefits. A company that wished to receive benefits as an Approved Enterprise must have received an approval from the Israeli Authority for Investments and Development of the IsraeliMinistry of Industry and Economy, or the Investment Center. Each certificate of approval for an Approved Enterprise relates to a specific investment program, delineated both by the financialscope of the investment including sources of funds and by the physical characteristics of the facility or other assets.In general, an Approved Enterprise is entitled to receive a cash grant from the Government of Israel and certain tax benefits under the “Grant Track” or an alternative package of taxbenefits under the Alternative Track. The tax benefits available under any certificate of approval relate only to taxable income attributable to the specific program and are contingent upon meetingthe criteria set out in the certificate of approval. Income derived from activity that is not approved by the Investment Center or not integral to the activity of the Approved Enterprise will not enjoytax benefits. The entitlement to the above benefits is subject to fulfillment of certain conditions, according to the law and related regulations. If a company has more than one Approved Enterpriseprogram or if only a portion of its capital investments are approved, its effective tax rate is the result of a weighted combination of the applicable rates.The tax benefits under the Alternative Track include an exemption from corporate tax on a company’s undistributed income derived from an Approved Enterprise for at least the first twoyears of the benefits period (depending on the geographic location of the Approved Enterprise facility within Israel) and the taxation of income generated from an Approved Enterprise at areduced corporate tax rate of up to 25% for the remainder of the benefits period, depending on the level of foreign investment in the company in each year, as detailed below. The benefits period islimited to 12 years from the operational year as determined by the Investment Center or 14 years from the start of the tax year in which approval of the Approved Enterprise is obtained, whicheveris earlier.In addition, a company that has an Approved Enterprise program is eligible for further tax benefits if it qualifies as a Foreign Investors’ Company, or an FIC, which is a company with alevel of foreign investment, as defined in the Investment Law, of more than 25%. The level of foreign investment is measured as the percentage of rights in the company (in terms of shares, rightsto profits, voting and appointment of directors), and of combined share and loan capital, that are owned, directly or indirectly, by persons who are not residents of Israel. The determination as towhether a company qualifies as an FIC is made on an annual basis. A company that qualifies as an FIC and has an Approved Enterprise program is eligible for an extension of the benefits periodof up to ten years and for further tax benefits if the level of foreign investment is 49% or more. If a company that has an Approved Enterprise program is a wholly owned subsidiary of anothercompany, then the percentage of foreign investments is determined based on the percentage of foreign investment in the parent company. As specified above, depending on the geographiclocation of the Approved Enterprise within Israel, income derived from the Approved Enterprise program may be exempt from tax on its undistributed income for a period of between two to tenyears, and will be subject to a reduced corporate tax rate for the remainder of the benefits period. The tax rate for the remainder of the benefits period will be 25%, unless the level of foreigninvestment is 49% or more, in which case the tax rate will be 20% if the foreign investment is 49% or more but less than 74%; 15% if 74% or more but less than 90%; and 10% if 90% or more.59If a company elects the Alternative Track and distributes a dividend out of income derived by its Approved Enterprise during the tax exemption period, it will be subject to corporate taxin respect of the amount of the dividend distributed (grossed-up to reflect the pre-tax income that it would have had to earn in order to distribute the dividend) at the corporate tax rate whichwould have been otherwise applicable if such income had not been tax-exempted under the Alternative Track. This rate generally ranges from 10% to 25%, depending on the level of foreigninvestment in the company in each year, as explained above. In addition, dividends paid out of income attributed to an Approved Enterprise (or out of dividends received from a company whoseincome is attributed to an Approved Enterprise) are generally subject to withholding tax at source at the rate of 15% or such lower rate as may be provided in an applicable tax treaty (subject tothe receipt in advance of a valid certificate from the Israel Tax Authority allowing for a reduced tax rate). The 15% tax rate is limited to dividends and distributions out of income derived during thebenefits period and actually paid at any time up to 12 years thereafter. After this period, the withholding tax is applied at a rate of up to 30%, or at the lower rate under an applicable tax treaty(subject to the receipt in advance of a valid certificate from the Israel Tax Authority allowing for a reduced tax rate). In the case of an FIC, the 12-year limitation on reduced withholding tax ondividends does not apply.The Investment Law also provides that an Approved Enterprise is entitled to accelerated depreciation on its property and equipment that are included in an Approved Enterpriseprogram during the first five years in which the equipment is used. This benefit is an incentive granted by the Israeli government regardless of whether the alternative benefits program is elected.The benefits available to an Approved Enterprise are subject to the continued fulfillment of conditions stipulated in the Investment Law and its regulations and the criteria in the specificcertificate of approval, as described above. If a company does not meet these conditions, it would be required to refund the amount of tax benefits, adjusted to the Israeli consumer price index,and interest, or other monetary penalties.One of our facilities has Approved Enterprise status granted by the Investment Center, which made us eligible for certain tax benefits under the Alternative Track.Tax Benefits Subsequent to the 2005 AmendmentThe 2005 Amendment applies to new investment programs commencing after 2004, but does not apply to investment programs approved prior to April 1, 2005. The 2005 Amendmentprovides that terms and benefits included in any certificate of approval that was granted before the 2005 Amendment became effective (April 1, 2005) will remain subject to the provisions of theInvestment Law as in effect on the date of such approval. Pursuant to the 2005 Amendment, the Investment Center will continue to grant Approved Enterprise status to qualifying investments.The 2005 Amendment, however, limits the scope of enterprises that may be approved by the Investment Center by setting criteria for the approval of a facility as an Approved Enterprise.The 2005 Amendment changed certain provisions of the Investment Law. As a result of the 2005 Amendment, a company was no longer required to obtain the advance approval of theInvestment Center in order to receive the tax benefits previously available under the Alternative Track (the certificate of approval from the Investment Center will only be necessary for receivingcash grants). Rather, a company may claim the tax benefits offered by the Investment Law directly in its tax returns, provided that its facilities meet the criteria for tax benefits set forth in the 2005Amendment (referred to as a “Beneficiary Enterprise”). A company that has a Beneficiary Enterprise may, at its discretion, approach the Israel Tax Authority for a pre-ruling regarding its eligibilityfor benefits under the 2005 Amendment.Tax benefits are available under the 2005 Amendment to production facilities (or other eligible facilities), which are generally required to derive more than 25% of their business incomefrom export to specific markets with a population of at least 14 million in 2012 (such export criteria will further be increased in the future by 1.4% per annum and meet additional criteria stipulated inthe amendment. In order to receive the tax benefits, the 2005 Amendment states that a company must make an investment in fixed assets in the Beneficiary Enterprise, which investment meetscertain conditions set forth in the amendment for tax benefits, including exceeding a minimum investment amount specified in the Investment Law. Such investment entitles a company to receive“Beneficiary Enterprise” status with respect to the investment, and may be made over a period of no more than three years from the end of the year in which the company chose to have the taxbenefits apply to its Beneficiary Enterprise. Where a company requests to have the tax benefits apply to an expansion of existing facilities, only the expansion will be considered to be aBeneficiary Enterprise and the company’s effective tax rate will be the weighted average of the applicable rates. In such case, the minimum investment required in order to qualify as a BeneficiaryEnterprise must exceed a certain percentage of the value of the company’s production assets before the expansion60The extent of the tax benefits available under the 2005 Amendment to qualifying income of a Beneficiary Enterprise depends on, among other things, the geographic location in Israel ofthe Beneficiary Enterprise. The location will also determine the period for which tax benefits are available. Such tax benefits include an exemption from corporate tax on undistributed incomegenerated by the Beneficiary Enterprise for a period of between two to ten years, depending on the geographic location of the Beneficiary Enterprise in Israel, and a reduced corporate tax rate ofbetween 10% to 25% for the remainder of the benefits period, depending on the level of foreign investment in the company in each year if it is a qualified FIC, as explained above. The benefitsperiod is limited to 12 or 14 years from the year the company first chose to have the tax benefits apply, depending on the location in Israel of the Beneficiary Enterprise.A company qualifying for tax benefits under the 2005 Amendment which pays a dividend out of income derived by its Beneficiary Enterprise during the tax exemption period will besubject to corporate tax in respect of the amount of the dividend distributed (grossed-up to reflect the pre-tax income that it would have had to earn in order to distribute the dividend) at thecorporate tax rate which would have otherwise been applicable if such income had not been tax-exempted. Dividends paid out of income attributed to a Beneficiary Enterprise (or out of dividendsreceived from a company whose income is attributed to a Beneficiary Enterprise) are generally subject to withholding tax at source at the rate of 15% or such lower rate as may be provided in anapplicable tax treaty (subject to the receipt in advance of a valid certificate from the Israel Tax Authority allowing for a reduced tax rate). The 15% tax rate is limited to dividends and distributionsout of income attributed to a Beneficiary Enterprise during the benefits period and actually paid at any time up to 12 years thereafter. After this period, the withholding tax is applied at a rate of upto 30%, or at such lower rate under an applicable tax treaty (subject to the receipt in advance of a valid certificate from the Israel Tax Authority allowing for a reduced tax rate). In the case of anFIC, the 12-year limitation on reduced withholding tax on dividends does not apply.The benefits available to a Beneficiary Enterprise are subject to the continued fulfillment of conditions stipulated in the Investment Law and its regulations. If a company does not meetthese conditions, it would be required to refund the amount of tax benefits, as adjusted by the Israeli consumer price index, and interest, or other monetary penalties.On October 24, 2010, we received a tax ruling from the Israel Tax Authority, according to which, among other things, our activity has been qualified as an “industrial activity”, as definedin the Investment Law and is also eligible to tax benefits as a Beneficiary Enterprise, which will apply to the turnover attributed to such enterprise. The benefits available to us under this tax rulingare subject to the fulfillment of conditions stipulated in the ruling. If we do not meet these conditions, the ruling may be abolished which would result in adverse tax consequences to us.Tax Benefits Under the 2011 AmendmentThe 2011 Amendment canceled the availability of the benefits granted to companies in accordance with the provisions of the Investment Law prior to 2011 and, instead, introduced newbenefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined in the Investment Law) as of January 1, 2011. The definition of a PreferredCompany includes a company incorporated in Israel that is not wholly-owned by a governmental entity, and that has, among other things, Preferred Enterprise status and is controlled andmanaged from Israel. Pursuant to the 2011 Amendment, a Preferred Company is entitled to a reduced corporate tax rate of 15% with respect to its preferred income derived by its PreferredEnterprise in 2011 and 2012, unless the Preferred Enterprise is located in a specified development zone, in which case the rate will be 10%. Such corporate tax rates were reduced from 15% and 10%for non-specified and specified development zones to 12.5% and 7%, respectively, in 2013 and then increased to 16% and 9% in 2014 and 2015 through 2016, respectively. Pursuant to the 2017Amendment, in 2017 and thereafter, the corporate tax rate for a Preferred Enterprise located in a specified development zone was decreased to 7.5%, while the reduced corporate tax rate for otherdevelopment zones remains 16%. Our facilities are not located in a specified development zone.61Dividends paid out of preferred income attributed to a Preferred Enterprise are generally subject to withholding tax at source at the rate of 20% or such lower rate as may be provided inan applicable tax treaty (subject to the receipt in advance of a valid certificate from the Israel Tax Authority allowing for a reduced tax rate). However, if such dividends are paid to an Israelicompany, no tax is required to be withheld (however, if such dividends are subsequently distributed to individuals or non-Israeli company withholding tax at a rate of 20% or such lower rate asmay be provided in an applicable tax treaty, will apply (subject to the receipt in advance of a valid certificate from the Israel Tax Authority allowing for a reduced tax rate)). The 2011 Amendmentalso provided transitional provisions to address companies already enjoying existing tax benefits under the Investment Law. These transitional provisions provide, among other things, thatunless an irrevocable request is made to apply the provisions of the Investment Law as amended in 2011 with respect to income to be derived as of January 1, 2011: (i) the terms and benefitsincluded in any certificate of approval that was granted to an Approved Enterprise which chose to receive grants and certain tax benefits under the Grant Track before the 2011 Amendmentbecame effective will remain subject to the provisions of the Investment Law as in effect on the date of such approval, and subject to certain conditions; (ii) the terms and benefits included in anycertificate of approval that was granted to an Approved Enterprise under the Alternative Track before the 2011 Amendment became effective will remain subject to the provisions of theInvestment Law as in effect on the date of such approval, provided that certain conditions are met; and (iii) a Beneficiary Enterprise can elect to continue to benefit from the benefits provided to itbefore the 2011 Amendment came into effect, provided that certain conditions are met.We have reviewed and evaluated the implications and effect of the benefits under the 2011 Amendment, and, while potentially eligible for such benefits, we have not yet chosen to besubject to the tax benefits introduced by the 2011 Amendment.New Tax benefits under the 2017 AmendmentThe 2017 Amendment was enacted as part of the Economic Efficiency Law that was published on December 29, 2016, and is effective as of January 1, 2017, subject to the publication ofregulations expected to be released before March 31, 2017. The 2017 Amendment provides new tax benefits for two types of “Technology Enterprises”, as described below, and is in addition tothe other existing tax beneficial programs under the Investment Law. The 2017 Amendment provides that a technology company satisfying certain conditions will qualify as a “Preferred Technology Enterprise” and will therefore enjoy a reduced corporatetax rate of 12% on income that qualifies as “Preferred Technology Income”, as defined in the Investment Law. The tax rate is further reduced to 7.5% for a Preferred Technology Enterprise locatedin development zone A. In addition, a Preferred Technology Company will enjoy a reduced corporate tax rate of 12% on capital gain derived from the sale of certain “Benefitted Intangible Assets”(as defined in the Investment Law) to a related foreign company if the Benefitted Intangible Assets were acquired from a foreign company on or after January 1, 2017 for at least NIS 200 million,and the sale receives prior approval from the National Authority for Technological Innovation (referred to as OCS). The 2017 Amendment further provides that a technology company satisfying certain conditions will qualify as a “Special Preferred Technology Enterprise” and will therefore enjoy areduced corporate tax rate of 6% on “Preferred Technology Income” regardless of the company’s geographic location within Israel. In addition, a Special Preferred Technology Enterprise willenjoy a reduced corporate tax rate of 6% on capital gain derived from the sale of certain “Benefitted Intangible Assets” to a related foreign company if the Benefitted Intangible Assets were eitherdeveloped by an Israeli company or acquired from a foreign company on or after January 1, 2017, and the sale received prior approval from OCS. A Special Preferred Technology Enterprise thatacquires Benefitted Intangible Assets from a foreign company for more than NIS 500 million will be eligible for these benefits for at least ten years, subject to certain approvals as specified in theInvestment Law. Dividends distributed by a Preferred Technology Enterprise or a Special Preferred Technology Enterprise, paid out of Preferred Technology Income, are subject to withholding of tax atsource at the rate of 20%, and if distributed to a foreign company and other conditions are met, the tax withholding rate will be 4%. We are examining the impact of the 2017 Amendment and the degree to which we will qualify as a Preferred Technology Enterprise or Special Preferred Technology Enterprise, and theamount of Preferred Technology Income that we may have, or other benefits that we may receive from the 2017 Amendment.From time to time, the Israeli government has discussed reducing the benefits available to companies under the Investment Law. The termination or substantial reduction of any of thebenefits available under the Investment Law could materially increase our tax liabilities.62B. Liquidity and Capital ResourcesOur working capital requirements generally reflect the growth in our business and have historically been provided by cash raised from our investors, payments from our collaboratorsand government grants. As of December 31, 2016, we had cash, marketable securities and short term bank deposits of $88.2 million and working capital of $84.3 million, which is calculated bysubtracting our current liabilities from our current assets. As of December 31, 2016, we had $3.4 million of outstanding indebtedness related to government grants. We expect that our workingcapital and capital investment needs will be funded for the foreseeable future mainly by our cash and cash equivalents, marketable securities and bank deposits we hold as well as from paymentsfrom our collaborators. Currently, our principal uses of cash are to fund our operations. In the future, cash may serve us in effecting M&A transactions for achieving inorganic growth in ourdifferent segments of operation. We believe that our existing cash and cash equivalents, marketable securities and short-term bank deposits as of December 31, 2016 will be sufficient to meet ourprojected cash requirements for at least 12 months.Additional funds may not be available when we need them on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timely basis, we may be required todelay, limit, scale back or cease our research and development activities, establishment and maintenance of sales and marketing capabilities or other activities that may be necessary tocommercialize our product candidates.Cash FlowsThe following table presents the major components of net cash flows used in and provided by operating, investing and financing activities for the periods presented: Year Ended December 31, 2014 2015 2016 (in thousands) Net cash used in operating activities $(8,895) $(12,407) $(11,693)Net cash provided by (used in) investing activities (84,030) 17,387 4,028 Net cash provided by financing activities 2,666 45 655 Exchange rate differences - cash and cash equivalents 18 (17) 25 Net increase (decrease) in cash and cash equivalents $(90,241) $5,008 $(6,985)Cash Used in Operating ActivitiesCash used in operating activities for the year ended December 31, 2016 was $11.7 million and resulted primarily from a net loss of $19.6 million, net financing income of $1.7 million, adecrease of $0.5 million in trade and other payables, partially offset by $2.9 million in share-based compensation expenses, a net decrease of $2.4 million in trade and other receivables, $2.3 millionin depreciation and amortization expenses and by $2.4 million in interest received during the year ended December 31, 2016. Cash used in operating activities decreased by $0.7 million in 2016 compared to 2015. Net cash used in operating activities for the year ended December 31, 2015 was $12.4 million andresulted primarily from a net loss of $17.2 million, an increase of $1.8 million in trade and other receivables, a decrease of $1.1 million in deferred revenues, a decrease of $0.7 million in trade andother payables and net financing income of $0.8 million, partially offset by $4.4 million in share-based compensation expenses, $2.4 million in depreciation and amortization expenses and by $2.7million in interest received during the year ended December 31, 2015. Cash used in operating activities increased by $3.5 million in 2015 compared to 2014. Net cash used in operating activities was $8.9 million for the year ended December 31, 2014 whichwas derived primarily from a net loss of $14.5 million, a decrease of $1.2 million in trade payables and other payables, a decrease of $0.6 million in deferred revenues, and net financing income of$0.9 million, partially offset by $3.2 million in share-based compensation expenses, $2.2 million in depreciation and amortization expenses, a decrease in trade and other receivables of $0.8 millionand by $2.0 million in interest received during the year ended December 31, 2014.Cash Provided by (Used in) Investing ActivitiesCash provided by investing activities was $4 million for the year ended December 31, 2016. This was primarily attributable to withdrawal of bank deposits, partially offset by netpurchases of marketable securities and purchases of property, plant and equipment.63Cash provided by investing activities was $17.4 million for the year ended December 31, 2015. This was primarily attributable to the net proceeds from sale of marketable securities andwithdrawal of bank deposits, partially offset by purchases of property, plant and equipment. Cash used in investing activities was $84 million for the year ended December 31, 2014. The cash useprimarily related to net purchases of marketable securities, investment in bank deposits and purchases of property, plant and equipment.Cash Provided by Financing ActivitiesCash provided by financing activities was $0.7 million for the year ended December 31, 2016. This was primarily attributable to proceeds from exercise of options and to net proceeds fromgovernment grants.Cash provided by financing activities was $45 thousand and $2.7 million for the years ended December 31, 2015 and 2014, respectively. In 2015, cash provided by financing activitiesresulted primarily from proceeds from exercise of options, partially offset by net repayment of government grants and in 2014, cash provided by financing activities resulted primarily fromproceeds from exercise of options.Government GrantsOur research and development efforts are financed, in part, through grants from OCS, BIRD, CIIRDF and EU. From our inception through 2016, we received grants totaling $6.2 million(including accrued interest) from OCS and repaid $3.2 million; we received grants totaling $0.8 million from BIRD and grants totaling $0.3 million from CIIRDF, which we have not yet repaid; andwe received grants totaling $0.3 million from EU, which are not required to be repaid. As of December 31, 2016, we had three active research grants under which we received funding: one fromeach of the OCS, BIRD and EU.Under the Israeli R&D Law, royalties on the revenues derived from sales of products or services developed in whole or in part using grants from OCS are due to the Israeli government,generally at a rate between 3.0% and 5.0%. The rate of the royalties payable to the Israeli government varies by the length of time a product has generated sales revenues. During the first threeyears of sales of products developed as a result of OCS grants, we are required to pay royalties of 3.0% of our revenues, and from the fourth year on, we are required to pay royalties of 3.5% ofour revenues, in all cases, up to 100% of the amount of grants received by us from OCS plus interest at the London Interbank Offered Rate, or LIBOR. In addition to paying any royalty due, wemust abide by other restrictions associated with receiving such grants under the R&D Law. These restrictions may impair our ability to outsource development of products containing our traits,engage in change of control transactions or otherwise transfer our know-how outside Israel and may require us to obtain the approval from OCS for certain actions and transactions and payadditional royalties and other amounts to OCS.We have two BIRD grants: (i) a joint development program with DuPont of research and development improvements to soybean rust resistance (ii) a joint research and developmentprogram with Marrone Bio Innovations, or MBI, for discovery of novel modes of biological action for insect control.Under these two BIRD programs, the grant for the joint development will be repaid either (a) if we and our partner have concluded the development of a product within the period ofdevelopment or if within 66 months, in the case of our program with DuPont, or 60 months, in the case of our program with MBI, from the original grant date, the parties to the developmentprogram did not conclude the development of a product but decide to continue the project, (b) through royalties from the revenues received for the licensing products developed through theproject (c) through royalties from the revenues generated from sales of products developed through the project or (d) through proceeds received from the outright sale of the technologydeveloped through the project, in an amount of up to 150% of the total grant received.The CIIRDF grant was also provided as part of a previous joint project of ours with Saskatchewan Wheat Pool Inc., operating under the name of Viterra, to develop canola with improvedyield and abiotic stress tolerance. This grant will be repaid from income resulting from the commercialization of a product developed pursuant to the grant project, at a rate of 2.5% of royalties onsales of such product, in an amount up to 100% of the total grant received. Alternatively, we may repay the grant as royalties of 2.5% of the income we receive from licensing the productdeveloped pursuant to the grant. Payment of such royalties is not required if commercial revenues are not generated as a result of the project.In early 2016, a grant application for a consortium for research in photosynthesis in which we participate within the EU Horizon 2020 Program for Research and Innovation was confirmed.The consortium's research program is focused on an innovative approach to modulate photosynthesis related pathways aiming to improve photosynthetic efficiency. Beyond us, the consortiumincludes academic institutions such as the Max Planck Institute of Molecular Plant Physiology and the Institute of Terrestrial Microbiology, the Weizmann Institute of Science, and the ImperialCollege of Science, Technology and Medicine. We will receive €0.9 million for our participation in the consortium during the five-year project. 64See "Item 3.D. Risk Factors—Risks Relating to Our Incorporation and Location in Israel—We have received Israeli government grants for certain of our research and developmentactivities. The terms of these grants may require us to satisfy specified conditions in order to manufacture products and transfer technologies supported by such grants outside of Israel. We maybe required to pay penalties in addition to repayment of the grants." C. Research and Development, Patents and Licenses, etc.Technology InfrastructureWe believe that we have achieved a unique position in the seeds, ag-biologicals and ag-chemicals industry through our ability to effectively integrate and analyze massive amount ofcomplex agricultural ‘big data’ aimed at improving crop productivity. Our technology infrastructure facilitates all of our product-driven operations: seed traits, ag-chemicals, ag-biologicals, andseeds. This infrastructure, which is highly flexible and synergistic, provides us with means of integrating our genomics core competencies. Specifically, our technology infrastructure is comprisedof four enablers that are key to our leading position in utilizing big data to improve plant performance: (i) scientific know-how and expertise in various relevant fields, such as plant science, ag-chemicals, and plant diseases, continuously enriched through advances in our discovery programs; (ii) vast amounts of data generated in-house or collected from public sources, tailored tosupport hypotheses we develop based on our scientific know-how; (iii) computational technologies that integrate, assemble and mine the vast amount of genomic, chemical and microbial data;and (iv) validation systems and assays in various plants and insects as well as screening systems for chemicals, used to validate the discoveries made through our computational technologies.We continuously strive to improve and expand our technological capabilities. Since our initiation in 2002, we believe that we have developed valuable computational technologiescontaining unique features that cannot be found elsewhere in our industry. We intend to continue investing in our research capabilities in order to expand our technological capabilities ingenomics, chemistry and microbiology to continue to provide innovative solutions for our collaborators.Science and Know-howAs of December 31, 2016, our research and development activities involve 140 employees amounting to approximately 76% of our total full-time workforce. Our staff possessesmultidisciplinary and wide-ranging expertise, with employees specializing in biology, chemistry, plant genetics, agronomics, mathematics, computer science and other related fields and 53 of ouremployees hold a Ph.D.Our main physical research and development facilities are located near the agricultural and biotech hub in Rehovot, Israel, and we benefit from continuing professional relationships withmembers of the agriculture and plant-science academy. In February 2015, we announced the establishment of our U.S. R&D site at the Bio-Research and Development Growth (BRDG) Park on thecampus of the Donald Danforth Plant Science Center in in St. Louis, Missouri, initially focusing on validation of genes discovered under our insect control program.Furthermore, we employ a Scientific Advisory Board composed of representatives from the Faculty of Agriculture of the Hebrew University in Jerusalem, the Weizmann Institute ofScience in Rehovot and other global academia institutions, as well as experienced scientists from the industry.Our research and development team is constructed under a matrix organization structure. Teams in our first R&D group are part of our product divisions and manage our discoveryprograms that focus on identifying genes and other genetic elements, chemical compounds, or microbial pursuant to our various product programs, whether under collaboration agreements or aspart of our internal independent research projects. Researchers in this group develop the hypotheses that guide our discovery programs, design the type and scope of genomic data generation,determine data-mining queries run on our computational technologies and decide the type of model plant validation to be used. Our second R&D group is an across company group that isresponsible to execute our discovery programs and to develop our new technological infrastructure. Researchers in this group develop and activate our technological systems, includingcomputational data integration and mining programs, our technologies to harvest genomic, chemical and phenotypic data, gene cloning and insertion into plants, and multiple validation andscreen pipelines.65We are constantly improving our scientific skill set and know-how. As we enter into new fields of operations and new product programs, we are able to leverage our existing know-howand enrich our genomic knowledge and capabilities.Computational TechnologiesOur computational technologies, utilized for data integration and analysis, are comprised of two main proprietary components: i) our databases generated via data integration capabilitiesand ii) our computational analysis platforms, utilized to mine these databases within our on-going activities.Proprietary DatabasesIn 2015, we expanded our database scope and data integration capabilities to leverage other sources and types of "big data" in order to support our growth activities; our insect andfungi resistance activity, focused on microbial genes as the potential source for novel resistance traits, discovery of microbial genes for our ag-biologicals activity, as well as our activity in thefield of ag-chemicals. As crop productivity is affected by the plant's surroundings, including broad, diverse microbial populations, underlining genomics are now becoming readily available. Inaddition, in search of new ag-chemicals to serve agricultural needs, initial steps towards mapping of the huge space of chemical data are taking place. We therefore added genes from microbial sources to our genomic database, which was previously comprised mainly of plant genes. We also established a chemical database to supportour ag-chemical activity. The genomic and chemical databases are integrated, enabling us to leverage data of interactions between genomic elements and chemicals. In addition, we are now in thecourse of developing an additional database, dedicated to microbial strains. This microbial database will support our insect resistance activity as well as our activity s for the discovery anddevelopment of ag-biological products. In addition, we continuously pursue and develop innovative approaches to data transmission and storage.Our databases draw in part on the public domain (primarily from academic institutions and research publications), and in part compile increasing amounts of proprietary data, generatedeither in-house or received from our collaborators.Our current database framework consists of the following:§Our genomic database is structured as gene centric, linking all available data relevant to a gene in a single assembled database. It covers over 16 million genes from more than 200 plantspecies, and accounts for various data types, including phenotypic (i.e., data related to a plant’s observable characteristics, morphology, development and physiological properties) andgenotypic (i.e., data from the molecular level, derived from DNA, RNA or other sources). During 2015 and 2016, we added genes from microbial sources to our genomic database, aiming atleveraging these novel genes for our insect and fungi resistance activity. Currently incorporating microbial genomics from public sources, we have over 42 million microbial genes in ourdatabase. To further broaden the scope of our microbial gene database to include novel genetic material, a pipeline for assembling gene models from samples containing bacterialpopulations, or metagenomics, was established. During 2015 and 2016, using our metagenomics pipeline, we have unveiled millions of genes, some of which have never been observed todate, as well as a multitude of bacteria never previously cultured. Altogether, the genomic database, including both its plant genes and newly added microbial genes, is continuouslyexpanded to support on-going activities, with accumulating, tailored data generated from our in-house field trials, as well as any newly available information from the public domain.