SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended December 31, 2001
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from to
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Commission file number 0-29634
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FUNDTECH LTD.
(Exact name of registrant as specified in its charter)

Israel N/A
(State or other jurisdiction of (IRS employer
incorporation or organization) identification no.)

12 HA'HILAZON STREET, 5TH FLOOR
RAMAT GAN 52522, ISRAEL
(Address of principal executive offices)

972 3 575-2750
--------------
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Ordinary Shares, NIS 0.01 par value
(Title of Class)

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 such shorter 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 _X_ No ____

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

The aggregate market value of the voting ordinary shares held by
non-affiliates of the registrant as of March 15, 2002, was $41,266,075.

As of March 15, 2002, registrant had 14,278,753 Ordinary Shares
outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

None

PART I

ITEM 1. BUSINESS

We are a leading provider of end-to-end financial transaction processing
software solutions for financial institutions (FIs). These solutions are grouped
into three broad categories: payment processing, foreign exchange settlement
processing, and delivery channels for FI cash management products. These
solutions enable banks to process and manage payments, foreign exchange
settlements and cash management communication between FIs and their customers.
The solutions facilitate communication between FIs and their customers for
initiating payments, making inquiries and managing their activities with the FI.
Our client/server web-enabled software products automate the payment and
settlement processes and provide real-time transaction processing capabilities
to FIs and their customers.

We were incorporated in Israel in 1993. We acquired our ACCESS Banking(TM)
products in April 1998, BBP, our Swiss subsidiary, in June 1999, and our Banker
products in September 1999. Our major products include ACCESS Banking(TM),
ACCESS.pro(TM), PAYplus USA(TM), PAYplus RTGS(TM), PAYplus for CLS(TM), Global
PAYplus(TM), WireUp(TM) and service bureau solutions, and related services and
third-party hardware sales.

INDUSTRY BACKGROUND

The increasing integration of global economies as well as the widespread
adoption of new banking technologies has led to dramatic increases in both the
number of transactions consummated through electronic payment systems and the
need for timely delivery of financial information. As a result, financial
institutions are seeking more efficient methods of offering payment, settlement
and cash management services.

The following trends continue to drive demand for our products and services
in this dynamic market environment: an increasing need for centralized payment
and treasury functions; global adoption of real-time gross settlement (RTGS);
migration to Internet-based solutions; growth in electronic commerce;
consolidation in the financial services industry; and, increased regulatory
requirements imposed on banks.

We believe that several market trends and the current environment are
favorable to our products and services. Specifically, we will focus on the
following trends and market conditions:

o continued expansion of Internet activities as they relate to financial
transactions;

o new and expanded regulatory requirements on banks especially in the
areas of interdiction and anti-money laundering purposes;

o greater emphasis on risk mitigation in such areas as liquidity
management and contingency and recovery capabilities;

o a shift on the part of financial institutions to use out-sourcing,
application service providers and "white-labeling" in lieu of
developing and managing their own information technology activities;
and

o continued spread of globalization that will require new tools for
banks to manage 24-hour trading and settlement, real-time information
demands and straight-through processing.

PRODUCTS AND SERVICES

Our products and related services are designed to integrate all elements of
the electronic payments cycle, including electronic funds transfer, and cash and
treasury management. We believe that our products are among the most
technologically advanced and cost-effective solutions in the electronic payments
and banking industry. Our products facilitate all aspects of the electronic
payments and banking cycle including payment initiation, electronic balance
reporting, account reconciliation, real-time account balance verification, and
other sophisticated auditing and reporting functionality. In addition, our
products offer exceptional graphical user interfaces, enabling our customers to
easily receive accurate and focused information concerning the status of
electronic payment transactions and other cash management data.

Our end-to-end solutions provide for remote initiation of transactions,
efficient and automated processing of these transactions, and settlement of the
transactions at the central bank of the country of origin. We are one of the
largest providers of services linking the banks to networks, such as the Federal
Reserve System in the U.S. which has approximately 7,500 banks on their FedLine
system. On a global basis, we provide banks with the capability to link to the
Society for Worldwide Financial Interbank Telecommunications (SWIFT) network for
communicating cross-border transactions. SWIFT has approximately 6800 banks in
189 countries. In addition to providing payment services, we are also a leading
provider of

settlement solutions that link banks to the Continuous Linked Settlement System
(CLS). CLS is a system set up by the largest foreign exchange banks in the world
to reduce foreign exchange settlement risk.

PRODUCT NAME DESCRIPTION

PAYMENT SOLUTIONS

PAYplus USA(TM) A payment solution for banks
operating in the U.S.

PAYplus RTGS(TM) A payments solution for banks
operating in countries outside
the U.S.

Global PAYplus(TM) A solution for managing the
global payments activities of
large multi-national banks and
financial institutions, that
conduct business in multiple
countries.

RECON$tar(TM) An automated reconciliation
solution for payments and other
electronic transactions.

CASH MANAGEMENT SOLUTIONS

ACCESS Banking(TM) A solution designed to enable
high end and mid-level
financial institutions to deliver
comprehensive cash management
services to their corporate
clients.

ACCESS.pro(TM) The next generation
Internet-based cash management
solution designed for high end
and mid-level financial
institutions.

Fundtech Banker(TM) A fully integrated cash
management solution designed
primarily for the community bank
market.

Fundtech Banker for the Internet(TM) A Web-based cash management
system that runs with the
Fundtech Banker cash management
system.

SETTLEMENT SOLUTIONS

PAYplus for CLS(TM) A solution designed to allow
its members, being the largest
international financial
institutions to fully
participate in the Continuous
Linked Settlement System.

NOSTROplus(TM) A position management and
analysis solution for the
management of correspondent bank
accounts.

ASP/OUTSOURCING SOLUTIONS

Fundtech Connect (ASP) - for PAYplus USA An Application Service Provider
(outsourcing solution) (ASP)
that provides the PAYplus
solution to banks operating in
the U.S.

Fundtech Connect (ASP) - for ACCESS An ASP that provides the ACCESS
solution to banks operating
in the U.S.

Interbank Gateway Services An ASP that provides payment
and settlement solutions
to banks in Europe, primarily
in Switzerland.

WireUP(TM) Disaster recovery and
contingency services for users
of our products.

PAYMENT SOLUTIONS

PAYPLUS USA(TM)

PAYplus USA(TM) is a funds transfer solution used to connect a financial
institution's funds transfer room with the Federal Reserve's FedWire system.
This solution evolved from and replaces two older products, FedPlus(TM) and
PAY$tar(TM). Our target

market includes all banks operating in the U.S. that do not need a global
payment solution, including U.S.-based banks, thrifts, S&L's and international
agency banks operating in the U.S.

PAYplus USA(TM) supports payment processing, risk management and regulatory
compliance for U.S. financial institutions that utilize the Federal Reserve
Bank's FedWire system for high value payments. PAYplus USA(TM) also offers the
same functionalities for international multi-currency payments of international
banks operating in the U.S.

PAYplus USA(TM) provides financial institutions with complete funds transfer
capacity at substantially lower cost than other technologies. At the same time,
it both reduces payments risk (through real-time updates of account balances by
means of an on-line interface with the host computer) and improves customer
service (through its comprehensive database containing relevant information
about a transfer - from its creation to accounting and memo posting).

PAYPLUS RTGS

PAYplus RTGS(TM) is a client/server electronic funds transfer solution that
is used by financial institutions to both process payment transactions and to
settle with central bank real-time gross settlement and net settlement systems.
PAYplus RTGS(TM) supports payment processing, risk management and regulatory
compliance for banks operating in countries outside the U.S. PAYplus RTGS(TM)
functionality includes, inter alia: (1) management of a financial institution's
cash reserves at a central bank; (2) forecasting of end-of-day funds
availability; (3) reconciliation of transactions performed by customers of the
financial institution directly with the central bank; and (4) management of
non-payment, fraud, foreign exchange and credit risks. PAYplus RTGS(TM) offers
multi-platform capabilities including Windows NT and UNIX operating system
platforms, along with web based infrastructure to support true browser based
operation.

GLOBAL PAYPLUS(TM)

Our Global PAYplus(TM) provides institutions with a real-time global view of
their payments activity. This multi-tiered system addresses the needs of both
local and global payment processes. At the local level, Global PAYplus(TM)
employs a client/server funds transfer payment system that supports both the
local payment processing, and risk management and regulatory compliance for the
local clearing systems. At the global level, Global PAYplus(TM) aggregates
worldwide payment activity. Global PAYplus(TM) is a multi-platform system
supporting both UNIX and NT that employs open technology standards. The system
features end-to-end security and multi-currency capabilities.

RECON$TAR(TM)

Our RECON$tar(TM) solution is a client/server system based on Windows NT
that enables financial institutions to automatically reconcile various types of
transactions, such as incoming/outgoing wire transfer transactions. Flexibility
was incorporated into the product to cover a wide range of reconciliation
requirements and to permit tailoring of the product to meet specific processing,
accounting and reporting needs.

CASH MANAGEMENT SOLUTIONS

ACCESS BANKING(TM)

Our ACCESS Banking(TM) solution is a client/server product that enables
banks and other financial institutions to provide cash management services to
their corporate clients. ACCESS Banking(TM) is targeted at the mid-to-large-size
financial institutions. Through ACCESS Banking(TM), clients can obtain balance
history and intra-day reporting, manage check transactions, originate ACH
transactions and initiate wire transfer payments. ACCESS Banking(TM) consists of
a server located in the back-office of a bank and a remote access module located
at the premises of the bank's corporate client. Clients can interact with the
bank's ACCESS Banking(TM) server remotely via the web, touch-tone telephone with
voice response, teletype terminal emulation or facsimile transmission.

ACCESS.PRO(TM)

The ACCESS.pro(TM) product, which is our newest Internet-based product,
enables corporations to perform sophisticated cash management functions across
accounts at multiple branches, in multiple currencies, and in multiple countries
and regulatory environments. ACCESS.pro(TM) is designed to reduce the cost of
delivering remote banking services through universal access and simplified
maintenance and distribution of remote software.

FUNDTECH BANKER

Fundtech Banker(TM) is a suite of cash-management products used in
connection with the delivery of comprehensive electronic banking to the
commercial and corporate markets. Fundtech Banker(TM) suite provides a bank's
commercial customers with timely notification of fraudulent or misposted
transactions, expedited funds transfer services, reduced reconcilement costs,
and more timely information flow and data delivery.

Fundtech Banker(TM) allows small and mid-tier banks to offer corporate and
commercial business customers products and services that previously were only
available to large institutions.

FUNDTECH BANKER FOR THE INTERNET

Fundtech Banker for the Internet(TM) is a Web-based product that addresses
the unique electronic banking service needs of the small business and middle
market. Fundtech Banker for the Internet(TM) is run with Fundtech Banker(TM),
our PC-based cash management suite of products.

SETTLEMENT SOLUTIONS

PAYPLUS FOR CLS(TM)

PAYplus for CLS(TM) is an integrated solution that assists large foreign
exchange trading banks in addressing the requirements of the CLS bank. PAYplus
for CLS(TM) provides payments, treasury, reconciliation, interface and systems
management controls that assist banks in meeting the necessary requirements. In
addition, PAYplus for CLS(TM) provides such institutions full control and
functionality for its foreign exchange (FX) trading relationships.

NOSTROplus(TM)

NOSTROplus(TM) is designed to facilitate the management of correspondent
account relationships worldwide by enabling banks to meet target balances at the
account and currency level while minimizing the costs of account ownership.

NOSTROplus(TM) is a client/server software application that combines account
balance management, automated funding, and account/transaction matching
features. NOSTROplus(TM) supports processing for major currencies and includes
special features for the management of Euro accounts and sweep relationships.

ASP/OUTSOURCING SOLUTIONS

FUNDTECH CONNECT - PAYPLUS USA AND ACCESS

Fundtech Connect is an application service provider (ASP) solution available
for all of our products. This service allows banks to have our solutions reside
at our data center rather than requiring the bank to purchase the necessary
hardware and software to host the solution in-house.

INTERBANK GATEWAY SERVICES

Interbank Gateway Services is a set of electronic payments and securities
application services provided by our service bureau in Switzerland. The
Interbank Gateway Services provides a secure and reliable technology
infrastructure, which enables financial institutions to initiate, process and
support electronic payment transactions across a wide range of settlement
systems. The service bureau's customers are currently predominantly Swiss banks,
but we intend to expand this offering into other areas of the world. In
addition, we intend to continue expanding the application services offered by
the service bureau in an effort to continue offering our bank customers the most
complete set of electronic payment and e-commerce solutions available in the
market.

Interbank Gateway Services provides the following application functionality:

o Cigt allows banks and other financial institutions to connect to the
Central Bank of Switzerland for the processing and settlement of bank
to bank e-payments.

o EUROSICigt allows banks and other financial institutions to connect to
the Central Bank of Switzerland for the processing and settlement of
bank to bank Euro-denominated e-payments.

o SECOMigt allows banks and other financial institutions to engage in
the electronic trading and settlement of securities transactions
through online-access to SECOM, Switzerland's securities trading and
settlement system.

o SWIFTigt allows banks and other financial institutions to connect to
the SWIFT network for the processing and settlement of international
bank to bank e-payments.

WIREUP(TM)- CONTINGENCY PROCESSING CENTERS

WireUp(TM) - Contingency Processing Centers were developed to respond to
the need of our customers for a contingency back-up system for wire transfer
operations (in accordance with government regulations). WireUp(TM) offering
supports all of our U.S.-based product groups and we have centers in Jersey
City, New Jersey, San Leandro, California and Norcross, Georgia.

CUSTOMERS AND MARKETS

Our scaleable products are sold to a wide array of financial institutions
and large business enterprises.

The markets for our products consist of the following end-users:

o U.S. Banks - This group of customers is divided into three tiers. The
top tier consists of approximately 100 banks, each with more than $10
billion of assets. The second tier consists of approximately 3,500
banks, each with over $100 million in assets. The third tier consists
of approximately 5,500 small banks, each with less than $100 million
of assets.

o Agency Banks and Branches of Foreign Banks Located in the United
States - These banks are located mainly in financial centers such as
New York City, San Francisco, Los Angeles and Dallas.

o Banks located Outside of the U.S. in countries that have moved or will
move into processing payments on a real time gross settlement basis.

o Large Business Enterprises - These enterprises consist of: (1)
financial institutions which provide regular treasury management
services to large corporations; (2) large non-bank financial
institutions, primarily brokerage houses, bond dealers, and insurance
firms, which need to conduct their own internal treasury management
and risk management activities; and (3) Fortune 500 companies with
significant multinational operations which require a real-time view of
their cash position.

During the year 2000 and 2001, we pursued a strategy of penetrating the top
tier of global banks with our PAYplus for CLS(TM) product offering. The major
foreign exchange trading banks worldwide, as well as central banks and
regulators are supporting the creation of the CLS, a global system for providing
FX settlement services. CLS is intended to handle FX trades with a daily value
of approximately three trillion U.S. dollars. We have been successful in
obtaining the majority of the CLS contracts awarded to date from banks
including, inter alia, Australia and New Zealand Banking Group Ltd., Bank of
America, Bank of New York, Citibank, Commerzbank, Deutsche Bank, Dresdner Bank,
and National Australia Bank. We believe that this significant step forward will
help us leverage our technology and offer those banks additional products in the
future such as the Citibank Global Payplus agreement.

In 2001, we entered into an agreement with a leading international financial
institution whereby we agreed to license certain of our products, including
PAYplus for CLS(TM) and Global PAYplus(TM), and perform various consulting and
maintenance services in connection with the license of such products. For the
year ended December 31, 2001, the aggregate total revenue derived from the
license of these products, and the fees earned in connection with the consulting
and maintenance services was approximately $7,800,000, which represents
approximately 17.7% of our 2001 revenues. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Major Customer."

SALES AND MARKETING

We sell our products and services primarily through our direct sales force.
In the past we have relied more heavily on referrals from partners. Many of our
partners have changed their market focus and/or become our direct competitors.
In response to this and other factors, we have grown our sales force to support
our direct sales efforts. We have a dedicated sales staff in the U.S., United
Kingdom, Switzerland, Singapore and Australia.

We are an active participant in various trade shows and conferences where we
promote our products. In addition, we receive inquiries about our products
directly through our corporate website.