§Our chemical database is structured as molecule centric, covering broad chemical collections, derived from publicly available sources of synthetic and natural chemistry. This databasecurrently comprises over 150 million chemicals, integrating multiple layers of data describing the chemicals' properties. Focus is attributed to the chemicals' potential activity foragricultural usage as ag-chemicals. This database, along with its integration to our genomic database, serves our on-going ag-chemical activity, supporting our discovery of novelchemicals to potentially serve as herbicides. The chemical database will continue to expand with data generated from in-house dedicated experiments, as well as incorporation of availablepublic data.66§Microbial strain database – In 2016, we continued to develop a third database, which is structured as microbial strain centric. The database comprises data on microbial strains isolatedfrom plant surroundings. We have already established a preliminary collection of several thousands of microbials, which have been isolated, and are undergoing initial characterization.This will serve our insect resistant activity, as well as potential other activities in the future.Overall, using field trials and advanced technologies for the collection and integration of different data types, we intend to continue developing and expanding our proprietary databases.We focus in particular on continuing to compile data from microbial genomics for our genomic databases, and chemical data for our chemical database.Computational Analysis PlatformsWe have developed advanced proprietary computational analysis platforms, comprised of novel algorithms and methodologies designed to handle immense amounts of data. Forexample, our ATHLETE™ technology mines genomic data on millions of genes, resulting in tens to hundreds of genes that we are able to predict will be “key” genes for improving a desired trait.The analysis platforms are utilized through mining of our databases through hundreds of queries that utilize various methodologies and algorithms.We believe the key features of our computational analysis platforms are:§Novel: Substantially all of the methodologies and tools utilized by our computational analysis platforms were developed in-house and are proprietary and unique in the industry.§Reliable: We apply our methodologies and statistical tools to meaningfully sort the data we receive and have quality assurance processes to ensure the reliability of the outputs wegenerate.§Flexible: Our computational analysis platforms are not restricted to a certain crop or trait, and thus permit us to continuously focus on new crops and traits and enter new fields in plantgenomics that foster product innovation.§Learning: As we generate new information related to our discovery efforts and validation results, we incorporate novel insights in order to improve the performance of our computationalanalysis platforms and generate new computational solutions. We also continuously monitor and improve the performance of our existing tools and expand our capabilities.§Efficient: In our experience, in most cases, a period of only six to nine months is required to complete the discovery process for “key” genes or other DNA fragments.We intend to continue improving our existing computational analysis platforms through novel methodologies and enhanced algorithms and developing new technologies, allowing us toaddress new fields, within plant genomics and beyond, in light of the arising needs of seed and ag-chemical industry pipelines. Where appropriate, we may also enter agreements with third partiesto bolster our technological capabilities.Currently, we operate and develop the following computational analysis platforms:ATHLETE™The ATHLETE™ computational analysis platform was launched in 2006 and is our central computational analysis platform for plant gene identification, comprised of unique algorithmictools and novel data-mining concepts that allow generation of rapid and reliable lists of genes relevant to a target trait.Using this technology, we are able to capture and dissect vast amounts of genomic data types from various plant species and other species and engage in the efficient discovery andprioritization of hundreds of genes linked to desired traits. Fundamentally, ATHLETE™ relies on statistical analysis and biological rationales to determine whether a certain gene is linked to adesired plant trait, facilitating the use of the gene to develop biotech-based traits. This technology mines our genomic, gene centric database, including the available information on the gene’sbiological activity, its molecular characteristics, and any available correlation between the gene’s phenotype and its activity in the molecular level, as well as the same type of information forsimilar genes in other plant species. Through hundreds of queries, the system is able to prioritize the genes linked to a desired trait. ATHLETE™ is one of our most versatile technological tools aswell; we apply this tool to different traits and crops, all according to the needs of our various internal programs and collaboration agreements.67ATHLETE™ is the computational analysis platform used in most of our collaborations, including our broad, multi-year collaborations with Monsanto and Bayer. Though our ATHLETE™technology is already capable of cutting-edge data processing and analysis, we are continuing to make improvements and introduce new features to this technology, creating a faster and moreefficient analytical tool. We have improved various aspects of ATHLETE™ since the launch of the analysis platform in 2006, including the development of new gene network based algorithms forthe discovery of genes for a given trait.Gene2Product™The Gene2Product™ analysis platform was launched in 2013, although components of the platform have been used since 2010. Gene2Product™ is a unique computational analysisplatform to develop biotechnology seed traits by high throughput optimization of a selected gene function in a target crop (which we refer to as “mode of use”). This technology complements ourATHLETE™ platform: efficacy of a gene depends not only on the presence or absence of the gene of interest, which is determined by ATHLETE™, but also on the optimization of the gene withother factors related to the mode of use of such gene, which is determined by Gene2Product™. Such factors include the choice of gene variant for the crop of interest, the interaction of the genewith other genes, the tissues in which the gene is expressed, the level and/or pattern of expression of the gene and the gene’s performance under changing environmental conditions.Gene2Product™ is designed to improve trait efficacy for certain genes identified (for example by ATHLETE™) through the following tools:§PlaNet (Plant Network), which its 2.0 version was launched on March 2014, is aimed at improving trait efficacy when approaching complex traits, such as yield, by predicting appropriatecombinations of the identified gene with additional genes, designed to jointly impact the trait when combined, and prioritize possible combinations with respect to their ability to improvea given trait;§PlaNet Next Generation, launched in January 2015, is a gene network based algorithm for the discovery of gene groups predicted to improve a given trait, aiming at predicting appropriatecombinations of genes that will jointly impact the trait when combined.§GeneSpec (Gene Spectrum), which selects the preferred variants of a selected gene of interest for the crop of interest by identifying and classifying up to 1,000 possible variants per genethrough the use of novel algorithms, according to sequence-function and other relationships;§RePack (Regulation Package), which predicts the regulation mode for the selected gene that will provide the optimal expression pattern, including predicting where in the plant theexpression would be beneficial and where it would be undesired in respect of tissue, organ, timing, level of expression and other aspects that can impact trait efficacy; and§GeneDex (Gene Index), which predicts functional robustness of the selected gene across different genetic backgrounds and environmental conditions, providing multiple relative indexscores for each gene predicting such gene’s contributions with respect to each trait of interest across different combinations of such variables.EvoBreed™The EvoBreed™ computational analysis platform was launched in 2010. EvoBreed™ is our technology for discovery of SNPs, to enhance advanced plant breeding, designed to offerreliable correlations between genetic data and plant phenotype. A SNP is a single-nucleotide polymorphism, which is essentially a DNA sequence variation that occurs when a single nucleotide, abasic gene “building block,” varies from one DNA sequence to another. Like ATHLETE™, EvoBreed™ specializes in comprehensive cross analysis, tapping into the extensive genomic datasetswe have collected. The result is a prediction of SNP-to-trait association. The ultimate purpose of EvoBreed™ is to enable plant breeders to design optimal crosses between breeds, enhancing adesired trait or set of traits, allowing for logical and insightful breeding decisions, to accelerate and correct the breeding process from start to end.68PoinTarWe developed a computational analysis platform for our ag-chemical division, PoinTar, which we launched on February 2014. This technology specializes in the identification of planttargets (proteins) for development of ag-chemicals such as herbicides, and examines data aimed to indicate the potential impact that a target, when inhibited, would have on a weed. Both our genecentric database and its integrated chemical-centric database are mined by PoinTar to achieve this goal. In addition to incorporating tools available in ATHLETE™, through dedicated toolsdeveloped to address the specific needs and considerations related to herbicide target identification, PoinTar addresses the structural characteristics of a target in order to predict the target’slikelihood of binding to a small chemical molecule for use as a herbicide.PointHitPointHit, launched in 2015, is a computational analysis platform for identifying chemical molecules that are predicted to be potential ag-chemicals, currently focusing on herbicideapplications. This analysis platform leverages biological rationale, discovering chemical molecules by optimizing between three key considerations: i) predicted binding to plant molecular targets,discovered by PoinTar, ii) potential for ag-activity, namely probability to be absorbed by the plant and transported within the plant to reach the molecular target within the plant, and iii)compliance with product desired attributes such as low cost of production, low toxicity and others. Overall, relying on 'big data' computational approaches, the PointHit platform is capable ofprioritizing tens of millions of chemicals to a selected library of candidate herbicide hits. The designed libraries will then be screened on plants in order to validate which of the candidatechemicals indeed exhibit herbicidal activity.BiomeMinerIn 2015 we launched a computational analysis platform for identifying microbial insecticidal toxins, i.e. microbial genes that can be specifically toxic to insects that lead to substantial cropdamage. This unique computational technology platform consists of a newly developed vast proprietary microbial-based gene centric database, the underlying data assembly pipelines, as well asa dedicated analysis platform, BiomeMiner. The BiomeMiner platform utilizes advance machine learning methods in order to identify toxins with novel modes of action in order to overcome therising resistance to current products’ modes of action. In August 2015, we announced the achievement of a key milestone in our insect control program with the successful completion of the firstcomputational discovery round for microbial genes with insecticidal properties using this platform.Amounts Spent on Research and DevelopmentFor information concerning the amounts that we spent on research and development activities in each of the last three years, please see the table at the start of “Item 5.A. OperatingResults— Comparison of Period-to-Period Results of Operations” above.D. Trend InformationThe world market experienced a decrease in commodity prices in 2014 (one example of such decrease is corn prices which decreased from around US$7 per bushel in mid-2013 to less thanUS$4 per bushel in late 2014 and maintained that level throughout 2015 and 2016).Commencing in 2015 and continued throughout 2016, the seeds and ag-chemicals markets, which are highly consolidated and dominated by a relatively small number of large companies,have undergone further consolidation. Bayer is in the process of acquiring Monsanto to form the largest player in our industry, Dow and DuPont are in the process of merging and Syngenta is inthe process of being acquired by ChemChina. These mergers may further limit the number of potential collaborators available for us to partner with. Due to the small number of companies in ourmarket, there are limited opportunities for us to grow our business with new collaborators. For further information, please see “Item 3.D Risk Factors—Risks Related to our Business and Industry—There are only a few companies in our seed and ag-chemical market, and we rely on a limited number of collaborators to develop and commercialize products containing our seed traits and ag-chemicals.”These trends may adversely impact the size of research and development expenditures of our existing and potential collaborators, which may, in turn, adversely impact the size of theresearch payments that we may receive, as well as our ability to extend existing collaborations or enter into new ones. For further information, please see "Item 3.D Risk Factors—Risks Related toour Business and Industry—A decrease in research expenditures in the seed, ag-chemicals and ag-biologicals markets may jeopardize the continuation, or scope, of our collaborations with seed, and ag-chemicals and ag-biologicals companies and adversely impact our ability to continue or extend existing collaborations or enter into new collaborations on favorable financial terms."69Name Age PositionExecutive officers Ofer Haviv 50 President and Chief Executive OfficerYuval Ben-Galim 44 Chief Operations OfficerIdo Dor 41 Executive Vice President & General Manager Crop EnhancementDr. Hagai Karchi 55 Chief Technology Officer & Head of R&D Crop EnhancementEran Kosover 40 Executive Vice President & General Manager Crop ProtectionAlex Taskar 51 Chief Financial Officer Directors Martin S. Gerstel(3)(4) 75 Chairman of the BoardSarit Firon(1)(2)(4) 50 DirectorZiv Kop(1)(3)(4) 45 DirectorDr. Adina Makover(2)(4) 64 DirectorLeon Y. Recanati(3)(4) 67 DirectorDr. Kinneret Livnat Savitsky(1)(2)(3) 49 DirectorOther than as described immediately above or disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the periodfrom January 1, 2016 to December 31, 2016 that are reasonably likely to have a material adverse effect on our net revenue, income, profitability, liquidity or capital resources, or that caused thedisclosed financial information to be not necessarily indicative of future operating results or financial condition.E. Off-Balance Sheet ArrangementsWe do not currently engage in off-balance sheet financing arrangements. In addition, we do not have any interest in entities referred to as variable interest entities, which includesspecial purpose entities and other structured finance entities.F. Contractual ObligationsOur significant contractual obligations and commitments as of December 31, 2016 are summarized in the following table: Less than 1 year 1-3 years 3-5 years More than 5 years Total (in thousands, unaudited) Trade payables $1,330 $- $- $- $1,330 Other payables(1) 2,803 - - - 2,803 Liabilities in respect of government grants (undiscounted)(2) 179 1,225 1,079 1,576 4,059 Non-cancellable operating leases(3) 876 1,079 553 - 2,508 Total $5,188 $2,304 $1,632 $1,576 $10,700 _______________________________ (1)Consists of liabilities to employees for salaries and payroll accruals, liabilities to government authorities and accrued expenses. (2)Consists of the projected repayments of government grants that partly fund our research and development activities. (3)Consists of non-cancellable operating leases of our offices, laboratory facilities, greenhouses and motor vehicles.ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEESA. Directors and Senior ManagementThe following table sets forth the name, age and position of each of our executive officers and directors as of the date of this annual report. ____________________________ (1)Member of our Audit Committee. (2)Member of our Compensation and Nominating Committee. (3)Member of our Corporate Development Committee. (4)Independent director under the Nasdaq Listing Rules.70Executive OfficersOfer Haviv has served as Evogene's President and Chief Executive Officer since December 2004 after having joined the company in January 2002 as Chief Financial Officer. Mr. Havivserves as Chairman of the Board of Directors of both the subsidiaries: Evogene Inc. and Evofuel Ltd., and has held such positions since 2006 and 2012, respectively. From 2006 to 2007, Mr. Havivserved as a director of the company. Mr. Haviv is a Certified Public Accountant and holds a BA in Accounting and Economics from Tel Aviv University.Alex Taskar joined Evogene in January 2017 as CFO. Prior to joining Evogene Mr. Taskar served in various senior managerial positions, including CFO of Mercury Interactive Israel, CFOof Orsus Solutions and various COO and CFO positions in several Industrial and Start-up companies. Mr. Taskar holds an M.A. in Economics and a BA in Accounting and Economics, both fromTel-Aviv University. Mr. Taskar is also a Certified Public Accountant in Israel.Yuval Ben-Galim has served as Chief Operating Officer, responsible for the overall management of Evogene's Technology Infrastructure, since September 2016. Prior to joining ourcompany, from June 2015 to September 2016 he served as Chief Product Development at Como, a company specializing in consumer loyalty management through mobile apps. Prior to this, from2011 to 2015, Mr. Ben-Galim served as COO at MyHeritage, responsible for the global operations of a world leading family history company. Previously held positions by Mr. Ben-Galim includevarious operation and software R&D experience. Mr. Ben-Galim holds an M.Sc. in Computer Science and a B.Sc. in Computer Science and Business Management from The Hebrew University ofJerusalem.Ido Dor has served as Executive Vice President & General Manager Crop Enhancement since November 2015, responsible for the overall management of the Crop Enhancement division.Mr. Dor joined Evogene in 2011 as a Director of Business Development and led the business activity of the Ag-Chemicals division. In 2015, Mr. Dor was appointed to lead Evogene’s AgBiologicals activity, overseeing research, development and business aspects. Prior to joining Evogene, Mr. Dor headed the Small & Mid-Size Enterprise business unit at the Israeli branch of SAP,the world leading organizational software company. Prior to his role at SAP Israel, Mr. Dor led a business unit at Niram Gitan Group, a leading Israeli management-consulting firm. Mr. Dor holds anM.B.A. and a BSc in Industrial Engineering - both from Tel Aviv University.Dr. Hagai Karchi has served as Chief Technology Officer & Head of R&D Crop Enhancement since November 2015. Dr. Karchi joined Evogene from its establishment in January 2002 asone of its founders, and has served as Company's Executive Vice President of Development and Chief Technology Officer since September 2008. Dr. Karchi also serves as a director of Evogene'ssubsidiary, Evogene Inc., since September 2006. Dr. Karchi holds a PhD in Plant Genetics and Genomics, earned jointly from the Weizmann Institute of Science and the Hebrew University ofJerusalem, and an MA and BA in Plant Genetics, both from the Hebrew University of Jerusalem.Eran Kosover has served as Executive Vice President & General Manager Crop Protection since November 2015, responsible for the overall management of the Crop Protection division.Prior to that, Mr. Kosover served as Evogene’s VP Project Management since April 2014, responsible for managing all company collaborations and internal projects. Between January 2009 andMay 2011 Mr. Kosover served as a Business Development Manager. Prior to joining the company, Mr. Kosover was in charge of Sales, Business Development and Operations in Atera Networks,an Israeli Hi-tech start-up in the field of SMB IT. Prior to Atera, Mr. Kosover worked as a Project Manager in various strategic consulting projects for Teva Pharmaceuticals (mainly Teva EUdivision). Mr. Kosover holds an M.A. in Economics and a B.A. in Economics and Management, both from the Tel Aviv University.71DirectorsMartin S. Gerstel has served as our chairman of the board of directors since December 2004 and as a director since February 2004. In addition, Mr. Gerstel has served as the chairman ofCompugen Ltd., a predictive drug discovery and development company, since 1997, other than from February 2009 to February 2010, during which time he served as either chief executive officeror co-chief executive officer, and, in both cases, as a member of the board of directors, chairman of Keddem Bioscience Ltd., a drug discovery company, since 2004, co-founder and co-chairman ofItamar Medical Ltd., a medical device company, since 1997. In addition, Mr. Gerstel has been a board member of Yeda Ltd., the technology transfer company of the Weizmann Institute of Science,since 1994 and a board member of Yissum Ltd., the technology transfer company of the Hebrew University, from 2003 to 2015. He is a member of the board of governors and the executivecommittee of the Weizmann Institute of Science and the board of governors of The Hebrew University of Jerusalem. Prior to relocating to Israel, Mr. Gerstel was co-chairman and chief executiveofficer of ALZA Corporation, a U.S. pharmaceutical company specializing in advanced drug delivery, which he helped to found in 1968. Mr. Gerstel holds a B.S. from Yale University and an M.B.A.from Stanford University.Sarit Firon has served as a director of our Company since she was appointed by the Board on August 10, 2016. Ms. Firon is the Managing Partner of Cerca Partners, a Venture Capital,co-investment fund. Previously, Ms. Firon was the Chief Executive Officer of Extreme Reality (XTR3D), a company that provides real time software-based, 3D motion capture technology, using asingle standard webcam. Prior to her role at Extreme Reality (XTR3D), Ms. Firon held roles as Chief Financial Officer at each of Kenshoo, MediaMind (NSDQ: MDMD, acquired by DG corp.),OLIVE SOFTWARE, P-CUBE (acquired by Cisco) and RADCOM, LTD. (NSDQ: RDCM). Ms. Firon serves as the Chairperson of myThings, a global leader in customized programmatic adsolutions, which runs personalized retargeting campaigns on desktop, mobile and Facebook, since July 2015. Ms. Firon also holds other board positions at DTORAMA, MediWound andProtected Media. Ms. Firon holds a Bachelor’s degree in accounting and economics, and a Diploma in Accounting Advanced Studies, both from Tel Aviv University. Ziv Kop has served as a director of our company since 2014. Mr. Kop also serves as a director of Outbrain Inc. and Outbrain LTD. Mr. Kop is a Partner at Marker LLC, an early and late stageventure capital firm. Mr. Kop has served as chief operating officer of Outbrain Inc. a web-based content discovery platform, from February 2014 to December 2015. Previously, and since itsinception in 2003 until June 2013, Mr. Kop was a Managing Partner at GlenRock Israel., a private equity investment firm, where he managed a portfolio of growth companies in the fields ofadvanced technologies and healthcare, and served on the board of more than ten private and public companies. Prior to his role at GlenRock, Mr. Kop served as Chief Executive Officer of POCManagement Consulting, a leading Israeli consultancy in the field of strategic planning. Mr. Kop holds an LL.B. and M.B.A. from Tel Aviv University Law School and Business School, and is agraduate of INSEAD’s Young Managers Program. Dr. Kinneret Livnat Savitsky has served as a director of our company since September 2010. Since 2010, Dr. Savitsky has served as the chief executive officer of BioLineRx Ltd., a drugdevelopment company. She also served on its board of directors from 2010 to 2011, and as its Vice President of Research and Development during 2004. From 2005 to 2009, she served as theGeneral Manager of BioLine Innovations Jerusalem Ltd., after having been employed by Compugen Ltd. from 1997 to 2004, where she last served as Vice President of Biology. Dr. Savitsky holds aB.Sc. in Biology from the Hebrew University in Jerusalem, as well as a M.Sc. in Biochemistry and a Ph.D. in Molecular Biology, both from Tel Aviv University, in Israel.Dr. Adina Makover has served as a director of our company since February 2003. Dr. Makover also serves as a diretor of the following companies: GeneGrafts Ltd., a biotechnologycompany, since 2006; Spine 21 Ltd., a medical device company, since 2008; EarlySense Ltd., a medical device company, since 2006; PerfAction Technologies Ltd., a medical device company, since2007; and Kadimastem, a medicine company in the field of stem cell-based therapeutics, since 2013. She has also served as a board observer at Argo Medical Ltd., a medical device company in therehabilitation field, since 2011. From 2006 to present, Dr. Makover has served as the investment manager of the Life Sciences ventures at ProSeed Venture Capital Fund Ltd. Dr. Makover holds aPh.D. in Life Sciences earned jointly from the Weizmann Institute of Science and Columbia University, and an M.B.A. from Bar-Ilan University. Leon Y. Recanati has served as a director of our company since May 2005. Mr. Recanati has served as chairman and chief executive officer of GlenRock Israel Ltd. since 2003. Previously,Mr. Recanati was chief executive officer and/or chairman of IDB Holding Corporation; Clal Industries Ltd.; Azorim Investment Development and Construction Co Ltd.; Delek Israel FuelCorporation; and Super-Sol Ltd. He also founded Clal Biotechnologies Industries Ltd., a biotechnology investment company operating in Israel. Mr. Recanati holds an M.B.A. degree from theHebrew University of Jerusalem and Honorary Doctorates from the Technion Institute of Technology and Tel Aviv University.72Arrangements for Election of Directors and Members of Management; Family RelationshipsThere are no arrangements or understandings with major shareholders, customers, suppliers or others related to the election of our board of directors or the appointment of members ofour senior management. There are furthermore no family relationships among any directors or members of our senior management.B. CompensationCompensation of Officers and DirectorsThe aggregate compensation, including non-cash share-based compensation (consisting of expenses related to option grants), accrued by us in respect of the year ended December 31,2016 to all persons who served as directors and/or executive officers during that year, was approximately $3.6 million. That amount includes approximately $1.7 million of gross compensation setaside or accrued for executive officers for purposes of pension, severance, retirement, car, phone or similar benefits or expenses, but does not include share based compensation, business travel,relocation, professional and business association dues and expenses reimbursed to executive officers, and other expenses commonly reimbursed by companies in Israel. During 2016 we grantedto our executive officers and directors an aggregate amount of 177,500 options at an average exercise price of NIS 26.48. All of such options will expire within ten (10) years from the date of grant.Our compensation for our executive officers is paid pursuant to employment agreements and is based, in part, on each executive officer’s personal contribution to our management,operations and success. Such compensation is determined consistent with our compensation policy. For more information on our compensation policy, please see “—Equity Compensation”. Eachexecutive officer’s annual bonus is determined according to a formula that is consistent with the compensation policy and that links financial and qualitative target-based goals and metrics relatedto the specific objectives within the responsibility of the relevant executive officer. Certain general company targets are uniform with respect to all of our executive officers, including our ChiefExecutive Officer. The goals and objectives of our executive officers are determined by the compensation and nominating committee and our board of directors. For each fiscal year, our board ofdirectors determines the maximum target bonus for each of our executive officers, including our Chief Executive Officer. In the case of our executive officers other than the Chief Executive Officer,assuming that the bonus terms conform to the compensation policy, such terms only require approval by the compensation and nominating committee followed by the board of directors. For ourChief Executive Officer, all terms of employment, including bonus terms, require in general approval by our shareholders including the holders of a majority of shares voted by all shareholders onsuch matter and held by shareholders who are neither controlling shareholders of our Company nor have a personal interest in such matter.The following table presents information regarding compensation accrued in our financial statements for the year ended December 31, 2016 for our five most highly compensatedexecutive officers, namely: our Chief Executive Officer (Mr. Ofer Haviv); our former Chief Financial Officer (Mr. Eyal Leibovitz, who served throughout 2016 and whose term of office expired inDecember 2016); our former Chief Scientific Officer & Head of R&D Crop Protection (Dr. Eyal Emmanuel, who ceased to serve in such position and as an executive officer in December 2016); ourChief our Executive Vice President & General Manager Crop Protection (Mr. Eran Kosover); and our Chief our Executive Vice President & General Manager Crop Enhancement (Mr. Ido Dor): (in thousands, US$)(1) Name and Position Salary and relatedbenefits Bonus(2) Value of OptionsGranted(3) Total Ofer HavivPresident and Chief Executive Officer 312 - 336 648 Eyal LeibovitzFormer Chief Financial Officer 196 - 167 363 Eyal EmmanuelFormer Chief Scientific Officer and Head of R&D Crop Protection 199 - 152 351 Eran KosoverEVP & General Manager Crop Protection 191 - 154 345 Ido DorEVP & General Manager Crop Enhancement 186 - 146 332 (1)All amounts reported in the table are in terms of cost to the Company, as recorded in our financial statements. (2)The executive management has waived its annual bonus for 2016. (3)Consists of amounts recognized as non-cash expenses in our comprehensive statement of income for the year ended December 31, 2016 (“Share based-compensation” expenses).73Employment and Consulting Agreements with Executive OfficersWe have entered into written employment agreements with all of our executive officers. Each of these agreements contains provisions regarding non-competition, confidentiality ofinformation and assignment of inventions. The non-competition provision applies for a period that is generally 12 months following termination of employment. The enforceability of covenantsnot to compete in Israel and in the United States is subject to limitations. The employment agreement of each executive officer is terminable at will, upon 60 days written notice, by either side tothe agreement, except for the employment agreement with Mr. Ofer Haviv, our President and Chief Executive Officer, which is terminable at will, upon 90 days written notice, by either side to theagreement.Director CompensationOur directors are entitled to cash compensation and equity compensation as follows:Cash Compensation to DirectorsAll of our directors receive annual fees and per-meeting fees for their service on our board and its committees, in the following amounts: §Annual fees in the amount of approximately $22,300 for directors not classified as experts and approximately $29,700 for directors classified as experts; §Per-meeting fees in the amount of approximately $860 for directors not classified as experts and approximately $1,140 for directors classified as experts; 60% of such amounts forparticipation in meetings via phone and 50% of such amounts for resolutions adopted in writing.Such amounts are within the range for cash compensation for external and unaffiliated directors under the Companies Law.Cash Compensation to Chairman of the BoardAccording to our compensation policy, a chairman of the board who is determined by the Board to be an “active chairman” in light of increased involvement in our activities andincreased time investment in the performance of the duties accompanying the chairman's position compared to the other directors, may be entitled to increased compensation relative to our otherdirectors. If so determined, an active chairman of our board will be entitled to (i) an annual fee of up to three times the average annual fee of the other directors and (ii) a per-meeting fee of up totwo times the average per-meeting fee of the other directors.Our Board has determined that Mr. Martin Gerstel, our chairman of the board, is an active chairman and our shareholders have approved setting Mr. Gerstel's fees as active chairman atapproximately $6,500 per month. Mr. Gerstel has waived his right to receive the per-meeting fees that are payable to our other directors for so long as he serves as the Company's active chairmanof the board.Equity CompensationUnder our compensation policy, each new non-employee director who is appointed to the board of directors is granted options to purchase 10,000 ordinary shares of the Company.These options vest over a period of four years, with one-sixteenth of the options vesting at the end of each successive three-month period following the director's appointment, subject tocontinued service through each vesting date. The chairman of the board is granted options to purchase twice the number of ordinary shares, on similar terms.74In addition, each non-employee director is granted annually, upon the anniversary of such director's original election to the board, options to purchase 2,500 ordinary shares of theCompany. These options vest over a period of one year commencing three years following such anniversary of the director's appointment to the board, with one fourth of the options vesting atthe end of each successive three-month period during such year, subject to continued service through each vesting date. The chairman of the board is granted options to purchase twice thenumber of ordinary shares, on similar terms. All of our currently serving directors, except for Dr. Kinneret Livnat Savitsky, were granted options accordingly. Dr. Livnat Savitsky, who duringSeptember 2016 completed a six-year service as an external director of our company (until when our board determined to opt-out of the requirement to have external directors (see “—C. BoardPractices—External Directors.”) then assumed the