We maintain a good relationship with the Federal Reserve Bank in the USA to
ensure that our products meet Federal Reserve requirements. We also maintain a
good working relationship with SWIFT, a utility for communication of global FI
payment and settlement instructions owned by the largest banks in the world. By
ensuring that our solutions are SWIFT-compliant, we are well positioned to offer
payment and settlement solutions to international banks.

SOFTWARE DEVELOPMENT

We believe that our software development team provides a significant
competitive advantage. The team is comprised of developers with experience in
visual programming design and object-oriented software development of
mission-critical applications. We also believe that this assembly of diverse
technical expertise contributes to the highly integrated functionality of our
products. Our ability to attract and retain highly qualified employees will be
one of the principal determinants of our success in maintaining technological
leadership. The total software development staff consisted of 173 full-time
employees on December 31, 2001. All of our products have been developed
internally by our product development staff. Some of these products embed, or
are bundled with, standardized software products developed by other companies.
We believe significant investments in product development are required to remain
competitive.

To ensure that our products are developed successfully, within their budgets
and according to schedule, all of our products are sent through the following
four distinct design and testing stages: (1) specifications are developed
through consultation with prospective users to ensure that the product matches
the user's requirements; (2) an internal quality assurance team verifies the
integrity of the product at each stage of development prior to beta testing; (3)
beta testing data is used to evaluate the functionality of the products and
their ability to perform under realistic conditions; and (4) a controlled group
of users is polled regularly to identify any modifications that may be
necessary. In addition, we work closely with current and potential end-users,
our strategic partners and leaders in certain industry segments to identify
market needs and define appropriate product specifications. Our employees also
participate in numerous user focus groups to review product design. We have
software development sites in Georgia, New Jersey, Massachusetts, Israel, and
Switzerland. We believe that separating development by geographic region allows
for both development to be in close proximity to the targeted market and
increases our opportunity to attract development talent.

CUSTOMER SUPPORT AND MAINTENANCE

We believe that effective customer support and maintenance in the software
industry requires rapid, efficient and comprehensive installation of the
product. Upon installation, we strive to provide superior customer support by
solving problems quickly and providing customers with consistent, accurate and
understandable technical information. We employ test scripts and bank production
data to test our solutions and our products are shipped with back-up procedures
installed. We recognize that timely solutions are essential for our
mission-critical solutions in the event problems do arise. We emphasize
responsiveness to our customers' inquiries and offer telephonic support
twenty-four hours a day. Customer inquiries range from production problems to
user questions and hardware issues. In addition, we utilize Remote Access
Services (RAS-Windows NT service) to enhance remote customer support. Certain of
our distributors also provide sales, service and technical support functions for
our products to end-users in the distributors' respective territories.

COMPETITION

We believe that the principal competitive factors in the industry in which
we operate are product performance, open industry standard architecture
scalability, technical features, compatibility with multiple existing operating
systems, reliability, security, relational database powers, price, customer
service and support, and ease of use. We also believe that our products and
related services are competitive with respect to these factors. However, there
can be no assurance that we will be able to differentiate our products from the
products of our competitors or that we can successfully develop or introduce
successfully new products that are less costly than, or superior to, those of
our competitors. In addition, existing and new competitors may have established
relationships with our existing and potential customers, which could have a
material adverse effect on our ability to compete.

The industry in which we operate is highly competitive and evolving.
Furthermore, certain large banks have developed solutions internally which they
are marketing to other banks and/or implementing in banks that they have
acquired. Many of our existing and potential competitors have, or are likely to
have, more extensive engineering, development, marketing, distribution
(particularly with respect to direct sales forces), financial, technological and
personnel resources than us.

Increased competition could materially adversely affect our revenues and
profitability through loss of market share, pricing pressures and other factors,
any of which could have a material adverse effect on our business, financial
condition and results of operations.

PROPRIETARY RIGHTS

Our competitive position depends heavily on our technological advantages.
Accordingly, we use a combination of technical measures, contractual rights,
non-disclosure agreements, trade secret statutes and precedents, copyrights and
trademarks to establish and protect the proprietary rights in our products and
technologies. We have no registered patents or pending patent applications.
Although we generally enter into non-disclosure and confidentiality agreements
with our employees, customers and distributors who have access to sensitive
information, there can be no assurance that these agreements will not be
breached, that the courts will enforce the restrictive provisions of these
agreements, or that such enforcement would provide adequate remedies for any
such breach. The courts may not regard any particular technology as being a
"trade secret" under applicable law. There can be no assurance that the steps we
take to protect our proprietary rights will be adequate to prevent others from
gaining access to or misappropriating our technology, or independently
developing or acquiring for sale products or services with technologies and
features similar to ours. The loss of proprietary rights or trade secret
protection, or the independent development or acquisition of such products could
have a material adverse effect on our business, financial condition and results
of operations.

Although we believe that our technology has been independently developed and
that none of our technology or intellectual property infringes on the rights of
others, there can be no assurance that we do not and will not infringe on
others' rights, or that third parties will not assert infringement claims
against us in the future. If such infringement were found to exist, we may be
required to modify our products and/or technologies, or obtain a license
permitting their continued use. In such circumstances, there can be no assurance
that we will be able to do either in a timely manner or upon acceptable terms
and conditions, and any failure to do so could have a material adverse effect on
our business, financial condition and results of operations. In addition, if
future litigation were to become necessary to protect trade secrets, know-how or
other proprietary rights, the defense against claimed infringement of the rights
of others, or the determination of the scope and validity of the proprietary
rights of others could result in substantial costs. Adverse determinations in
any litigation or proceeding could subject us to significant liabilities to
third parties, preventing us from producing, selling or using certain of our
products or technologies, any of which could have a material adverse effect on
our business, financial condition and results of operations. There can be no
assurance that we will have the resources to defend or prosecute a proprietary
rights infringement or other action. In addition, the laws of certain countries
may not protect our contractual rights, trade secrets, copyrights, technical
measures, non-disclosure agreements, trademarks, products, processes or
technologies to the same extent as in the U.S.

GOVERNMENT REGULATION

Our current and prospective customers, which include financial institutions
such as state and federally chartered banks, savings and loan associations, as
well as customers in other industries that we may target in the future, operate
in markets that are subject to extensive and complex regulation. While we are
not directly subject to such regulation, except in connection with the operation
of our Swiss service bureau, our products and services must be designed to work
within the extensive and evolving regulatory constraints under which our
customers operate. The failure of our products and services to support
customers' compliance with current regulations, to address changes in customers'
respective regulatory environments or to adapt to such changes in an efficient
and cost-effective manner could have a material adverse effect on our business,
results of operations and financial condition.

EMPLOYEES

As of December 31, 2001, we had 363 employees, of which 239 were located in
the United States, 50 were located in Israel, 46 were located in Switzerland, 21
were located in the United Kingdom, 5 were located in Australia and 2 were
located in Singapore. Of the 239 employees located in the United States, 130
were employed in software development, 60 were employed in operations, 19 were
employed in sales and marketing and 30 were employed in administration. Of the
50 employees in Israel, 28 were employed in software development, 15 were
employed in operations, 1 was employed in sales and marketing and 6 were
employed in administration. Of the 46 employees in Switzerland, 15 were employed
in software development, 14 were employed in operations, 6 were employed in
sales and marketing and 11 were employed in administration. Of the 21 employees
in the United Kingdom, 14 were employed in operations, 5 were employed in sales
and marketing and 2 were employed in administration. Of the 5 employees in
Australia, 4 were employed in operations and 1 was employed in sales and
marketing. Of the 2 employees in Singapore, 1 was employed in sales and
marketing and 1 was employed in operations.

We consider ourselves to have good relations with our employees and have
never experienced a labor dispute, strike or work stoppage. Our employees are
not represented by a labor union.

None of our employees are a party to a collective bargaining agreement with
us. However, we are subject to certain provisions of collective bargaining
agreements among the Government of Israel, the Histadrut (General Federation of
Labor in Israel) and the Coordinating Bureau of Economic Organizations
(including the Industrialists' Association) that are applicable to our Israeli
employees by virtue of expansion orders of the Israeli Ministry of Labor and
Welfare. In addition, Israeli labor laws are applicable to all of our employees
in Israel. Those provisions and laws principally concern the length of the
workday, minimum daily wages for workers, procedures for dismissing employees,
determination of severance pay and other conditions of employment.

As a general practice, although not legally required, we contribute funds on
behalf of most of our full-time employees in Israel to an individual insurance
policy known as "Managers' Insurance." This policy provides a combination of
savings plan, insurance and severance pay benefits to the insured employee,
provides for payments to the employee upon retirement or death, and secures
severance pay, if any, to which the employee is legally entitled upon
termination of employment. The remaining part of this obligation is presented on
our balance sheet as a provision for severance pay. See Note 2(m) to the
Consolidated Financial Statements.

All Israeli employers are required to provide certain increases in wages as
partial compensation for increases in the CPI. The specific formula for such
increases varies according to agreements reached among the Government of Israel,
the Manufacturers' Association and the Histadrut. Israeli employees and
employers also are required to pay pre-determined sums (which include a
contribution to national health insurance) to the Israel National Insurance
Institute, which provides a range of social security benefits.

CAUTIONARY STATEMENT FOR FORWARD-LOOKING INFORMATION

From time to time, information provided by us, including but not limited to
statements included in this report, or other statements made by or on our
behalf, may contain forward-looking statements. Such forward-looking statements
are made pursuant to the safe-harbor provisions of the Private Securities
Litigation Reform Act of 1995. Such statements may relate, but are not limited,
to projections of revenues, income or loss, capital expenditures, plans for
growth and future operations, competition and regulation as well as assumptions
relating to the foregoing. Forward-looking statements are inherently subject to
risks and uncertainties, many of which cannot be predicted or quantified. When
used in this report, the words, "estimates," "expects," "anticipates,"
"believes," "plans," "intends" and variations of such words and similarly
expressions are intended to identify forward-looking statements that involve
risks and uncertainties. Future events and actual results could differ
materially from those set forth in, contemplated by or underlying the
forward-looking statements. The factors that could cause actual results to
differ materially from those suggested by any such statements include, but are
not limited to, those discussed or identified from time to time in our public
filings, including general economic and market conditions, changes in
regulations and taxes and changes in competition and pricing environments.
Reliance should not be placed on these forward-looking statements, which are
applicable only as of the date hereof. We undertake no obligation to revise or
update these forward-looking statements to reflect events or circumstances that
arise after the date of this report or to reflect the occurrence of
unanticipated events.

ITEM 2. PROPERTIES

We do not own any real property. As of December 31, 2001, we leased an
aggregate of approximately 13,000, 17,000, 15,000, 15,000, 6,700 and 26,000
square feet of office space in Ramat Gan, Israel, Burlington, Massachusetts,
Jersey City, New Jersey, Carrollton, Texas, San Leandro, California and
Norcross, Georgia, respectively, and 9,500 and 1,800 square feet of office space
in Switzerland and the U.K. The aggregate annual lease payments for our
facilities were approximately $1,778,000. In March 2002, we terminated our lease
in Carrollton, Texas and entered into a new lease with the same landlord for
approximately 3,000 square feet also located in Carrollton, Texas, resulting in
a net savings in our annual lease payments of approximately $112,000.

ITEM 3. LEGAL PROCEEDINGS

We are not a party to any litigation or legal proceeding, either in Israel
or abroad, and are not aware of any other pending or threatened litigation that
may have a material adverse effect on us or our business. The complaint, which
was filed against us in the United States District Court for the District of New
Jersey on or about October 22, 1999 (previously disclosed on Forms 10-K for the
years ended December 31, 1999 and December 31, 2000) was dismissed in August
2000.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On January 31, 2002, we held our Annual Meeting of Shareholders, at which:

(i) an increase of 100,000 options available for grant under the Directors'
Option Plan was approved, with 10,403,123 votes cast for, 657,609 cast
against, 1,074,670 abstentions and 0 broker non-votes;

(ii) the compensation of directors was approved, with 11,041,223 votes cast
for, 18,079 cast against, 1,076,100 abstentions and 0 broker non-votes;

(iii) the compensation of Gil Weiser for consulting services provided to
the Company was ratified and approved, with 11,007,838 votes cast for,
52,264 cast against, 1,075,300 abstentions and 0 broker non-votes;

(iv) the compensation and option award of Reuven-Ben Menachem were ratified
and approved, with 11,008,295 votes cast for, 1,105,989 cast against,
21,118 abstentions and 0 broker non-votes;

(v) (a) a decrease of 218,857 of the number of options available for grant
under the 1997 Israel Plan and a decrease of 218,857 of the number of
Ordinary Shares reserved for issuance upon exercise of options under the
1997 Israel Plan; (b) a decrease of 134,436 in the number options available
for grant under the 1997 U.S. Plan and a decrease of 134,436 in the number
of Ordinary Shares reserved for issuance upon exercise of options under the
1997 U.S. Plan; and, (c) an increase of 385,045 in the number of options
available for grant under the 1999 Plan and an increase of 385,045 in the
number of Ordinary Shares reserved for issuance upon exercise of options
under the 1999 Plan was approved, with 10,824,450 votes cast for, 236,184
cast against, 1,074,768 abstentions and 0 broker non-votes;

(vi) appointment of Kost, Forer and Gabbay, a member of Ernst & Young
International, independent certified public accountants, as auditors for
fiscal year 2001 and authorization of the Board of Directors to set the
remuneration for such auditors was ratified, with 12,077,432 votes cast
for, 39,420 cast against, 18,550 abstentions and 0 broker non-votes;

(vii) amendments to the Articles of Association were ratified and approved,
with 10,872,062 votes cast for 188,280 cast against, 1,075,060 abstentions
and 0 broker non-votes; and

(viii) the purchase of insurance for the benefit of the directors, the
undertaking in advance to indemnify such directors and the exemption of
such directors from their duty of care were approved, with 10,861,800 votes
cast for, 199,152 cast against, 1,074,450 abstentions and 0 broker
non-votes.

PART II

ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our ordinary shares are quoted on the NASDAQ National Market under the
symbol "FNDT". Prior to July 28, 1999, our symbol was "FNDTF". The following
table sets forth, for the periods indicated, the high and low closing sales
prices for the ordinary shares:

HIGH LOW
1999
First Quarter.................................... 31 19
Second Quarter................................... 44 1/4 25 1/4
Third Quarter.................................... 31 3/8 21 3/8
Fourth Quarter................................... 21 1/2 10 9/16

2000
First Quarter.................................... 41 5/8 22 1/4
Second Quarter................................... 28 1/8 18 3/16
Third Quarter.................................... 26 7/8 19 1/4
Fourth Quarter................................... 24 1/4 14 5/16

2001
First Quarter .................................. 18.125 5.813
Second Quarter................................... 11.34 5.658
Third Quarter.................................... 7.50 4.52
Fourth Quarter................................... 5.36 3.42

2002 First Quarter (Through March 15, 2002)........ 5.24 3.54

On March 15, 2002, the last closing sale price of the ordinary shares, as
reported by the NASDAQ National Market, was $4.20 per share. As of March 15,
2002, we had 65 shareholders of record. We believe that the number of beneficial
owners of the ordinary shares is approximately 1500-2000.

DIVIDEND POLICY

We intend to retain all future earnings for use in the development of our
business and do not anticipate paying cash dividends in the foreseeable future.
If we declare cash dividends, they could be taxable to the recipient. Because we
have received benefits under the Law for the Encouragement of Capital
Investments, 1959, as amended (the "Investment Law"), payment of cash dividends
during the exemption period granted under the Investment Law will subject that
portion of our income derived from the Approved Enterprise status granted to us
under the Investment Law to Israeli taxes to which the income would not
otherwise be subject. We intend to reinvest the amount of the tax-exempt income
derived from our "Approved Enterprises" status permanently and not to distribute
such income as dividends.

Under the Israeli Companies Law of 1999 (the "Companies Law"), dividends may
be paid by an Israeli company only out of its profits, as defined in such law.
Under the Companies Law, a company's Board of Directors has the general
authority to distribute dividends to the shareholders out of profits referred to
above, and a company may determine in its Articles of Association that dividends
may be approved: (i) by the general meeting, following a recommendation of the
Board of Directors (the shareholders may reduce, but not increase, the dividends
recommended by the Board of Directors), (ii) by the Board of Directors, after
the shareholders have approved the maximum amount of dividends which may be
distributed, and (iii) in any other manner detailed in a company's Articles of
Association, provided that the company's board shall determine that such
distribution complies with the provisions of the Companies Law. In the event we
pay dividends, it is anticipated that any dividends paid to non-residents of
Israel would be paid in NIS.

PASSIVE FOREIGN INVESTMENT COMPANY

We would be a passive foreign investment company (a "PFIC") for 2001 if
(taking into account certain "look-through" rules with respect to the income and
assets of our subsidiaries) either 75 percent or more of our gross income for
the taxable year is passive income or the average percentage (by value) of our
passive assets during the taxable year is at least 50 percent.

Based on discussions with our professional advisors, we reasonably believe
that we should not be a PFIC for 2001. No ruling has been or will be obtained
from the Internal Revenue Service as to whether we are a PFIC, and no assurance
can be given that the Internal Revenue Service will not disagree with, or
challenge in court, the position that we are not a PFIC, or that such challenge
will not be sustained by a court.

In general, if, notwithstanding our belief, we were a PFIC, each U.S.
shareholder of ours would, unless it made one of the elections discussed below
on a timely basis (generally on or before the due date (as extended) for its
income tax return for the first tax year to which the election will apply), be
taxable on gain recognized from the disposition of our shares (including gain
deemed recognized if our shares are used as security for a loan) and upon
receipt of certain distributions with respect to our shares as if such income
had been recognized ratably over the shareholder's holding period during which
we were a PFIC. The tax would be computed at the highest ordinary income tax
rate in effect for each period to which the income is allocated, and an interest
charge on the tax as so computed would also apply. Additionally, if we were a
PFIC, U.S. shareholders who acquire our shares from decedents (other than
nonresident aliens) dying before 2010 would be denied the normally-available
step-up in basis for such shares to fair market value at the date of death and,
instead, would have a tax basis in such shares equal to the decedent's basis, if
lower.

As an alternative to the tax treatment described above, a U.S. shareholder
could elect to treat us as a "qualified electing fund" (a "QEF"), in which case
the U.S. shareholder would be taxed currently on its pro rata share of our
ordinary earnings and net capital gain (subject to a separate election to defer
payment of taxes, which deferral is subject to an interest charge). As another
alternative to the tax treatment described above, a U.S. shareholder could elect
to mark our shares to market annually, recognizing as ordinary income or loss
each year an amount equal to the difference as of the close of the taxable year
between the fair market value of the our shares and the shareholder's adjusted
basis in the shares. Losses would be allowed only to the extent of net
mark-to-market gain previously included in income by the U.S. shareholder.

The U.S. federal income tax consequences to a U.S. shareholder if we were
to be a PFIC are complex. A U.S. shareholder should consult with its own advisor
with regard thereto in light of its particular circumstances, as well as with
regard to whether it should make, and the requirements for making, the elections
described above. A U.S. shareholder considering making a QEF election should
also consult with us to determine if we can provide or make available the
information necessary to make such an election.

RECENT SALES OF UNREGISTERED SECURITIES

There were no sales of unregistered securities in 2001.

ITEM 6. SELECTED FINANCIAL DATA

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

The selected consolidated statement of operations data for each of the three
years ended December 31, 1999, 2000 and 2001, and the selected consolidated
balance sheet data as of December 31, 2000 and 2001 are derived from our
Consolidated Financial Statements set forth elsewhere herein which have been
prepared in accordance with U.S. generally accepted accounting principles. The
selected consolidated statement of operations for each of the two years ended
December 31, 1997 and 1998 and the selected consolidated balance sheet data as
of December 31, 1997, 1998 and 1999 have been derived from our audited
consolidated financial statements not included herein. All of the financial data
set forth below are in thousands and should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and Notes thereto
appearing elsewhere herein.

YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1997 1998 1999 2000 2001
---------- ---------- ---------- ---------- ---------

STATEMENT OF OPERATIONS DATA:
Revenues:
Software license fees.................. $ 4,997 $ 14,007 $ 17,667 $ 28,492 $ 17,067
Maintenance and services fees.......... 2,313 7,116 12,531 17,351 26,248
Hardware sales......................... 709 2,009 1,493 1,437 842
---------- ---------- ---------- ---------- ---------
Total revenues....................... 8,019 23,132 31,691 47,280 44,157
Cost of revenues:
Software license costs................. 334 238 559 252 896
Maintenance and services costs......... 1,086 4,549 8,051 12,292 18,316
Hardware costs......................... 646 1,631 1,132 1,131 686
---------- ---------- ---------- ---------- ---------
Total cost of revenues............... 2,066 6,418 9,742 13,675 19,898
---------- ---------- ---------- ---------- ---------
Gross profit............................. 5,953 16,714 21,949 33,605 24,259
Operating expenses:
Software development................... 2,468 6,636 12,880 17,747 19,185
Selling and marketing, net............. 1,750 2,970 6,464 9,637 10,325
General and administrative............. 1,189 2,080 3,737 6,207 9,328
Amortization of acquisition, related
goodwill and other intangible assets... -- 206 1,275 2,462 2,525
Provision for doubtful accounts.......... 100 185 258 717 5,966
Non recurring expenses................... -- -- -- -- 4,073
In-process research and development
write-off............................ -- 16,600 2,802 -- --
---------- ---------- ---------- ---------- ---------
Total operating expenses............. 5,507 28,677 27,416 36,770 51,402
---------- ---------- ---------- ---------- ---------
Operating income (loss).................. 446 (11,963) (5,467) (3,165) (27,143)
Impairment and realized losses on
available for sale marketable securities -- -- -- -- (7,826)
Financial income, net.................... 190 571 3,756 5,542 3,343
---------- ---------- ---------- ---------- ---------
Net income (loss)........................ $ 636 $ (11,392) $ (1,711) $ 2,377 $ (31,626)
========== ========== ========= ========== =========

Basic earnings (loss) per share.......... $ 0.22 $ (1.12) $ (0.13) $ 0.17 $ (2.22)
========== ========== ========= ========== ==========
Diluted earnings (loss) per share........ $ 0.08 $ (1.12) $ (0.13) $ 0.16 $ (2.22)
========== ========== ========= ========== ==========
Shares used in computing:
Basic earnings (loss) per share........ 2,837 10,151 12,855 14,096 14,218
========== ========== ========= ========== ==========
Diluted earnings (loss) per share...... 7,935 10,151 12,855 14,777 14,218
========== ========== ========= ========== ==========

CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents, short-term bank
deposits and short term investments.... $ 4,267 $ 13,019 $ 82,516 $ 63,315 $ 45,385
Working capital.......................... $ 6,645 $ 18,140 $ 90,016 $ 83,840 $ 55,206
Total assets............................. $ 9,658 $ 32,717 $ 125,142 $ 126,872 $ 102,056

Short-term bank credits, including current
maturities of long-term debt........... $ 255 -- -- -- --
Long-term debt........................... $ 261 -- -- -- --
Shareholders' equity..................... $ 7,404 $ 25,048 $ 118,594 $ 119,714 $ 91,220

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

We were incorporated in Israel in 1993. We acquired our ACCESS Banking(TM)
products in April 1998, BBP, our Swiss subsidiary, in June 1999, and our Banker
products in September 1999. To date, we have derived substantially all of our
revenues from licenses of our ACCESS Banking(TM), ACCESS.Pro(TM), FEDplu$(TM),
PAY$tar(TM), PAYplus RTGS(TM), PAYplus for CLS(TM), Global CASHstar(TM),
WireUp(TM) and service bureau solutions and related services and third-party
hardware sales.

Financial information contained in Item 7 "Management's Discussion and
Analysis of Financial Condition and Results of Operations," is presented on a
consolidated basis. Therefore, within Item 7 references to "we," "our" and "us"
refer to us and our subsidiaries.

CRITICAL ACCOUNTING POLICY DISCLOSURE

REVENUE RECOGNITION

Our revenues are generated from licensing the rights to use our software
products directly to end-users and indirectly through sub-license fees from
resellers. In addition, we also generate revenues from selling professional
services, including consulting, implementation, training and maintenance and
hardware sales.

Revenue from software license agreements is recognized when all criteria
outlined in Statement Of Position (SOP) 97-2 "Software Revenue Recognition" (as
amended) are satisfied. Revenue from license fees is recognized when persuasive
evidence of an agreement exists, delivery of the product has occurred, the fee
is fixed or determinable and collectibility is probable.

Where software arrangements involve multiple elements, revenue is allocated
to each element based on vendor specific objective evidence ("VSOE") of the
relative fair values of each element in the arrangement, in accordance with the
"residual method" prescribed by SOP 98-9 "Modification of SOP 97-2, Software
Revenue Recognition With Respect to Certain Transactions". Our VSOE used to
allocate the sales price to services and maintenance is based on the price
charged when these elements are sold separately. License revenue is recorded
based on the residual method. Under the residual method, revenue is recognized
for the delivered elements when (1) there is VSOE of the fair values of all the
undelivered elements, and (2) all revenue recognition criteria of SOP 97-2, as
amended, are satisfied. Under the residual method any discount in the
arrangement is allocated to the delivered element.

We generally do not grant rights of return to our customers. We generally
provide a warranty period of up to six months at no extra charge. No provision
is recorded at the time revenue is recognized for estimated warranty costs
since, in our experience, such costs are immaterial.

SOP 97-2 specifies that extended payment terms in a software licensing
arrangement may indicate that the software license fees are not deemed to be
fixed or determinable. In addition, if payment of a significant portion of the
software license fees is not due until more than twelve months after delivery,
the software license fees should be presumed not to be fixed or determinable,
and thus should be recognized as the payments become due. However, SOP 97-2
specifies that if a company has a standard business practice of using extended
payment terms in software licensing arrangements and has a history of
successfully collecting the software license fees under the original terms of
the software licensing arrangement without making concessions, such company
overcomes the presumption that the software license fees are not fixed or
determinable. Thus, a company should recognize software license fees when all
other SOP 97-2 revenue recognition criteria are satisfied. We have concluded
that for certain software arrangements with extended payment terms, the "fixed
or determinable" presumption has been overcome and software license fees have
been recognized upon meeting the remaining SOP 97-2 revenue recognition

criteria. The present value of such software license fees recognized in years
1999, 2000 and 2001 totaled approximately $1,700,000, $5,000,000 and $1,883,000
respectively.

When contracts contain hosting services arrangements, we apply Emerging
Issues Task Force 00-03 "Software Revenue Recognition, to Arrangements That
Include the Right to Use Software Stored On Another Entity's Hardware."

Arrangements that include professional services are evaluated to determine
whether those services are essential to the functionality of other elements of
the arrangement. When services are considered essential, revenue under the
arrangement is recognized using contract accounting. When services are not
considered essential, the revenue allocable to the software services is
recognized as the services are performed.

Revenues from software licenses that require significant customization,
integration and installation are recognized based on SOP 81-1 "Accounting for
Performance of Construction - Type and Certain Production -Type Contracts",
using contract accounting on the percentage-of-completion method based on the
relationship of actual costs incurred to total costs estimated to be incurred
over the duration of the contract.

Provisions for estimated losses on uncompleted contracts are made in the
period in which such losses are first determined in the amount of the estimated
loss on the entire contract. As of December 31, 2001 no such estimated losses
were identified.

Revenue on arrangements with customers who are not the ultimate users (such
as resellers) is not recognized until the product has been delivered to the end
user.

Revenue from maintenance and services are recognized over the life of the
maintenance agreement or at the time that services are rendered.

Revenue from hardware sales are recognized when persuasive evidence of an
agreement exists, delivery has occurred, the fee is fixed or determinable and
collectibility is probable.

Deferred revenue includes unearned amounts received under maintenance and
support contracts and amounts billed to customers but not recognized as revenue.

OTHER CRITICAL ACCOUNTING POLICIES

Our trade receivables and long-term trade receivables primarily include
amounts due from banks and large financial institutions. We generally do not
require collateral; however, in certain circumstances, we may require letters of
credit, other collateral or additional guarantees. An allowance for doubtful
accounts is determined with respect to those specific amounts that we have
determined to be doubtful of collection. We perform ongoing credit evaluations
of our customers.

Management's assessment for uncertainties of outstanding debts
collectibility resulted in a provision for doubtful accounts expenses in total
amounts of $258,000, $717,000 and $5,966,000 for 1999, 2000 and 2001
respectively.

We account for our investments in marketable securities using Statement of
Financial Accounting Standard No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" ("SFAS No. 115").

Management determines the appropriate classification of its investments in
marketable debt and equity securities at the time of purchase and reevaluates
such determinations at each balance sheet date. Debt securities for which we do
not have the intent or ability to hold to maturity are classified as
available-for-sale, along with any investments in equity securities that have
not been classified as "trading securities".

As of December 31, 2000 and 2001 all marketable securities were designated
as available-for-sale.

As of December 31, 2001, due to the market conditions, and since management
believed that the decline in the fair value of the marketable securities was
other than temporary, the cost basis of these securities was written down to
fair value as a new cost basis. During the fourth quarter of 2001, we sold
approximately 86% of our investment in marketable securities. As of December 31,
2001 an impairment and realized losses on available-for-sale marketable
securities amounting to $7,826,000 was included in earnings.

Software development costs incurred in the process of developing product
improvements or new products are generally charged to expenses as incurred, net
of participation of the Office of the Chief Scientist.

SFAS No. 86 "Accounting for the Costs of Computer Software to be Sold,
Leased or Otherwise Marketed" requires capitalization of certain software
development costs subsequent to the establishment of technological feasibility.
Based on our product development process, technological feasibility is
established upon completion of a detailed program design.

Our costs incurred between completion of the detailed program design and the
point at which the product is ready for general release have been capitalized.
As of December 31, 2001, the Company capitalized development costs totaling
$7,876,000 in aggregate, which costs have not been amortized as the products are
not yet ready for general release to customers.

In response to declines associated with the cautious investment technology
spending environment within the financial services industry, during the second
quarter of 2001 we adopted a restructuring and integration plan. As part of the
plan, through the end of January, 2002, we reduced our work force by 89
employees and sublet portions of our existing office space. In addition, we
consolidated aspects of our Dallas operation into our existing operations in
order to improve efficiency and eliminate duplicate cost structures.

We began to realize the benefits of the plan in the third quarter of 2001 as
evidenced by the reduction in total maintenance and services costs and total
software development expenses. Total maintenance and services costs decreased by
$1,280,000, or 13.11%, to $8,518,000 in the six months ended December 31, 2001
from $9,798,000 in the six months ended June 30, 2001. Software development
expenses (before reduction for capitalization) decreased by $1,253,000, or 9.5%,
to $11,916,000 in the six months ended December 31, 2001 from $13,169,000 in the
six months ended June 30, 2001.

In 2000 and 2001, we incurred expenses in connection with new ventures,
which were to be reimbursed by such ventures upon the formation of the
underlying entities. We capitalized $1,035,000 in connection with such ventures.
In April 2001, management and the other investors decided not to proceed with
the formation of the entities, which resulted in our writing-off the full
amount.

The currency of the primary economic environment in which our operations are
conducted is the dollar. Thus, we use the dollar as our functional and reporting
currency. Transactions and balances in other currencies are remeasured into
dollars in accordance with the principles set forth in FASB Statement No. 52.
Exchange gains and losses arising from remeasurement are recorded as income or
expense as applicable. See "Impact of Inflation and Currency Fluctuations;
Market Risks."

The financial statements of a foreign subsidiary whose functional currency
is not the U.S. dollar have been translated into U.S. dollars. All balance sheet
accounts have been translated using the exchange rates in effect at the balance
sheet date. Statement of operations amounts have been translated using the
average exchange rate for the period. The resulting translation adjustments are
reported as a separate component of accumulated other comprehensive income
(loss) in shareholders' equity.

Israeli companies, such as ours, are generally subject to income tax at the
corporate rate of 36%. However, we are eligible for certain tax benefits which
should result in our income being taxed at a significantly lower rate for some
time after we begin to report taxable income and exhaust our net operating loss
carry-forwards. See "Effective Corporate Tax Rate."