position of a “standard”, non-external, director (following her election by our shareholders at our annual general meeting of shareholders heldduring July 20, 2016) and she will be entitled to annual grants of options commencing September 2017, the anniversary of such appointment.Under our compensation policy, all option grants to directors are subject to the terms of our 2013 Share Option Plan, are granted at an exercise price equal to the higher of (i) the closingprice of our ordinary shares on the TASE on the date of the option grant and (ii) the average closing price of our ordinary shares on the TASE during the 30 trading days prior to the options grantdate, plus 5% (or the average closing price of our ordinary shares on the TASE during the 15 trading days prior to the options grant date, plus 5%, with respect to grants to directors effectedunder the compensation policy that was in effect prior to January 17, 2017, the date of the extraordinary general meeting at which our shareholders adopted the compensation policy currently ineffect). All options expire 10 years following the date of grant thereof.Information regarding the options to purchase our ordinary shares (including number of options, exercise price and expiration date of all such options) held by each of our directors andexecutive officers who beneficially owns our ordinary shares, after including ordinary shares underlying options held by them, which, as of March 31, 2017, were exercisable or exercisable within60 days, appears in the beneficial ownership table in Item 7.A below and in the footnotes thereto.Option PlansWe maintain three share option and incentive plans: our Evogene Share Option Plan (2002), our Evogene Ltd. Key Employee Share Incentive Plan, 2003, and our Evogene Ltd. 2013 ShareOption Plan, or the 2013 Plan. All such option and incentive plans provide for the grant of options to purchase our ordinary shares.As of March 31, 2017, options to purchase 4,246,731 ordinary shares were outstanding under our option and incentive plans, having a weighted average exercise price of NIS 36.18 pershare, of which, options to purchase 3,138,404 ordinary shares were exercisable. An additional 1,713,983 ordinary shares remained available for future grant under our option and incentive plans(all of which are available under our 2013 Plan) as of that date.Among other types of option awards, our share option and incentive plans provide for granting options in compliance with Section 102 of the Israeli Income Tax Ordinance, 1961, or theOrdinance, which provides to employees, directors and officers, who are not controlling shareholders (i.e., who hold less than 10% of our share capital) and are Israeli residents, favorable taxtreatment for compensation in the form of shares or options issued or granted, as applicable, to a trustee under the “capital gains track” for the benefit of the relevant employee, director or officerand are (or were) to be held by the trustee for at least two years after the date of grant or issuance. Under the “capital gains track”, we are not allowed to deduct an expense with respect to thegrant or issuance of the options or shares.The 2013 Plan also permits us to grant options to U.S. residents. Under an addendum to the 2013 Plan, or the U.S. Addendum, that our shareholders approved at a special generalmeeting of our shareholders on March 15, 2016 following adoption by our board in March 2015, the board may grant options to U.S. residents to purchase ordinary shares, in accordance with theapplicable provisions of the U.S. Internal Revenue Code of 1986, as amended, or the Code. 75Options granted under our plans are subject to vesting schedules and generally expire 10 years from the grant date. The plans address the treatment of vested and unvested optionsupon the termination of employment of the option holder as well as upon consummation of a merger or consolidation of our company, or sale of all or substantially all of our shares or assets. Theplans also provide for certain lock up arrangements (generally, for a 180-day period) to which option holders and holders of shares issued upon exercise of options will be subject uponconsummation of a public offering, similarly to our directors and executive officers.The plans are administered by our board.C. Board PracticesBoard of DirectorsUnder the Companies Law and our articles of association, the supervision of the management of our business is vested in our board of directors. Our board of directors may exercise allpowers and may take all actions that are not specifically granted to our shareholders or to executive management. Our Chief Executive Officer (referred to as a “general manager” under theCompanies Law) is responsible for our day-to-day management. Our Chief Executive Officer is appointed by, and serves at the discretion of, our board of directors, subject to the employmentagreement that we have entered into with him. All other executive officers are appointed by the Chief Executive Officer and are subject to the terms of any applicable employment agreements thatwe may enter into with them.Under our articles of association and the Companies Law, our board of directors must consist of not less than three and no more than seven directors. Currently our board of directorsconsists of six directors. Previously, two of our directors presided as “external directors”, as such term is defined in the Companies Law. See “—External Directors.”Our directors are elected annually, by a simple majority vote of holders of our voting shares participating and voting at the annual meeting of our shareholders, for a one-year term, fromthe annual general meeting of our shareholders at which they are elected until the next annual general meeting and until their respective successors are elected and qualified or until their earlierremoval by our shareholders at a general meeting, or upon the occurrence of certain events, in accordance with the Companies Law and our articles of association.In addition, under our articles of association, our board of directors may appoint directors to fill vacancies or as new directors for a term of office that lasts until the next annual meetingof our shareholders. In the event of a vacancy resulting in the board consisting of less than the minimum number of directors required by our articles of association, our board of directors mayonly act in order to convene a general meeting of our shareholders for the purpose of electing such additional number of directors.Pursuant to the terms of a put option agreement we entered into with Monsanto in October 2013, Monsanto has the right to nominate a non-voting observer to our board of directors solong as Monsanto holds at least 5% of our voting rights. In addition, pursuant to a share purchase agreement we entered into with Bayer in December 2010 and as amended in June 2013, Bayeralso has the right to appoint one observer to our board of directors so long as Bayer holds at least 3% of our issued and outstanding shares. In each case, the observer is entitled to be advisedreasonably in advance of board meetings, and is to receive copies of all material distributed in connection with such meetings. The observer would not have any voting rights. To date, neitherMonsanto nor Bayer has appointed an observer.Chairman of the BoardOur articles of association provide that the chairman of the board is appointed by the members of the board of directors and serves as chairman of the board throughout his term as adirector, unless resolved otherwise by the board of directors. Under the Companies Law, the general manager or a relative of the general manager may not serve as the chairman of the board ofdirectors, and the chairman or a relative of the chairman may not be vested with authorities of the general manager, in each case without shareholder approval consisting of a majority vote of theshares present and voting at a shareholders meeting, provided that either: §such majority includes at least 2/3 of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest in such appointment, present andvoting at such meeting; or §the total number of shares of non-controlling shareholders who do not have a personal interest in such appointment voting against such appointment does not exceed two percent of theaggregate voting rights in the company.In addition, a person subordinated, directly or indirectly, to the general manager may not serve as the chairman of the board of directors; the chairman of the board may not be vestedwith authorities that are granted to those subordinated to the general manager; and the chairman of the board may not serve in any other position in the company or a controlled company, exceptthat he may serve as a director or chairman of a subsidiary.76External DirectorsPursuant to recently enacted regulations under the Companies Law, the board of directors of a company whose shares are listed on certain non-Israeli stock exchanges (including theNasdaq Global Market), which company does not have a controlling shareholder (as such term is defined in the Companies Law) may elect not to comply with the requirements of the CompaniesLaw relating to the election of external directors and to the composition of the audit committee and compensation committee, provided that the company complies with the requirements as todirector independence and audit committee and compensation committee composition applicable to companies that are incorporated in the jurisdiction in which its stock exchange is located. As our company does not have a controlling shareholder, and as we comply with the Nasdaq listing rules applicable to domestic U.S. companies with respect to a majority of ourdirectors being independent and with respect to the composition of our audit committee and compensation committee, our board of directors determined in May 2016 to opt out of the requirementto elect external directors. If in the future we were to have a controlling shareholder, we would again be required to comply with the requirements relating to external directors and composition ofthe audit committee and compensation committee. One of our two former external directors, Dr. Kinneret Livnat-Savitsky, remained on our board of directors as an independent director. The term controlling shareholder, as used in the Companies Law for purposes of all matters related to external directors and for certain other purposes, means a shareholder that has theability to direct the activities of the company, other than by virtue of being an office holder. For purposes of all matters related to external directors, a shareholder is presumed to be a controllingshareholder if the shareholder holds 50% or more of the voting rights in the company or has the right to appoint the majority of the directors of the company or its general manager (chiefexecutive officer).Directors’ Service ContractsThere are no arrangements or understandings between us, on the one hand, and any of our directors, on the other hand, providing for benefits upon termination of their service asdirectors of our company.Financial Statements Review and Audit CommitteeOur financial statements review and audit committee, or audit committee, consists of Ms. Sarit Firon, Mr. Ziv Kop and Dr. Kinneret Livnat Savitsky. Ms. Sarit Firon serves as theChairperson of the audit committee.Requirements as to CompositionFollowing recently enacted regulations described above, we may comply with the requirements of the Companies Law by appointing an audit committee, whose composition complieswith the Nasdaq Listing Rules. Under the Nasdaq Listing Rules, we are required to maintain an audit committee consisting of at least three independent directors, each of whom is financiallyliterate and at least one of whom has accounting or related financial management expertise.All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and Nasdaq Listing Rules. Our board of directorshas determined that that each of Ms. Sarit Firon and Mr. Ziv Kop is an audit committee financial expert as defined by the SEC rules and has the requisite financial experience required under theNasdaq Listing Rules.Each of the members of the audit committee is “independent” as such term is defined in Rule 10A-3(b)(1) under the Exchange Act, which is different from the general test forindependence of board and committee members under the Nasdaq Listing Rules.Audit Committee RoleOur board of directors (following the approval by our audit committee) has adopted an audit committee charter setting forth the required composition, meeting procedures and othermatters related to the terms of operation of the committee. The charter also describes the responsibilities of the audit committee consistent with the rules of the SEC and the Nasdaq Listing Rules,which include, among others: §retaining and terminating the services of our independent auditors, subject to the approval of the board of directors and shareholders; 77§pre-approval of audit and non-audit services to be provided by the independent auditors; §reviewing with management and our independent directors our financial reports prior to their submission to the SEC; and §approval of certain transactions with office holders and other related-party transactions.The charter of the audit committee is available on our website at http://investors.evogene.com/corporate-governance.Additionally, under the Companies Law, an audit committee is required, among other things, to (i) identify deficiencies in the administration of the company (including by consulting withthe internal auditor), and recommend remedial actions with respect to such deficiencies, (ii) review and approve certain related party transactions, including determining whether or not suchtransactions are extraordinary transactions or insignificant transactions, and (iii) adopt procedures with respect to processing employee complaints in connection with deficiencies in theadministration of the company, and the appropriate means of protection afforded to such employees. In addition, the audit committee is responsible for overseeing the internal control proceduresof the company. Under the Companies Law, the approval of the audit committee is required for specified actions and transactions with office holders and controlling shareholders. See “—Approval of Related Party Transactions under Israeli Law.”Compensation and Nominating CommitteeOur compensation and nominating committee, or compensation committee, consists of Ms. Sarit Firon, Dr. Kinneret Livnat Savitsky and Dr. Adina Makover. Dr. Livnat Savitsky serves asthe Chairperson of the committee.Requirements as to CompositionFollowing recently enacted regulations described above, we may comply with the requirements of the Companies Law by appointing a compensation committee, whose compositioncomplies with the Nasdaq Listing Rules. Under the Nasdaq Listing Rules, we are required to maintain a compensation committee consisting of at least two independent directors (as definedunder the Nasdaq Listing Rules). Each compensation committee member must furthermore be deemed by our board of directors to meet the enhanced independence requirements for members ofthe compensation committee under the Nasdaq Listing Rules, which requires (among other things) that our board consider the source of each such committee member’s compensation inconsidering whether he or she is independent.Compensation Committee RoleOur board of directors (following approval by our compensation committee) has adopted a compensation and nominating committee charter setting forth the required composition,meeting procedures and other matters related to the terms of operation of the committee. The charter also describes the responsibilities of the compensation committee consistent with the NasdaqListing Rules and the Companies Law, which include, among others: §reviewing and recommending an overall compensation policy with respect to our Chief Executive Officer and other executive officers, as described below under “—CompensationPolicy”; §reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officers, including evaluating their performancein light of such goals and objectives; §reviewing and approving the granting of options and other incentive awards; §reviewing, evaluating and making recommendations regarding the compensation and benefits for our non-employee directors; and §advising our board of directors in selecting individuals who are best able to fulfill the responsibilities of a director or executive officer of our company.The charter of the compensation and nominating committee is available on our website at http://investors.evogene.com/corporate-governance.78Corporate Development CommitteeOur board of directors has formed a corporate development committee (replacing our former finance committee), of which Mr. Martin Gerstel, Mr. Ziv Kop and Mr. Leon Recanati serve asmembers. The corporate development committee assists our board of directors in fulfilling its oversight responsibilities across the principal areas of corporate development for our company andits subsidiaries. This committee may also assist the board by reviewing such matters as corporate and division strategy and M&A opportunities and making recommendations for considerationby our board of directors.Compensation PolicyIn addition to appointing a compensation and nominating committee, we are required to establish a policy regarding the terms of engagement of office holders (which include directorsand senior executive officers), or a compensation policy. The compensation policy serves as the basis for determining the financial terms of employment or engagement of office holders, includingexculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy must relate to certain factorsspecified in the Companies Law, including advancement of the company’s objectives, the company’s business and its long-term strategy, and creation of appropriate incentives for executives. Itmust also consider, among other things, the company’s risk management, size and the nature of its operations. The Companies Law describes what factors have to be considered by, and whatprinciples must be included in, the compensation policy.Our compensation policy was last updated in January 2017, at a special general meeting of our shareholders, following recommendation of our compensation committee and our board ofdirectors. For additional information, see “Item 6.B. Compensation—Compensation of Officers and Directors—Directors Compensation.”Compensation of Directors and OfficersUnder the Companies Law, the compensation of each of our directors and our Chief Executive Officer requires the approval of our compensation committee, the subsequent approval ofthe board of directors and, unless exempted under the regulations promulgated under the Companies Law, the approval of our shareholders at a general meeting (in the case of a company’s chiefexecutive officer, the shareholder approval must include the special majority described under “—Exculpation, Insurance and Indemnification of Office Holders” below. The compensation of anyother office holder (who is neither a director nor our Chief Executive Officer), if consistent with our compensation policy, requires the approval of our compensation committee, followed by ourboard of directors. Compensation of any such office holder that deviates from our compensation policy also requires shareholder approval. For additional information, see “Item 6.B.Compensation—Compensation of Officers and Directors.”Leniency Allowing Combining of Audit and Compensation and Nominating CommitteesUnder leniencies adopted by the Israeli Securities Authority, a company may have in place only one board committee that serves the required functions of each of the audit andcompensation committees under Israeli law.Internal AuditorUnder the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor recommended by the audit committee (subject to the limits imposed by theCompanies Law on who may be appointed as an internal auditor). Under the Companies Law, the internal auditor may be an employee of the company but not an office holder, an affiliate, or arelative of an office holder or affiliate, and may not be the company’s independent accountant or its representative.The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. The audit committee is required to oversee theactivities and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan. Doron Cohen, CPA, has been appointed as our internal auditor and he hasserved in such role since November 19, 2009. Mr. Cohen is a certified internal auditor and a partner of Fahn Kanne Control Management Ltd, an affiliate of Grant Thornton LLP.79Our internal auditor also provides management and the audit committee ongoing assessments of our risk management processes and system of internal control.Approval of Related Party Transactions under Israeli LawFiduciary Duties of Directors and Executive OfficersThe Companies Law codifies the fiduciary duties that office holders owe to a company. Each person listed in the table under “Item 6.A—Directors and Senior Management” is an officeholder under the Companies Law. An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care withwhich a reasonable office holder in the same position would have acted under the same circumstances. The duty of loyalty requires that an office holder act in good faith and in the best interestsof the company. The duty of care includes a duty to use reasonable means to obtain (i) information on the appropriateness of a given action submitted for his or her approval or performed byvirtue of his or her position; and (ii) all other important information pertaining to these actions. The duty of loyalty includes a duty to (i) refrain from any conflict of interest between theperformance of his or her duties in the company and his or her personal affairs; (ii) refrain from any activity that is competitive with the business of the company; (iii) refrain from exploiting anybusiness opportunity of the company in order to receive a personal gain for himself or herself or others; and (iv) disclose to the company any information or documents relating to the company’saffairs which the office holder received as a result of his or her position as an office holder.Disclosure of Personal Interests of an Office Holder and Approval of Certain TransactionsThe Companies Law requires that an office holder promptly disclose to the board of directors any personal interest that he or she may have and all related material information known tohim or her concerning any existing or proposed transaction with the company. If it is determined that an office holder has a personal interest in a transaction, approval by the board of directors isrequired for the transaction, unless the company’s articles of association provide for a different method of approval. Our articles of association provide that for non-extraordinary interested partytransactions, the board of directors may delegate its approval, or may provide a general approval to certain types of non-extraordinary interested party transactions. Every interested partytransaction requires that our board of directors determine affirmatively that the transaction is favorable to the company. Approval first by the company’s audit committee and subsequently by theboard of directors is required for an extraordinary transaction, meaning any transaction that is not in the ordinary course of business, not on market terms or that is likely to have a material impacton the company’s profitability, assets or liabilities. A director and any other office holder who has a personal interest in a transaction which is considered at a meeting of the board of directors orthe audit committee may generally (unless it is with respect to a transaction which is not an extraordinary transaction) not be present at such a meeting or vote on that matter unless a majority ofthe directors or members of the audit committee, as applicable, have a personal interest in the matter. If a majority of the members of the audit committee or the board of directors has a personalinterest in the approval of such a transaction then all of the directors may participate in deliberations of the audit committee or board of directors, as applicable, with respect to such transactionand vote on the approval thereof and, in such case, shareholder approval is also required.Pursuant to the Companies Law, extraordinary transactions with our office holders who are not directors require audit committee approval and subsequent approval by our board ofdirectors. Compensation, insurance, indemnification or exculpation arrangements for office holders who are not directors require approval by our compensation committee, followed by our boardof directors and, if deviating from our compensation policy, our shareholders. Compensation arrangements with directors, including in their capacities as executive officers, or with or our ChiefExecutive Officer, as well as insurance (unless exempted under the applicable regulations), indemnification or exculpation of directors or our Chief Executive Officer, require the approval of thecompensation and nominating committee, the board of directors and our shareholders, in that order. If the transaction or compensation arrangement of the office holder brought for approvalamends an existing arrangement, then only the approval of the audit committee or compensation and nominating committee (as appropriate) is required if that committee determines that theamendment is not material in relation to the existing arrangement.Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain TransactionsPursuant to the Companies Law, the disclosure requirements regarding personal interests that apply to directors and executive officers also apply to a controlling shareholder of a publiccompany. We currently do not have a controlling shareholder.80An extraordinary transaction between a public company and a controlling shareholder, or in which a controlling shareholder has a personal interest, requires the approval of a company’saudit committee, board of directors and shareholders in that order. For the terms of compensation (or insurance, indemnification or exculpation) of a controlling shareholder who is an office holder,the approval by our compensation and nominating committee is required in lieu of audit committee approval. The shareholder approval for any such extraordinary transaction or compensatoryarrangement must fulfill one of the following requirements: §at least a majority of the voting rights in the company held by shareholders who have no personal interest in the transaction or arrangement and who are present and voting (in person orby proxy) at the general meeting, must be voted in favor of approving the transaction or arrangement (for this purpose, abstentions are disregarded); or §the voting rights held by shareholders who have no personal interest in the transaction or arrangement and who are present and voting (in person or by proxy) at the general meeting,and who vote against the transaction, do not exceed two percent of the voting rights in the company.Shareholder DutiesPursuant to the Companies Law, a shareholder has a duty to act in good faith and in customary manner toward the company and other shareholders and to refrain from abusing his or herpower with respect to the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respect to the following matters: §an amendment to the company’s articles of association; §an increase of the company’s authorized share capital; §a merger; or §interested party transactions that require shareholder approval.In addition, a shareholder has a general duty to refrain from discriminating against other shareholders. Certain shareholders also have a duty of fairness toward the company. Theseshareholders include any controlling shareholder, any shareholder who knows that it has the power to determine the outcome of a shareholder vote and any shareholder who has the power toappoint or to prevent the appointment of an office holder of the company or exercise any other rights available to it under the company’s articles of association with respect to the company. TheCompanies Law does not define the substance of this duty of fairness, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach of theduty of fairness. Israeli courts have not yet interpreted the scope or nature of any of these duties.Approval of Private PlacementsUnder the Companies Law, a significant private placement of securities requires approval by the board of directors and the shareholders by a simple majority. A private placement isconsidered a significant private placement if it results in a person becoming a controlling shareholder, or if all of the following conditions are met: §the securities issued amount to 20% or more of the company’s outstanding voting rights before the issuance; §some or all of the consideration is other than cash or listed securities or the transaction is not on market terms; and §the transaction will increase the relative holdings of a shareholder who holds 5% or more of the company’s outstanding share capital or voting rights or that will cause any person tobecome, as a result of the issuance, a holder of more than 5% of the company’s outstanding share capital or voting rights.Exculpation, Insurance and Indemnification of Office HoldersUnder the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpate an office holder in advancefrom liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if a provision authorizing such exculpation is included in itsarticles of association. Our articles of association include such a provision. An Israeli company may not exculpate a director from liability arising out of a prohibited dividend or distribution toshareholders.81An Israeli company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed as an office holder, either in advance of an event orfollowing an event, provided a provision authorizing such indemnification is contained in its articles of association: §financial liability imposed on him or her in favor of another person pursuant to a judgment, settlement or arbitrator’s award approved by a court. However, if an undertaking to indemnifyan office holder with respect to such liability is provided in advance, then such an undertaking must be limited to events which, in the opinion of the board of directors, can be foreseenbased on the company’s activities when the undertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under thecircumstances, and such undertaking shall detail the abovementioned events and amount or criteria; §reasonable litigation expenses, including attorneys’ fees, incurred by the office holder as a result of an investigation or proceeding instituted against him or her by an authority authorizedto conduct such investigation or proceeding, provided that (i) no indictment was filed against such office holder as a result of such investigation or proceeding; and (ii) no financialliability, such as a criminal penalty, was imposed upon him or her as a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability wasimposed, it was imposed with respect to an offense that does not require proof of criminal intent; and §reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against him or her by the company, on its behalf orby a third party or in connection with criminal proceedings in which the office holder was acquitted or as a result of a conviction for an offense that does not require proof of criminalintent.An Israeli company may insure an office holder against the following liabilities incurred for acts performed as an office holder if and to the extent provided in the company’s articles ofassociation: §a breach of the duty of loyalty to the company, to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company; §a breach of the duty of care to the company or to a third party, including a breach arising out of the negligent conduct of the office holder; §a financial liability imposed on the office holder in favor of a third party; §a financial liability imposed on the office holder in favor of a third party harmed by a breach in an administrative proceeding; and §reasonable litigation expenses, including attorneys’ fees, incurred by the office holder as a result of an administrative proceeding instituted against him or her. §An Israeli company may not indemnify or insure an office holder against any of the following: §a breach of the duty of loyalty, except to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company; §a breach of the duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the office holder; §an act or omission committed with intent to derive illegal personal benefit; or §a fine or forfeit levied against the office holder.Under the Companies Law, exculpation, indemnification and insurance of office holders must be approved by the compensation and nominating committee and the board of directors and,with respect to directors and our Chief Executive Officer, also by our shareholders (with the special majority described under “-Approval of Related Party Transactions Under Israeli Law -Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain Transactions, to also exclude controlling shareholders).Our articles of association allow us to indemnify and insure our office holders for any liability imposed on them as a consequence of an act which was performed by virtue of being anoffice holder. Our shareholders have approved an amendment to our articles of association that extends such indemnification and insurance to cover omissions by our office holders (in their roleas such) as well. Our office holders are currently covered by a directors’ and officers’ insurance policy.82We have entered into agreements with each of our directors and executive officers. Each such agreement exculpates our director or officer, to the fullest extent permitted by law, fromliability to us for damages caused to us as a result of a breach of duty of care, and undertaking to indemnify them to the fullest extent permitted by law. This indemnification is limited to eventsdetermined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances.The maximum indemnification amount set forth in such agreements is limited to an amount equal to 25% of our shareholders’ equity as reflected in our most recent consolidated financialstatements prior to the date on which the indemnity payment is made. If the amount equal to 25% of our shareholders’ equity is insufficient to cover all indemnity amounts payable with respect toall indemnifiable directors and executive officers, such amount will be allocated among our directors and executive officers pro rata, in accordance with their relative culpabilities, as finallydetermined by a court with respect to a particular claim. The maximum amount set forth in such agreements is in addition to any amount paid (if paid) under insurance and/or by a third partypursuant to an indemnification arrangement. In the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act is against public policy andtherefore unenforceable.D. EmployeesThe number of our employees as of December 31, 2014, 2015 and 2016, was 207, 210 and 185, respectively. Until 2015, all of our employees were based in Israel. Starting in 2015, we hademployees of our U.S. subsidiary, Evogene Inc., who are based at our U.S. research and development site in St. Louis, Missouri. In addition, as of December 31, 2016, we had 55 hourly, part-timeemployees who are based in Israel. The following table shows the breakdown of our employees' headcount workforce as of December 31, 2016, excluding hourly, part-time, employees: As of December 31, 2016 Department Evogene Ltd.(Israel) Evogene Inc.