SIGNIFICANT REVENUE INFORMATION

The following table presents our consolidated revenues according to the
geographical regions to which such revenues are attributable:

1999 2000 2001
---- ---- ----
TOTAL TOTAL TOTAL
REVENUES PERCENTAGE REVENUES PERCENTAGE REVENUES PERCENTAGE
-------- ---------- -------- ---------- -------- ----------

Israel $ 495 1.6% $ 574 1.2% $ 205 0.5%
U.S.A. 23,257 73.4 26,942 57.0 30,773 69.7
Australia 239 0.7 4,062 8.6 -- --
Switzerland 4,156 13.1 6,313 13.4 7,381 16.7
Other 3,544 11.2 9,389 19.8 5,798 13.1
========== =========== ============ ======== ============== ========
$ 31,691 100.0% $ 47,280 100.0% $ 44,157 100.0%
========== =========== ============ ======== ============== ========

MAJOR CUSTOMER

In 2001, we derived approximately 17.7% of our annual revenues from the
license fees, and consulting and maintenance service fees earned in connection
with an agreement with a leading international financial institution. See
"Business Description - Customers and Markets." We anticipate entering into new
orders under this agreement which will likely result in an increase in fees
earned from this customer in 2002. We also anticipate that these fees will
represent a higher percentage of our total annual revenue in 2002 as compared to
2001. A failure of the bank to enter into or proceed with such orders could have
a material adverse effect on our business, financial condition and results of
operations.

ACQUISITION OF BUSINESSES FROM CHECKFREE, BBP, AND CERTAIN ASSETS FROM STERLING

In April 1998, we acquired from CheckFree two businesses engaged primarily
in the design and development of cash management software products and the
development and sale of wire transfer products. We paid $18,824,000 in cash
(including acquisition expenses) for the acquired CheckFree businesses. The
transaction was accounted for as a purchase and resulted in the initial
recording of approximately $3 million of goodwill which is being amortized over
a period of 10 years and a one time write-off of research and development in
process in the amount of $16.6 million.

In June 1999, we entered into a Share Purchase Agreement with Biveroni
Batchelet Partners AG, a Swiss corporation ("BBP"), and its shareholders,
pursuant to which we purchased all of the outstanding shares of BBP for an
aggregate purchase price of approximately $13.9 million, of which 75% was paid
in cash and 25% in stock (105,315 ordinary shares). The transaction was
accounted for as a purchase and resulted in the initial recording of
approximately $11.1 million of goodwill and other intangibles which is being
amortized over an average period of 8.5 years and a one time write-off of
research and development in process in the amount of $2.8 million.

On September 30, 1999, Fundtech Corporation, a wholly owned subsidiary of
ours and FCMS, LLC, our indirect wholly owned subsidiary, consummated the
purchase of certain assets and assumed liabilities constituting the cash
management business of Sterling Commerce (Northern America) Inc. (the "Cash
Management Business") for approximately $6.9 million (including acquisition
expenses). The cash consideration was paid through immediately available funds
from our working capital. The transaction was accounted for as a purchase and
resulted in the initial recording of approximately $7.3 million of goodwill and
other intangibles which is being amortized over an average period of 9.2 years.

Certain preacquisition contingency reserves were established as of the
acquisition dates that are subject to adjustment during the "allocation period"
in accordance with SFAS 38 "Accounting for Preacquisition Contingencies." The
fair value of the net assets acquired from BBP and Sterling has been adjusted to
reflect the resolution of these contingencies established relating to certain
litigation and liabilities associated with acquired contractual commitments.

The purchase price reallocation resulted in a total reduction to the fair
value of the Sterling and BBP acquisitions of approximately $1,573,000 and
$214,000 respectively as well as a corresponding increase to goodwill.

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated the percentage of
revenues represented by each of the items in our statement of operations:

YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
1997 1998 1999 2000 2001
---------- ---------- ---------- ---------- ---------

Revenues:
Software license fees............ 62.3% 60.6% 55.6% 60.3% 38.7%
Maintenance and service fees..... 28.8 30.8 39.7 36.7 59.4
Hardware sales................... 8.9 8.6 4.7 3.0 1.9
---------- ---------- ---------- ---------- ---------
Total revenues................. 100.0 100.0 100.0 100.0 100.0
---------- ---------- ---------- ---------- ---------
Cost of revenues:
Software license costs........... 4.2 1.0 1.8 0.5 2.0
Maintenance and service costs.... 13.5 19.7 25.3 26.0 41.5
Hardware costs................... 8.1 7.1 3.6 2.4 1.6
---------- ---------- ---------- ---------- ---------
Total cost of revenues......... 25.8 27.8 30.7 28.9 45.1
---------- ---------- ---------- ---------- ---------
Gross profit........................ 74.2 72.2 69.3 71.1 54.9
---------- ---------- ---------- ---------- ---------
Operating expenses:
Software development, net........ 30.8 28.7 40.6 37.5 43.5
Selling and marketing, net....... 21.8 12.8 20.4 20.4 23.4
General and administrative....... 14.8 9.0 11.8 13.2 21.1
Amortization of acquisition, related
goodwill and other intangible assets -- 0.9 4.0 5.3 5.7
Provision for doubtful accounts .... 1.3 0.8 0.9 1.6 13.5
Non recurring expenses -- -- -- -- 9.2
In-process research and development
write-off........................ -- 71.8 8.8 -- --
---------- ---------- ---------- ---------- ---------
Total operating expenses............ 68.7 124.0 86.5 77.8 116.4
---------- ---------- ---------- ---------- ---------
Operating income (loss)............. 5.5 (51.8) (17.2) (6.7) (61.5)
Impairment and realized losses on
available for sale marketable
securities....................... (17.7)
Financial income, net............... 2.4 2.5 11.8 11.7 7.6
---------- ---------- ---------- ---------- ---------
Net income (loss)................... 7.9% (49.3)% (5.4)% 5.0% (71.6)%
========== ========== ========== ========== =========

YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

Software License Fees. Software license fees consist of revenues derived
from software license agreements entered into between us and our customers.
Software license fees decreased by $11,425,000, or 40.1%, to $17,067,000 in the
year ended December 31, 2001 from $28,492,000 for the year ended December 31,
2000. The decrease is primarily attributable to lengthening sales cycles and
more cautious spending on the part of the information technology departments of
financial institutions.

Maintenance and Services Fees. Maintenance and services fees include
revenues derived from maintenance contracts, installation and training fees,
service bureau fees, consulting fees, certification fees and related items. We
generally receive a contract for maintenance and services at the time a contract
for the license is entered into. Maintenance and services fees increased by
$8,897,000, or 51.3%, to $26,248,000 in the year ended December 31, 2001 from
$17,351,000 in the year ended December 31, 2000. The increase is commensurate
with the increase in software licenses (and corresponding license fees) under
maintenance and the increase in the services provided under large projects
for top-tiered customers.

Hardware Sales. Hardware sales consist of the reselling of third-party
hardware in connection with the licensing and installation of our software.
Hardware sales decreased by $595,000, or 41.4%, to $842,000 in the year ended
December 31, 2001 from $1,437,000 in the year ended December 31, 2000. The
decrease in hardware sales is attributable to a decrease in the number of
software licenses in connection with which the customer purchased hardware
through us.

Software License Costs. Software license costs consist primarily of the
royalty payments related to grants from the Government of Israel, product media,
duplication, manuals, shipping, third-party embedded software costs and
royalties to others. Software license costs increased by $644,000, or 255.6%, to
$896,000 in the year ended December 31, 2001, from $252,000 in the year ended
December 31, 2000. The gross margin of software license fees decreased from 99%
in the year ended December 31, 2000 to 95% in the year ended December 31, 2001.
The decrease in the gross margin is primarily due to an increase in third-party
embedded software costs and royalties.

Maintenance and Services Costs. Maintenance and services costs consist
primarily of personnel costs, telephone support costs and other costs related to
the provision of maintenance, service bureau and professional services.
Maintenance and services costs increased by $6,024,000 or 49.0% to $18,316,000
in the year ended December 31, 2001, from $12,292,000 in the year ended December
31, 2000 due to increased software licenses under maintenance and the increase
in the services provided under large projects for top-tiered customers. The
gross margin on maintenance and services fees increased slightly from 29.1% in
the year ended December 31, 2000 to 30.1% in the year ended December 31, 2001.

Hardware Costs. Hardware costs consist primarily of our cost of computer
hardware resold to our customers. The cost of hardware sales decreased by
$445,000, or 39.3%, to $686,000 in the year ended December 31, 2001 from
$1,131,000 in the year ended December 31, 2000. The decrease in costs is
commensurate with the decrease in hardware sales. The gross margin on hardware
decreased from 21.3% in the year December 31, 2000 to 18.5% in the year ended
December 31, 2001. The decrease in gross margin is primarily due to volume
discounts.

Software Development. Software development expenses are related to the
development and testing of new products. Software development expenses increased
by $1,438,000, or 8.1%, to $19,185,000 in the year ended December 31, 2001, from
$17,747,000 in the year ended December 31, 2000. These amounts exclude
$5,901,000 of capitalized costs in the year ended December 31, 2001, and
$1,975,000 of capitalized costs in the year ended December 31, 2000, incurred
for the development of the Company's Global PAYplus product. The increase in
software development costs is principally related to the development and
enhancement of new products such as PAYplus RTGS(TM), PAYplus for CLS(TM),
ACCESS.pro(TM), NOSTROPlus(TM) and the Banker suite.

Selling and Marketing, Net. Selling and marketing expenses increased by
$688,000, or 7.1%, to $10,325,000 in the year ended December 31, 2001 from
$9,637,000 in the year ended December 31, 2000. Selling and marketing expenses
as a percentage of revenues increased by 3% to 23.4% in the year ended December
31, 2001 from 20.4% in the year ended December 31, 2000. This increase as a
percentage of revenues is primarily attributable to a decrease in revenues and
an increase in expenses resulting from operating the Singapore office and the
expanded European operations for the full year.

General and Administrative. General and administrative expenses increased by
$3,121,000, or 50.2%, to $9,328,000 in the year ended December 31, 2001 from
$6,207,000 in the year ended December 31, 2000. This increase is due to the
headcount addition of general and administrative personnel an increase in
average salaries and an increase in professional and consulting fees.

Amortization of Acquisition-Related Goodwill and other Intangible Assets.
Amortization expense increased by $63,000, or 2.6%, to $2,525,000 for the year
ended December 31, 2001 from $2,462,000 for the year ended December 31, 2000.
This amortization of goodwill has remained relatively stable.

In June 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations" and No.142 "Goodwill and other Intangible Assets" ("the
Statements"), effective for fiscal years beginning after December 15, 2001.
Under the new rules, goodwill and intangible assets deemed to have indefinite
lives will no longer be amortized but will be subject to annual impairment tests
in accordance with the Statements. Other intangible assets will continue to be
amortized over their useful lives.

We will apply the new rule beginning in the first quarter of 2002. During
2002, we will perform the first of the required impairment tests of goodwill and
indefinite lived intangible assets. We cannot yet estimate what the effect, if
any, of these tests will be on our financial position and results of operations.

Provision for Doubtful Accounts. Management's assessment for uncertainties
of outstanding debts collectibility resulted in a provision for doubtful
accounts totaling $5,966,000 for the year ended December 31, 2001 compared to
$717,000 for the year ended December 31, 2000.

Non-Recurring Expenses. In connection with the restructuring and integration
plan we adopted in the second quarter of 2001, we recorded non-recurring
expenses totaling $3,038,000. These non-recurring expenses included: (i)
facility closures and related costs in the amount of $1,513,000; (ii) employee
termination benefits and related costs in the amount of $790,000; (iii) property
and equipment abandonment in the amount of $270,000 and (iv) integration costs
in the amount of $465,000. In addition, in the second quarter of 2001 we
wrote-off $1,035,000 in connection with the decision not to proceed with the
formation of certain entities. For further explanation, see the "Other Critical
Accounting Policies" section above.
19

Impairment of Marketable Securities. The charge for impairment of marketable
securities was $7,826,000 for the year ended December 31, 2001 as compared to $0
for the year ended December 31, 2000. As of December 31, 2001, due to market
conditions the unrealized losses in our marketable securities increased to
$7,826,000. Since we believe this decline is other than temporary, the cost
basis of these securities was written down to fair value as a new cost basis.

Financial Income, Net. Net financial income decreased by $2,199,000, or 40%,
to $3,343,000 in the year ended December 31, 2001 from $5,542,000 in the year
ended December 31, 2000. The decrease of the financial income is primarily due
to a decrease in cash and cash equivalents and marketable securities, as well as
interest and dividend rate declines that were earned on such holdings.

YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999

Software License Fees. Software license fees consist of revenues derived
from software license agreements entered into between us and our customers.
Software license fees increased by $10,825,000 to $28,492,000 in the year ended
December 31, 2000 from $17,667,000 for the year ended December 31, 1999, an
increase of 61%. This increase was attributable to the sale of our current
product offerings, specifically PAYplus RTGS(TM), PAYplus for CLS(TM) and ACCESS
Banking(TM), as well as a growth in sales from businesses acquired in 1999,
including the Banker internet cash management products and revenues generated
from the BBP service bureau.

Maintenance and Services Fees. Maintenance and services fees include
revenues derived from maintenance contracts, installation and training revenue,
consulting fees, certification fees and related items. We generally receive a
contract for maintenance and service at the time a contract for the license is
entered into. Maintenance and services fees increased by $4,820,000 to
$17,351,000 in the year ended December 31, 2000 from $12,531,000 in the year
ended December 31, 1999, an increase of 38%. The increase was commensurate with
the increase in the number of customer licenses and the acquisition of BBP and
the Sterling Cash Management Business during 1999.

Hardware Sales. Hardware sales consist of the reselling of third-party
hardware in connection with the license and installation of our software.
Hardware sales decreased by $56,000 to $1,437,000 in the year ended December 31,
2000 from $1,493,000 in the year ended December 31, 1999, a decrease of 4%. The
decrease in hardware sales was attributable to the decrease in the number of
software licenses sold whereby the customer also purchased hardware through us.

Software License Costs. Software license costs consist primarily of the
royalty payments related to grants from the Government of Israel, product media,
duplication, manuals, shipping and royalties to others. Software license costs
decreased by $307,000 to $252,000 in the year ended December 31, 2000 from
$559,000 in the year ended December 31, 1999, a decrease of 55%. The gross
margin of software license fees increased from 97% in the year ended December
31, 1999 to 99% in the year ended December 31, 2000. The increase in gross
margin is attributable to the decrease in royalty bearing software as a
percentage of total sales as most of our product offerings are not
royalty-bearing.

Maintenance and Services Costs. Maintenance and services costs consist
primarily of personnel costs, telephone support costs and other costs related to
the provision of maintenance and consulting services. Maintenance and services
costs increased by $4,241,000 to $12,292,000 in the year ended December 31, 2000
from $8,051,000 in the year ended December 31, 1999, an increase of 53%. The
gross margin on maintenance and services fees decreased from 36% in the year
ended December 31, 1999 to 29% in the year ended December 31, 2000. The decrease
is attributed to a lower gross margin on the PAYplus for CLS(TM) product and the
need to increase the support staff in expectation of expansion in services
contracts in the future.

Hardware Costs. Hardware costs consist primarily of our cost of computer
hardware resold to our customers. Cost of hardware sales decreased by $1,000 to
$1,131,000 in the year ended December 31, 2000 from $1,132,000 in the year ended
December 31, 1999, a decrease of 0.1%. The gross margin on hardware decreased
from 24% in the year December 31, 1999 to 21.3% in the year ended December 31,
2000. The decrease on gross margin was primarily due to an increase in lower
margin products accounting for a greater percentage of the overall hardware
revenue.

Software Development. Software development expenses are related to the
development and testing of new products. Software development expenses increased
by $4,867,000 to $17,747,000 in the year ended December 31, 2000, from
$12,880,000 in the year ended December 31, 1999, an increase of 38%. The
increase in software development costs is principally related to the further
development of new product offerings such as PAYplus for CLS(TM), PAYplus
RTGS(TM), ACCESS.pro(TM), NOSTROPlus(TM) and Global CASHstar and also due to the
development resources added as a result of the acquisition of BBP and the
Sterling Cash Management Business.

Selling and Marketing, Net. Selling and marketing expenses increased by
$3,173,000 to $9,637,000 in the year ended December 31, 2000 from $6,464,000 in
the year ended December 31, 1999, an increase of 49%. Selling and marketing
expenses as a percentage of revenues remained constant at 20% in the years ended
December 31, 1999 and 2000. The increase in costs is attributed to expenses
relating to opening the sales offices in Australia and Singapore and expanding
the sales channels in Europe as well as increasing the size of the U.S. sales
group.

General and Administrative. General and administrative expenses increased by
$2,470,000 to $6,207,000 in the year ended December 31, 2000 from $3,737,000 in
the year ended December 31, 1999, an increase of 66.1%. The increase is due to
the expansion of the business which primarily required additional personnel,
among other factors.

Amortization of Acquisition-Related Goodwill and Other Intangible Assets.
Amortization expenses increased by $1,187,000 to $2,462,000 in the year ended
December 31, 2000 from $1,275,000 in the year ended December 31, 1999, an
increase of 93.1%. The increase is due to the amortization of goodwill from the
acquisition of BBP and the Sterling Cash Management Business which took place in
June and September 1999, respectively.

Provision for Doubtful Accounts. Provision for doubtful accounts increased
by 459,000 to $717,000 in the year ended December 31, 2000 from $258,000 in the
year ended December 31, 1999.

Financial Income, Net. Net financial income increased by $1,786,000 to
$5,542,000 in the year ended December 31, 2000 from $3,756,000 in the year ended
December 31, 1999 an increase of 48%. The increase of the financial income is
due mainly to interest earned on cash received from our April 30, 1999 secondary
public offering.

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

Software License Fees. Software license fees consist of revenues derived
from software license agreements entered into between us and our customers.
Software license fees increased by $3,660,000 to $17,667,000 in the year ended
December 31, 1999 from $14,007,000 for the year ended December 31, 1998, an
increase of 26%. This increase was attributable to the licensing of our current
product offerings, as well as growth in the licensing from our acquired
businesses, including the internet cash management products. The increase was
also attributable to revenues generated from the BBP service bureau.

Maintenance and Services Fees. Maintenance and services fees include
revenues derived from maintenance contracts, installation and training revenue,
consulting fees, certification fees and related items. We generally receive a
contract for maintenance and service at the time a contract for the license is
entered into. Maintenance and services fees increased by $5,415,000 to
$12,531,000 in the year ended December 31, 1999 from $7,116,000 in the year
ended December 31, 1998, an increase of 76%. The increase was commensurate with
the increase in the number of customers and the acquisition of BBP and the
Sterling Cash Management Business during 1999.

Hardware Sales. Hardware sales consist of the reselling of third-party
hardware in connection with the license and installation of our software.
Hardware sales decreased by $516,000 to $1,493,000 in the year ended December
31, 1999 from $2,009,000 in the year ended December 31, 1998, a decrease of 26%.
The decrease in hardware sales was attributable to the decrease in the number of
software licenses sold whereby the customer also purchased hardware through us.

Software License Costs. Software license costs consist primarily of the
royalty payments related to grants from the Government of Israel, product media,
duplication, manuals, shipping and royalties to others. Software license costs
increased by $321,000 to $559,000 in the year ended December 31, 1999 from
$238,000 in the year ended December 31, 1998, an increase of 135%. The gross
margin of software license fees decreased from 98% in the year ended December
31, 1998 to 97% in the year ended December 31, 1999. The decrease in gross
margin is attributable to the increase in royalty bearing software as a
percentage of total sales as certain of our product offerings are not
royalty-bearing.

Maintenance and Services Costs. Maintenance and services costs consist
primarily of personnel costs, telephone support costs and other costs related to
the provision of maintenance and consulting services. Maintenance and services
costs increased by $3,502,000 to $8,051,000 in the year ended December 31, 1999
from $4,549,000 in the year ended December 31, 1998, an increase of 77%. The
gross margin on maintenance and services fees remained constant at 36% in the
years ended December 31, 1998 and 1999. The increase in maintenance and services
costs is attributable to the growth in sales and includes costs related to the
acquired entities.

Hardware Costs. Hardware costs consist primarily of our cost of computer
hardware resold to our customers. Cost of hardware sales decreased by $499,000
to $1,132,000 in the year ended December 31, 1999 from $1,631,000 in the year
ended

December 31, 1998, a decrease of 31%. This gross margin on hardware increased
from 19% in the year December 31, 1998 to 24% in the year ended December 31,
1999. The increase on gross margin was primarily due to an increase in higher
margin products accounting for a greater percentage of the overall hardware
revenue.

Software Development. Software development expenses are related to the
development and testing of new products. Software development expenses increased
by $6,244,000 to $12,880,000 in the year ended December 31, 1999, from
$6,636,000 in the year ended December 31, 1998, an increase of 94%. The increase
in software development costs is principally related to the development of our
new product offerings, such as Global PAYplus RTGS(TM), ACCESS.pro(TM),
NOSTROPlus(TM) and Global CASHstar and is also due to the development resources
added as a result of the acquisition of BBP and the Sterling Cash Management
Business. In the years ended December 31, 1998 and 1999, we did not receive
grants from the Government of Israel.

Selling and Marketing, Net. Selling and marketing expenses increased by
$3,494,000 to $6,464,000 in the year ended December 31, 1999 from $2,970,000 in
the year ended December 31, 1998, an increase of 118%. Selling and marketing
expenses as a percentage of revenues increased from 13% in December 31, 1998 to
20% in the year ended December 31, 1999 due to a decrease in sales attributable
to each salesperson, expenses relating to opening the sales office in Australia
expanding the sales channels in Europe and increasing the size of the U.S. sales
group.

General and Administrative. General and administrative expenses increased by
$1,657,000 to $3,737,000 in the year ended December 31, 1999 from $2,080,000 in
the year ended December 31, 1998, an increase of 79.7%. The increase is due to
the expansion of the business.

Amortization of Acquisition-Related Goodwill and Other Intangible Assets.
Amortization expenses increased by $1,069,000 to $1,275,000 in the year ended
December 31, 1999 from $206,000 in the year ended December 31, 1998, an increase
of 519%. The increase is due to the amortization of goodwill from the
acquisition of BBP and the Sterling Cash Management Business that took place in
June and September 1999, respectively.

Provision for Doubtful Accounts. Provision for doubtful accounts increased
by $85,000 to $185,000 in the year ended December 1999 from $100,000 in the year
ended December 31, 1998.

Financial Income, Net. Net financial income increased by $3,185,000 to
$3,756,000 in the year ended December 31, 1999 from $571,000 in the year ended
December 31, 1998 an increase of 558%. The increase of the financial income is
due mainly to interest earned on cash received from our April 30, 1999 secondary
public offering.

LIQUIDITY AND CAPITAL RESOURCES

We have financed our operations primarily through the sale of equity
securities in the amount of approximately $139.7 million including net proceeds
from the 1998 initial public offering in the amount of approximately $29.0
million, proceeds from the follow-on 1999 public offering in the amount of
approximately $92.3 million and grants from the Government of Israel. As of
December 31, 2001, working capital was $55.2 million, of which cash and cash
equivalents and marketable securities were $45.4 million.

Cash flows from operations. Net cash used in operating activities amounted
to $5.1 million for the year ended December 31, 2001 as compared to $9.8 million
for the year ended December 31, 2000. This decrease of $4.7 million was
primarily due to the decrease in net income, net of the charge for impairment of
marketable securities in 2001, offset by the net decrease in trade receivables
and long-term trade receivables and the increase in deferred revenues and
accrued expenses.

Cash flows from investing activities. Net cash provided by investing
activities amounted to $26.6 million for the year ended December 31, 2001 as
compared to net cash used which amounted to $14.8 million for the year ended
December 31, 2000. This change was primarily due to the proceeds from the sale
of short-term bank deposits and marketable securities in 2001 as well as the
decrease in purchase of property and equipment, offset by the capitalization of
software development costs in 2001 compared to 2000. Capital expenditures
totaled $2.0 million in the year ended December 31, 2001 as compared to $3.4
million for the same period in 2000. We believe our capital expenditure program
is sufficient to maintain our current level and quality of operations. We review
our capital expenditures program periodically and modify it as required to meet
current needs.

Cash flows from financing activities. Net cash provided by investing
activities was $0.3 million for the year ended December 31, 2001 as compared to
$1.5 million for the year ended December 31, 2000. The decrease was due to the
decrease in proceeds from the issuance of share capital and exercise of stock
options and warrants, net.

We believe that cash and cash equivalents and marketable securities
(including proceeds from our public offerings) will provide adequate financial
resources to finance our current and planned future operations for the
foreseeable future. However, in the event that we make one or more acquisitions
for consideration consisting of all or a substantial part of our available cash,
we might be required to seek external debt or equity financing for such
acquisition or acquisitions or to fund subsequent operations.

IMPACT OF INFLATION AND CURRENCY FLUCTUATIONS; MARKET RISK

The dollar cost of our operations in Israel is influenced by the extent to
which any increase in the rate of inflation in Israel is (or is not) offset (or
is offset on a lagging basis) by the devaluation of the NIS in relation to the
U.S. dollar. Inflation in Israel will have a negative effect on our
profitability of contracts under which we receive payments in U.S. dollars or
U.S. dollar-linked NIS while incurring expenses in NIS linked to the Israeli
CPI, unless such inflation is offset by a devaluation of the NIS.

For some time until 1997, inflation in Israel exceeded the devaluation of
the NIS against the U.S. dollar, and we experienced increases in the dollar cost
of our operations in Israel. This trend was reversed in 1997 and 1998. In 1997,
the rate of inflation was 7.0% and the rate of devaluation was 8.8%. In 1998,
the rate of inflation was 8.6% and the rate of devaluation was 17.6%. In 1999,
Israel experienced inflation at the rate of 1.3% as well as a devaluation of the
U.S. dollar against the NIS at the rate of 0.2%. In 2000, the rate of inflation
was 0% and the rate of devaluation of the dollar against the NIS was at the rate
of 2.7%. In 2001, the rate of inflation was 1.4% and the rate of devaluation of
the U.S. dollar against the NIS was at the rate of 9.3%.

A devaluation of the NIS in relation to the U.S. dollar would have the
effect of decreasing the U.S. dollar value of any asset of our assets that
consist of NIS or receivables payable in NIS (unless such receivables are linked
to the U.S. dollar). Such a devaluation would also have the effect of reducing
the U.S. dollar amount of any expenses or liabilities which are payable in NIS
(unless such expenses or payables are linked to the U.S. dollar). Conversely,
any increase in the value of the NIS in relation to the U.S. dollar would have
the effect of increasing the U.S. dollar value of any unlinked NIS assets and
the U.S. dollar amounts of any unlinked NIS liabilities and expenses.

Because exchange rates between the NIS and the U.S. dollar fluctuate
continuously (albeit with a historically declining trend in the value of the
NIS), exchange rate fluctuations, and especially larger periodic devaluations,
will have an impact on our profitability and period-to-period comparisons of our
results. Such impact is recorded in our financial statements as financial income
or expense. To date, we have not engaged in currency-hedging transactions
intended to reduce the effect of fluctuations in foreign currency exchange rates
on our results of operations.

EFFECTIVE CORPORATE TAX RATE

Our development facility in Israel has been granted "Approved Enterprise"
status under Israel's Law for the Encouragement of Capital Investments. We have
derived, and expect to continue to derive, a portion of our income from Approved
Enterprise investments. Under the Approved Enterprise program, we are entitled
to reductions in the tax rate normally applicable to Israeli companies with
respect to income generated from our Approved Enterprise investments. We are
entitled to a tax exemption for a period of two years commencing in the first
year in which such income is earned, subject to certain time restrictions. Our
first year of tax exemption was 1998. At December 31, 2001, we had net operating
loss carry-forwards in the U.S. of approximately $36.3 million and $5.9 million
loss carry-forwards in Israel. See Note 13 to the Consolidated Financial
Statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not utilize financial instruments for trading purposes and hold no
derivative financial instruments which could expose us to significant market
risk.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Unaudited Quarterly Financial Data for 2001 and 2000:

The following are summaries of quarterly financial data for the years ended
December 31, 2000 and 2001 as reported by the Company:

Q1 2000 Q2 2000 Q3 2000 Q4 2000 Q1 2001 Q2 2001 Q3 2001 Q4 2001
-------- ----------- --------- ---------- ---------- ---------- -------- ---------
(in thousands, except per share data)
STATEMENT OF OPERATIONS DATA:

Total Revenues ....................... $ 10,004 $ 11,315 $ 13,864 $ 12,097 $ 13,147 $ 11,118 $ 10,564 $ 9,328
Gross Margin ......................... 6,750 8,277 10,394 8,184 7,858 5,835 5,681 4,885
Net Income (loss) .................... (748) 1,111 2,144 (130) (629) (6,967) (14,436) (9,594)
Earnings (loss) per share (Basic) .... (0.05) 0.08 0.15 (0.01) (0.04) (0.49) (1.01) (0.67)
Earnings (loss) per share
(Diluted) .......................... (0.05) 0.08 0.15 (0.01) (0.04) (0.49) (1.02) (0.67)
Adjusted Proforma Net Income (loss)* . (145) 1,714 2,769 501 3 (2,516) (4,439) (4,284)
Adjusted Proforma Earnings (loss) per
share (Diluted)* ................... (0.01) 0.12 0.19 0.03 0.00 (0.18) (0.31) (0.30)

* Adjusted proforma net income (loss) and adjusted earnings (loss) per share
exclude the effects of "Amortization of acquisition-related goodwill and
other intangible assets" and "Provision for doubtful accounts" in 2000 and
2001 and "Non-recurring expenses" and "Impairment and realized losses of
marketable securities" in 2001.

The following Consolidated Financial Statements of Fundtech Ltd. and
its subsidiaries for the years ended December 31, 2000 and 2001, together with
the report of the independent auditors thereon, are presented under Item 14 of
this report:

Report of Independent Auditors

Consolidated Balance Sheets

Consolidated Statements of Operations

Statements of Changes in Shareholders' Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

The following table lists the names and ages of the current directors,
executive officers and key employees:

NAME AGE POSITION
---- --- --------

Reuven Ben-Menachem.. 41 Chief Executive Officer and Chairman
Yeoshua Agassi 53 Director
George M. Lieberman.. 59 Director
Rony Ross 52 Director
Meir Shannie 56 Director
Gil Weiser 60 Director
Ben-Zion Zilberfarb 52 Director

Yoram Bibring 44 Chief Financial Officer
Paul Campbell 38 Senior Vice President and General Manager
Gil Gadot 40 Executive Vice President of Technology,
General Manager of Israeli Operations
Michael S. Hyman 44 Vice President, General Counsel and Secretary
Joseph P. Mazzetti 61 President of Global Products and Operations
Mordecai Porath 51 Senior Vice President for Global Strategic
Solutions, Director of the CLS Program
Michael Sgroe 46 President of U.S. Products and Operations
George M. Stetter 56 Executive Vice President of Corporate and
Strategic Planning

Reuven Ben-Menachem a co-founder of Fundtech, has served as the Chief
Executive Officer and as a Director of the Company since its inception in April
1993 and as the Chairman of the Board of Directors of the Company since August
1998. Before founding the Company, Mr. Ben-Menachem was employed at Logica Data
Architects, a funds transfer software provider located in Waltham,
Massachusetts, most recently as a Technical Director and a Product Manager. From
January 1984 until June 1986, Mr. Ben-Menachem served as Director of Banking
Systems at Manof Communications Systems, a middleware software provider located
in Tel Aviv, Israel. Prior thereto, Mr. Ben-Menachem served as a senior
programmer/analyst in the Israeli Air Force. Mr. Ben Menachem studied for a B.A.
in Business at Haifa University.

Yeoshua Agassi has served as a Director since July 2001. Since the Spring of
2001, Mr. Agassi has also served as Vice President of Business Development of
Clal Industries and Investments Ltd. ("CII"), one of Israel's largest investment
and holding companies. CII, located in Tel Aviv, Israel, is invested primarily
in the industrial and technology sectors and holds a major equity position in
Fundtech. See "Security Ownership of Certain Beneficial Owners and Management."
During 2000, Mr. Agassi served as the General Manager of Leumicard Ltd., one of
Israel's leading credit card providers and servicers located in Bene Brak,
Israel. From 1993 until 1998, Mr. Agassi served as the General Manager of
Israeli Direct Insurance Company ("IDI"), a direct insurer located in Tel Aviv,
which he co-founded in 1993. Before founding IDI, Mr. Agassi was employed from
1987 until 1992 at The Magen Insurance Company, a direct insurer located in Tel
Aviv, most recently as the Vice President of Operations. Mr. Agassi has earned
an MBA in Marketing from Bar Ilan University, as well as a B.A. in Economics
from Tel Aviv University.