(U.S.) Total Executive Management 5 - 5 Crop Enhancement 25 - 25 Crop Protection 20 10 30 Evofuel 3 - 3 Technology Platform 95 - 95 General and administrative 27 - 27 Total 175 10 185 Israeli labor laws govern the length of the workday, minimum wages for employees, procedures for hiring and dismissing employees, determination of severance pay, annual leave, sickdays, advance notice of termination of employment, equal opportunity and anti-discrimination laws and other conditions of employment. Subject to certain exceptions, Israeli law generallyrequires severance pay upon the retirement, death or dismissal of an employee, and requires us and our employees to make payments to the National Insurance Institute, which is similar to theU.S. Social Security Administration. Our employees have pension plans that comply with the applicable Israeli legal requirements.While none of our employees is party to any collective bargaining agreements, certain provisions of the collective bargaining agreements between the Histadrut (General Federation ofLabor in Israel) and the Coordination Bureau of Economic Organizations (including the Industrialists’ Associations) are applicable to our employees in Israel by order of the Israeli Ministry of theEconomy and Industry. These provisions primarily concern pension fund benefits for all employees, insurance for work-related accidents, recuperation pay and travel expenses.None of our employees are represented by a labor union or covered under a collective bargaining agreement. We have never experienced any employment-related work stoppages andbelieve our relationships with our employees are good.The employees of our U.S. subsidiary are subject to the U.S. labor laws and have insurances coverage, health benefits and plans, such as (i) medical and dental care; (ii) long termdisability protection plans; (iii) life insurance; and (iv) 401k savings plan.Our staff possesses multidisciplinary and wide-ranging expertise, with employees specializing in biology, chemistry, plant genetics, agronomics, mathematics, computer science and otherrelated fields. Additionally, 53 of our employees hold a Ph.D.related fields. Additionally, 53 of our employees hold a Ph.D.83E. Share OwnershipFor information regarding the share ownership of our directors and executive officers, please refer to the table in “Item 7.A. Major Shareholders.”ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSA. Major ShareholdersThe following table sets forth information with respect to the beneficial ownership of our shares as of April 25, 2017 by: §each person or entity known by us to own beneficially more than 5% of our outstanding shares; §each of our directors and executive officers individually; and §all of our executive officers and directors as a group.The beneficial ownership of ordinary shares is determined in accordance with the rules of the SEC, and generally includes any ordinary shares over which a person exercises sole orshared voting or investment power, or the right to receive the economic benefit of ownership. For purposes of the table below, we deem shares subject to options or warrants that are currentlyexercisable or exercisable within 60 days of the date of April 25, 2017, to be outstanding and to be beneficially owned by the person holding the options or warrants for the purposes of computingthe percentage ownership of that person but we do not treat them as outstanding for the purpose of computing the percentage ownership of any other person.For the purpose of calculating the percentage of shares beneficially owned by any shareholder, this table lists applicable percentage ownership based on 25,667,809 ordinary sharesoutstanding as of April 25, 2017. Unless otherwise indicated below, to our knowledge, all persons named in the table have sole voting and investment power with respect to their shares, except tothe extent that authority is shared by spouses under community property laws.Unless otherwise noted below, each shareholder’s address is c/o Evogene Ltd., 13 Gad Feinstein Street, Park Rehovot P.O.B 2100, Rehovot 7612002, Israel. The shareholders listed below(including our directors and executive officers) do not have any different voting rights from any of our other shareholders. We know of no arrangements that would, at a subsequent date, result ina change of control of our company. A description of any material relationship that our principal shareholders have had with us or any of our predecessors or affiliates within the past three yearsis included under “Item 7.B. Related Party Transactions.” Shares Beneficially Held Name of Beneficial Owner Number Percentage ofClass Principal Shareholders Entities affiliated with Waddell & Reed Financial, Inc. (1) 3,057,294 11.9%Entities affiliated with Migdal Insurance & Financial Holdings Ltd. (2) 1,957,390 7.6%Monsanto Company (3) 1,636,364 6.4%Entities affiliated with Psagot Investment House Ltd. (4) 1,557,611 6.1%Entities affiliated with Harel Insurance, Investments & Financial Services Ltd. (5) 1,299,406 5.1%Entities affiliates with The Phoenix Holding Ltd. (6) 1,296,561 5.1% Executive Officers and Directors Ofer Haviv 647,188(7) 2.5%Yuval Ben Galim - * Ido Dor 87,463(8) * Dr. Hagai Karchi 419,375(9) 1.6%Eran Kosover 69,991(10) * Alex Taskar - * Martin S. Gerstel 419,006(11) 1.6%Sarit Firon 1,875(12) * Ziv Kop 8,125(13) * Dr. Adina Makover 15,317(14) * Leon Y. Recanati 866,359(15) 3.4%Dr. Kinneret Livnat Savitsky 15,000(16) * All directors and executive officers as a group (12 persons) 2,549,699 9.5%_______________________________ *Less than 1%.84 (1)This information is based upon a Schedule 13G/A filed jointly with the SEC on February 14, 2017 by (i) Waddell & Reed Financial, Inc., or WRF; (ii) Waddell & Reed Financial Services,Inc., or WRFSI, a subsidiary of WRF; (iii) Waddell & Reed Inc., or WRI, a broker-dealer and subsidiary of WRFSI; (iv) Waddell & Reed Investment Management Company, or WRIMCO,an investment advisory subsidiary of WRI; and (v) Ivy Investment Management Company, or IICO, an investment advisory subsidiary of WRF. According to this Schedule 13G/A, theinvestment advisory contracts grant IICO and WRIMCO investment power over securities owned by their advisory clients and the investment sub-advisory contracts grant IICO andWRIMCO investment power over securities owned by their sub-advisory clients and, in most cases, voting power. Any investment restriction of a sub-advisory contract does not restrictinvestment discretion or power in a material manner. Therefore, IICO and/or WRIMCO may be deemed the beneficial owner of the securities under Rule 13d-3 under the Exchange Act.These ordinary shares are held according to the following segmentation with direct or indirect voting and dispositive power as indicated: WRF: 3,057,294 (indirect); WRFSI: 1,155,062(indirect); WRI: 1,155,062 (indirect); WRIMCO: 1,155,062 (direct); and IICO: 1,902,232 (direct). The principal address for these entities is 6300 Lamar Avenue, Overland Park, KS 66202. (2)This information is based upon a Schedule 13G filed by Migdal Insurance & Financial Holdings Ltd., or "Migdal", with the SEC on January 30, 2017. According to this Schedule 13G,1,957,390 ordinary shares are held for members of the public through, among others, provident funds, mutual funds, pension funds and insurance policies, which are managed bysubsidiaries of Migdal, according to the following segmentation: (i) 1,113,585 ordinary shares are held by Profit participating life assurance accounts; (ii) 761,999 ordinary shares are heldby Provident funds and companies that manage provident funds and (iii) 81,806 ordinary shares are held by companies for the management of funds for joint investments in trusteeship,each of which subsidiaries operates under independent management and makes independent voting and investment decisions. The principal address of Migdal is 4 Efal Street; P.O. Box3063; Petach Tikva 49512, Israel. (3)This information is based upon a Schedule 13G/A filed by Monsanto Company with the SEC on February 12, 2016. Monsanto Company is a Delaware corporation and is listed on theNYSE and possesses voting and dispositive investment power over these ordinary shares. The principal address for Monsanto Company is 800 North Lindbergh Boulevard, St. Louis,Missouri 63167, USA. (4)This information is based upon a Schedule 13G/A filed by Psagot Investment House Ltd. with the SEC on February 15 2017. These ordinary shares are held for members of the publicthrough, among others, portfolio accounts managed by Psagot Securities Ltd., Psagot Exchange Traded Notes Ltd., mutual funds managed by Psagot Mutual Funds Ltd., and providentfunds and pension funds managed by Psagot Provident Funds and Pension Ltd., according to the following segmentation: (i) 18,757 ordinary shares beneficially owned by portfolioaccounts managed by Psagot Securities Ltd.; (ii) 469,248 ordinary shares beneficially owned by Psagot Exchange Traded Notes Ltd.; (iii) 141,369 ordinary shares beneficially owned bymutual funds managed by Psagot Mutual Funds Ltd. (of this amount, 10,300 ordinary shares may also be considered beneficially owned by Psagot Securities Ltd., but are not included inthe shares beneficially owned by Psagot Securities Ltd.); and (iv) 928,238 ordinary shares beneficially owned by provident funds managed by Psagot Provident Funds and Pension Ltd.Each of the foregoing companies is a wholly-owned subsidiary of Psagot Investment House Ltd. The subsidiaries operate under independent management and make their ownindependent voting and investment decisions. Any economic interest or beneficial ownership in any of the securities covered by this report is held for the benefit of owners of theportfolio accounts, holders of the exchange-traded notes, or for the benefit of the members of the mutual funds, provident funds, or pension funds, as the case may be. The principaladdress of Psagot Investment House Ltd. is 14 Ahad Ha’am Street, Tel Aviv 65142, Israel. (5)This information is based upon a Schedule 13G/A filed by Harel Insurance Investments & Financial Services Ltd., or “Harel”, with the SEC on January 31, 2017. According to thisSchedule 13G/A (i) 1,297,276 ordinary shares are held for members of the public through, among others, provident funds, mutual funds, pension funds and insurance policies, which aremanaged by subsidiaries of Harel, (ii) 1,657 ordinary shares are held by third party client accounts managed by a subsidiary of Harel as portfolio managers, which subsidiary operatesunder independent management and makes independent investment decisions and has no voting power in the securities held in such client accounts, and (iii) 473 ordinary shares arebeneficially held for Harel's own account (Nostro account). The principal address of Harel is Harel House, 3 Abba Hillel Street, Ramat Gan 52118, Israel. (6)This information is based upon a Schedule 13G filed with the SEC on June 9, 2015 jointly by (i) Itzhak Sharon (Tshuva); (ii) Delek Group Ltd. and (iii) The Phoneix Holding Ltd. Accordingto this Schedule 13G, 1,296,561 ordinary shares are held by various direct or indirect, majority or wholly-owned subsidiaries of the Phoneix Holding Ltd. (the “Subsidiaries”). TheSubsidiaries manage their own funds and/or the funds of others, including for holders of exchange-traded notes or various insurance policies, members of pension or provident funds,unit holders of mutual funds, and portfolio management clients. Each of the Subsidiaries operates under independent management and makes its own independent voting and investmentdecisions. The Phoenix Holding Ltd. is a majority-owned subsidiary of Delek Group Ltd. The majority of Delek Ltd.’s outstanding share capital and voting rights are owned, directly andindirectly, by Itzhak Sharon (Tshuva) though private companies wholly-owned by him, and the remainder is held by the public. The principal address of the Phoenix Holding Ltd. is 53,Derech Hashalom, Givataim, 53454, Israel. The address of Itzhak Sharon (Tshuva) and Delek Investments and Properties Ltd. is 7, Giborei Israel Street, P.O.B 8464, Netanya, 42504, Israel. 85(7)Consists of 647,188 ordinary shares issuable upon exercise of options that are currently exercisable or exercisable within 60 days of April 25, 2017, of which, options to purchase 150,000ordinary shares expire on August 24, 2019, options to purchase 200,000 ordinary shares expire on June 19, 2020, options to purchase 201,563 ordinary shares expire on July 17, 2023 andoptions to purchase 95,625 ordinary shares expire on March 22, 2025. The weighted average exercise price of these options is NIS 35.57. (8)Consists of 87,463 ordinary shares issuable upon exercise of options that are currently exercisable or exercisable within 60 days of April 25, 2017. The weighted average exercise price ofthese options is NIS 35.43. (9)Consists of 329,375 ordinary shares issuable upon exercise of options that are currently exercisable or exercisable within 60 days of April 25, 2017, of which, options to purchase 60,000ordinary shares expire on August 24, 2019, options to purchase 125,000 ordinary shares expire on June 19, 2020, options to purchase 93,750 ordinary shares expire on July 15, 2023, andoptions to purchase 50,625 ordinary shares expire on March 22, 2025. The weighted average exercise price of these options is NIS 34.17. Also includes 90,000 ordinary shares held by Dr.Karchi. (10)Consists of 69,991 ordinary shares issuable upon exercise of options that are currently exercisable or exercisable within 60 days of April 25, 2017. The weighted average exercise price ofthese options is NIS 44.07. (11)Includes 70,000 ordinary shares issuable upon exercise of options that are currently exercisable or exercisable within 60 days of April 25, 2017, of which, options to purchase 37,500ordinary shares expire on June 11, 2017, options to purchase 7,500 ordinary shares expire on July 20, 2018, options to purchase 5,000 ordinary shares expire on April 9, 2020, options topurchase 5,000 ordinary shares expire on June 11, 2020, options to purchase 5,000 ordinary shares expire on September 17, 2021, options to purchase 5,000 ordinary shares expire on June11, 2022, and options to purchase 5,000 ordinary shares expire on September 15, 2023. The weighted average exercise price of these options is NIS 18.42. Also includes 349,006 ordinaryshares consisting of: (a) 133,815 ordinary shares held by Martin Gerstel and (b) 215,191 ordinary shares held by Shomar Corporation over which Martin Gerstel and his wifeMrs. Shoshana Gerstel possess voting and investment power. (12)Consists of 1,875 ordinary shares issuable upon exercise of options that are currently exercisable or exercisable within 60 days of April 25, 2017. The weighted average exercise price ofthese options is NIS 26.89. (13)Consists of 8,125 ordinary shares issuable upon exercise of options that are currently exercisable or exercisable within 60 days of April 25, 2017. The weighted average exercise price ofthese options is NIS 71.05. (14)Includes 15,000 ordinary shares issuable upon exercise of options that are currently exercisable or exercisable within 60 days of April 25, 2017. The weighted average exercise price ofthese options is NIS 29.43. Also includes 317 ordinary shares held by Dr. Makover. (15)Includes 838,859 ordinary shares held by Mr. Recanati. Also includes 27,500 ordinary shares issuable upon exercise of options that are currently exercisable or exercisable within 60 daysof April 25, 2017, of which, options to purchase 12,500 ordinary shares expire on June 11, 2017, options to purchase 2,500 ordinary shares expire on July 20, 2018, options to purchase2,500 ordinary shares expire on April 9, 2020, options to purchase 2,500 ordinary shares expire on June 11, 2020, options to purchase 2,500 ordinary shares expire on September 17, 2021,options to purchase 2,500 ordinary shares expire on June 11, 2022, and options to purchase 2,500 ordinary shares expire on September 15, 2023. The weighted average exercise price ofthese options is NIS 20.57. (16)Consists of 15,000 ordinary shares issuable upon exercise of options that are currently exercisable or exercisable within 60 days of April 25, 2017. The weighted average exercise price ofthese options is NIS 31.54.Changes in Percentage Ownership by Major ShareholdersOver the course of 2016, there were decreases in the percentage ownership of some of our major shareholders, including (w) entities affiliated with Harel Insurance Investment &Financial Services Ltd. (from 5.7% to 5.06%) (ii) entities affiliated with Migdal Insurance & Financial Holdings Ltd. (from 8.36% to 7.63%), (iii) the entities affiliated with Psagot Investment HouseLtd. (from 9.31% to 6.07%), (iv) Monsanto Company (from 6.43% to 6.38%), (v) the entities affiliates with The Phoenix Holding Ltd. (from 5.10% to 5.05%) and (vi) the entities affiliated withWaddell & Reed Financial, Inc. (from 12.66% to 11.91%).Over the course of 2015, there were increases in the percentage ownership of entities affiliated with Waddell & Reed Financial, Inc. (from 12.07% to 12.66%) while there were decreases inthe percentage ownership of other of our major shareholders, including (i) entities affiliated with Migdal Insurance & Financial Holdings Ltd. (from 8.50% to 8.36%), (ii) the entities affiliated withPsagot Investment House Ltd. (from 9.76% to 9.31%) and (iii) Monsanto Company (from 6.45% to 6.43%).86Over the course of 2014, there were increases in the percentage ownership of some of our pre-existing major shareholders, including (i) entities affiliated with Waddell & Reed Financial,Inc. (from 8.93% to 12.07%) and (ii) entities affiliated with Migdal Insurance & Financial Holdings Ltd. (from 7.14% to 8.50%), while there were decreases in the percentage ownership of other ofour pre-existing major shareholders, including (iii) the entities affiliated with Psagot Investment House Ltd. (from 10.29% to 9.76%) and (iv) Monsanto Company (from 9.81% to 6.45%).Record HoldersAs of April 25, 2017, all of our ordinary shares (other than 10,000 ordinary shares) were held of record in the United States, in the name of two record shareholders—Cede & Co., asnominee for the Depository Trust Company, and Monsanto Company. The number of record holders is not representative of the number of beneficial holders of our ordinary shares, nor is itrepresentative of where such beneficial holders reside, since the shares held in the name of Cede & Co. are listed for trading on Nasdaq and the TASE and are beneficially owned by a wide rangeof underlying beneficial shareholders who hold their shares in "street name." In particular, we are aware, based on public filings, that in addition to Monsanto Company, which holds 6.4% of ourordinary shares, entities affiliated with Waddell & Reed Financial, Inc, which hold 11.9% of our outstanding ordinary shares, have an address in the United States. B. Related Party TransactionsExcept as described below or elsewhere in this annual report, since January 1, 2015, we have had no transaction, nor do we have any presently proposed transaction, and neither we nor oursubsidiaries have had any loan, nor do we or our subsidiaries have any presently proposed loan, involving any related party described in Item 7.B of Form 20-F promulgated by the SEC.Agreements with Directors and OfficersEmployment AgreementsWe have entered into written employment agreements with all of our executive officers. Each of these agreements contains provisions regarding non-competition, confidentiality ofinformation and assignment of inventions. The non-competition provision applies for a period that is generally 12 months following termination of employment. The enforceability of covenantsnot to compete in Israel and in the United States is subject to limitations.OptionsSee “Item 6.B. Compensation—Option Plans”.Indemnification AgreementsOur articles of association allow us to indemnify and insure our office holders for any liability imposed on them as a consequence of an act which was performed by virtue of being anoffice holder. They also allow us to exculpate an office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty ofcare. In furtherance of such allowance we have entered into agreements with each of our directors and executive officers exculpating them, to the fullest extent permitted by law, from liability to usfor damages caused to us as a result of a breach of duty of care, and undertaking to indemnify them to the fullest extent permitted by law. See “Item 6.C. Board Practices—Exculpation, Insuranceand Indemnification of Office Holders.”C. Interests of Experts and CounselNot applicable.ITEM 8.FINANCIAL INFORMATIONA. Consolidated Statements and Other Financial InformationConsolidated financial statementsWe have appended our consolidated financial statements at the end of this annual report, starting at page F-2, as part of this annual report. 87Legal ProceedingsFrom time to time, we may be subject to legal proceedings and claims in the ordinary course of business. We are currently not involved in any pending or contemplated legal proceedingsthat could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or results of operations. We may become involved in material legal proceedingsin the future. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.Dividend PolicySince our inception, we have not declared or paid any cash or other form of dividends on our ordinary shares. We currently intend to retain any earnings for use in our business and donot currently intend to pay cash dividends on our ordinary shares. Dividends, if any, on our outstanding ordinary shares will be declared by and subject to the discretion of our board ofdirectors. Even if our board of directors decides to distribute dividends, the form, frequency and amount of such dividends will depend upon our future operations and earnings, capitalrequirements and surplus, general financial condition, contractual restrictions and other factors our board of directors may deem relevant.In addition, the distribution of dividends may be limited by Israeli law, which permits the distribution of dividends only out of distributable profits. See “Item 10.B. Memorandum andArticles of Association—Dividend and Liquidation Rights.” In addition, if we pay a dividend out of income derived during the tax exemption period from the portion of our facilities that havebeen granted Approved Enterprise status, we may be required to recapture the deferred corporate tax with respect to the amount distributed. See “Item 10.E. Taxation—Israeli Tax Considerationsand Government Programs—Law for the Encouragement of Capital Investments, 5719-1959.”B. Significant ChangesNo significant changes have occurred since December 31, 2016, except as otherwise disclosed in this annual report.ITEM 9.THE OFFER AND LISTINGA. Listing DetailsOur ordinary shares have been trading on the TASE since 2007, on the NYSE from November 2013 until December 2016, and on the Nasdaq since December 2016, in all cases under thesymbol “EVGN.” The following table sets forth, for the periods presented, the reported high and low closing sale prices of our ordinary shares on the TASE in NIS and U.S. dollars, and thereported high and low closing sale prices of our ordinary shares on the NYSE and Nasdaq in U.S. dollars. Tel Aviv Stock Exchange NYSE / Nasdaq NIS U.S.$ U.S.$ Price Per Ordinary Share Price Per Ordinary Share Price Per Ordinary Share High Low High Low High Low Annual: 2017 (up to April 25, 2017) 21.18 18.49 5.54 5.03 5.53 4.95 2016 32.72 19.60 8.30 5.08 8.42 5.10 2015 41.17 24.90 10.45 6.42 10.42 6.50 2014 69.82 34.12 20.10 8.81 19.91 8.74 2013 68.80 36.34 19.62 9.73 19.99 16.74 2012 39.00 29.58 10.31 7.43 — — Quarterly: First Quarter 2017 21.18 18.49 5.54 5.03 5.53 4.95 Fourth Quarter 2016 24.46 19.60 6.45 5.17 6.45 5.10 Third Quarter 2016 26.57 23.49 6.95 6.26 6.99 6.10 Second Quarter 2016 29.76 23.50 7.86 6.05 8.06 6.08 First Quarter 2016 32.72 23.48 8.30 6.04 8.42 5.95 Fourth Quarter 2015 33.62 24.90 8.66 6.42 9.04 6.50 Third Quarter 2015 35.90 30.91 9.38 7.97 9.34 8.17 Second Quarter 2015 40.07 33.15 10.15 8.72 10.26 8.70 First Quarter 2015 41.17 32.49 10.45 8.28 10.42 8.20 Most Recent Six Months: March 2017 19.31 18.49 5.34 5.03 5.39 5.01 February 2017 20.35 18.83 5.43 5.01 5.46 4.95 January 2017 21.18 18.84 5.54 5.00 5.53 5.53 December 2016 20.76 19.60 5.42 5.08 5.38 5.10 November 2016 22.71 20.85 5.95 5.43 6.04 5.57 October 2016 24.46 22.85 6.45 5.94 6.45 6.01 88B. Plan of DistributionNot applicable.C. MarketsSee “—Listing Details” above.D. Selling ShareholdersNot applicable.E. DilutionNot applicable.F. Expenses of the IssueNot applicable.ITEM 10.ADDITIONAL INFORMATIONA. Share CapitalNot applicable.B. Memorandum and Articles of AssociationFor a discussion of the provisions of the company’s articles of association with respect to the powers of directors, see “Item 6.C. Board Practices.”Objects and PurposesOur registration number with the Israeli Registrar of Companies is 51-283872-3. Our purpose as set forth in article 4 of our articles of association is to engage in any legal business.VotingHolders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders at a shareholder meeting. Shareholders may vote atshareholder meetings either in person, by proxy or by written ballot. Israeli law does not allow public companies to adopt shareholder resolutions by means of written consent in lieu of ashareholder meeting. Shareholder voting rights may be affected by the grant of any special voting rights to the holders of a class of shares with preferential rights that may be authorized in thefuture. Except as otherwise disclosed herein, an amendment to our articles of association to change the rights of our shareholders requires the prior approval of a simple majority of our sharesrepresented and voting at a general meeting and of the holders of a class of shares whose rights are being affected (or the consent in writing of all the holders of such class of shares).89Share Ownership RestrictionsThe ownership or voting of ordinary shares by non-residents of Israel is not restricted in any way by our articles of association or the laws of the State of Israel, except that citizens ofcountries that are in a state of war with Israel may not be recognized as owners of ordinary shares.Transfer of SharesFully paid ordinary shares are issued in registered form and may be freely transferred under our articles of association unless the transfer is restricted or prohibited by anotherinstrument, Israeli law or the rules of a stock exchange on which the shares are traded.Election of DirectorsOur ordinary shares do not have cumulative voting rights for the election of directors. Rather, under our articles of association, our directors, other than external directors, are elected ateach annual general meeting of the shareholders, upon expiration of the term of office, by the holders of a simple majority of our ordinary shares present in person or by proxy at such meeting(excluding abstentions). As a result, the holders of our ordinary shares that represent more than 50% of the voting power represented at a shareholder meeting and voting thereon (excludingabstentions) have the power to elect any or all of our directors. Vacancies on our board of directors, resulting from a resignation or other termination of service by a then serving director, may befilled by a vote of a simple majority of the directors then in office as described under “Item 6.C. Board Practices—Board of Directors.” For additional information regarding the election of andvoting by directors, please refer to “Item 6.C. Board Practices—Board of Directors.”Dividend and Liquidation RightsUnder Israeli law, we may declare and pay a dividend only if, upon the reasonable determination of our board of directors, the distribution will not prevent us from being able to meet theterms of our existing and contingent obligations as they become due. Under the Companies Law, the distribution amount is further limited to the greater of retained earnings or earnings generatedover the two most recent years according to our then last reviewed or audited financial statements, provided that the date of the financial statements is not more than six months prior to the dateof distribution. In the event that we do not have retained earnings and earnings legally available for distribution, as defined in the Companies Law, we may seek the approval of the court in orderto distribute a dividend. The court may approve our request if it is convinced that there is no reasonable concern that the payment of a dividend will prevent us from satisfying our existing andforeseeable obligations as they become due.In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of ordinary shares on a pro-rata basis. Dividend and liquidationrights may be affected by the grant of preferential dividend or distribution rights to the holders of a class of shares with preferential rights that may be authorized in the future. See “Item 8.A.Consolidated Statements and Other Financial Information—Dividend Policy.”Shareholder MeetingsUnder the Companies Law, we are required to convene an annual general meeting of our shareholders once every calendar year, not more than 15 months following the preceding annualgeneral meeting. Our board of directors may convene a special general meeting of our shareholders and is required to do so at the request of two directors or one quarter of the members of ourboard of directors, or at the request of one or more holders of 5% or more of our share capital and 1% of our voting power, or the holder or holders of 5% or more of our voting power. Allshareholder meetings require prior notice of at least 21 days and, in certain cases, 35 days. The chairperson of our board of directors or another one of our directors authorized by our board ofdirectors presides over our general meetings. If either of such persons is not present within 15 minutes from the appointed time for the commencement of the meeting, the directors present at suchmeeting shall appoint one of our directors as the chairperson for such meeting, and if they fail to do so, then the shareholders present shall appoint one of our directors to act as chairperson, andif no director is present, then one of the shareholders present at such meeting shall act as chairperson. Subject to the provisions of the Companies Law and the regulations promulgatedthereunder, only shareholders of record on a date decided upon by the board of directors, which may be between four and 40 days prior to the date of the meeting (depending on the type ofmeeting and whether written proxies are being used) are entitled to participate and vote at general meetings of shareholders.90QuorumUnder our articles of association, the quorum required for a meeting of shareholders consists of at least two shareholders present in person, by proxy or by written ballot, who hold orrepresent between them at least 25% of our voting power. A meeting adjourned for lack of a quorum generally is adjourned to the same day in the following week at the same time and place(without requirement of additional notification to the shareholders), or to a later time, if indicated in the notice to the meeting or to such other time and place as determined by the board ofdirectors in a notice to our shareholders. At the reconvened meeting, if a quorum is not present within half an hour from the appointed time for the commencement of the meeting, the meeting willtake place so long as at least one shareholder is present (regardless of the voting power held or represented by any such shareholder(s)), unless the meeting was called pursuant to a request byour shareholders, in which case the quorum required is the number of shareholders required to call the meeting as described under “—Shareholder Meetings” above.ResolutionsUnder the Companies Law, unless otherwise provided in the articles of association or applicable law, all resolutions of the shareholders require a simple majority of the voting rightsrepresented at the meeting, in person, by proxy or by written ballot, and voting on the resolution (excluding abstentions).Access to Corporate RecordsUnder the Companies Law, all shareholders generally have the right to review minutes of our general meetings, our shareholder register, including with respect to material shareholders,our articles of association, our financial statements and any document we are required by law to file publicly with the Israeli Companies Registrar or the Israeli Securities Authority. Anyshareholder who specifies the purpose of its request may request to review any document in our possession that relates to any action or transaction with a related party which requiresshareholder approval under the Companies Law. We may deny a request to review a document if we determine that the request was not made in good faith, that the document contains a tradesecret or patent or that the document’s disclosure may otherwise impair our interests.Modification of Class RightsThe rights attached to any class of share (to the extent that we may have separate classes of shares in the future), such as voting, liquidation and dividend rights, may be amended byadoption of a resolution by the holders of a majority of our shares represented at the meeting and the holders or a majority of the shares of that class present at a separate class meeting, orotherwise in accordance with the rights attached to such class of shares, as set forth in our articles of association.Acquisitions under Israeli LawFull Tender OfferA person wishing to acquire shares of a public Israeli company and who could as a result hold over 90% of the target company’s voting rights or the target company’s issued andoutstanding share capital (or of a class thereof), is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstandingshares of the company (or the applicable class). If (a) the shareholders who did not accept the offer hold less than 5% of the issued and outstanding share capital of the company (or theapplicable class) and the shareholders who accept the offer constitute a majority of the offerees that do not have a personal interest in the acceptance of the tender offer or (b) the shareholderswho did not accept the tender offer hold less than 2% of the issued and outstanding share capital of the company (or of the applicable class), all of the shares that the acquirer offered to purchasewill be transferred to the acquirer by operation of law. A shareholder who had its shares so transferred may petition the court within six months from the date of acceptance of the full tender offer,regardless of whether such shareholder agreed to the offer, to determine whether the tender offer was for less than fair value and whether the fair value should be paid as determined by the court.However, an offeror may provide in the offer documents that a shareholder who accepted the offer will not be entitled to appraisal rights as described in the preceding sentence, as long as theofferor and the company disclosed the information required by law in connection with the tender offer. If (a) the shareholders who did not accept the tender offer hold 5% or more of the issuedand outstanding share capital of the company (or of the applicable class) or the shareholders who accept the offer constitute less than a majority of the offerees that do not have a personalinterest in the acceptance of the tender offer, or (b) the shareholders who did not accept the tender offer hold 2% or more of the issued and outstanding share capital of the company (or of theapplicable class), the acquirer may not acquire shares of the company that will increase its holdings to more than 90% of the company’s issued and outstanding share capital (or of the applicableclass) from shareholders who accepted the tender offer.91Special Tender OfferThe Companies Law provides that an acquisition of shares of an Israeli public company must be made by means of a special tender offer if as a result of the acquisition the purchaserwould become a holder of 25% or more of the voting rights in the company. This rule does not apply if there is already another holder of 25% or more of the voting rights in the company. Similarly,the Companies Law provides that an acquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder ofmore than 45% of the voting rights in the company, if there is no other shareholder of the company who holds more than 45% of the voting rights in the company. These requirements do notapply if the acquisition (i) occurs in the context of a private placement by the company that received shareholder approval, (ii) was from a shareholder holding 25% or more of the voting rights inthe company and resulted in the acquirer becoming a holder of 25% or more of the voting rights in the company, or (iii) was from a holder of more than 45% of the voting rights in the companyand resulted in the acquirer becoming a holder of more than 45% of the voting rights in the company. A special tender offer may be consummated only if (i) at least 5% of the voting powerattached to the company’s outstanding shares will be acquired by the offeror and (ii) the number of shares tendered in the offer exceeds the number of shares whose holders objected to the offer(excluding controlling