George M. Lieberman has served as a Director since 1998 and as an
independent director since 2000. He is an E-Commerce innovator. Since July 2000,
Mr. Lieberman has served as the Chief Technology Officer of Verus International
Group Limited, a global investment company located in New York, New York. Prior
to joining Verus International, during 1999 and 2000, Mr. Lieberman served as
Chief Information Officer of WIT Capital Group, a pioneer Internet investment
firm located in New York, New York. Prior to joining WIT Capital, Mr. Lieberman
was employed by Merrill Lynch & Co., one the world's leading financial
institutions, from April 1991 through the end of 1999, most recently serving as
First Vice President of Technology Strategy and Planning and as a member of the
Merrill Lynch Technology Advisory Board. Mr. Lieberman has more than 30 years of
information technology management and development experience across a broad
spectrum of industries. He holds two computer-related patents. Mr. Lieberman was
also responsible for the development of major systems projects at many other
financial industry companies including Citibank and ADP. Mr. Lieberman holds
advanced degrees in Industrial

Engineering and Operations Research from New York University. Mr. Lieberman is
the Chairman of the Corporate Advisory Board of The Institute for Technology and
Enterprise part of the Polytechnic University of New York.

Rony Ross has served as a Director since February 2002. Ms. Ross has
served as CEO of Panorama Software Systems, Ltd. since its inception in 1994.
From 1992-1994, Ms. Ross served as a Director of Kav Manche, a publicly traded
company specializing in providing real-time information from the Israeli Stock
Exchange. From 1991-1993, Ms. Ross served as CEO of Metalshaft Israel Ltd., a
joint venture with three U.S.-based companies that developed several CAD/CAM
products for the sheet metal industry. Ms. Ross has earned both an MBA in
Marketing and a B.Sc. in Mathematics and Statistics from Tel Aviv University,
and a M. Sc. in Computer Science from the Weizmann Institute of Science.

Meir Shannie has served as a Director since June 2001. Mr. Shannie has
served as the Chief Executive Officer and President of CII since January 2001.
See "Security Ownership of Certain Beneficial Owners and Management." From 1997
through 2000, Mr. Shannie was a private businessman consulting for a number of
business ventures and companies in Israel. From 1982 until 2000, Mr. Shannie
served on the Board of Directors of Sano Bruno's Enterprises Ltd., a leading
manufacturer of cleaning and home care products located in Hod Hasharon. From
1996 until 2000, Mr. Shannie served on the Board of Directors of Eden Springs
Ltd., a manufacturer and distributor of mineral water located in Bene Brak.
During 2000, he served on the Board of Directors of Cellcom Israel Ltd., a
leading cellular communications provider in Israel located in Herzlia. From 1993
until 1997, Mr. Shannie served as the Chairman of Israeli Direct Insurance
Company, a direct insurer located in Tel Aviv, Israel, which he co-founded in
1993. Presently Mr. Shannie serves as Chairman of the Boards of Directors of
Polgat Ltd., a manufacturer of wholesale clothing located in Kiryat Gat and
Scitex Corporation Ltd., a holding company focused on digital imaging
technologies located in Herzlia and Tel Aviv, as well as on the Boards of
Directors of Elite Industries Ltd., a food and candy manufacturer located in
Ramat-Gan, American Israeli Paper Mills Ltd., a manufacturer and distributor of
paper and paper goods located in Hadera, ECI Telecom Ltd., a provider of
integrated network solutions for digital telecommunications and data
transmission systems to network service providers located in Israel, all
publicly traded companies. Mr. Shannie has earned both an MBA and a B.A. from
Tel Aviv University.

Gil Weiser has served as a Director since July 2000 and as a consultant to
BBP, the Company's indirectly wholly owned Swiss subsidiary since May 2001.
Since December 2000, Mr. Weiser has served as the Vice-Chairman of Orama (Tel
Aviv), an Israeli/U.S. merchant bank located in Tel Aviv, Israel. In addition,
during 2000 and 2001, Mr. Weiser has consulted for and had other affiliations
with a number of other Israeli high-tech companies. From early 1999 until the
Spring 2000, Mr. Weiser served as the General Manager of Hewlett Packard
(Israel), a distributor of Hewlett Packard products and services, located in Tel
Aviv, Israel. Prior to serving as General Manager of Hewlett Packard (Israel),
Mr. Weiser served from 1995 until 1998 as President and Chief Executive Officer
of Computation and Measurement Systems Ltd. (CMS) located in Tel Aviv, the
Israeli representative of Hewlett Packard. From 1993 to 1995, Mr. Weiser served
as President and Chief Executive Officer of Fibronics International Inc., a
worldwide provider of network solutions for complex data operations in
heterogeneous computing environments, located in Haifa, Israel. From 1976 until
1993, Mr. Weiser served as Managing Director of Digital Israel located in
Herzlia, a wholly owned subsidiary of Digital Equipment Corporation. Mr. Weiser
has and continues to hold significant public positions including Chairman of the
Multinational Companies Forum and Vice Chairman of the Israeli Management
Center. Presently he serves as Chairman of the Executive Board of Haifa
University, one of the leading institutions of higher education in Israel. Mr.
Weiser has earned a B.S.E.E. in Electrical Engineering from the Technion as well
as an M.S.E.E. in Electronics Computer Sciences from the University of
Minnesota.

Ben-Zion Zilberfarb has served as an Independent Director since his election
to the Board of Directors in January 2002. Dr. Zilberfarb has served as a
Professor of Economics since 1988 and head of the A. Meir Center for Banking
since the fall of 2000, at Bar-Ilan University located in Ramat-Gan, Israel. Dr.
Zilberfarb also served as the Director General of the Ministry of Finance from
March 1998 until July 1999 and as Chairman of the Board of Euro-Trade Bank from
March 2000 until April 2001. Dr. Zilberfarb has served on various government
committees since 1982, including most recently, as a member of the committee to
privatize El Al Airlines, and as a member of the U.S. Israel Bi-national Science
Foundation. From January 1989 until February 1998, Dr. Zilberfarb served as the
Chairman of the Investment Committee of Bank Leumi Provident Funds, a mutual
fund located in Tel Aviv, Israel and as a consultant to several other financial
institutions and several government and regulatory authorities including the
Israel Securities Authority and the Bank of Israel. Presently, Dr. Zilberfarb
serves as Chairman of the Board of Directors of Karnit Insurance Co., as well as
on the Board of Directors of Partner Communications. Dr. Zilberfarb has earned a
Ph.D in Economics from the University of Pennsylvania and both an M.A. and a B.
A. in Economics from Bar-Ilan University.

Paul Campbell has served as Senior Vice President and General Manager of
Electronic Banking in our Atlanta, Georgia office since October 2001, and prior
to that as Vice President, Electronic Banking Product Management, since joining
Fundtech in June 1999. Prior to joining Fundtech, Mr. Campbell was employed for
12 years at Republic National Bank of New York where he co-founded the cash
management department in 1992 and served as First Vice President with specific

responsibilities of developing and deploying a full range of cash management
services to the corporate, international and private banking businesses. Prior
to 1992, Mr. Campbell held various assignments in the Operations Review Group
with specific responsibilities serving as an internal management consultant for
various areas of the organization. Mr. Campbell holds a BBA, in Finance from
East Tennessee State University and is CCM accredited.

Yoram Bibring has served as Chief Financial Officer since joining Fundtech
in September 2001. Prior to joining Fundtech, Mr. Bibring served from April 1999
until May 2001 as Chief Financial Officer of ViryaNet, a provider of software
solutions to the workforce management market, located in Southborough,
Massachusetts. From November 1998 until April 1999, Mr. Bibring served as a
Financial Consultant for ViryaNet and others. Prior to joining ViryaNet, Mr.
Bibring served from February 1998 until November 1998 as Chief Financial Officer
of Americash, Inc., a leading operator of e-cash platforms located in New York,
New York, which was sold to American Express. Prior to joining Americash, from
January 1990 until January 1998, Mr. Bibring was employed by Geotek
Communications, a wireless communications service provider located in Montville,
New Jersey, where he served initially as Chief Financial Officer and then as the
President of it's International Division. Mr. Bibring's extensive financial
career also includes several years in public accounting in Israel and the United
States. He holds a B.A. in Accounting and Economics from Tel-Aviv University and
is a certified public accountant in both Israel and the United States.

Gil Gadot has served as Executive Vice President of Technology and General
Manager of Israeli Operations of Fundtech since September 1998. Mr. Gadot was
the Senior Vice President of Technology and U.S. Operations from 1995 until
September 1998, and prior to that served as Vice President of Research and
Development of the Company since it commenced operations in 1993. From 1987 to
1993, Mr. Gadot was a senior project manager of DSSI, a leading systems and
software supplier located in Mahwah, New Jersey. Prior to joining DSSI, Mr.
Gadot served as a senior programmer and analyst holding a rank of Captain in the
Israeli Army Computer Center. Mr. Gadot has more than 18 years of software
development experience, particularly in advanced graphical user interface,
operating and real-time systems. He holds a B.Sc. in Computer Science and
Economics from Bar-Ilan University in Israel.

Michael S. Hyman has served as a Vice President, General Counsel and
Secretary of Fundtech since joining the Company in September 1998. Prior to
joining Fundtech, during 1998, Mr. Hyman worked as Special Counsel to Wilson
Sonsini Goodrich and Rosati located in Palo Alto, California, one of the leading
technology law firms in the U.S. Prior to joining Wilson Sonsini, during 1996
and 1997, Mr. Hyman worked as a local counsel and foreign expert for the Israeli
law firm of Leshem, Brandwein & Associates. Mr. Hyman's extensive legal career
also includes several years of consulting for high tech companies in the U.S.,
Europe and Israel. Mr. Hyman is a member of the bars of the State of Illinois
and the State of Israel. Mr. Hyman holds a J.D. from Boston University Law
School and a B.A. in History from the Honors Program at the University of
Michigan.

Joseph P. Mazzetti has served as President Global Products and Operations
since January, 2001 and prior to that as Executive Vice President, Sales and
Marketing since joining Fundtech in November 1994. Prior to joining Fundtech,
Mr. Mazzetti was employed from 1992 to 1994 as an Executive Vice President at
PRT Corp., a software consulting company located in New York City. From 1984 to
1992, Mr. Mazzetti was employed at Logica Data Architects, a global consulting
and systems integration firm located in Waltham, Massachusetts, where he held
the position of Executive Vice President of the Financial Products Group with
responsibility for the funds transfer, message switching and asset/liability
product lines. Mr. Mazzetti has more than 30 years of experience in information
technology in the public and private sectors with concentration in the banking
and financial institutions market. Mr. Mazzetti holds a M.Sc. in Industrial
Engineering from Stevens Institute of Technology and a B.S. in Physics from
Georgetown University.

Mordecai Porath has served as Senior Vice President for Global Strategic
Solutions and Director of the CLS program at Fundtech since January 2000. Prior
to that, Mr. Porath served as Vice President of Global Strategic Solutions from
February 1998 through December 1999, and as Director of Cash Management from
August 1997 through January 1998. Prior to joining Fundtech, Mr. Porath was
employed by Logica Data Architects, located in Waltham, Massachusetts, where he
served as a Product Director between 1987 and 1993, and in various other
technical and management positions between 1982 and 1987. Mr. Porath has over 20
years of software development experience, specializing in developing high
availability on-line transaction processing system (OLTP). Mr. Porath holds a
BSIE from Tel-Aviv University and a MSCE from the Massachusetts Institute of
Technology.

Michael Sgroe has served as President of U.S. Products and Operations since
January 2001 and prior to that as Senior Vice President and General Manager of
the U.S. Payments Division since joining Fundtech in May 2000. Prior to joining
Fundtech, Mr. Sgroe was employed for over 16 years at Chase Manhattan Bank, a
leading financial institution headquartered in New York City, where he served as
Vice President with responsibility for developing and deploying high-performance
solutions for the bank's Payments and Cash Management businesses. During this
period, Mr. Sgroe also served as CIO and Vice President

of Technology and Operations for the e-Procurement solutions provider Metiom, an
e-commerce start-up with an equity ownership position held by Chase Manhattan
Bank. Mr. Sgroe began his career in 1979 at Morgan Guaranty Trust, where he held
assignments both in New York and in London. Mr. Sgroe holds a B.A. in
Anthropology from the City University of New York.

George M. Stetter has served as the Executive Vice President of Corporate
Marketing and Strategic Planning since joining Fundtech in June 2001. Prior to
joining Fundtech, Mr. Stetter was employed by Merrill Lynch & Co., Inc. (NYC)
from June 1987 until April 2001, where he most recently served as First Vice
President responsible for global cash management and bank relations. In this
position he was responsible for commercial banking relationships and
establishment of bank credit facilities. He was instrumental in defining and
establishing the policies, procedures and systems that Merrill Lynch implemented
to control global cash movements and banking activities. Mr. Stetter is a former
chairman of the Association for Financial Professionals (AFP), formerly the
Treasury Management Association, and also serves on AFP's Payment Advisory
Group. He has been a member of cash management advisory boards of Citibank,
Chase, Bank of America and Mellon Bank, and is a featured speaker at various
industry trade shows including SWIFT's SIBOS conference and AFP's Annual
Conference. Mr. Stetter holds a B.A. in Finance from the University of Virginia.

Our Amended and Restated Articles of Association (the "Articles of
Association"), provides that, unless otherwise resolved by an ordinary
resolution of the General Meeting, the number of directors on the Board of
Directors of the Company shall be between five and seven directors. The minimum
number of directors is five. Officers serve at the discretion of the Board of
Directors.

Prior to every annual meeting, the Board of Directors selects a panel of
between five and seven persons to be proposed to the shareholders of Fundtech
for election as directors. Such individuals, if elected, serve as directors
until the next annual meeting. The above does not apply to the nomination of
"independent"/"external" directors under the Companies Law, as explained below.
Except for such nominees, no panel of candidates for a directorship may be
proposed at an annual meeting unless not less than 72 hours and not more than 42
days prior to the date appointed for the ordinary annual meeting, a notice in
writing, signed by shareholders holding at least 10% of our issued and
outstanding shares who are entitled to attend a meeting in respect of which such
notice has been sent and who are entitled to vote thereat, is delivered to
Fundtech stating that such shareholders intend to propose candidates for such
directorships instead of the nominees proposed by the Board of Directors. The
directors, other than the "independent"/"external" directors under the Companies
Law, are elected by an resolution at every annual meeting, for a term of office
which shall end upon the convening of the first annual shareholder meeting held
after the date of their election.

The Articles of Association provide that a director may appoint, by written
notice to Fundtech, any individual to serve as an alternate director, subject to
the provisions of the Companies Law. Any alternate director shall have all of
the rights and obligations of the appointing director except the power to
appoint an alternate for himself or herself. Unless the period or scope of any
such appointment is limited by the appointing director, such appointment is
effective for all purposes and for a period of time concurrent with the term of
the appointing director.

INDEPENDENT OR "EXTERNAL" DIRECTORS

Under the Companies Law, companies incorporated under the laws
of Israel whose shares have been offered to the public in or outside of Israel
(i.e. public companies) are required to appoint two independent or "external"
directors on their Board of Directors. A person may not be appointed as an
external director if the person or the person's relative, partner, employer or
any entity under such person's control, has, as of the date of the person's
election as an external director, or had, during the two years preceding such
election, any affiliation with the company, any person or entity controlling the
company or any entity controlled by the company or by this controlling entity.
The term "affiliation" includes:

o an employment relationship;

o business or professional relationship maintained on a regular basis;

o control; and

o service as an office holder.

A person may not serve as an external director if the person's
other duties or responsibilities create, or may create, a conflict of interest
with the person's responsibilities as an external director or may adversely
impact such person's ability to serve as an external director.

Under the Companies Law, each committee which is authorized to exercise one
of the functions of the Board of Directors is required to include at least one
external director. The term of an external director is three years and may be
extended by the shareholders for an additional three year term. Until the lapse
of two years from termination of service as director, a company may not engage
an external director to serve as an office holder and cannot employ or receive
services from that person, either directly or indirectly, including through a
corporation controlled by that person. The external directors must be elected by
the majority of the shareholders in a general meeting. Such majority must either
include at least one-third (1/3) of the shares of non-controlling shareholders
voting on the matter, or the total shares of non-controlling shareholders voting
against the election may not represent more than one percent (1%) of the voting
rights in the company.

George Lieberman and Ben-Zion Zilberfarb currently serve as independent or
"external" directors within the meaning prescribed by the Companies Law. In
addition, Gil Weiser and Rony Ross qualify as independent directors under the
requirements prescribed by NASDAQ.

DUTIES UNDER THE COMPANIES LAW

The Companies Law codifies the fiduciary duties that "office holder"
including directors and executive officers, owe to a company. 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 same level of skill with which a
reasonable office holder in the same position would act under the same
circumstances. This includes a duty to use reasonable means to obtain
information on the advisability of a given action brought for such office
holder's approval or performed by him by virtue of his position, and all other
significant information pertaining to such action. The duty of loyalty requires
an office holder to act in good faith and for the company's benefit, and
includes avoiding any conflict of interest between the office holder's position
in the company and any other position held by him or his personal affairs,
avoiding any competition with the company, avoiding exploiting any business
opportunity of the company in order to receive personal advantage for himself or
others, and revealing to the company any information or documents relating to
the company's affairs which the office holder has received due to his position
as an office holder. Under the Companies Law, all arrangements as to
compensation of office holders who are not directors require approval of the
Board of Directors, in certain cases with the prior approval of the Audit
Committee, and, with respect to indemnification and insurance of these office
holders, also require Audit Committee approval. Arrangements regarding the
compensation of directors, regardless of whether to be paid in such director's
position as a director or employee of the Company, require the approval of the
Audit Committee, Board of Directors and shareholders.

APPROVAL OF CERTAIN TRANSACTIONS UNDER THE COMPANIES LAW

The Companies Law requires that an office holder of a company promptly
disclose any personal interest that he or she may have and all related material
information known to him or her in connection with any existing proposed
transaction by the company. If the transaction is an extraordinary transaction
as defined under the Companies Law, the office holder must also disclose any
personal interest held by the office holder's spouse, siblings, parents,
grandparents, descendants, spouse's descendants and the spouses of any of the
foregoing. In addition, the office holder must also disclose any interest held
by any corporation in which the office holder is a five percent (5%) or greater
shareholder, director or general manager or in which he or she has the right to
appoint at least one director or the general manager. An extraordinary
transaction is defined as a transaction which is either (i) not in the ordinary
course of business, or (ii) not on market terms, or (iii) likely to have a
material impact on the company's profitability, assets or liabilities.

In the case of a transaction of a company with an office holder, which is
not an extraordinary transaction, after the office holder complies with the
above disclosure requirement only approval of the Board of Directors is required
unless the company's articles of association provide otherwise. Such transaction
must not be adverse to the company's interest. Furthermore, if the transaction
is an extraordinary transaction, then, in addition to any approval stipulated by
the articles of association, it also must be approved by the company's Audit
Committee and then by the Board of Directors, and, under certain circumstances,
by the shareholders of the company. In most cases an office holder who has a
personal interest in a matter which is considered at a meeting of the Board of
Directors or the Audit Committee may not be present at the meeting or vote on
this matter.

The Companies Law applies the same disclosure requirements to a controlling
shareholder as it does to an office holder of a public company. A controlling
shareholder is a shareholder who has the ability to direct the operation of the
company (except if such ability derives only from his position as director or
office holder in the company), including a shareholder that holds 25% or more of
the voting rights if no other shareholder owns more than 50% of the voting
rights in the company. Extraordinary transactions with a controlling shareholder
or in which a controlling shareholder has a personal interest, and the terms of
compensation (whether as an office holder or an employee) of a controlling
shareholder who is an office holder,

require the approval of the Audit Committee, the Board of Directors and the
shareholders of the company. The shareholder approval must include at least
one-third of the shareholders who have no personal interest in the transaction
and are present (in person or by proxy) at the meeting or, alternatively, the
total shareholdings of those who have no personal interest in the transaction
who vote against the transaction must not represent more than one percent of the
voting rights in the company.

In addition, a private placement of securities that will increase the
relative holdings of a shareholder that holds five percent (5%) or more of a
company's outstanding share capital or voting rights (assuming the exercise or
conversion of all securities held by such person that are exercisable for or
convertible into shares) or that will cause any person to become, as a result of
the issuance, a holder of more than five percent (5%) of the company's
outstanding share capital or voting rights, requires approval by the Board of
Directors and the shareholders of such company.

Our Articles of Association provide that the Board of Directors may
delegate all of its powers to such committees of the Board of Directors as it
deems appropriate, subject to the provisions of the applicable law.

For information concerning the direct and indirect personal interests of
certain of our Office Holders and principal shareholders in certain transactions
with us, see "Certain Relationships and Related Party Transactions."

INTERNAL AUDITOR

Pursuant to the Companies Law, the Board of Directors of a public company
must appoint an internal auditor. The role of the internal auditor is to
examine, among other things, whether the actions of the Company comply with the
law and follow orderly business procedures. The internal auditor may be an
employee of the Company but may not be an interested party, an office holder or
a relative of an interested party or office holder, and may not be a member of
the auditors of the Company or such auditor's representative.

INDEMNIFICATION OF DIRECTORS AND OFFICERS

Sections 260 and 261 of the Companies Law permit a company to perform both
of the following actions, provided that such actions are authorized by the
company's articles of association: (i) insure an office holder for the breach of
his duty of care or, to the extent he acted in good faith and had a reasonable
basis to believe that the act would not prejudice the company, for the breach of
his fiduciary duty as well as for monetary liabilities charged against him as a
result of an act or omission he committed in connection with his serving as an
officer or director of the company, and (ii) indemnify an office holder for
monetary liability incurred by him pursuant to a judgment, including a
settlement or arbitration decision approved by a court, as well as for
reasonable legal expenses incurred by him in an action brought against him by or
on behalf of the company or others, or as a result of a criminal charge of which
he was acquitted, or as a result of a criminal procedure in which he was
convicted of a felony which does not require proof of criminal intent provided
that any such liability or expense incurred by such office holder is due to an
action performed by such office holder by virtue of his position with the
company.

Under Section 260(B) of the Companies Law, a company is entitled to
undertake in advance to indemnify an office holder for the breach of his or her
duty of care, provided that the articles of association of the company permit
such indemnification in advance and further provided that such indemnification
shall be limited to the type of events that, in the discretion of the Board of
Directors of the Company, may be anticipated at such time of undertaking and
that such undertaking shall be limited to an amount which the Board of Directors
deems reasonable in light of the applicable circumstances. These are
specifically limited in their scope by Section 263 of the Companies Law, which
provides that a company may not indemnify an office holder nor enter into an
insurance contract which would provide coverage for any liability incurred as a
result of the following: (a) a breach by the office holder of his fiduciary duty
unless he acted in good faith and had a reasonable basis to believe that the act
would not prejudice the company; (b) a breach by the office holder of his duty
of care if such breach was done intentionally or recklessly; (c) any act or
omission done with the intent to derive an unlawful personal benefit; or (d) any
fine levied against such office holder. In addition, under Section 259 of the
Companies Law a company may exempt an office holder from his duty of care to the
company, in whole or in part and subject to the limitations of Section 263 of
the Companies Law described above, provided that such actions are authorized by
the company's articles of association.

The Articles of Association provide that the Company may enter into a
contract for the insurance of the liability, in whole or in part, of any of its
office holders (as defined below) with respect to: (i) a breach of his duty of
care to Fundtech or to another person; (ii) a breach of his fiduciary duty to
Fundtech, provided that the office holder acted in good faith and had a
reasonable basis to assume that his actions would not adversely affect the best
interests of Fundtech; or (iii) a financial liability imposed upon him in favor
of another person in respect of an act performed by him in his capacity as an
office holder of Fundtech. In addition, Fundtech may indemnify an office holder
against: (i) a financial liability imposed on him in favor of another person by
any judgment, including a compromise judgment or an arbitrator's award approved
by a court in respect of

an act performed in his capacity as an office holder of Fundtech, and (ii)
reasonable litigation expenses, including attorneys' fees, incurred by such
office holder or charged to him by a court in proceedings instituted against him
by Fundtech or on its behalf or by another person, or in a criminal charge from
which he was acquitted, all in respect of an act performed in his capacity as an
office holder of Fundtech.

AUDIT COMMITTEE

Pursuant to the Companies Law, the Board of Directors of a public company
must appoint an Audit Committee as well as an internal auditor that meet the
following requirements. The Audit Committee must be comprised of at least three
directors, including all of the external directors elected as such in accordance
with the requirements of the Companies Law. The Audit Committee may not include
the chairman of the Board of Directors, any director employed by the Company or
providing services to the Company on a regular basis or a controlling
shareholder or his relative. The role of the Audit Committee is to examine
problems in the management of the Company, in consultation with the internal
auditor and the Company's auditor, and suggest an appropriate course of action.
In addition, the approval of the Audit Committee is required in order to take
certain actions and to enter into transactions with office holders and
interested parties.

Under the requirements for quotation on NASDAQ, we are required to have at least
three independent directors on its Board of Directors and to establish an Audit
Committee. A majority of the members of the audit committee must be independent
of management and financially literate. In addition, one of such independent
directors must have accounting or related financial management expertise. We are
in compliance with this requirement.

DIRECTOR COMPENSATION

Prior to 2002, pursuant to its directors' stock option plan, we granted
options to purchase up to 6,000 ordinary shares to each member of the Board of
Directors for service from such member's election to the Board of Directors
until the next annual meeting of the shareholders. In 2002, pursuant to its
directors' stock option plan, we granted options to purchase up to 15,000
ordinary shares to each member of the Board of Directors for service from such
member's election to the Board of Directors until the second annual meeting of
the shareholders following such election.

We do not otherwise currently compensate directors for attending meetings of
the Board of Directors or committee meetings of the Board of Directors, but we
do reimburse directors for their reasonable travel expenses incurred in
connection with attending these meetings.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

As of the date of this report, all current directors and officers are
current with their filings. During 2002, the following Forms 5 were filed to
report transactions that should have been reported in 2001 on Form 4, if such
filings were filed timely: Mr. Reuven Ben-Menachem, Chief Executive Officer,
President and Chairman of the Board of Fundtech Ltd. filed a Form 5 with the
Securities and Exchange Commission covering five transactions; Gil Gadot,
Executive Vice President of Technology and General Manager of Israeli Operations
filed a Form 5 with the Securities and Exchange Commission covering three
transactions; Michael Hyman, Vice President, General Counsel and Secretary filed
a Form 5 with the Securities and Exchange Commission covering one transaction;
Joseph Mazzetti, President of Global Products and Operations filed a Form 5 with
the Securities and Exchange Commission covering two transactions; Mordecai
Porath, Senior Vice President for Global Strategic Solutions and Director of the
CLS Program, filed a Form 5 with the Securities and Exchange Commission covering
eight transactions; Michael Sgroe, President of U.S. Products and Operations,
filed a Form 5 with the Securities and Exchange Commission covering one
transaction; George M. Lieberman, Director, filed a Form 5 with the Securities
and Exchange Commission covering two transactions; Gil Weiser, Director, filed a
Form 5 with the Securities and Exchange Commission covering one transaction; Jay
Morrison, a Director through January 31, 2001, filed a Form 5 with the
Securities and Exchange Commission covering four transactions.

In addition, as of the date of this filing, the following persons have
failed to timely file Forms 5 to report transactions that should have been
reported in 2001 on Form 4, if such filings we filed timely: Michael Carus,
Executive Vice President and Chief Financial Officer during a portion of 2001, a
Form 5 with the Securities and Exchange Commission covering seven transactions;
Rimon Ben-Shaoul, a Director for a portion of 2001, a Form 5 with the Securities
and Exchange Commission covering three transactions; Achi Racov, a Director for
a portion of 2001, a Form 5 with the Securities and Exchange Commission covering
two transactions; Rina Shainski, a Director for a portion of 2001, a Form 5
failed with the Securities and Exchange Commission covering two transactions.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth all compensation paid or distributed during
the years ended December 31, 2001, 2000 and 1999 by us for services rendered by
(i) our chief executive officer and (ii) our four most highly compensated
executive officers (the "Named Executive Officers") other than the chief
executive officer.

SUMMARY COMPENSATION TABLE

LONG-TERM
COMPENSATION AWARDS
-----------------------------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING ALL OTHER
NAME & PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
------------------------------ ----------- ---------------------- ---------- ----------------- -----------------

Reuven Ben-Menachem.............. 2001 $225,000 50,000(1) - -
Chief Executive Officer, 2000 225,000 - 46,000(2) -
President and Chairman 1999 200,000 65,000 6,000(3) -

Paul Campbell.................... 2001 148,976 30,000(1) - -
Senior Vice President and 2000 142,566 30,000 3,200 -
General Manager 1999 77,424 - 15,000 26,798(5)

Joseph P. Mazzetti............... 2001 200,000 70,000(1) - -
President of Global Products and 2000 200,000 - 35,000 -
Operations 1999 160,000 18,000 - -

Mordecai Porath.................. 2001 176,666 55,000(1) - -
Senior Vice President 2000 189,584 40,000 25,000 -
1999 140,000 - - -

Michael Sgroe (4)................ 2001 200,000 50,000(1) - -
President of U.S. Products and 2000 116,667 - 40,000 -
Operations 1999 - - - -

(1) Represents year 2000 bonus paid in 2001.

(2) Includes 6,000 options granted pursuant to the Director's Option Plan
and 40,000 options granted pursuant to our employee option plans.

(3) Includes 6,000 options granted pursuant to the Director's Option Plan.

(4) Joined Fundtech Corporation in June 2000.

(5) Represents moving expenses for 1999.

No stock appreciation rights, long-term restricted stock awards, or
long-term incentive plan payouts were awarded to, earned by, or paid to the
Named Executive Officers during any of the last three fiscal years.

OPTION GRANTS IN LAST FISCAL YEAR

There were no options granted in the last fiscal year.

OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES

The following table summarizes for each of the Named Executive Officers
option exercises during fiscal 2001, including the aggregate value of gains on
the date of exercise, the total number of unexercised options for ordinary
shares, if any, held at December 31, 2001 and the aggregate dollar value of
unexercised in-the-money options for ordinary shares, if any, held at December
31, 2001. Value of unexercised in-the-money options at fiscal year-end is the
difference between the exercise or base price of such options and the fair
market value of the underlying ordinary shares on December 31, 2001, which was
$5.36 per share. These values have not been, and may never be, realized, as
these options have not been, and may never be,

exercised. Actual gains, if any, upon exercise will depend on the value of
ordinary shares on the date of any exercise of options.

NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END
------------------------------ ---------------------------------
SHARES
ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------- ---------------- ------------- --------------- -------------------- ------------------ ----------------

Reuven Ben-Menachem - - 48,000 35,000 - -
Paul Campbell - - 10,575 7,625 - -
Joseph Mazzetti 12,000 29,760 34,875 25,625 21,315 -
Mordecai Porath - - 21,925 16,625 22,432 -
Michael Sgroe - - 15,000 25,000 - -

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The members of the Compensation Committee for the fiscal year ended
December 31, 2001 were Mr. Ben-Zion Zilberfarb, Mr. George Lieberman and Mr.
Yeosha Agassi. No member of the Compensation Committee is an officer or employee
of the Company. The responsibilities of the Compensation Committee include
administering our stock plans and approving the compensation of our executive
officers.

STOCK OPTION PLANS

We currently have four active plans for granting options to employees of
the company and its subsidiaries and one plan for granting options to the
directors of the company: the Fundtech Ltd. 1996 Stock Option Plan for Fundtech
Corporation (the "1996 U.S. Plan"); the Fundtech Ltd. 1997 Stock Option Plan for
Fundtech Corporation (the "1997 U.S. Plan"); the Fundtech Ltd. The 1997 Israeli
Share Option Plan (the "1997 Israel Plan"); the Fundtech Ltd. 1999 Employee
Option Plan (the "1999 Option Plan"); and the Fundtech Ltd. Directors Option
Plan (the "Directors Option Plan").