shareholders, holders of 25% or more of the voting rights in the company and any person having a personal interest in the acceptance of the tender offer).In the event that a special tender offer is made, a company’s board of directors is required to express its opinion on the advisability of the offer, or shall abstain from expressing anyopinion if it is unable to do so, provided that it gives the reasons for its abstention. An office holder in a target company who, in his or her capacity as an office holder, performs an action thepurpose of which is to cause the failure of an existing or foreseeable special tender offer or is to impair the chances of its acceptance, is liable to the potential purchaser and shareholders fordamages, unless such office holder acted in good faith and had reasonable grounds to believe he or she was acting for the benefit of the company. However, office holders of the target companymay negotiate with the potential purchaser in order to improve the terms of the special tender offer, and may further negotiate with third parties in order to obtain a competing offer.If a special tender offer is accepted, then shareholders who did not respond to or that had objected the offer may accept the offer within four days of the last day set for the acceptanceof the offer. In the event that a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or such controlling person orentity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with the target company for a period of one year from the date ofthe offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in the initial special tender offer.MergerThe Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain conditions described under the Companies Law are met, a majority ofeach party’s shareholders. The board of directors of a merging company is required pursuant to the Companies Law to discuss and determine whether in its opinion there exists a reasonableconcern that as a result of a proposed merger, the surviving company will not be able to satisfy its obligations towards its creditors, such determination taking into account the financial status ofthe merging companies. If the board of directors determines that such a concern exists, it may not approve a proposed merger. Following the approval of the board of directors of each of themerging companies, the boards of directors must jointly prepare a merger proposal for submission to the Israeli Registrar of Companies.For purposes of the shareholder vote, unless a court rules otherwise, if one of the merging companies (or any person who holds 25% or more of the outstanding shares or the right toappoint 25% or more of the directors of one of the merging companies) holds shares in the other merging company, the merger will not be deemed approved if a majority of the shares voted at theshareholders meeting by shareholders other than the other party to the merger, or by any person who holds 25% or more of the outstanding shares or the right to appoint 25% or more of thedirectors of the other party, vote against the merger. In addition, if the non-surviving entity of the merger has more than one class of shares, the merger must be approved by each class ofshareholders. If the transaction would have been approved but for the separate approval of each class or the exclusion of the votes of certain shareholders as provided above, a court may stillapprove the merger upon the request of holders of at least 25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value of theparties to the merger and the consideration offered to the shareholders. If a merger is with a company’s controlling shareholder or if the controlling shareholder has a personal interest in themerger, then the merger is instead subject to the same special majority approval that governs all extraordinary transactions with controlling shareholders (as described above under “Item 6.C.Board Practices—Approval of Related Party Transactions under Israeli Law—Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain Transactions”).92Under the Companies Law, each merging company must inform its secured creditors of the proposed merger plans. Upon the request of a creditor of either party to the proposed merger,the court may delay or prevent the merger if it concludes that there exists a reasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations ofany of the parties to the merger, and may further give instructions to secure the rights of creditors.In addition, a merger may not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger is filed with the Israeli Registrar of Companiesand 30 days have passed from the date that shareholder approval of both merging companies is obtained.Antitakeover Measures under Israeli LawBesides the requirements described above with respect to tender offers and mergers, Israeli law and our articles of association enable the implementation of additional measures that maydelay or prevent a takeover attempt and thereby preclude our shareholders from realizing a potential premium over the market value of our ordinary shares that they hold. Our articles ofassociation allow our company to increase its registered share capital and provide that the increased capital will be divided into shares having ordinary, preferred or deferred rights or any otherspecial rights, or may be subject to terms and restrictions in respect of dividend, repayment of capital, voting or other terms, in each case provided that the general meeting of our shareholdersapproves via a simple majority of shares present (in person or by proxy) and voting. Israeli law also permits the issuance of preferred stock. However, the TASE rules and regulations prohibit alisted company from having more than one class of shares listed, and the TASE’s current position is that a listed company may not issue or list preferred shares. Therefore, assuming that theTASE’s current position does not change, as long as our ordinary shares are listed on the TASE, we will be prohibited from issuing preferred stock.To date, the legality of a poison pill as an additional antitakeover measure has not been examined in Israel.C. Material ContractsOther than as described in other parts of this annual report, we have no other material contracts to which we were party during the last two years.D. Exchange ControlsOther than general anti-money laundering regulations, there are currently no Israeli currency control regulations in effect that restrict our import or export of capital to or from the State ofIsrael, or the availability of cash and cash equivalents for use by our affiliated companies. Under the Bank of Israel Law, 5770-2010, the Governor of the Bank of Israel, with the approval of themonetary policy committee of the Bank of Israel, is authorized to issue an administrative order restricting the transfer of funds to or from Israel. However, such an order is only likely to be issuedunder emergency circumstances and only for a temporary period, if necessary for the achievement of the goals of the Bank of Israel or the carrying out of its responsibilities under Israeli law.Furthermore, Israel has agreed, pursuant to international agreements to which it is a party (including incident to Israel’s having joined the International Monetary Fund) to allow for the free flowof capital to and from within its borders. Certain transactions nevertheless require the filing of reports with the Bank of Israel.Similarly, there are no currently effective Israeli governmental laws, decrees, regulations or other legislation that restrict the payment of dividends or other distributions with respect toour ordinary shares or the proceeds from the sale of the shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding some transactions. However, legislationremains in effect under which currency controls can be imposed by administrative action at any time.93E. TaxationThis section discusses the material Israeli income tax consequences concerning the ownership and disposition of our ordinary shares purchased by investors in our U.S. initial publicoffering. This summary does not discuss all the aspects of Israeli tax law that may be relevant to a particular investor in light of his or her personal investment circumstances or to some types ofinvestors subject to special treatment under Israeli law. Examples of such investors include residents of Israel or traders in securities who are subject to special tax regimes not covered in thisdiscussion. Because parts of this discussion are based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriatetax authorities or the courts will accept the views expressed in this discussion. The discussion below is subject to change, including due to amendments under Israeli law or changes to theapplicable judicial or administrative interpretations of Israeli law, which change could affect the tax consequences described below.Taxation of Our Non-Israeli ShareholdersCapital Gains Taxes Applicable to Non-Israeli Resident Shareholders. A non-Israeli resident (whether individual or corporation) who derives capital gains from the sale of shares in anIsraeli resident company that were purchased after the company was listed for trading on a stock exchange outside of Israel should generally be exempt from Israeli tax so long as the shares werenot held through a permanent establishment that the non-resident maintains in Israel and that such shareholder is not subject to the Israeli Income Tax Law (Inflationary Adjustments) 5745-1985.However, non-Israeli corporations will not be entitled to the foregoing exemption if Israeli residents: (i) have a controlling interest of more than 25% in such non-Israeli corporation or (ii) are thebeneficiaries of, or are entitled to, 25% or more of the revenues or profits of such non-Israeli corporation, whether directly or indirectly. Additionally, such exemption is not applicable to a personwhose gains from selling or otherwise disposing of the shares are deemed to be business income.A sale of shares by a non-Israeli resident may be exempt from Israeli capital gains tax under the provisions of an applicable tax treaty (subject to the receipt in advance of a validcertificate from the Israel Tax Authority allowing for an exemption). For example, under the United States-Israel Tax Treaty, the disposition of shares by a shareholder who is a United Statesresident (for purposes of the United States-Israel Tax Treaty) holding the shares as a capital asset and is entitled to claim the benefits afforded to such person by the treaty, is generally exemptfrom Israeli capital gains tax unless, among other things, (i) the capital gain arising from the disposition can be attributed to a permanent establishment of the shareholder which is maintained inIsrael; (ii) the shareholder holds, directly or indirectly, shares representing 10% or more of the voting capital during any part of the 12-month period preceding such sale, exchange or disposition,subject to certain conditions; or (iii) such U.S. resident is an individual and was present in Israel for a period or periods aggregating to 183 days or more during the relevant taxable year. In eachcase, the sale, exchange or disposition of such shares would be subject to Israeli tax, to the extent applicable; however, under the United States-Israel Tax Treaty, the United States resident wouldbe permitted to claim a credit for the Israeli tax against the United States federal income tax imposed with respect to the sale, exchange or disposition, subject to the limitations in United Stateslaws applicable to foreign tax credits. The United States-Israel Tax Treaty does not relate to U.S. state or local taxes.In some instances, where our shareholders may be liable for Israeli tax on the sale of their ordinary shares, the payment of the consideration may be subject to the withholding of Israelitax at source. Shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order to avoid withholding at source at the time of sale. Specifically, intransactions involving a sale of all of the shares of an Israeli resident company, in the form of a merger or otherwise, the Israel Tax Authority may require from shareholders who are not liable forIsraeli tax to sign declarations in forms specified by this authority or obtain a specific exemption from the Israel Tax Authority to confirm their status as non-Israeli resident, and, in the absence ofsuch declarations or exemptions, may require the purchaser of the shares to withhold taxes at source.Taxation of Non-Israeli Shareholders on Receipt of Dividends. Non-Israeli residents (whether individuals or corporations) are generally subject to Israeli income tax on the receipt ofdividends paid on our ordinary shares at the rate of 25%, or 15% if the dividend is distributed from income attributed to an Approved Enterprise or Beneficiary Enterprise (and 20% with respect toPreferred Enterprise). With respect to a person who is a “substantial shareholder” at the time of receiving the dividend or on any time during the preceding twelve months, the applicable tax rate is30%. A “substantial shareholder” is generally a person who alone or together with such person’s relative or another person who collaborates with such person on a permanent basis, holds,directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right to vote, receive profits, nominate a director or an executiveofficer, receive assets upon liquidation, or order someone who holds any of the aforesaid rights how to act, regardless of the source of such right. Dividends paid on publicly traded shares, whichare registered with and held by a nominee company, to non-Israeli residents are generally subject to Israeli withholding tax at a rate of 25% (whether the recipient is a “substantial shareholder” ornot), unless a lower rate is provided under an applicable tax treaty between Israel and the shareholder’s country of residence and provided that a certificate from the Israel Tax Authority allowingfor a reduced withholding tax rate is obtained in advance. However, a distribution of dividends to non-Israeli residents is subject to withholding tax at source at a rate of 15% if the dividend isdistributed from income attributed to an Approved Enterprise or a Beneficiary Enterprise (and 20% if the dividend is distributed from income attributed to a Preferred Enterprise), unless a reducedtax rate is provided under an applicable tax treaty (subject to the receipt in advance of a valid certificate from the Israel Tax Authority allowing for a reduced tax rate).94In this regard, under the United States-Israel Tax Treaty, the maximum rate of tax withheld at source in Israel on dividends paid to a holder of our ordinary shares who is a United Statesresident (for purposes of the United States-Israel Tax Treaty) is 25%. However, generally, the maximum rate of withholding tax on dividends, not generated by an Approved Enterprise or aBeneficiary Enterprise, that are paid to a United States corporation holding at least 10% or more of our outstanding voting capital throughout the tax year in which the dividend is distributed aswell as during the previous tax year, is 12.5%, provided that no more than 25% of our gross income for such preceding year consists of certain types of dividends and interest. We cannot assureyou that we will designate the profits that we may distribute in a way that will reduce shareholders’ tax liability. Notwithstanding the foregoing, dividends distributed from income attributed to anApproved Enterprise or a Beneficiary Enterprise are subject to withholding tax at the rate of 15% for such a United States corporate shareholder, provided that the condition related to our grossincome for the previous year (as set forth in the previous sentence) is met. If the dividend is attributable partly to income derived from an Approved Enterprise, a Beneficiary Enterprise or aPreferred Enterprise, and partly to other sources of income, the withholding rate will be a blended rate reflecting the relative portions of the two types of income. United States residents who aresubject to Israeli withholding tax on a dividend may be entitled to a credit or deduction for Untied States federal income tax purposes in the amount of the taxes withheld, subject to detailed rulescontained in United States tax legislation.A non-Israeli resident who receives dividends from which tax was withheld is generally exempt from the obligation to file tax returns in Israel with respect to such income, provided that(i) such income was not derived from a business conducted in Israel by the taxpayer, and (ii) the taxpayer has no other taxable sources of income in Israel with respect to which a tax return isrequired to be filed.Excess TaxIndividuals who are subject to tax in Israel are also subject to an additional tax at a rate of 2% on annual income exceeding NIS 803,520 for 2017 (and as of 2017, the additional tax will be ata rate of 3% on annual income exceeding NIS 640,000), which amount is linked to the annual change in the Israeli consumer price index, including, but not limited to, dividends, interest and capitalgain.United States Federal Income TaxationThe following is a description of the material United States federal income tax consequences to U.S. Holders (as defined below) of the acquisition, ownership and disposition of our ordinaryshares. This description addresses only the United States federal income tax consequences to holders of our ordinary shares that hold such ordinary shares as capital assets. This descriptiondoes not address tax considerations applicable to holders that may be subject to special tax rules, including, without limitation: §banks, financial institutions or insurance companies; §real estate investment trusts, regulated investment companies or grantor trusts; §dealers or traders in securities, commodities or currencies; §tax-exempt entities; §certain former citizens or long-term residents of the United States; §persons that received our shares as compensation for the performance of services; §persons that will hold our shares as part of a “hedging,” “integrated” or “conversion” transaction or as a position in a “straddle” for United States federal income tax purposes; §partnerships (including entities classified as partnerships for United States federal income tax purposes) or other pass-through entities, or holders that will hold our shares through suchan entity; §U.S. Holders (as defined below) whose “functional currency” is not the U.S. dollar; or §holders that own directly, indirectly or through attribution 10.0% or more of the voting power or value of our shares.95Moreover, this description does not address the United States federal estate, gift or alternative minimum tax consequences, or any state, local or foreign tax consequences, of theacquisition, ownership and disposition of our ordinary shares.This description is based on the United States Internal Revenue Code of 1986, as amended (the “Code”), existing, proposed and temporary United States Treasury Regulations andjudicial and administrative interpretations thereof, in each case as in effect and available on the date hereof. Each of the foregoing is subject to change, which change could apply retroactivelyand could affect the tax consequences described below. There can be no assurances that the U.S. Internal Revenue Service will not take a different position concerning the tax consequences ofthe acquisition, ownership and disposition of our ordinary shares or that such a position would not be sustained.For purposes of this description, a “U.S. Holder” is a beneficial owner of our ordinary shares that, for United States federal income tax purposes, is: §a citizen or resident of the United States; §a corporation (or other entity treated as a corporation for United States federal income tax purposes) created or organized in or under the laws of the United States or any state thereof,including the District of Columbia; §an estate the income of which is subject to United States federal income taxation regardless of its source; or §a trust if such trust has validly elected to be treated as a United States person for United States federal income tax purposes or if (1) a court within the United States is able to exerciseprimary supervision over its administration and (2) one or more United States persons have the authority to control all of the substantial decisions of such trust.A “Non-U.S. Holder” is a beneficial owner of our ordinary shares that is neither a U.S. Holder nor a partnership (or other entity treated as a partnership for United States federal incometax purposes).If a partnership (or any other entity treated as a partnership for United States federal income tax purposes) holds our ordinary shares, the tax treatment of a partner in such partnershipwill generally depend on the status of the partner and the activities of the partnership. Such a partner or partnership is encouraged to consult its tax advisor as to its tax consequences.You are encouraged to consult your advisor with respect to the United States federal, state, local and foreign tax consequences of acquiring, owning and disposing of our ordinaryshares. DistributionsSubject to the discussion below under “Passive Foreign Investment Company Considerations,” if you are a U.S. Holder, the gross amount of any distribution that we pay you withrespect to our ordinary shares before reduction for any Israeli taxes withheld therefrom generally will be includible in your income as dividend income to the extent such distribution is paid out ofour current or accumulated earnings and profits as determined under United States federal income tax principles. To the extent that the amount of any cash distribution exceeds our current andaccumulated earnings and profits as determined under United States federal income tax principles, it will be treated first as a tax-free return of your adjusted tax basis in our ordinary shares andthereafter as capital gain. We do not expect to maintain calculations of our earnings and profits under United States federal income tax principles. Therefore, if you are a U.S. Holder you shouldexpect that the entire amount of any cash distribution generally will be reported as dividend income to you; provided, however, that distributions of ordinary shares to U.S. Holders that are part ofa pro rata distribution to all of our shareholders generally will not be subject to United States federal income tax. Subject to the PFIC rules discussed below, non-corporate U.S. Holders mayqualify for the lower rates of taxation with respect to dividends on ordinary shares applicable to long-term capital gains (i.e., gains from the sale of capital assets held for more than one year),provided that certain conditions are met, including certain holding period requirements and the absence of certain risk reduction transactions. Moreover, such reduced rate shall not apply if weare a PFIC for the taxable year in which we pay a dividend, or were a PFIC for the preceding taxable year. Dividends will not be eligible for the dividends received deduction generally allowed tocorporate U.S. Holders.96If you are a U.S. Holder, dividends that we pay you with respect to our ordinary shares will be treated as foreign source income, which may be relevant in calculating your foreign taxcredit limitation. Subject to certain conditions and limitations, Israeli tax withheld on dividends may be deducted from your taxable income or credited against your United States federal income taxliability. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends that we distribute generally shouldconstitute “passive category income,” or, in the case of certain U.S. Holders, “general category income.” A foreign tax credit for foreign taxes imposed on distributions may be denied if you donot satisfy certain minimum holding period requirements. The rules relating to the determination of the foreign tax credit are complex, and you are encouraged to consult your tax advisor todetermine whether and to what extent you will be entitled to this credit.Sale, Exchange or Other Disposition of Ordinary SharesSubject to the discussion below under “Passive Foreign Investment Company Considerations,” if you are a U.S. Holder, you generally will recognize an amount of gain or loss on thesale, exchange or other disposition of our ordinary shares equal to the difference between the amount realized on such sale, exchange or other disposition and your tax basis in our ordinaryshares, and such gain or loss will be capital gain or loss. The tax basis in an ordinary share generally will equal the cost of such ordinary share. If you are a non-corporate U.S. Holder, capital gainfrom the sale, exchange or other disposition of ordinary shares generally will be eligible for a preferential rate of taxation applicable to capital gains, if your holding period for such ordinary sharesexceeds one year. The deductibility of capital losses for United States federal income tax purposes is subject to limitations under the Code. Any such gain or loss that a U.S. Holder recognizesgenerally will be treated as U.S. source income or loss for foreign tax credit limitation purposes.Passive Foreign Investment Company ConsiderationsBased on certain estimates of our gross income and gross assets and the nature of our business, we believe that we were classified as a PFIC for the taxable year ending December 31,2016. As a result, a U.S. Holder who held our ordinary shares at any time during 2016 would be subject to special rules generally intended to reduce or eliminate any benefits from the deferral ofU.S. federal income tax that a U.S. Holder could derive from investing in a non-U.S. company that does not distribute all of its earnings on a current basis.A non-U.S. corporation will be classified as a PFIC for federal income tax purposes in any taxable year in which, after applying certain look-through rules, either: §at least 75% of its gross income is “passive income”; or §at least 50% of the average quarterly value of its gross assets (which may be determined in part by the market value of our ordinary shares, which is subject to change) is attributable toassets that produce “passive income” or are held for the production of passive income.Passive income for this purpose generally includes dividends, interest, royalties, rents, gains from commodities and securities transactions, the excess of gains over losses from thedisposition of assets which produce passive income, and includes amounts derived by reason of the temporary investment of funds raised in offerings of our ordinary shares. If a non-U.S.corporation owns at least 25% by value of the stock of another corporation, the non-U.S. corporation is treated for purposes of the PFIC tests as owning its proportionate share of the assets ofthe other corporation and as receiving directly its proportionate share of the other corporation’s income. For publicly traded corporations, the PFIC asset test described above is applied using thefair market value of the non-U.S. corporation’s assets. For purposes of a the PFIC asset test, a publicly traded non-U.S. corporation may treat the aggregate fair market value of its assets as beingequal to the sum of the aggregate value of its outstanding stock (“Market Capitalization”) and the total amount of its liabilities. We intend to take the position that the excess of our MarketCapitalization plus liabilities over the book value of all of our assets may generally be treated as attributable to non-passive asset. If we are classified as a PFIC in any year with respect to which aU.S. Holder owns our ordinary shares, we will continue to be treated as a PFIC with respect to such U.S. Holder in all succeeding years during which the U.S. Holder owns our ordinary shares,regardless of whether we continue to meet the tests described above.Due to the decline in our Market Capitalization in 2016, we believe that we met the PFIC asset test described above for 2016 and, as a result, we were classified as a PFIC in 2016.Furthermore, because we currently hold, and expect to continue to hold, a substantial amount of cash and cash equivalents and other passive assets used in our business, and because ourMarket Capitalization is currently below the level necessary to avoid PFIC status for 2017, there is substantial risk we will be classified as a PFIC for the 2017 taxable year as well. However,because PFIC status is based on our income, assets and activities for the entire taxable year, and our Market Capitalization, it is not possible to determine whether we will be characterized as aPFIC for the 2017 taxable year until after the close of the year. Moreover, we must determine our PFIC status annually after the close of each taxable year based on tests which are factual in nature,and our status in future years will depend on our income, assets, activities and Market Capitalization in those years. Thus, there can be no assurance that we will not be considered a PFIC for thecurrent taxable year or any future taxable year.97If we are a PFIC for any taxable year during which a U.S. Holder owns ordinary shares, we will generally continue to be treated as a PFIC with respect to such U.S. Holder for allsucceeding years during which such U.S. Holder owns such ordinary shares, unless we cease to be a PFIC and the U.S. Holder makes a “deemed sale” election with respect to such ordinaryshares. If such election is made, the U.S. Holder will be deemed to have sold the ordinary shares it holds at their fair market value and any gain from the deemed sale would be subject to the rulesdescribed in the following paragraph. After the deemed sale election, so long as we do not become a PFIC in a subsequent taxable year, the ordinary shares with respect to which such electionwas made will not be treated as shares in a PFIC and will not be subject to the rules described below with respect to any “excess distribution” the U.S. Holder receives from us or any gain from anactual sale or other disposition of such ordinary shares. U.S. Holders are strongly urged to consult their tax advisors as to the possibility and consequences of making a deemed sale election if wewere to become and then cease to be a PFIC, and such election becomes available.If you are a U.S. Holder that owns our ordinary shares during 2016 or any other taxable year for which we are a PFIC, then unless you make one of the elections described below, a specialtax regime will apply to both (a) any “excess distribution” by us to you (generally, your ratable portion of distributions in any year which are greater than 125% of the average annual distributionreceived by you in the shorter of the three preceding years or your holding period for our ordinary shares) and (b) any gain realized on the sale or other disposition of the ordinary shares. Underthis regime, any excess distribution and realized gain will be treated as ordinary income (even if you hold the ordinary shares as capital assets) and will be subject to tax as if (a) the excessdistribution or gain had been realized ratably over your holding period, (b) the amount deemed realized in each year had been subject to tax in each year of that holding period at the highestmarginal rate for such year (other than income allocated to the current period or any taxable period before we became a PFIC, which would be subject to tax at the U.S. Holder’s regular ordinaryincome rate for the current year and would not be subject to the interest change discussed below), and (c) the interest charge generally applicable to underpayments of tax had been imposed onthe taxes deemed to have been payable in those years. The tax liability for amounts allocated to years prior to the year of disposition or excess distribution cannot be offset by any net operatinglosses for such years.If we are a PFIC for any taxable year during which a U.S. Holder holds our ordinary shares, then in lieu of being subject to the tax and interest charge rules discussed above, a U.S. Holdermay make an election to include gain on the stock of a PFIC as ordinary income under a mark-to-market method, provided that such ordinary shares are “regularly traded” on a “qualifiedexchange.” In general, our ordinary shares will be treated as “regularly traded” for a given calendar year if more than a de minimis quantity of our ordinary shares are traded on a qualifiedexchange on at least 15 days during each calendar quarter of such calendar year. Our ordinary shares are listed, and we expect them to continue to be listed for the foreseeable future, on the NewYork Stock Exchange, which is a qualifying exchange for this purpose. However, no assurance can be given that our ordinary shares will continue to be regularly traded on a “qualified exchange”for purposes of the mark-to-market election. In addition, because a mark-to-market election cannot be made for any lower-tier PFICs that we may own, a U.S. Holder may continue to be subject tothe PFIC rules discussed above with respect to such holder’s indirect interest in any investments we hold that are treated as an equity interest in a PFIC for United States federal income taxpurposes.If a U.S. Holder makes an effective mark-to-market election, in each year that we are a PFIC, such U.S. Holder will include in each year that we are a PFIC as ordinary income the excess ofthe fair market value of such U.S. Holder’s ordinary shares at the end of the year over such U.S. Holder’s adjusted tax basis in the shares. Such U.S. Holder will be entitled to deduct as anordinary loss in each such year the excess of such U.S. Holder’s adjusted tax basis in the ordinary shares over their fair market value at the end of the year, but only to the extent of the net amountpreviously included in income as a result of the mark-to-market election. If a U.S. Holder makes an effective mark-to-market election, in each year that we are a PFIC, any gain such U.S. Holderrecognizes upon the sale or other disposition of such U.S. Holder’s ordinary shares will be treated as ordinary income and any loss will be treated as ordinary loss, but only to the extent of the netamount of previously included income as a result of the mark-to-market election.98A U.S. Holder’s adjusted tax basis in the ordinary shares will be increased by the amount of any income inclusion and decreased by the amount of any deductions under the mark-to-market rules discussed above. If a U.S. Holder makes an effective mark-to-market election, it will be effective for the taxable year for which the election is made and all subsequent taxable yearsunless the ordinary shares are no longer regularly traded on a qualified exchange or the IRS consents to the revocation of the election. U.S. Holders are encouraged to consult their tax advisersabout the availability of the mark-to-market election, and whether making the election would be advisable in their particular circumstances.In certain circumstances, a U.S. equity holder in a PFIC may avoid the adverse tax and interest-charge regime described above by making a “qualified electing fund” election to include inincome its share of the corporation’s income on a current basis. However, a U.S. Holder may make a qualified electing fund election with respect to the ordinary shares only if we agree to furnishyou annually with a PFIC annual information statement as specified in the applicable Treasury regulations.We do not intend to provide the information necessary for U.S. Holders to make qualified electing fund elections if we are classified as a PFIC. U.S. Holders are encouraged to consulttheir tax advisors to determine whether any of these elections would be available and if so, what the consequences of the alternative treatments would be in their particular circumstances.If we are determined to be a PFIC for any year in which a U.S. Holder holds our ordinary shares, the general tax treatment for the U.S. Holder described in this paragraph would apply toindirect distributions and gains deemed to be realized by the U.S. Holders in respect of any of our subsidiaries that also may be determined to be PFICs.If a U.S. Holder owns ordinary shares during any year in which we are a PFIC and the U.S. Holder recognizes gain on a disposition of our ordinary shares or receives distributions withrespect to our ordinary shares, the U.S. Holder generally will be required to file an IRS Form 8621 with respect to the company, generally with the U.S. Holder’s federal income tax return for thatyear. If our company were a PFIC for a given taxable year, then you are encouraged to consult your tax advisor concerning your annual filing requirements.U.S. Holders are strongly encouraged to consult their tax advisors regarding the consequences of our classification as a PFIC for our 2016 taxable year, our potential classification asa PFIC in 2017 and future taxable years, and the application of the PFIC rules on their investment.Backup Withholding Tax and Information Reporting RequirementsUnited States backup withholding tax and information reporting requirements may apply to certain payments to certain holders of stock. Information reporting generally will apply topayments of dividends on, and to proceeds from the sale or redemption of, our ordinary shares made within the United States, or by a United States payor or United States middleman, to a holderof our ordinary shares, other than an exempt recipient (including a payee that is not a United States person that provides an appropriate certification and certain other persons). A payor will berequired to withhold backup withholding tax from any payments of dividends on, or the proceeds from the sale or redemption of, ordinary shares within the United States, or by a United Statespayor or United States middleman, to a holder, other than an exempt recipient, if such holder fails to furnish its correct taxpayer identification number or otherwise fails to comply with, or establishan exemption from, such backup withholding tax requirements. Any amounts withheld under the backup withholding rules will be allowed as a credit against the beneficial owner’s United Statesfederal income tax liability, if any, and any excess amounts withheld under the backup withholding rules may be refunded, provided that the required information is timely furnished to the InternalRevenue Service.Foreign Asset ReportingCertain U.S. Holders who are individuals are required to report information relating to an interest in our ordinary shares, subject to certain exceptions (including an exception for sharesheld in accounts maintained by financial institutions). U.S. Holders are encouraged to consult their tax advisors regarding their information reporting obligations, if any, with respect to theirownership and disposition of our ordinary shares.Medicare TaxCertain U.S. Holders that are individuals, estates or trusts are subject to a 3.8% tax on all or a portion of their “net investment income,” which may include all or a portion of their dividendincome and net gains from the disposition of ordinary shares. Each U.S. Holder that is an individual, estate or trust is encouraged to consult its tax advisors regarding the applicability of theMedicare tax to its income and gains in respect of its investment in the ordinary shares.99The above description is not intended to constitute a complete analysis of all tax consequences relating to acquisition, ownership and disposition of our ordinary shares. You areencouraged to consult your tax advisor concerning the tax consequences of your particular situation.F. Dividends and Paying AgentsNot applicable.G. Statement by ExpertsNot applicable.H. Documents on DisplayWe are currently subject to the informational requirements of the Exchange Act applicable to foreign private issuers and fulfill the obligations of these requirements by filing reports withthe SEC. As a foreign private issuer, we are exempt from the rules under the Exchange Act relating to the furnishing and content of proxy statements, and our officers, directors and principalshareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to fileperiodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. However, we intend to file with theSEC, within 120 days after the end of each subsequent fiscal year, an annual report on Form 20-F containing financial statements which will be examined and reported on, with an opinionexpressed, by an independent public accounting firm. We also intend to furnish the SEC reports on Form 6-K containing unaudited quarterly financial information.You may inspect and copy such material without charge at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You may also obtain copiesof such material from the SEC at prescribed rates by writing to the Public Reference Section of the SEC, 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for furtherinformation on the public reference room. The SEC maintains an Internet website at http://www.sec.gov that contains reports, proxy statements, information statements and other material that arefiled through the SEC’s Electronic Data Gathering, Analysis and Retrieval, or “EDGAR” system.We also file annual and special reports and other information with the Israeli Securities Authority through its fair disclosure electronic system called MAGNA. You may review thesefilings on the website of the MAGNA system operated by the Israeli Securities Authority at www.magna.isa.gov.il or on the website of the TASE at www.tase.co.il.Our ordinary shares are quoted on the TASE and, since December 2016, on Nasdaq (after being listed on the NYSE from November 2013 until December 2016). Information about us isalso available on our website at http://www.evogene.com. Our website and the information contained therein or connected thereto will not be deemed to be incorporated into this annual reportand you should not rely on any such information in making your decision whether to purchase our ordinary shares.I. Subsidiary InformationNot applicable.ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKWe are exposed to a variety of risks, including foreign currency exchange fluctuations, changes in interest rates, inflation, and other risks. We regularly assess the risks to minimize anyadverse effects on our business. For sensitivity analysis of our exposure to foreign currency exchange fluctuations and changes in market prices of listed securities, see Note 13d to ourconsolidated financial statements as of and for the year ended December 31, 2016 included elsewhere in this annual report.Foreign Currency RiskMost of our revenues are denominated in U.S. dollars. In contrast, we incur expenses primarily denominated in NIS. As a result, any appreciation of the NIS relative to the U.S. dollaradversely impacts our profitability due to the portion of our expenses that are incurred in NIS. As of December 31, 2016, we had open forward currency contracts to protect against our exposureto foreign currency fluctuations in the amount of approximately $2.0 million. In the future we may enter into additional hedging transactions in order to decrease our foreign currency risk, howeverthese transactions may not fully protect us from such risk.100Period Depreciation (Appreciation)of the NIS against the U.S.dollar (%) Based on Averageof Daily Exchange RatesThroughout Year Comparedto Previous Year 2016 (1.1)2015 8.6 2014 (0.9)2013 (6.4)2012 7.8 The following table presents information about the changes in the exchange rates of the NIS against the U.S. dollar: Our exposure related to exchange rate changes on our net asset position denominated in currencies other than USD varies with changes in our net asset position. Net asset positionrefers to financial assets, such as trade receivables and cash and cash deposits, less financial liabilities, such as trade payable and other payables. The impact of any such transaction gains orlosses is reflected in finance expenses or income. Our most significant exposure relates to a potential change in the exchange rates of the U.S. dollar and the NIS. Assuming a 10% decrease in theU.S. dollar relative to the NIS, and assuming no other change, our finance expenses would have increased by $0.2 million in 2016, increase by $0.4 million in 2015, and increase by $0.3 million in2014 due to our negative current net asset position denominated in U.S. dollars as of December 31, 2016, 2015 and 2014.Commodity Price RiskOperating in the agribusiness sector, changes in certain commodity prices may affect our reported operating results and cash flows. The budget for, and size of, research anddevelopment expenditures of our existing and potential collaborators may be reduced as a result of a decrease in commodity prices. For example, corn prices decreased from around US$7 perbushel in mid-2013 to less than US$4 per bushel in late 2014 and thereafter maintained that price level throughout 2015 and 2016. Such developments may, in turn, adversely impact the size of theresearch payments that we may receive from these collaborators, as well as our ability to extend existing collaborations or enter into new ones. In addition, the prospects of our wholly ownedsubsidiary Evofuel will depend on biofuel and oil and natural gas prices. Further, the royalties we may receive from our collaborators on the sales and transfers of seeds containing the traits wedevelop could be affected by fluctuations in seed commodity prices. As of December 31, 2016, we did not have any hedge arrangements in place to protect our exposure to commodity pricefluctuations.Interest rate riskWe have a considerable investment in marketable securities that consist of corporate bonds and government treasury notes denominated in U.S. dollars. These investments expose us tothe risk of interest rate fluctuations. An increase in U.S. interest rates could cause the fair value of these investments to decrease. As of December 31, 2016 the fair value of these investments was$71.7 million. The potential loss in fair value from a hypothetical 0.5% increase in the interest rate would be approximately $0.9 million. As of December 31, 2016, we did not have any hedgearrangements in place to protect our exposure to interest rate fluctuations.ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIESNot applicable.PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESNone.101ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDSThe effective date of the registration statement, File No. 333-191315, for our U.S. initial public offering of ordinary shares, par value NIS 0.02 per share, was November 20, 2013. Theoffering commenced on November 21, 2013 and was closed on November 26, 2013. Credit Suisse Securities and Deutsche Bank Securities acted as joint book-running managers for the offering,and Oppenheimer & Co. and Piper Jaffray & Co. acted as co-managers. We registered and sold 5,750,000 of our ordinary shares in our U.S. initial public offering. The aggregate offering price ofthe shares registered was approximately $84.8 million, as was the aggregate price of the shares sold. The total expenses of the offering, including underwriting discounts and commissions, wereapproximately $8 million. The net proceeds that we received from the offering were approximately $76.8 million.A portion of the net proceeds from our U.S. initial public offering has been used to enhance our seed traits operation, to develop and expand our ag-chemicals operations, to furtherdevelop and commercialize our Evofuel activities, to develop our ag-biologicals operations, and to fund our working capital and capital expenditures. The balance is held in cash, short termdeposit and marketable securities.None of the net proceeds of our U.S. initial public offering was paid directly or indirectly to any director, officer, general partner of ours or to their associates, persons owning ten percentor more of any class of our equity securities, or to any of our affiliates.ITEM 15.CONTROLS AND PROCEDURES(a)Disclosure Controls and ProceduresOur management, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined inRules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2016. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as ofDecember 31, 2016, our disclosure controls and procedures were effective such that the information required to be disclosed by us in reports that we file or submit under the Exchange Act isrecorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our Chief ExecutiveOfficer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.(b)Management’s Annual Report on Internal Control Over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) promulgatedunder the Exchange Act). Our internal control system has been designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reportingand the preparation and fair presentation of our published consolidated financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to futureperiods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as ofDecember 31, 2016. In making our assessment, our management used the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations ofthe Treadway Commission (COSO) (2013). Based on such assessment, our management has concluded that, as of December 31, 2016, our internal control over financial reporting is effective basedon those criteria.(c)Attestation Report of Registered Public Accounting FirmThis annual report does not include an attestation report of our independent registered public accounting firm regarding internal controls over financial reporting because the JOBS Actprovides us with an exemption from that requirement, as we qualify as an emerging growth company.102 2016 2015 Audit Fees $105,000 $120,000 Audit-Related Fees - - Tax Fees 22,000 15,252 Total $127,000 $135,252 (d)Changes in internal control over financial reportingDuring the period covered by this annual report, no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) promulgated underthe Exchange Act), have occurred that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.ITEM 16.[RESERVED]ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERTOur board of directors has determined that each of Ms. Sarit Firon and Mr. Ziv Kop qualifies as an audit committee financial expert, as defined by the rules of the SEC, and has therequisite financial experience required by the Nasdaq Listing Rules. In addition, each of Ms. Firon and Mr. Kop is independent, as such term is defined in Rule 10A-3(b)(1) under the Exchange Actand under the Nasdaq Listing Rules.ITEM 16B.CODE OF ETHICSWe have adopted a Code of Ethics and Proper Business Conduct applicable to our executive officers, directors and all other employees, which is a “code of ethics” as defined in this Item16B of Form 20-F promulgated by the SEC. We have also implemented a training program for new and existing employees concerning our Code of Ethics and Proper Business Conduct. A copy ofthe code is delivered to every employee of Evogene Ltd. and all of its subsidiaries, and is available to investors and others on our website at http://investors.evogene.com/corporate-governanceor by contacting our investor relations department. Information contained on, or that can be accessed through, our website does not constitute a part of this Form 20-F and is not incorporated byreference herein. Under Item 16B of Form 20-F, if a waiver or amendment of the Code of Business Conduct and Ethics applies to our principal executive officer, principal financial officer, principalaccounting officer, controller or other persons performing similar functions and relates to standards promoting any of the values described in Item 16B(b) of Form 20-F, we will disclose suchwaiver or amendment (i) on our website within five business days following the date of amendment or waiver in accordance with the requirements of Instruction 4 to such Item 16B or (ii) throughthe filing of a Form 6-K. We granted no waivers under our Code of Ethics and Proper Business Conduct in 2016. We intend to disclose any amendments to, or waivers of, the Code of Ethics andProper Business Conduct on our Web site.ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICESPrincipal Accountant Fees and Services.We paid or accrued the following fees for professional services rendered by Kost, Forer, Gabbay & Kasierer, a member of Ernst & Young Global and an independent registered publicaccounting firm, for the years ended December 31, 2016 and 2015:“Audit fees” are the aggregate fees billed for the audit of our annual financial statements. This category also includes services that generally the independent accountant provides, suchas consents and assistance with and review of documents filed with the SEC. “Audit-related fees” include consultations in the regular course of business.“Tax fees” include fees for professional services rendered by our auditors for tax compliance and tax consulting in connection with international transfer pricing.Our audit committee has adopted a pre-approval policy for the engagement of our independent accountant to perform certain audit and non-audit services. Pursuant to this policy, whichis designed to assure that such engagements do not impair the independence of our auditors, the audit committee pre-approves annually any specific audit and non-audit services, audit-relatedservice and tax services that may be performed by our independent accountants. Pursuant to that policy, our audit committee pre-approved all fees paid to our auditors for the year endedDecember 31, 2016.103ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEESNot applicable.ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSNot applicable.ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTNot applicable.ITEM 16G.CORPORATE GOVERNANCEExcept as otherwise indicated, we are in compliance with corporate governance standards as currently applicable to us under Israeli, U.S., SEC and Nasdaq laws, rules and/or regulations,as applicable. Under the Nasdaq Listing Rules, as a foreign private issuer, we may elect to follow certain corporate governance practices permitted under the Companies Law in lieu of compliancewith corresponding corporate governance requirements otherwise imposed by the Nasdaq Listing Rules for U.S. domestic issuers. We currently follow the provisions of the Companies Law,rather than the Nasdaq Listing Rules, solely with respect to the following requirements: § Quorum. As permitted under the Companies Law pursuant to our articles of association, the quorum required for an ordinary meeting of shareholders will consist of at least twoshareholders present in person, by proxy or by other voting instrument in accordance with the Companies Law, who hold at least 25% of the voting power of our shares (and in anadjourned meeting, with some exceptions, at least two shareholders), instead of 33 1/3% of the issued share capital required under the NASDAQ Listing rules.§ Executive sessions of independent directors. Israeli law does not require executive sessions of independent directors. Although all of our current directors are “independentdirectors” under the applicable Nasdaq criteria, we do not intend to comply with this requirement if we have directors who are not independent.§ Shareholder approval. We will seek shareholder approval for all corporate actions requiring such approval under the Companies Law, which include (i) transactions with directorsconcerning the terms of their service or indemnification, exemption and insurance for their service (or for any other position that they may hold at a company), (ii) transactionsconcerning the compensation, indemnification, exculpation and insurance of the chief executive officer; (iii) the compensation policy recommended by the compensation and nominatingcommittee of our board of directors and approved by our board of directors (and any amendments thereto); (iv) extraordinary transactions with, and the terms of employment or otherengagement of, a controlling shareholder (if and when this becomes relevant to our company), (v) amendments to our articles of association, and (vi) certain non-public issuances ofsecurities. In addition, under the Companies Law, a merger requires approval of the shareholders of each of the merging companies. We will not be required to, however, seek shareholderapproval for any of the following events described in the Nasdaq Listing Rules:ocertain issuances of shares in excess of 20% of the outstanding shares of the Company; oan issuance that will result in a change of control of our company; and oadoption of, or material changes to, our equity compensation plans. ITEM 16H.MINE SAFETY DISCLOSURENot applicable. PART IIIITEM 17.FINANCIAL STATEMENTSNot applicable. ITEM 18.FINANCIAL STATEMENTSSee pages F-2 through F-45 of this annual report.ITEM 19.EXHIBITSSee the Index of Exhibits incorporated herein by reference. 104 SIGNATURES The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on itsbehalf. Evogene Ltd. Date: April 28, 2017 By: /s/ Ofer HavivName: Ofer HavivTitle: President and Chief Executive Officer105ANNUAL REPORT ON FORM 20-FINDEX OF EXHIBITS Exhibit No. Description1.1 Amended and Restated Articles of Association of the Registrant (incorporated by reference to Exhibit 3.2 to Evogene’s Registration Statement on Form F-1, as amended(Registration No. 333-191315))1.2 Amendments to Articles 19 and 21 of the Amended and Restated Articles of Association of the Registrant (incorporated by reference to Appendix A to Evogene's proxystatement for its 2014 annual general meeting of shareholders, annexed as Exhibit 99.1(a) to Evogene’s Report of Foreign Private Issuer on Form 6-K, furnished to the SEC onApril 8. 2014)4.1 Form of Indemnification Agreement (incorporated by reference to Exhibit 10.9 to Evogene’s Registration Statement on Form F-1, as amended (Registration No. 333-191315))4.2 Evogene Share Option Plan (2002) (incorporated by reference to Exhibit 10.10 to Evogene’s Registration Statement on Form F-1, as amended (Registration No. 333-191315))4.3 Evogene Ltd. Key Employee Share Incentive Plan, 2003 (incorporated by reference to Exhibit 10.11 to Evogene’s Registration Statement on Form F-1, as amended (RegistrationNo. 333-191315))4.4.1 Evogene Ltd. 2013 Share Option Plan (incorporated by reference to Exhibit 10.12 to Evogene’s Registration Statement on Form F-1, as amended (Registration No. 333-191315))4.4.2 2015 U.S. Addendum to Evogene Ltd. 2013 Share Option Plan (incorporated by reference to Exhibit A to the proxy statement for Evogene’s special general meeting ofshareholders held on March 15, 2016, annexed as Exhibit 99.1 to Evogene’s Report of Foreign Private Issuer on Form 6-K, furnished to the SEC on February 4, 2016)4.5 Second Amended and Restated Collaboration Agreement, dated October 27, 2013, by and between Monsanto Company and Evogene Ltd., (incorporated by reference toExhibit 10.1 to Evogene’s Registration Statement on Form F-1, as amended (Registration No. 333-191315)) †4.6 Wheat Collaboration and License Agreement, dated December 10, 2010, by and between Bayer CropScience AG and Evogene Ltd., as amended on October 14, 2012 and onJuly 21, 2014 (incorporated by reference to Exhibits 10.6 and 10.7 to Evogene’s Registration Statement on Form F-1, as amended (Registration No. 333-191315)) †4.7.1 Evogene Ltd. Officers’ Compensation Policy (incorporated by reference to Appendix A to Evogene’s proxy statement for its special general meeting of shareholders held onMarch 11, 2014, annexed as Exhibit 99.1 to Evogene’s Report of Foreign Private Issuer on Form 6-K, furnished to the SEC on February 10, 2014)4.7.2 Amendments to Evogene Ltd. Officers’ Compensation Policy (incorporated by reference to Appendix A to Evogene's proxy statement for its 2015 annual general meeting ofshareholders held on May 5, 2015, annexed as Exhibit 99.2 to Evogene’s Report of Foreign Private Issuer on Form 6-K, furnished to the SEC on March 31, 2015)8.1 List of subsidiaries of the Registrant12.1 Certificate of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to §302 of the Sarbanes-Oxley Act of 200212.2 Certificate of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to §302 of the Sarbanes-Oxley Act of 200213.1 Certificate of Chief Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 200213.2 Certificate of Chief Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 200215.1 Consent of Kost Forer Gabbay and Kasierer, a member of Ernst & Young Global† Confidential treatment has been requested for portions of this document. The omitted portions of this document have been filed with the SEC. 106 EVOGENE LTD. AND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2016IN U.S. DOLLARS INDEX Page Report of Independent Registered Public Accounting FirmF-2 Consolidated Statements of Financial PositionF-3 Consolidated Statements of Profit or Loss and Other Comprehensive Income (Loss)F-4 Consolidated Statements of Changes in EquityF-5 Consolidated Statements of Cash FlowsF-6 - F-7 Notes to Consolidated Financial StatementsF-8 - F-45 Kost Forer Gabbay & Kasierer3 Aminadav St.Tel-Aviv 6706703, IsraelTel: +972-3-6232525Fax: +972-3-5622555ey.com REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors ofEvogene Ltd. We have audited the accompanying consolidated statements of financial position of Evogene Ltd. and its subsidiaries ("the Company") as of December 31, 2016 and 2015 and the relatedconsolidated statements of profit or loss and other comprehensive income (loss), changes in equity and cash flows for each of the three years in the period ended December 31, 2016. Thesefinancial 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the auditto obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financialreporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purposeof expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. 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 board ofdirectors 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 and itssubsidiaries as of December 31, 2016 and 2015 and the consolidated results of their operations, changes in their equity and their cash flows for each of the three years in the period endedDecember 31, 2016, in conformity with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board. Tel-Aviv, Israel KOST FORER GABBAY & KASIERERApril 28, 2017 A Member of Ernst & Young Global F - 2EVOGENE LTD. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITIONU.S. dollars in thousands (except share and per share data) December 31, Note 2016 2015 CURRENT ASSETS: Cash and cash equivalents 7 $3,236 $10,221 Restricted cash 47 47 Marketable securities 8 71,738 71,807 Short-term bank deposits 13,137 18,603 Trade receivables 169 2,675 Other receivables 9 1,163 1,023 89,490 104,376 LONG-TERM ASSETS: Long-term deposits 13 22 Property, plant and equipment, net 10 6,483 8,197 6,496 8,219 $95,986 $112,595 CURRENT LIABILITIES: Trade payables $1,330 $1,771 Other payables 11 2,803 3,049 Liabilities in respect of government grants 12 125 259 Deferred revenues and other advances 5 967 560 5,225 5,639 LONG-TERM LIABILITIES: Liabilities in respect of government grants 12 3,303 2,880 Deferred revenues and other advances 5 138 298 Severance pay liability, net 14 31 26 3,472 3,204 SHAREHOLDERS' EQUITY: 17 Ordinary shares of NIS 0.02 par value:Authorized − 150,000,000 ordinary shares; Issued and outstanding –25,480,809 and 25,404,362 shares at December 31,2016 and 2015, respectively 141 140 Share premium and other capital reserve 183,342 180,214 Accumulated deficit (96,194) (76,602) 87,289 103,752 $95,986 $112,595 The accompanying notes are an integral part of the consolidated financial statements. F - 3EVOGENE LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME (LOSS)U.S. dollars in thousands (except share and per share data) Year ended December 31, Note 2016 2015 2014 Revenues $6,540 $11,129 $14,511 Cost of revenues 19a 5,639 8,255 9,709 Gross profit 901 2,874 4,802 Operating expenses: Research and development, net 19b 16,405 14,449 14,022 Business development 19c 1,696 1,964 1,851 General and administrative 19d 3,889 4,382 4,185 Total operating expenses 21,990 20,795 20,058 Operating loss (21,089) (17,921) (15,256) Financing income 19e 2,424 2,571 2,242 Financing expenses 19e (891) (1,863) (1,516) Loss before taxes on income (19,556) (17,213) (14,530)Taxes on income 36 - - Net loss $(19,592) $(17,213) $(14,530) Other comprehensive income (loss): Loss from cash flow hedges $- $(45) $(222)Amounts transferred to the statement of profit or loss for cash flow hedges - 267 - Total comprehensive loss $(19,592) $(16,991) $(14,752) Basic and diluted net loss per share 20 $(0.77) $(0.68) $(0.58) The accompanying notes are an integral part of the consolidated financial statements. F - 4EVOGENE LTD. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITYU.S. dollars in thousands Sharecapital Share premiumand other capitalreserve Accumulatedothercomprehensiveloss Accumulateddeficit Total Balance as of January 1, 2014 $137 $169,469 $- $(44,859) $124,747 Net loss - - - (14,530) (14,530) Exercise of options 3 2,854 - - 2,857 Other comprehensive loss - - (222) - (222) Share-based compensation - 3,230 - - 3,230 Balance as of December 31, 2014 $140 $175,553 $(222) $(59,389) $116,082 Net loss - - - (17,213) (17,213) Exercise of options - 296 - - 296 Other comprehensive income - - 222 - 222 Share-based compensation - 4,365 - - 4,365 Balance as of December 31, 2015 $140 $180,214 $- $(76,602) $103,752 Net and comprehensive loss - - - (19,592) (19,592) Exercise of options 1 185 - - 186 Share-based compensation - 2,943 - - 2,943 Balance as of December 31, 2016 $141 $183,342 $- $(96,194) $87,289 The accompanying notes are an integral part of the consolidated financial statements. F - 5EVOGENE LTD. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWSU.S. dollars in thousands Year endedDecember 31, 2016 2015 2014 Cash flows from operating activities: Net loss $(19,592) $(17,213) $(14,530) Adjustments to reconcile net loss to net cash used in operating activities: Adjustments to the profit or loss items: Depreciation and amortization 2,279 2,433 2,249 Share-based compensation 2,943 4,365 3,230 Net financing income (1,688) (845) (926)Loss from sale of property, plant and equipment 39 - - Taxes on income 36 - - 3,609 5,953 4,553 Changes in asset and liability items: Decrease (increase) in trade receivables 2,506 (1,492) 730 Decrease (increase) in other receivables (100) (293) 58 Decrease (increase) in long term deposits 9 (1) 7 Decrease in trade payables (215) (68) (267)Decrease in other payables (303) (640) (895)Increase (decrease) in severance pay liability, net 5 (3) 10 Decrease in deferred revenues and other advances (81) (1,055) (571)Increase (decrease) in liabilities in respect of government grants 115 (284) - 1,936 (3,836) (928) Cash received (paid) during the year for: Interest received 2,360 2,689 2,010 Taxes paid (6) - - Net cash used in operating activities (11,693) (12,407) (8,895) Cash flows from investing activities: Purchase of property, plant and equipment (808) (2,005) (3,564)Proceeds from sale of marketable securities 23,926 38,164 31,195 Purchase of marketable securities (24,561) (31,168) (80,615)Proceeds from (investment in) bank deposits, net 5,466 11,443 (30,046)Proceeds from sale of property, plant and equipment 5 - - Decrease (increase) in restricted cash - 953 (1,000) Net cash provided by (used in) investing activities 4,028 17,387 (84,030) The accompanying notes are an integral part of the consolidated financial statements. F - 6 EVOGENE LTD. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWSU.S. dollars in thousands Year endedDecember 31, 2016 2015 2014 Cash flows from financing activities: Proceeds from exercise of options 186 296 2,857 Proceeds from government grants 802 167 339 Repayment of government grants (333) (418) (530) Net cash provided by financing activities 655 45 2,666 Exchange rate differences - cash and cash equivalent balances 25 (17) 18 Increase (decrease) in cash and cash equivalents (6,985) 5,008 (90,241) Cash and cash equivalents, beginning of the year 10,221 5,213 95,454 Cash and cash equivalents, end of the year $3,236 $10,221 $5,213 Significant non-cash activities: Acquisition of property, plant and equipment $150 $349 $536 The accompanying notes are an integral part of the consolidated financial statements. F - 7 EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data)NOTE 1: – GENERAL a.Evogene Ltd. together with its subsidiaries ("the Company" or "Evogene") is a leading biotechnology company focused on the improvement of crop productivity andperformance, addressing the world’s increasing demand for food, feed and fuel. We have developed a proprietary innovative technology platform, leveraging scientificunderstanding and computational technologies to harness agriculture ‘Big Data’ in order to develop improved seed traits, innovative ag-chemical products and novel ag-biological products. Furthermore, we operate a seed business under our wholly-owned subsidiary, Evofuel Ltd., or Evofuel, currently focusing on the development of improved castor bean seedsto serve as a feedstock source for biofuel and other industrial uses. Evogene Ltd. was founded on October 10, 1999 as Agro Leads Ltd., a division of Compugen Ltd. In 2002, our company was spun-off as an independent corporation underthe laws of the State of Israel, and changed its name to Evogene Ltd.The Company’s shares have been trading on the Tel Aviv Stock Exchange (“TASE”) since 2007, on the New York Stock Exchange (“NYSE”) from November 2013 untilDecember 2016, and on the Nasdaq Stock Market ("NASDAQ") since December 2016.b.The Company principally derives its revenues from collaboration arrangements, see note 5. As to major customers, see Note 21(c). In a case of termination of collaborationagreement with a major customer, the Company may not be able to make up the lost revenue and this may have a material adverse effect on its results of operations.c. The Company has two fully owned active subsidiaries –Evofuel and Evogene Inc.Evogene Inc. was incorporated in Delaware, United States. Since 2015, Evogene Inc. is engaged in research and development in the field of insect control and located in theBio-Research and Development Growth (BRDG) Park, in St. Louis, Missouri, United States.d.Definitions In these Financial Statements – Subsidiary- Company that is controlled by the Company (as defined in IFRS 10) and whose accounts are consolidated with those of the Company.Related parties- As defined in IAS 24.F - 8EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data)NOTE 2: - SIGNIFICANT ACCOUNTING POLICIESThe following accounting policies have been applied consistently in the financial statements for all periods presented, unless otherwise stated.a.Basis of presentation of the financial statements:These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS").The Company's financial statements have been prepared on a cost basis, except for financial assets and liabilities (including derivatives) which are presented at fair valuethrough profit or loss.The Company has elected to present profit or loss items using the function of expense method.b.Consolidated financial statements:The consolidated financial statements comprise the financial statements of companies that are controlled by the Company (subsidiaries). Control is achieved when theCompany is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.Potential voting rights are considered when assessing whether an entity has control. The consolidation of the financial statements commences on the date on which controlis obtained and ends when such control ceases.The financial statements of the Company and of the subsidiaries are prepared as of the same dates and periods. The consolidated financial statements are prepared usinguniform accounting policies by all companies in the Group. Significant intragroup balances and transactions and gains or losses resulting from intragroup transactions areeliminated in full in the consolidated financial statements.c.Functional currency, presentation currency and foreign currency:1.Functional currency and presentation currency:The presentation currency of the financial statements is the U.S. dollar.The Company and its subsidiaries determine the functional currency of each entity, and this currency is used to separately measure each entity's financial positionand operating results. The Company's functional currency is the U.S. dollar. F - 9EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data) NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (Cont.)2.Transactions, assets and liabilities in foreign currency:Transactions denominated in foreign currency are recorded upon initial recognition at the exchange rate at the date of the transaction. After initial recognition,monetary assets and liabilities denominated in foreign currency are translated at each reporting date into the functional currency at the exchange rate at that date.Exchange rate differences, other than those capitalized to qualifying assets or accounted for as hedging transactions in equity, are recognized in profit or loss. Non-monetary assets and liabilities denominated in foreign currency and measured at cost are translated at the exchange rate at the date of the transaction. Non-monetaryassets and liabilities denominated in foreign currency and measured at fair value are translated into the functional currency using the exchange rate prevailing at thedate when the fair value was determined.d.Cash equivalents:Cash equivalents are considered as highly liquid investments, including unrestricted short-term bank deposits with an original maturity of three months or less from the dateof investment or with a maturity of more than three months, but which are redeemable on demand without penalty.e.Short-term deposits:Short-term bank deposits are deposits with an original maturity of more than three months from the date of investment but less than one year and which do not meet thedefinition of cash equivalents. The deposits are presented according to their terms of deposit.f.Government grants:Government grants received from the Office of the Chief Scientist in Israel ("OCS"), the Israel-U.S. Binational Industrial Research and Development Foundation ("BIRD") andthe Canada-Israel Industrial Research and Development Foundation ("CIIRDF") are recognized upon receipt as a liability if future economic benefits are expected from theresearch project that will result in royalty-bearing sales.A liability for the loan is first measured at fair value using a discount rate that reflects a market rate of interest. The difference between the amount of the grant received andthe fair value of the liability is accounted for as a government grant and recognized as a reduction of research and development expenses. After initial recognition, theliability is measured at amortized cost using the effective interest method. Royalty payments are treated as a reduction of the liability. If no economic benefits are expectedfrom the research activity, the grant receipts are recognized as a reduction of the related research and development expenses. In that event, the royalty obligation is treatedas a contingent liability in accordance with IAS 37. F - 10 % Mainly % Laboratory equipment 10-33.33 15 Computers and peripheral equipment 33.33 Office equipment and furniture 6 Motor vehicles 15 Leasehold improvements see below EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data)NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (Cont.)In each reporting date, the Company evaluates whether there is reasonable assurance that the liability recognized, in whole or in part, will not be repaid (since the Companywill not be required to pay royalties) based on the best estimate of future sales and using the original effective interest method, and if so, the appropriate amount of theliability is derecognized against a corresponding reduction in research and development expenses.Amounts paid as royalties are recognized as settlement of the liability.Non-refundable grants from the OCS and the European Union Horizon 2020 (“EU”) for funding research and development projects are recognized at the time the Company isentitled to such grants on the basis of the related costs incurred and recorded as a deduction from research and development expenses.g.Leases:The criteria for classifying leases as finance or operating leases depend on the substance of the agreements and are made at the inception of the lease in accordance with thefollowing principles as set out in IAS 17.The Company is only involved in operating lease transaction as a lessee.Leases in which substantially all the risks and rewards of ownership of the leased asset are not transferred to the Company are classified as operating leases. Leasepayments are recognized as an expense in profit or loss on a straight-line basis over the lease term.h.Property, plant and equipment:Property, plant and equipment are measured at cost, including directly attributable costs, less accumulated depreciation, accumulated impairment losses and any relatedinvestment grants and excluding day-to-day servicing expenses.Depreciation is calculated on a straight-line basis over the useful life of the assets at annual rates as follows:Leasehold improvements are depreciated on a straight-line basis over the shorter of the lease term (including the extension option held by the Company and intended to beexercised) and the expected life of the improvement.The useful life, depreciation method and residual value of an asset are reviewed at least each year-end and any changes are accounted for prospectively as a change inaccounting estimate. Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognized. F - 11EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data) NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (Cont.)i.Intangible assets:Separately acquired intangible assets are measured on initial recognition at cost including directly attributable costs.Intangible assets with a finite useful life are amortized over their useful life and reviewed for impairment whenever there is an indication that the asset may be impaired. Theamortization period and the amortization method for an intangible asset are reviewed at least at each year end.Amortization expenses in respect of intangible assets in the statements of comprehensive loss for 2016, 2015 and 2014 totaled $0, $0 and $45, respectively. The expenses wereincluded in research and development expenses.Research and development expenditures:Research expenditures are recognized in profit or loss when incurred.j.Impairment of non-financial assets:The Company evaluates the need to record an impairment of non-financial assets whenever events or changes in circumstances indicate that the carrying amount is notrecoverable.If the carrying amount of non-financial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverable amount is the higher offair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using a pre-tax discount rate that reflects the risksspecific to the asset. The recoverable amount of an asset that does not generate independent cash flows is determined for the cash-generating unit to which the assetbelongs. Impairment losses are recognized in profit or loss.An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset's recoverable amount since thelast impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower of the carrying amount that would have beendetermined (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years and its recoverable amount. The reversal of impairmentloss of an asset presented at cost is recognized in profit or loss.k.Revenue recognition:Revenues are recognized in profit or loss when the revenues can be measured reliably, it is probable that the economic benefits associated with the transaction will flow tothe Company and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Revenues are measured at the fair value of the considerationreceived. F - 12EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data) NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (Cont.)The following are the specific revenue recognition criteria which must be met before revenue is recognized:-Revenues from agreements that do not contain a general right of return and are composed of multiple elements such as license, services, royalties and milestoneevents are allocated to the different elements and are recognized in respect of each element separately. An element constitutes a separate accounting unit if and only ifit has a separate value to the customer. Revenue from each element is recognized when the criteria for revenue recognition have been met and only to the extent of theconsideration that is not contingent upon completion or performance of future services in the contract.-Revenues from research and development services as part of the Company's collaboration agreements are recognized as service revenues. Recognition of the serviceis throughout the services period and is determined based on the proportion of actual costs incurred for each reporting period to the estimated total costs, subject tothe enforceable rights.-Revenues from milestone events stipulated in the agreements are recognized upon the occurrence of a substantive element specified in the agreement.Deferred revenues and other advances:Deferred revenues and other advances are unearned amounts including up-front payments received from customers not yet recognized as revenues. Up-front paymentsreceived upon entering into the collaboration agreements are initially deferred when received and then recognized as service revenues over the duration of the relevantcontract based on the proportion of actual costs incurred for each reporting period to the estimated total costs of the collaboration.l.Taxes on income:Current or deferred taxes are recognized in profit or loss, except to the extent that they relate to items which are recognized in other comprehensive income (loss) or equity.1.Current taxes:The current tax liability is measured using the tax rates and tax laws that have been enacted or substantively enacted by the reporting date as well as adjustmentsrequired in connection with the tax liability in respect of previous years.2.Deferred taxes:Deferred taxes are computed in respect of temporary differences between the carrying amounts in the financial statements and the amounts attributed for taxpurposes.Deferred taxes are measured at the tax rate that is expected to apply when the asset is realized or the liability is settled, based on tax laws that have been enacted orsubstantively enacted by the reporting date.F - 13EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data) NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (Cont.)Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is not probable that they will be utilized. Temporary differences for whichdeferred tax assets had not been recognized are reviewed at each reporting date and a respective deferred tax asset is recognized to the extent that their utilization isprobable.m.Financial instruments:1.Financial assets:Financial assets within the scope of IAS 39 are initially recognized at fair value plus directly attributable transaction costs, except for financial assets measured at fairvalue through profit or loss in respect of which transaction costs are recorded in profit or loss.After initial recognition, the accounting treatment of financial assets is based on their classification as follows:a)Financial assets at fair value through profit or loss:This category includes financial assets held for trading and financial assets designated upon initial recognition as at fair value through profit or loss.b)Loans and receivables:Loans and receivables are investments with fixed or determinable payments that are not quoted in an active market. After initial recognition, loans are measuredbased on their terms at amortized cost plus directly attributable transaction costs using the effective interest method and less any impairment losses. Short-term borrowings are measured based on their terms, normally at face value. 2.Financial liabilities at amortized cost:Financial liabilities at amortized cost are initially recognized at fair value. Loans and other liabilities measured at amortized cost are presented less direct transactioncosts.After initial recognition, these loans and other liabilities are measured based on their terms at amortized cost less directly attributable transaction costs using theeffective interest method. F - 14EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data) NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (Cont.)3.Derecognition of financial instruments:a)Financial assets:A financial asset is derecognized when the contractual rights to the cash flows from the financial asset expire or the Company has transferred its contractualrights to receive cash flows from the financial asset or assumes an obligation to pay the cash flows in full without material delay to a third party and hastransferred substantially all the risks and rewards of the asset, or has neither transferred nor retained substantially all the risks and rewards of the asset, buthas transferred control of the asset.b)Financial liabilities:A financial liability is derecognized when it is extinguished, that is when the obligation is discharged or cancelled or expires. A financial liability is extinguishedwhen the debtor (the Company) discharges the liability by paying in cash, other financial assets, goods or services; or is legally released from the liability.When an existing financial liability is exchanged with another liability from the same lender on substantially different terms, or the terms of an existing liabilityare substantially modified, such an exchange or modification is accounted for as an extinguishment of the original liability and the recognition of a new liability.The difference between the carrying amounts of the above liabilities is recognized in profit or loss. If the exchange or modification is not substantial, it isaccounted for as a change in the terms of the original liability and no gain or loss is recognized on the exchange. When evaluating whether the change in theterms of an existing liability is substantial, the Company takes into account both quantitative and qualitative considerations.n.Derivative financial instruments designated as hedges:The Company entered into contracts for derivative financial instruments such as forward currency contracts to hedge risks associated with foreign exchange ratefluctuations.Any gains or losses arising from changes in the fair values of derivatives that do not qualify for hedge accounting are recorded immediately in profit or loss.Hedges qualify for hedge accounting, among others, when at inception of the hedging relationship there is a formal designation and documentation of the hedgingrelationship and of the Company's risk management objective and strategy for undertaking the hedge. Hedges are assessed on an ongoing basis to determine whether theyare highly effective during the reporting period for which the hedge is designated. Hedges that meet the criteria for hedge accounting are accounted for as follows:F - 15EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data)NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (Cont.)Cash flow hedges:The effective portion of the change in the fair value of the hedging instrument is recognized in other comprehensive income (loss) while any ineffective portion is recognizedimmediately in profit or loss.Amounts recognized as other comprehensive income (loss) are reclassified to profit or loss when the hedged transaction affects profit or loss, such as when the hedgedincome or expense is recognized or when a forecasted transaction occurs.If the forecast transaction or firm commitment is no longer expected to occur, amounts previously recognized in other comprehensive income (loss) are reclassified to profit orloss. If the hedging instrument expires or is sold, terminated or exercised, or if its designation as a hedge is revoked, amounts previously recognized in other comprehensiveincome (loss) remain in other comprehensive income (loss) until the forecast transaction or firm commitment occurs.o.Fair value measurement:Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.Fair value measurement is based on the assumption that the transaction will take place in the asset's or the liability's principal market, or in the absence of a principal market,in the most advantageous market.The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that marketparticipants act in their economic best interest.Fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best useor by selling it to another market participant that would use the asset in its highest and best use.The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use ofrelevant observable inputs and minimizing the use of unobservable inputs.F - 16Level 1-Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2-Inputs other than quoted prices included within Level 1 that are observable directly or indirectly. Level 3-Inputs that are not based on observable market data (valuation techniques which use inputs that are not based on observable market data).EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data) NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (Cont.)All assets and liabilities measured at fair value or for which fair value is disclosed are categorized into levels within the fair value hierarchy based on the lowest level inputthat is significant to the entire fair value measurement:p.Provisions:A provision in accordance with IAS 37 is recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that anoutflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.q.Employee benefit liabilities:The Company has several employee benefit plans:1.Short-term employee benefits:Short-term employee benefits are benefits that are expected to be settled wholly before twelve months after the end of the annual reporting period in which theemployees render the related services. These benefits include salaries, paid annual leave, paid sick leave, recreation and social security contributions and arerecognized as expenses as the services are rendered. A liability in respect of a cash bonus or a profit-sharing plan is recognized when the Company has a legal orconstructive obligation to make such payment as a result of past service rendered by an employee and a reliable estimate of the amount can be made.2.Post-employment benefits:The plans are normally financed by contributions to insurance companies and classified as defined contribution plans or as defined benefit plans. The Company has defined contribution plans pursuant to section 14 to the Severance Pay Law under which the Company pays fixed contributions and will have nolegal or constructive obligation to pay further contributions if the fund does not hold sufficient amounts to pay all employee benefits relating to employee service inthe current and prior periods.Contributions to the defined contribution plan in respect of severance or retirement pay are recognized as an expense when contributed concurrently withperformance of the employee's services. F - 17EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data)NOTE 2: – SIGNIFICANT ACCOUNTING POLICIES (Cont.)In respect of its severance pay obligation to certain of its employees, the Company makes current deposits in pension funds and insurance companies ("the planassets"). Plan assets comprise assets held by a long-term employee benefit fund or qualifying insurance policies. Plan assets are not available to the Company's owncreditors and cannot be returned directly to the Company.r.Share-based payment transactions:The Company's employees and consultants are entitled to remuneration in the form of equity-settled share-based payment transactions.Equity-settled transactions:The cost of equity-settled transactions with employees is measured at the fair value of the equity instruments granted at grant date. The fair value is determined using anacceptable option pricing model.As for consultants, the cost of the transactions is measured at the fair value of the services received as consideration for equity instruments granted.The cost of equity-settled transactions is recognized in profit or loss together with a corresponding increase in equity during the period which the performance and/orservice conditions are to be satisfied ending on the date on which the relevant employees become entitled to the award ("the vesting period"). The cumulative expenserecognized for equity-settled transactions at the end of each reporting period until the vesting date reflects the extent to which the vesting period has expired and theCompany's best estimate of the number of equity instruments that will ultimately vest. No expense is recognized for awards that do not ultimately vest.If the Company modifies the conditions on which equity-instruments were granted, an additional expense is recognized for any modification that increases the total fair valueof the share-based payment arrangement or is otherwise beneficial to the employee or other service provider at the modification date.s.Loss per share:Loss per share is calculated by dividing the net loss attributable to equity holders of the Company by the weighted number of ordinary shares outstanding during the period.Potential ordinary shares are included in the computation of diluted earnings per share when their conversion decreases earnings per share from continuing operations.F - 18EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data) NOTE 3: -SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUPMTIONS USED IN THE PREPARATION OF THE FINANCIAL STATEMENTSIn the process of applying the significant accounting policies, the Company has made the following judgments which have the most significant effect on the amounts recognized inthe financial statements:a.Judgments:Revenues:The Company assesses the criteria for recognition of revenue related to up-front payments and multiple components as outlined by IAS 18, "Revenues". Judgment isnecessary to determine over which period the Company will satisfy its obligations related to up-front payments and when components can be recognized separately and theallocation of the related consideration to each component.b.Estimates and assumptions:The preparation of the financial statements requires management to make estimates and assumptions that have an effect on the application of the accounting policies and onthe reported amounts of assets, liabilities, revenues and expenses. Changes in accounting estimates are reported in the period of the change in estimate.The key assumptions made in the financial statements concerning uncertainties at the reporting date and the critical estimates computed by the Company that may result in amaterial adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.-Government grants:Government grants received from the OCS, BIRD and CIIRDF are recognized as a liability if future economic benefits are expected from the research and developmentactivity that will result in royalty-bearing sales. There is uncertainty regarding the estimated future cash flows used to measure the amount of the liability.-Legal claims:In estimating the likelihood of outcome of legal claims filed against the Company, the companies relies on the opinion of its legal counsel. These estimates are basedon the legal counsel's best professional judgment, taking into account the stage of proceedings and legal precedents in respect of the different issues. Since theoutcome of the claims will be determined in courts, the results could differ from these estimates.F - 19EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data)NOTE 3: -SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUPMTIONS USED IN THE PREPARATION OF THE FINANCIAL STATEMENTS (Cont.)-Determining the fair value of share-based payment transactions:The fair value of share-based payment transactions is determined upon initial recognition by an acceptable option pricing model. The inputs to the model includeshare price and exercise price and assumptions regarding expected volatility, expected life of share option and expected dividend yield. NOTE 4: -DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTIONa.IFRS 15, "Revenue from Contracts with Customers":IFRS 15 ("the new Standard") was issued by the IASB in May 2014.The new Standard replaces IAS 18, "Revenue", IAS 11, "Construction Contracts", IFRIC 13, "Customer Loyalty Programs", IFRIC 15, "Agreements for the Construction ofReal Estate", IFRIC 18, "Transfers of Assets from Customers" and SIC-31, "Revenue - Barter Transactions Involving Advertising Services".The new Standard introduces a five-step model that will apply to revenue earned from contracts with customers:Step 1: Identify the contract with a customer, including reference to contract combination and accounting for contract modifications.Step 2: Identify the separate performance obligations in the contractStep 3: Determine the transaction price, including reference to variable consideration, financing components that are significant to the contract, non-cash consideration andany consideration payable to the customer.Step 4: Allocate the transaction price to the separate performance obligations on a relative stand-alone selling price basis using observable information, if it is available, orusing estimates and assessments.Step 5: Recognize revenue when a performance obligation is satisfied, either at a point in time or over time.The new Standard is to be applied retrospectively for annual periods beginning on January 1, 2018. Early adoption is permitted. At this stage, the Company does not intendto adopt IFRS 15 early.F - 20EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data)NOTE 4: -DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)The new Standard allows the option of modified retrospective adoption with certain reliefs according to which the new Standard will be applied to existing contracts from theinitial period of adoption and thereafter with no restatement of comparative data. Under this option, the Company will recognize the cumulative effect of the initial adoptionof the new Standard as an adjustment to the opening balance of retained earnings (or another component of equity, as applicable) as of the date of initial application.Alternatively, the new Standard permits full retrospective adoption with certain reliefs.Alternatively, the new Standard permits full retrospective adoption with certain reliefs.The Company is still in the process of completing its assessment on the impact this guidance will have on its consolidated financial statements. The Company expects tocomplete its assessment process during 2017.b.IFRS 9, "Financial Instruments":In July 2014, the IASB issued the final and complete version of IFRS 9, "Financial Instruments" ("IFRS 9"), which replaces IAS 39, "Financial Instruments: Recognition andMeasurement". IFRS 9 mainly focuses on the classification and measurement of financial assets and it applies to all assets in the scope of IAS 39.According to IFRS 9, all financial assets are measured at fair value upon initial recognition. In subsequent periods, debt instruments are measured at amortized cost only ifboth of the certain conditions are met.IFRS 9 also includes a new model for measurement of impairment of financial assets.Subsequent measurement of all other debt instruments and financial assets should be at fair value. IFRS 9 establishes a distinction between debt instruments to be measuredat fair value through profit or loss and debt instruments to be measured at fair value through other comprehensive income (loss).According to IFRS 9, the provisions of IAS 39 will continue to apply to derecognition and to financial liabilities for which the fair value option has not been elected.IFRS 9 also prescribes new hedge accounting requirements.IFRS 9 is to be applied for annual periods beginning on January 1, 2018. Early adoption is permitted.The Company is evaluating the possible impact of the adoption of IFRS 9 but is presently unable to assess its effect, if any, on the financial statements.F - 21EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data)NOTE 4: -DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)c.Amendments to IAS 7, "Statement of Cash Flows", regarding additional disclosures of financial liabilities:In January 2016, the IASB issued amendments to IAS 7, "Statement of Cash Flows", ("the amendments") which require additional disclosures regarding financial liabilities.The amendments require disclosure of the changes between the opening balance and the closing balance of financial liabilities, including changes from cash flows, changesarising from obtaining or losing control of subsidiaries, the effect of changes in foreign exchange rates and changes in fair value.The amendments are effective for annual periods beginning on or after January 1, 2017. Comparative information for periods prior to the effective date of the amendments isnot required. Early application is permitted.The Company will include the necessary disclosures in the financial statements when applicable.d.IFRS 16, "Leases":In January 2016, the IASB issued IFRS 16, "Leases" ("the new Standard"). According to the new Standard, a lease is a contract, or part of a contract, that conveys the rightto use an asset for a period of time in exchange for consideration.According to the new Standard:·Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except in certain cases) similar tothe accounting treatment of finance leases according to the existing IAS 17, "Leases".·Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding right-of-use asset. Lessees will also recognizeinterest and depreciation expenses separately.The new Standard is effective for annual periods beginning on or after January 1, 2019. Early adoption is permitted provided that IFRS 15, "Revenue from Contracts withCustomers", is applied concurrently.For leases existing at the date of transition, the new Standard permits lessees to use either a full retrospective approach, or a modified retrospective approach, with certaintransition relief whereby restatement of comparative data is not required.The Company is evaluating the possible effects of the new Standard. Since the Company's lease contracts are significant, the Company estimates that the adoption of thenew Standard will have a material impact on the Company's assets and liabilities. However, at this stage, the Company is unable to quantify the impact on the financialstatements.F - 22EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data)NOTE 5: -COLLABORATION AGREEMENTSBelow is information regarding collaboration agreements which each amounts to 10% or more of our total revenues in 2016:a.Our most significant collaboration in the seed traits activity is with Monsanto, addressing yield, drought tolerance and fertilizer utilization in corn, soybean, cotton andcanola through biotechnology. The collaboration, initiated in 2008, originally focused on gene discovery, and a 2011 expansion of the agreement added new researchactivities for increasing trait efficacy. The collaboration was extended and expanded for a second time in October 2013, to address corn resistance to Fusarium, a fungusresponsible for Stalk Rot disease in corn. Our activities under the extended agreement are scheduled to expire in August 2019.b.Our collaboration with Bayer, initiated in 2010, was originally focused on discovery of genes and other genomic elements addressing yield, abiotic stress and nitrogen useefficiency in wheat. In 2014 the collaboration agreement was amended and the collaboration's focus was shifted to discovery of promoters, which are segments of DNA thatdetermine how a gene will be expressed in the plant.c.We have a collaboration with a multinational consumer goods company, addressing yield improvement in a certain field crop through non-GM methods. In this collaboration,initiated in 2014, we generate new varieties of the target crop using a molecular biology method known as TILLING with the goal that our partner includes such new varietiesin its breeding pipeline. Our activities under this agreement are scheduled to expire in 2018.NOTE 6: -LONG-TERM INVESTMENTOn February 4, 2013, the Company signed an agreement with a private Israeli company, according to which the Company undertook to provide the private Israeli company withrights to use its greenhouses and facilities, including support for the private Israeli company's development process, for the consideration of total value amounting to $365, whichwas determined based on a third party valuation.In April 2015 the private Israeli company began a dissolution process as result of its insolvency and inability to pay back its debtors. Subsequently the Company recorded a fullimpairment of the investment in the amount of $382.F - 23 December 31, 2016 2015 Cash for immediate withdrawal in USD $1,741 $2,604 Cash equivalents in NIS bank deposit (1) 1,170 26 Cash for immediate withdrawal in NIS 281 64 Cash for immediate withdrawal in Euro and other currencies 44 227 Cash equivalents in USD bank deposits - 7,300 $3,236 $10,221 December 31, 2016 2015 Financial assets measured at fair value through profit or loss: Corporate bonds and government treasury notes $71,738 $71,807 December 31, 2016 2015 Government authorities $354 $257 Patent cost reimbursement 283 246 Accrued bank interests 110 70 Prepaid expenses 157 182 Other receivables 259 268 $1,163 $1,023 EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data) NOTE 7: - CASH AND CASH EQUIVALENTS(1)As of the reporting date, the NIS deposit bear interest of 0.09%. The deposit is withdrawable daily.NOTE 8: - MARKETABLE SECURITIES NOTE 9: - OTHER RECEIVABLES F - 24 Laboratoryequipment Computers andperipheralequipment Office equipmentand furniture Leaseholdimprovements Vehicles Total Cost: Balance at January 1, 2016 $4,340 $3,194 $216 $12,582 $98 $20,430 Additions 219 356 8 26 - 609 Disposals - - - - (98) (98) Balance at December 31, 2016 4,559 3,550 224 12,608 - 20,941 Accumulated Depreciation: Balance at January 1, 2016 2,751 2,376 100 6,962 44 12,233 Additions 409 480 14 1,366 10 2,279 Disposals - - - - (54) (54) Balance at December 31, 2016 3,160 2,856 114 8,328 - 14,458 Depreciated cost at December 31, 2016 $1,399 $694 $110 $4,280 $- $6,483 Laboratoryequipment Computers andperipheralequipment Office equipmentand furniture Leaseholdimprovements Vehicles Total Cost: Balance at January 1, 2015 $3,550 $2,728 $209 $12,027 $98 $18,612 Additions 790 466 7 555 - 1,818 Balance at December 31, 2015 4,340 3,194 216 12,582 98 20,430 Accumulated Depreciation: Balance at January 1, 2015 2,339 1,932 87 5,413 29 9,800 Additions 412 444 13 1,549 15 2,433 Balance at December 31, 2015 2,751 2,376 100 6,962 44 12,233 Depreciated cost at December 31, 2015 $1,589 $818 $116 $5,620 $54 $8,197 EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data) NOTE 10: -PROPERTY, PLANT AND EQUIPMENT, NETBalance at December 31, 2016:Balance at December 31, 2015:F - 25 December 31, 2016 2015 Employees and payroll accruals $1,953 $2,133 Accrued expenses 471 577 Government authorities 379 339 $2,803 $3,049 2016 2015 Balance at January 1, $3,139 $3,673 Grants received 474 167 Royalties paid (333) (418)Amounts recorded in profit or loss 148 (283) Balance at December 31, $3,428 $3,139 EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data)NOTE 11: -OTHER PAYABLESNOTE 12: - LIABILITIES IN RESPECT OF GOVERNMENT GRANTSThe Company received research and development grants from the OCS, and undertook to pay royalties of 3%-3.5% of revenues derived from research and development projectsthat were financed by the OCS, of up to 100% of the grants received. As of December 31, 2016, the Company received grants amounting to $6,175, (including accrued interest), whiletotal royalties paid as of that date amounted to $3,173.The Company received research and development grants from BIRD, and undertook to pay royalties of 5% of revenues derived from research and the development projects thatwere financed by BIRD, of up to 150% of all grants received. As of December 31, 2016, the Company received grants in the amount of $808. No royalties have yet been paid throughDecember 31, 2016 as no revenues were derived from products developed using these grants.The Company received research and development grants from CIIRDF, and undertook to pay royalties of 2.5% of revenues derived from research and the development projects thatwere financed by CIIRDF, of up to 100% of all grants received. As of December 31, 2016, the Company received grants amounting to $334. No royalties have yet been paid throughDecember 31, 2016 as no revenues were derived from products developed using these grants. F - 26EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data) NOTE 13: -FINANCIAL INSTRUMENTSa.Classification of financial instruments by fair value hierarchy:As of December 31, 2016 Level 2 Financial assets: Marketable securities $71,738 As of December 31, 2015 Level 2 Financial assets: Marketable securities $71,807 During 2016, there were no transfers due to the fair value measurement of any financial instrument to or from Levels 1, 2 and 3.b.Financial risk factors:The Company's operations are exposed to various financial risks, such as market risk (foreign currency risk, price risk), credit risk, and liquidity risk. The Company'scomprehensive risk management plan focuses on measures to minimize possible negative effects on the financial performance of the Company.The Company's Board of Directors has provided guidelines for risk management, and specific policies for various risk exposures, such as foreign currency risk, interest-raterisk, credit risk, and the use of derivative financial instruments, non-derivative financial instruments, and excess-liquidity investments.1.Market Risk:a)Foreign currency risk:The Company operates primarily in Israel, and has an exchange rate risk as it incurs fixed expenses in New Israel Shekels, which differs from its functionalcurrency.b)Price risk:The Company has investments in bonds, classified as financial instruments, which are measured at fair value through profit and loss. Accordingly, theCompany is exposed to a risk from changes in the fair value of these investments.F - 27 Up to 1 year 1 year to 2years 2 yearsto 3 years 3 years to 4years 4 years to 5years Over 5 years Total Trade payables $1,330 $- $- $- $- $- $1,330 Other payables 2,803 - - - - - 2,803 Liabilities in respect ofgovernment grants 179 712 513 481 598 1,576 4,059 $4,312 $712 $513 $481 $598 $1,576 $8,192 Up to 1 year 1 year To 2years 2 yearsTo 3 years 3 years to 4years 4 years to 5years Over 5 years Total Trade payables $1,771 $- $- $- $- $- $1,771 Other payables 3,049 - - - - - 3,049 Liabilities in respect ofgovernment grants 304 865 467 843 1,005 302 3,786 $5,124 $865 $467 $843 $1,005 $302 $8,606 EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data)NOTE 13: -FINANCIAL INSTRUMENTS (Cont.)2.Credit Risk:The Company holds cash and cash equivalents, short-term investments and other financial instruments with various financial institutions. Its policy is to spread itsinvestments among various institutions. In accordance with this policy, the Company invests its funds with stable financial institutions.The Company has no trade receivables balances past due, and accordingly has not recognized any provision for doubtful accounts. 3.Liquidity Risk: The following table presents the repayment dates of the Company's financial liabilities, by contractual terms, in nominal amounts (including interest payments):Balance at December 31, 2016: Balance at December 31, 2015: c.Fair Value:The carrying amounts of cash and cash equivalents, short-term investments, other receivables, trade payables and other payables approximate their fair values due to theshort-term maturities of such instruments.The fair value of the liabilities in respect of government grants is measured using a discount rate that reflects the applicable market rate of interest at the date the grants arereceived which approximates the fair value at the respective balance sheet date. The fair value measurement is categorized into Level 3. F - 28 December 31, 2016 2015 Sensitivity test to changes in the NIS exchange rate: Gain (loss) from the change: Increase of 5% in exchange rate $84 $176 Decrease of 5% in exchange rate $(84) $(176) Sensitivity test to changes in the market price of listed securities: Gain (loss) from the change: Increase of 5% in market price $3,587 $3,590 Decrease of 5% in market price $( 3,587) $( 3,590)EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data)NOTE 13: -FINANCIAL INSTRUMENTS (Cont.)d.Sensitivity tests relating to changes in market factors:Sensitivity tests and principal work assumptions:The selected changes in the relevant risk variables were determined based on management's estimate as to reasonable possible changes in these risk variables. e.Hedging activities and derivatives:Cash flow hedges:As of December 31, 2014, the Company held NIS/USD forward contracts designated as hedges of expected future employee wages, for expected future payments togovernment authorities and to Israeli suppliers, and for rent payments. The main terms of these positions were set to match the terms of the hedged items.Cash flow hedges of the expected employee wages, government authorities payments and rent payments in January-April 2015 were estimated as highly effective, and asresult on December 31, 2014 other comprehensive loss in the amount of about $222, was recorded in equity in Accumulated other comprehensive loss.As of December 31, 2015 there were no hedging contracts held by the Company.As of December 31, 2016, the Company held NIS/USD forward contracts designated as hedges of expected future employee wages and for expected future payments togovernment authorities. The main terms of these positions were set to match the terms of the hedged items.Cash flow hedges of the expected employee wages and government authorities payments in January-March 2017 were not estimated as highly effective, and as result onDecember 31, 2016 financing income in the amount of $7, was recorded in profit or loss.F - 29 Year ended December 31, 2016 2015 2014 Expenses - defined contribution plan $769 $782 $835 EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data)NOTE 14: -SEVERANCE PAY LIABILITY, NETLabor laws and the Severance Pay Law in Israel (the "Severance Law") require the Company to pay compensation to employees upon dismissal or retirement, or to make routinecontributions in defined contribution plans pursuant to Section 14 of the Severance Pay Law, as described below. The Company's liability is accounted for as a post-employmentbenefit. The Company's employee benefit liability is based on a valid labor agreement, the employee's salary, and the applicable terms of employment, which together generate aright to severance compensation.Post-employment employee benefits are financed by deposits with defined deposit plans, as detailed below.Contributions in accordance with Section 14 to the Severance Law release the Company from any additional liability to employees for whom said contributions were made. Thesecontributions represent defined contribution plans. NOTE 15: -TAXES ON INCOMEa.Tax rates applicable to the Company:1.The Israeli corporate income tax rate was 25% in 2016 and 26.5% in 2015 and 2014. On January 4, 2016 the Israeli Parliament's Plenum approved by a second and third reading the Bill for Amending the Income Tax Ordinance (No. 217) (Reduction ofCorporate Tax Rate), 2015, which includes a reduction of the corporate tax rate from 26.5% to 25%.In December 2016, the Israeli Parliament approved the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the 2017 and 2018Budget Years), 2016 which reduces the corporate income tax rate to 24% (instead of 25%) effective from January 1, 2017 and to 23% effective from January 1, 2018.2.Evogene Inc, a company incorporated in the U.S., is subject to U.S. income taxes. In 2016 the weighted tax rate applicable to Evogene Inc. was approximately 26%(Federal tax and state tax where the company operates).b.Tax benefits under the Israel Law for the Encouragement of Capital Investments, 1959 (the "Investment Law"):Under the Investment Law, the Company has been granted "Approved Enterprise" and "Beneficiary Enterprise" status which provides certain benefits, including taxexemptions and reduced tax rates. Income not eligible for Approved Enterprise and Beneficiary Enterprise benefits is taxed at a regular rate.F - 30EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data) NOTE 15: -TAXES ON INCOME (Cont.)During the benefit period, the Company is tax exempt in the first two years of the benefit period and subject to tax at the reduced rate of 10%-25% for a period of five to eightyears (depending on the level of foreign investments in the Company) of the benefit period.In the event of distribution of dividends from the said tax-exempt income, the amount distributed will be subject to corporate tax at the rate ordinarily applicable to theApproved and Beneficiary Enterprise's income. The tax-exempt income attributable to the "Approved Enterprise" program mentioned above can be distributed toshareholders without subjecting the Company to taxes only upon the complete liquidation of the Company. Tax-exempt income generated under the Company's "BeneficiaryEnterprise" program will be subject to taxes upon dividend distribution or complete liquidation.The entitlement to the above benefits is conditional upon the Company's fulfilling the conditions stipulated by the Law and regulations published thereunder. Should theCompany fail to meet such requirements in the future, income attributable to its Approved Enterprise and Privileged Enterprise programs could be subject to the statutoryIsraeli corporate tax rate and the Company could be required to refund a portion of the tax benefits already received, with respect to such programs.Amendment to the Law for the Encouragement of Capital Investments, 1959 (Amendment 68):In December 2010, the "Knesset" (Israeli Parliament) passed the Law for Economic Policy for 2011 and 2012 (Amended Legislation), 2011 ("the Amendment"), whichprescribes, among others, amendments in the Law for the Encouragement of Capital Investments, 1959 ("the Law"). The Amendment became effective as of January 1, 2011.According to the Amendment, the benefit tracks in the Law were modified and a flat tax rate applies to the Company's entire privileged income under its status as a privilegedcompany with a privileged enterprise. Commencing from the 2011 tax year, the Company can elect (without possibility of reversal) to apply the Amendment in a certain taxyear and from that year and thereafter, it will be subject to the amended tax rates. The tax rates under the Amendment are: 2011 and 2012 - 15% (in development area A - 10%)and in 2013 - 12.5% (in development area A - 7%).Amendment to the Law for the Encouragement of Capital Investments, 1959 (Amendment 71):On August 5, 2013, the "Knesset" issued the Law for Changing National Priorities (Legislative Amendments for Achieving Budget Targets for 2013 and 2014), 2013 whichconsists of Amendment 71 to the Law for the Encouragement of Capital Investments ("the Amendment"). According to the Amendment, the tax rate on preferred incomeform a preferred enterprise in 2014 and thereafter will be 16% (in development area A - 9%). The Amendment also prescribes that any dividends distributed to individuals orforeign residents from the preferred enterprise's earnings as above will be subject to tax at a rate of 20%.F - 31EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data) NOTE 15: -TAXES ON INCOME (Cont.)Amendment to the Law for the Encouragement of Capital Investments, 1959 (Amendment 73): In December 2016, the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the 2017 and 2018 Budget Years), 2016 which includesAmendment 73 to the Law for the Encouragement of Capital Investments ("the Amendment") was published. According to the Amendment, a preferred enterprise located indevelopment area A will be subject to a tax rate of 7.5% instead of 9% effective from January 1, 2017 and thereafter (the tax rate applicable to preferred enterprises located inother areas remains at 16%).The Company has evaluated the effect on its financial statements of the transition to the preferred enterprise tax track, and as of the date of the approval of the financialstatements, the Company believes that it will not transition to the preferred enterprise tax track. The Company's position may change in the future.The new tax tracks under the Amendment are as follows:Technological preferred enterprise - an enterprise for which total consolidated revenues of its parent company and all subsidiaries are less than NIS 10 billion. Atechnological preferred enterprise, as defined in the Law, which is located in the center of Israel will be subject to tax at a rate of 12% on profits deriving from intellectualproperty (in development area A - a tax rate of 7.5%).c.Tax assessments:The Company received assessments that are considered final, up to and including the 2012 tax year.d.Carryforward losses for tax purposes and other temporary differences:As of December 31, 2016, the Evogene Ltd. and its Israeli subsidiary have carryforward operating tax losses amounting to approximately $55 million, which can be carriedforward for an indefinite period.e.Deferred taxes:The Company did not recognize deferred tax assets for carry-forward losses and other temporary differences, because their utilization in the foreseeable future is notprobable.f.Theoretical tax: The reconciliation between the tax expense, assuming that all the income and expenses, gains and losses in the statement of income were taxed at the statutory tax rate andthe taxes on income recorded in profit or loss, does not provide significant information and therefore is not presented. F - 32EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data)NOTE 16: - COMMITMENTS AND CONTINGENT LIABILITIESa.The Company leases facilities for its offices and research and development activities, as well as motor vehicles under operating leases. Future minimum lease payments undernon-cancelable operating leases for the years ended December 31, are as follows: 2017 $876 2018 781 2019 and after 851 $2,508 The Company has provided bank guarantees in the amount of $278 to secure compliance with its facilities rental payment requirements.b.Claims The Company is involved in certain claims arising in the normal course of business. However, the Company believes that the ultimate resolution of these matters will nothave a material adverse effect on its financial position, results of operations, or cash flows. c.Government grants The Company received research and development grants from the OCS, BIRD and CIIRDF, see note 12. If no economic benefits are expected from the research activity, theroyalty obligation is not recorded as a liability and instead is treated as a contingent liability in accordance with IAS 37. The grants from the OCS impose certain restrictionson the transfer outside of Israel of the underlying know-how and the manufacturing or manufacturing rights of the underlying products and technologies. F - 33 December 31, 2016 2015 Authorized Issued andOutstanding Authorized Issued andOutstanding Number of shares Ordinary shares of NIS 0.02 par value each 150,000,000 25,480,809 150,000,000 25,404,362 Number ofshares NIS par value Outstanding at January 1, 2015 25,350,954 507,019 Exercise of options 53,408 1,068 Outstanding at December 31, 2015 25,404,362 508,087 Exercise of options 76,447 1,529 Outstanding at December 31, 2016 25,480,809 509,616 EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data)NOTE 17: - SHAREHOLDERS' EQUITYa.General:All ordinary shares, options, per share data and exercise prices included in these financial statements for all periods presented have been adjusted to reflect the 1-for-2reverse share split effected on November 19, 2013. b.Share capital: c.Changes in share capital:Share capital issued and outstanding: d.Rights attached to shares: Voting rights at the general meeting, rights to dividends, rights upon liquidation of the Company and the right to appoint directors of the Company. e.Capital management in the Company:The Company's objectives in managing capital are as follows:To maintain its ability to ensure the continuity of the business, and thus to generate a return to equity holders, investors and other parties.The Company manages its capital structure and makes adjustments following changes in economic conditions and the risk-nature of its operations. In order to maintain or toadjust the necessary capital structure, the Company takes various steps, such as raising funds by capital issues.F - 34 Year ended December 31, 2016 2015 2014 Share-based compensation $2,943 $4,365 $3,230 EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data)NOTE 18: - SHARE- BASED COMPENSATIONa.Expenses recognized in the financial statements:The expense recognized in the Company's financial statements for services provided by employees and service-providers is as follows: The Company maintains three share option and incentive plans: the Evogene Share Option Plan (2002), the Evogene Ltd. Key Employee Share Incentive Plan, 2003, and theEvogene Ltd. 2013 Share Option Plan. All such option and incentive plans provide for the grant of options to purchase the Company's ordinary shares and generally expire10 years from the grant date. b.Share-based payment plan for employees and consultants:During 2014, 2015 and 2016 the board of directors of the Company approved an issuance to its employees and consultants of 508,000, 692,750 and 200,000 options,respectively. The fair value of the options determined at their grant date using binomial model was approximately $2,445, $2,287 and $524, respectively. c.Option grants to key officers and directors:On March 20, 2014, the board of directors of the Company approved an issuance to its directors of 20,000 options exercisable into 20,000 ordinary shares of the Company,NIS 0.02 par value each, for an exercise price of NIS 71.05 ($20.39) per share. The fair valueof the options determined at their grant date using binomial model was approximately $179.On August 17, 2014, the board of directors of the Company approved an issuance to its directors of 12,500 options exercisable into 12,500 ordinary shares of the Company,NIS 0.02 par value each, for an exercise price of NIS 61.21 ($17.66) per share. The fair value of the options determined at their grant date using binomial model wasapproximately $68.On November 9, 2014, the board of directors of the Company approved an issuance to certain of its key officers of 173,800 options exercisable into 173,800 ordinary shares ofthe Company, NIS 0.02 par value each, for an exercise price of NIS 47.66 ($12.51) per share. The fair value of the options determined at their grant date using binomial modelwas approximately $668.F - 35EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data)NOTE 18: - SHARE- BASED COMPENSATION (Cont.)On March 22, 2015, the board of directors of the Company approved an issuance to the Company’s President and Chief Executive Officer of 170,000 options exercisable into170,000 ordinary shares of the Company, NIS 0.02 par value each, for an exercise price of NIS 39.62 ($9.78) per share. The grant was approved by the Company's shareholderson May 5, 2015 at a general shareholders meeting. The fair value of these options using the binomial model is approximately $663.On March 22, 2015, the board of directors of the Company approved an issuance to certain of its key officers of 285,000 options exercisable into 285,000 ordinary shares ofthe Company, NIS 0.02 par value each, for an exercise price of NIS 39.62 ($9.78) per share. The fair value of the options determined at their grant date using binomial modelwas approximately $1,016.On March 22, 2015, the board of directors of the Company approved an issuance to two of its directors of 2,500 options each exercisable into 2,500 ordinary shares, NIS 0.02par value each of the Company, for an exercise price of NIS 38.77 ($9.57) and NIS 40.77 ($10.06) per share. The determined fair value of the options at their grant date usingbinomial model was approximately $20.On July 2, 2015, the board of directors of the Company approved an issuance to certain of its directors of 12,500 options exercisable into 12,500 ordinary shares of theCompany, NIS 0.02 par value each, for an exercise price of NIS 39.53 ($10.46) per share. The fair value of the options determined at their grant date using binomial model wasapproximately $44.On November 17, 2015, the board of directors of the Company approved an issuance to certain of its key officers of 160,000 options exercisable into 160,000 ordinary sharesof the Company, NIS 0.02 par value each, for an exercise price of NIS 31.77 ($8.14) per share. The fair value of the options determined at their grant date using binomial modelwas approximately $382.On December 16, 2015, the board of directors of the Company approved an issuance to one of its key officers of 130,000 options exercisable into 130,000 ordinary shares ofthe Company, NIS 0.02 par value each, for an exercise price of NIS 27.73 ($7.15) per share. The fair value of the options determined at their grant date using binomial modelwas approximately $298.On February 29, 2016, the board of directors of the Company approved an issuance to two of its directors of 2,500 options each exercisable into 2,500 ordinary shares, NIS0.02 par value each of the Company, for an exercise price of NIS 28.28 ($7.23) and NIS 32.72 ($8.37) per share. The determined fair value of the options at their grant date usingbinomial model was approximately $14.On May 18, 2016, the board of directors of the Company approved an issuance to certain of its directors of 12,500 options each exercisable into 12,500 ordinary shares, NIS0.02 par value each of the Company, for an exercise price of NIS 27.79 ($7.25) per share. The determined fair value of the options at their grant date using binomial model wasapproximately $41.F - 36 2016 2015 2014 Number ofoptions Weightedaverage exerciseprices ($) Number ofoptions Weightedaverage exerciseprices ($) Number ofoptions Weightedaverage exerciseprices ($) Outstanding at January 1 4,970,028 9.65 3,770,762 9.75 3,565,793 9.08 Grants 377,500 6.94 1,455,250 8.90 714,300 14.80 Exercised (76,447) 2.45 (53,408) 5.58 (449,627) 6.14 Forfeited (831,197) 9.87 (202,576) 7.15 (59,704) 11.73 Outstanding at December 31 4,439,884 9.50 4,970,028 9.65 3,770,762 9.75 Exercisable at December 31 3,203,850 9.18 2,794,672 8.79 2,166,364 7.57 EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data)NOTE 18: - SHARE- BASED COMPENSATION (Cont.)On August 10, 2016, the board of directors of the Company approved an issuance to one of its directors of 10,000 options each exercisable into 10,000 ordinary shares, NIS0.02 par value each of the Company, for an exercise price of NIS 26.89 ($7.06) per share. The determined fair value of the options at their grant date using binomial model wasapproximately $27.On September 26, 2016, the board of directors of the Company approved an issuance to its key officer of 150,000 options exercisable into 150,000 ordinary shares of theCompany, NIS 0.02 par value each, for an exercise price of NIS 26.21 ($6.96) per share. The fair value of the options determined at their grant date using binomial model wasapproximately $318.d.Options exercised:During 2016, 2015, and 2014 employees, directors and consultants exercised 76,447, 53,408 and 449,627 options, respectively, into a total of 579,482 Ordinary shares, NIS 0.02par value each of the Company, for a total consideration of $186, $296 and $2,857 respectively.e.Share options activity:The following table summarizes the number of share options, the weighted average exercise price, and the changes that were made in the option plans to employees,consultants and directors:F - 37 Options outstanding Range ofexerciseprices ($) Number outstanding Averageremainingcontractuallife Weightedaverageexerciseprice 2.02 - 6.83 723,238 3.47 4.87 6.96 – 7.85 1,055,672 5.29 7.40 8.09 - 9.78 1,146,272 7.63 9.21 10.03 – 13.7 1,289,735 6.89 12.47 17.65 - 20.39 224,967 7.36 18.74 Total 4,439,884 6.17 9.50 2016 2015 2014 Dividend yield (%) - - - Expected volatility of the share prices (%) 45-54 48-51 53-59 Risk-free interest rate (%) 1.87-2.35 1.8-2.7 0.64-5.77 Suboptimal factor 1.8-2 1.8-2 1.8-2 Post-vesting forfeiture rate (%) 5-10 5-10 5-10 EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data NOTE 18: - SHARE- BASED COMPENSATION (Cont.)The following table summarizes information about share options outstanding at December 31, 2016: f.The weighted average outstanding remaining contractual term of the options as of December 31, 2016 is 6.17 years (as of December 31, 2015, it was 7 years). g.The weighted average fair value of options granted during 2016 was $2.93 (for options granted during 2015, the fair value was $3.24). h.The fair value of the Company's share options granted to employees, directors and consultants for the years ended December 31, 2016, 2015 and 2014 was estimated usingthe binomial model with the following assumptions:The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative of expected future trends.F - 38EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data)NOTE 18: - SHARE-BASED COMPENSATION (Cont.)i.Modifications to the conditions of the options:On December 29, 2015 the board of directors of the Company approved for one of its key officers and several of its employees scheduled to cease their employment with theCompany through January 31, 2016 an extension to the originally awarded 3 month period post-employment allowing for exercise of fully vested options to periods rangingbetween 6 months and 2 years from their unemployment date. The weighted average incremental fair value measured using the Black & Scholes method was approximately$0.63 per option.On August 10, 2016 the board of directors of the Company approved for one of its key officers scheduled to cease his employment with the Company through August 31,2016 an extension to the originally awarded 3 month period post-employment allowing for exercise of fully vested options to period of 2 years from his unemployment date.The weighted average incremental fair value measured using the binomial model was approximately $0.67 per option.On December 28, 2016 the board of directors of the Company approved for one of its key officers scheduled to cease his employment with the Company through December31, 2016 an extension to the originally awarded 3 month period post-employment allowing for exercise of fully vested options to period of 2 years from his unemploymentdate. The weighted average incremental fair value measured using the binomial model was approximately $0.05 per option.F - 39 Year ended December 31, 2016 2015 2014 Salaries and benefits $3,520 $4,381 $5,030 Share-based compensation 231 831 708 Sub-contractors and consultants 594 757 1,087 Materials 162 325 954 Depreciation 599 960 999 Rentals and maintenance 448 689 855 Other 85 312 76 $5,639 $8,255 $9,709 Year ended December 31, 2016 2015 2014 Salaries and benefits $9,207 $7,930 $8,173 Share-based compensation 1,369 1,531 897 Materials and sub-contractors 2,120 1,508 1,152 Plant growth and greenhouse maintenance 473 730 573 Rentals and office maintenance 1,081 761 1,285 Depreciation and amortization 1,679 1,475 1,250 Other 656 819 784 Participation in respect of government grants (180) (305) (92) $16,405 $14,449 $14,022 Year ended December 31, 2016 2015 2014 Salaries and benefits $947 $1,010 $1,287 Share-based compensation 508 685 347 Travel 136 160 139 Legal 16 56 55 Other 89 53 23 $1,696 $1,964 $1,851 Year ended December 31, 2016 2015 2014 Salaries and benefits $1,551 $1,608 $1,780 Share-based compensation 835 1,317 1,278 Professional fees 1,228 1,200 1,004 Other 275 257 123 $3,889 $4,382 $4,185 EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data) NOTE 19: - STATEMENTS OF COMPREHENSIVE LOSS - ADDITIONAL INFORMATIONa.Cost of revenues: b.Research and development, net: c.Business development: d.General and administrative: F - 40 Year ended December 31, 2016 2015 2014 Exchange differences, net $17 $41 $18 Interest income 2,400 2,530 2,224 Hedging instruments 7 - - $2,424 $2,571 $2,242 Year ended December 31, 2016 2015 2014 Bank expenses and commissions $155 $195 $200 Change in the fair value of marketable securities 703 1,237 832 Hedging instruments - 99 164 Devaluation of investment - 332 89 Revaluation of liabilities in respect of government grants 33 - 231 $891 $1,863 $1,516 Year ended December 31, 2016 2015 2014 Weightednumberof shares *) Loss Weightednumber of shares *) Loss Weightednumberof shares *) Loss Number of shares and net loss for thecomputation of basic and diluted net loss pershare 25,444,733 (19,592) 25,378,325 (17,213) 25,100,556 (14,530)EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data)NOTE 19: - STATEMENTS OF COMPREHENSIVE LOSS - ADDITIONAL INFORMATION (Cont.)e.Financing income and expenses Financing income: Financing expenses: NOTE 20: - NET LOSS PER SHAREDetails of the number of shares and loss used in the computation of net loss per share:*)To compute diluted net loss per share, potential ordinary shares, detailed below, have not been taken into account due to their anti-dilutiveeffect.F - 41Evogene segment-Develops seed traits, ag-chemical products, and ag-biological products to improve plant performance. Evofuel segment-Develops improved castor bean seeds to serve as a feedstock source for biofuel and other industrial uses. Evogene Evofuel Adjustments Total For the Year Ended December 31, 2016 Revenues $6,540 $- $- $6,540 Operating loss $(20,168) $(921) $- $(21,089) Net financing income 1,533 Loss before taxes on income $(19,556)EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data) NOTE 21: -OPERATING SEGMENTSa.General:Commencing January 1, 2012, the Company operates in two segments. The segments were determined on the basis of information considered by the Chief OperatingDecision-Maker ("CODM") for purposes of decision-making on the allocation of resources and evaluation of performance. The following Company's segments are engagedin business activities for which they earn revenues and incur expenses, their results are reviewed by the CODM and discrete financial information is available:Segments performance is determined based on operating loss reported in the financial statements. The results of a segment reported to the CODM include items attributeddirectly to a segment, as well as other items, which are indirectly attributed using reasonable assumptions. b.The following table presents our revenues and operating loss by segments: F - 42 Evogene Evofuel Adjustments Total For the Year Ended December 31, 2015 Revenues $11,129 $- $- $11,129 Operating loss $(16,146) $(1,775) $- $(17,921) Net financing income 708 Loss before taxes on income $(17,213) Evogene Evofuel Adjustments Total For the Year Ended December 31, 2014 Revenues $14,511 $- $- $14,511 Operating loss $(13,078) $(2,178) $- $(15,256) Net financing expenses 726 Loss before taxes on income $(14,530) Year ended December 31, 2016 2015 2014 Customer A (shareholder) 77% 77% 60%Customer B 11% 14% 27%Customer C 12% - - Year ended December 31, 2016 2015 2014 United States 89% 86% 73%Germany 11% 14% 27% 100% 100% 100%EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data)NOTE 21: -OPERATING SEGMENTS (Cont.) c.Major customers:Revenues from major customers each of whom amounts to 10% or more, of total revenues:See also Note 22 (a).d.Geographical information:Revenues based on the location of the customers, are as follows: F - 43 Year ended December 31, 2016 2015 2014 Salary and related benefits $1,714 $1,849 $1,935 Share-based compensation 1,467 2,254 1,637 $3,181 $4,103 $3,572 Number of people that received salary and benefits 10 8 6 Key officers Certainshareholder Receivables $- $283 Other payables $285 $- Key officers Certainshareholder Receivables $- $2,746 Other payables $505 $- Year ended December 31, 2016 2015 2014 Compensation to directors not employed by the Company or on its behalf $322 $371 $289 Number of directors received the above compensation by the Company 9 8 8 EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data) NOTE 22: -BALANCES AND TRANSACTIONS WITH KEY OFFICERS AND CERTAIN SHAREHOLDERSa.2016 shareholders information refers to Monsanto, which to the best of the Company’s knowledge hold approximately 6.4%, of the Company's ordinary shares and is also amajor customer (see also Notes 5, 21(c)).b.Balances: Balance at December 31, 2016: Balance at December 31, 2015: c.Benefits to directors: d.Salary and Benefits to key officers: F - 44 Key officers Certainshareholders Revenues $- $(5,058)Cost of revenues 104 (782)Research and development expenses 1,286 - Business development expenses 710 - General and administrative expenses 1,081 - $3,181 $(5,840) Key officers Certainshareholders Revenues $- $(10,095)Cost of revenues 544 (656)Research and development expenses 1,194 - Business development expenses 874 - General and administrative expenses 1,491 - $4,103 $(10,751) Key officers Certainshareholders Revenues $- $(12,611)Cost of revenues 185 (635)Research and development expenses 1,035 - Business development expenses 937 - General and administrative expenses 1,415 - $3,572 $(13,246)EVOGENE LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share and per share data)NOTE 22: -BALANCES AND TRANSACTIONS WITH KEY OFFICERS AND CERTAIN SHAREHOLDERS (Cont.)e.Transactions:For the year ended December 31, 2016 For the year ended December 31, 2015 For the year ended December 31, 2014 F - 45 EXHIBIT 8.1 List of SubsidiariesName of Subsidiary Jurisdiction Ownership Interest Evofuel Ltd. Israel 100%Evogene Inc. Delaware 100%Leviev-Evogene Namibia (PTY) Ltd. Namibia 100%Biomica Ltd. Israel 100% EXHIBIT 12.1CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TOEXCHANGE ACT RULE 13A-14(A)/15D-14(A)AS ADOPTED PURSUANT TO SECTION 302OF THE SARBANES-OXLEY ACT OF 2002I, Ofer Haviv, certify that: 1. I have reviewed this annual report on Form 20-F of Evogene Ltd.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of thecircumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results ofoperations and cash flows of the company as of, and for, the periods presented in this report; 4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material informationrelating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonableassurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controlsand procedures, as of the end of the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materiallyaffected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and 5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and theaudit committee of the company’s board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect thecompany’s ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting. /s/ Ofer HavivOfer HavivPresident and Chief Executive OfficerDate: April 28, 2017 EXHIBIT 12.2CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TOEXCHANGE ACT RULE 13A-14(A)/15D-14(A)AS ADOPTED PURSUANT TO SECTION 302OF THE SARBANES-OXLEY ACT OF 2002 I, Alex Taskar, certify that: 1. I have reviewed this annual report on Form 20-F of Evogene Ltd.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of thecircumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results ofoperations and cash flows of the company as of, and for, the periods presented in this report; 4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material informationrelating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonableassurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controlsand procedures, as of the end of the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materiallyaffected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and 5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and theaudit committee of the company’s board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect thecompany’s ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting./s/ Alex TaskarAlex TaskarChief Financial OfficerDate: April 28, 2017 EXHIBIT 13.1 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO18 U.S.C. SECTION 1350AS ADOPTED PURSUANT TO SECTION 906OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Evogene Ltd. (the “Company”) on Form 20-F for the fiscal year ended December 31, 2016 as filed with the Securities and Exchange Commissionon the date hereof (the “Report”), I, Ofer Haviv, do certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Ofer HavivOfer HavivPresident and Chief Executive OfficerDate: April 28, 2017 EXHIBIT 13.2 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO18 U.S.C. SECTION 1350AS ADOPTED PURSUANT TO SECTION 906OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Evogene Ltd. (the “Company”) on Form 20-F for the fiscal year ended December 31, 2016 as filed with the Securities and Exchange Commissionon the date hereof (the “Report”), I, Alex Taskar, do certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Alex TaskarAlex TaskarChief Financial OfficerDate: April 28, 2017 EXHIBIT 15.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors of Evogene Ltd.: We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No.’s 333-193788, 333-201443 and 333-203856) of Evogene Ltd. of our report dated April28, 2017, with respect to the consolidated financial statements of Evogene Ltd. and its subsidiaries included in the annual report on Form 20-F of Evogene Ltd for the year ended December 31,2016. /s/ Kost, Forer, Gabbay & KasiererKOST, FORER, GABBAY & KASIERERA Member of Ernst & Young Global Tel Aviv, IsraelDate: April 28, 2017

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