As of March 22, 2002, we had granted options to purchase 2,076,929 ordinary
shares, of which 447,855 options have been exercised and 1,629,074 options
remain outstanding. An additional 841,071 options are reserved and remain
available to be issued. These options have been reserved and granted pursuant to
the following plans:

1996 STOCK OPTION PLANS

We adopted the 1996 Employee Stock Option Plan for the Employees of Fundtech
Ltd. (the "102 Plan") in May 1996, which provided for the granting of options
under Section 102 of the Israel Income Tax Ordinance. The 102 Plan had a five
year term limit and expired in May 2001. At the time of its expiration 112,504
options granted pursuant to the 102 Plan had been exercised. As of March 22,
2002, no options remain outstanding and no ordinary shares are reserved or
remain available to be issued pursuant to the 102 Plan.

We adopted the 1996 U.S. Plan in October 1996. The options granted under the
U.S. Plan vest over a period of four years and expire five years from the date
of grant. The 1996 U.S. Plan had a five year term limit and expired in October
2001. As of March 22, 2002, we had granted options to purchase 211,997 ordinary
shares pursuant to the 1996 U.S. Plan, of which 149,228 options had been
exercised and 62,769 options remain outstanding. Other than the ordinary shares
reserved for issuance upon exercise of the currently outstanding options, no
ordinary shares are reserved and remain available to be issued pursuant to the
1996 U.S. Plan.

1997 STOCK OPTION PLANS

We adopted the 1997 U.S. Plan in September 1997. The options granted under
the 1997 U.S. Plan vest over a period of four years and expire five years from
the date of grant. As of March 23, 2002, we had granted options to purchase
471,611 ordinary shares pursuant to the 1997 U.S. Plan, of which 143,125 options
have been exercised and 328,486 options remain outstanding. Other than the
ordinary shares reserved for issuance upon exercise of the currently outstanding
options, an additional 20,700 are reserved and remain available to be issued
pursuant to the 1997 U.S. Plan.

We adopted the 1997 Israel Plan in December 1997. The options granted under
the 1997 Israel Plan vest over a period of four years and expire five years from
the date of grant. As of March 22, 2002, we had granted options to purchase
483,305

ordinary shares pursuant to the 1997 Israel Plan, of which 32,579 options have
been exercised and 450,726 options remain outstanding. Other than the ordinary
shares reserved for issuance upon exercise of the currently outstanding options,
an additional 47,838 are reserved and remain available to be issued pursuant to
the 1997 Israel Plan.

On October 20, 1998, the Board of Directors repriced all stock options
(other than those held by Directors or the Named Executive Officers) with an
exercise price of more than $11.625 to an exercise price of $11.625 (the then
current market price of the ordinary shares at the close of trading on that
day).

1999 EMPLOYEE OPTION PLAN

We adopted the 1999 Employee Option Plan in September 1999. The options
granted under the 1999 Employee Option Plan vest over a period of four years and
expire five years from the date of grant. As of March 22, 2002, we had granted
options to purchase 577,012 ordinary shares pursuant to the 1999 Employee Option
Plan, of which 10,419 options have been exercised and 566,593 options remain
outstanding. Other than the ordinary shares reserved for issuance upon exercise
of the currently outstanding options, an additional 756,033 are reserved and
remain available to be issued pursuant to the 1999 Employee Option Plan.

DIRECTORS' STOCK OPTION PLAN

We adopted the Directors Option Plan in August 1998. Options granted
pursuant to the Directors Option Plan before 2002 vest over a period of one year
and expire five years from the date of grant. Options granted pursuant to the
Directors Option Plan after 2002 vest at a rate of 16 2/3% every six months and
expire five years from the date of grant. As of March 22, 2002, we had granted
options to purchase 220,500 ordinary shares pursuant to the Directors Option
Plan, of which no options have been exercised and 220,500 options remain
outstanding. Other than the ordinary shares reserved for issuance upon exercise
of the currently outstanding options, an additional 16,500 options are reserved
and remain available to be issued pursuant to the Directors Option Plan.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial
ownership of the ordinary shares as of March 15, 2002, and as adjusted to
reflect the sale of the ordinary shares in this offering, by (i) all directors,
(ii) all executive officers, (iii) all directors and executive officers as a
group, and (iv) each person who is known by us to own beneficially more than 5%
of its outstanding ordinary shares. Unless otherwise indicated, the address of
each beneficial owner listed below is c/o Fundtech Ltd., 12 Ha'hilazon Street,
Fifth Floor, Ramat Gan, Israel.

NUMBER OF SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED(1) OWNED(2)
---------------------------------------- ---------------------- ---------------------

PRINCIPAL SHAREHOLDERS
Aura Investments Research and
Developments Ltd.(3)................. 1,055,000 7.39%
Clal Industries and Investments(4) ..... 4,453,497 31.19%

DIRECTORS
Reuven Ben-Menachem(5).................. 415,275 2.90%
Yeoshua Agassi(6) ...................... 4,456,497 31.20%
George M. Lieberman(7).................. 19,000 *
Rony Ross .............................. 0 0.00%
Meir Shannie(8) ........................ 4,456,497 31.20%
Gil Weiser(9)........................... 9,500 *
Ben-Zion Zilberfarb(10) ................ 2,500 *

NAMED EXECUTIVE OFFICERS
Paul Campbell(11) ...................... 10,975 *
Joseph Mazzetti(12)..................... 53,625 *
Mordecai Porath(13)..................... 25,950 *
Michael Sgroe (14) ..................... 20,000 *

DIRECTORS AND EXECUTIVE OFFICERS
AS A GROUP (14 PERSONS) ................ 763,062 5.25%

- ------------

* Less than one percent.

(1) Except as otherwise noted and pursuant to applicable community property
laws, each person or entity named in the table has sole voting and
investment power with respect to all ordinary shares listed as owned by
such person or entity. Shares beneficially owned included shares that
may be acquired pursuant to the exercise of fully vested options that
are exercisable through May 31, 2002.

(2) Based on 14,278,753 ordinary shares outstanding. Ordinary shares deemed
beneficially owned by virtue of the rights of any person or group to
acquire such shares within 60 days of the date of this disclosure are
treated as outstanding only for purposes of determining the percentage
owned by such person or group.

(3) Consists of 1,055,000 ordinary shares held by Aura Investment Research
and Developments Ltd. The address of the shareholders is 16B Szold
Street, Ramat Hasharon, Israel.

(4) Consists of 4,453,497 ordinary shares held by Clal Industries and
Investments Ltd. ("CII"). The address of Clal is Clal Atidim Tower,
Building No. 4, Tel Aviv 61581, Israel.

(5) Consists of 359,150 ordinary shares, options to purchase 18,000 ordinary
shares granted pursuant to the Directors' Option Plan and options to
purchase 38,125 ordinary shares granted pursuant to the relevant plan(s)
for granting option to employees of the company and its subsidiaries
("Employee Option Plan(s)") held by Mr. Ben-Menachem.

(6) Consists of 4,453,497 ordinary shares held by CII and options to
purchase 3,000 ordinary shares granted pursuant to the Directors' Option
Plan held by Mr. Agassi. The address of Mr. Agassi is c/o Clal
Industries and Investments Ltd., Clal Atidim Tower, Building No. 4, Tel
Aviv 61581, Israel.

(7) Consists of options to purchase 19,000 ordinary shares granted pursuant
to the Directors' Option Plan held by Mr. Lieberman.

(8) Consists of 4,453,497 ordinary shares held by CII and options to
purchase 3,000 ordinary shares granted pursuant to the Directors' Option
Plan held by Mr. Shannie. The address of Mr. Shannie is c/o Clal
Industries and Investments Ltd., Clal Atidim Tower, Building No. 4, Tel
Aviv 61581, Israel.

(9) Consists of options to purchase 9,500 ordinary shares granted pursuant
to the Directors' Option Plan held by Mr. Weiser.

(10) Consists of options to purchase 2,500 ordinary shares granted pursuant
to the Directors' Option Plan held by Mr. Zilberfarb.

(11) Consists of options to purchase 10,975 ordinary shares granted pursuant
to the Employee Option Plan(s) held by Mr. Campbell.

(12) Consists of 12,500 ordinary shares and options to purchase 41,375
ordinary shares granted pursuant to the Employee Option Plan(s) held by
Mr. Mazzetti.

(13) Consists of 400 ordinary shares and options to purchase 25,050 ordinary
shares granted pursuant to the Employee Option Plan(s) held by Mr.
Porath.

(14) Consists of options to purchase 20,000 ordinary shares granted pursuant
to the Employee Option Plan(s) held by Mr. Sgroe.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

RELATED PARTY TRANSACTIONS

Mr. Weiser, a member of the Board of Directors, receives $4,500 per month
to provide consulting services and serve as the Chairman of the Executive
Committee of BBP, our indirectly wholly owned Swiss subsidiary. This consulting
agreement expires March 2002, unless extended by the Audit Committee or unless
previously terminated by either party upon thirty (30) days advanced written
notice to the other. This agreement was approved by the Audit Committee, the
Board of Directors and the shareholders.

REGISTRATION RIGHTS

We have entered into agreements with some of our existing shareholders
entitling them to certain registration rights (relating to 914,890 ordinary
shares). Pursuant to such agreements, our existing shareholders will each have
the right, exercisable at any time within four years from the date of IPO, to
demand one registration of their shares under the Securities Act. In addition,
each of the parties to such agreements (other than us) will have the right to
have its shares included in certain of our registration statements.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) FINANCIAL STATEMENTS

(1) All Consolidated Financial Statements of Fundtech Ltd. and its subsidiaries
for the years ended December 31, 2000 and 2001 are filed herewith. See Item 8
for a list of such financial statements.

(2) All financial statement schedules for which provision is made in the
applicable accounting regulation of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable and therefore
have been omitted.

(3) Exhibits - See response to (c) below.

(b) REPORTS ON FORM 8-K

(1) We filed a report on Form 8-K on October 11, 2001 relating to the issuance
of a press release relating to updating third quarter guidance.

(2) We filed a report on Form 8-K on November 1, 2001 relating to the issuance
of a press release reporting our third quarter results. Included with the
Form 8-K were consolidated financial statements pertaining to the third
quarter.

(3) We filed a report on Form 8-K on November 5, 2001 relating to the issuance
of a press release announcing the appointment of Yoram Bibring as our chief
financial officer.

(4) We filed a report on Form 8-K on November 7, 2001 relating to the issuance
of a press release dated November 7, 2001 announcing our intention to seek
Israeli court approval for the repurchase of our shares.

EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
--------- ------------------------

3.1 Amended Memorandum of Association of Registrant*
3.2 Amended and Restated Articles of Association of Registrant*
4.1 Form of Ordinary Share Certificate*
4.2 Form of Registration Rights*
10.1 Asset Purchase Agreement dated September 30, 1999, by and among FCMS, LLC., Fundtech Corporation, Sterling
Commerce (Northern America), INC., Sterling Commerce (America) INC. and Sterling Commerce, INC.*****
10.2 Software Development, Licensing and Maintenance Agreement, dated September 26, 1997, by and between Merrill
Lynch and Fundtech*+
10.3 Development and Distribution License Agreement, dated August 15, 1997, by and between Compaq and Fundtech*+
10.4 Share Purchase Agreement, dated June 1, 1999, by and among Fundtech Ltd., Biveroni Batschelet Partners AG and
the Shareholders listed on Schedule I thereto.******
10.5 Fundtech Ltd. 1996 Employee Stock Option Plan for the Employees of Fundtech Ltd.*
10.6 Fundtech Ltd. 1996 Employee Stock Option Plan for the Employees of Fundtech Ltd. and the Employees of Fundtech
Corp.*
10.7 Fundtech Ltd. 1997 Stock Option Plan for Fundtech Corporation*
10.8 Fundtech Ltd. December 1997 Israeli Share Option Plan (English summary)*
10.9 Fundtech Ltd. 1999 Employee Option Plan****
10.10 Fundtech Ltd. Directors Option Plan*******
10.11 Loan Agreement, dated March 1993, between Fundtech and Aura Research & Development Ltd., as amended (English
summary)*
10.12 Grant Approvals issued by the Chief Scientist to Fundtech (English summary of representative approval)*
10.13 Grant Approvals issued by theMarketing Fund to Fundtech (English summary)*
10.14 Asset Purchase Agreement between CheckFree Corporation and Fundtech Ltd., dated as of April 20, 1998**
10.15 Employment Agreement between Reuven Ben-Menachem and Fundtech Corporation, dated November 25, 1997***
10.16 Lease Agreement relating to Fundtech's Facility in Ramat Gan, Israel (English summary)***
10.17 Lease Agreement relating to Fundtech's Facility in Norcross, Georgia***
10.18 Lease Agreement relating to Fundtech's Facility in Jersey City, New Jersey^
10.19 Lease Agreement relating to Fundtech's Facility in Carrollton, Texas^
10.20 Lease Agreement relating to Fundtech's Facility in Burlington, Massachussetts^
21 Subsidiaries of Registrant(1)
23 Consent of Kost, Forer & Gabbay(1)
- ------------

****** Previously filed as an Exhibit to Registrant's Report on Form 8-K,
dated June 1, 1999, and incorporated herein by reference.
******* Previously filed as Exhibit to the Registrant's Registration Statement
on Form S-8, as amended (Commission Registration No. 333-9380), and
incorporated herein by reference.
+ Certain portions of this agreement have been omitted pursuant to a
request for confidential treatment.
^ Previously filed as Exhibit to the Registrant's Form 10-K, dated
April 2, 2001.
(1) Filed herewith.

(d) Valuation and Qualifying Accounts

FUNDTECH LTD. AND SUBSIDIARIES

December 31, 2001

- ------------------------------------ -------------- -------------------------- ------------- ---------------
COL. A COL. B COL. C COL. D COL. E
- ----------------------------------- -------------- -------------------------- ------------- ---------------
Additions
--------------------------
Balance at Charged to Charged to
Beginning of Costs Other Deductions - Balance at
Description Period and Accounts Describe End of Period
Expenses -Describe
- ------------------------------------ -------------- ------------ ------------- ------------- ---------------

Year Ended December 31, 2001
Deducted from asset accounts:
Allowance for doubtful accounts $ 1,315,000 $ 5,966,000 - $ 1,315,000(1) $ 5,966,000
- ------------------------------------ -------------- ------------ ------------- ------------- ---------------
Year Ended December 31, 2000
Deducted from asset accounts:
Allowance for doubtful accounts $ 598,000 $ 717,000 - - $ 1,315,000
- ------------------------------------ -------------- ------------ ------------- ------------- ---------------
Year Ended December 31, 1999
Deducted from asset accounts:
Allowance for doubtful accounts $ 340,000 $258,000 - - $ 598,000
- ------------------------------------ -------------- ------------ ------------- ------------- ---------------

(1) Uncollectible accounts written off.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized, on March
26, 2002.

FUNDTECH LTD.

By: /s/ REUVEN BEN-MENACHEM
--------------------------
Name: Reuven Ben-Menachem
Title: Chairman of the Board of Directors,
Chief Executive Officer and President

Pursuant to the requirements of the Securities Exchange Act of 1933, this
Report has been signed by the following persons in the capacities and on the
dates indicated:

SIGNATURE TITLE DATE

/s/ REUVEN BEN-MENACHEM Chairman of the Board of March 26, 2002
- -------------------------------------------- Directors,
Reuven Ben-Menachem Chief Executive Officer and
President

/s/YORAM BIBRING Chief Financial Officer March 26, 2002
- --------------------------------------------
Yoram Bibring

/s/ YEOSHUA AGASSI Director March 26, 2002
- --------------------------------------------
Yeoshua Agassi

/s/ GEORGE M. LIEBERMAN Director March 26, 2002
- --------------------------------------------
George M. Lieberman

/s/ RONY ROSS Director March 26, 2002
- --------------------------------------------
Rony Ross

/s/ MEIR SHANNIE Director March 26, 2002
- --------------------------------------------
Meir Shannie

/s/ GIL WEISER Director March 26, 2002
- --------------------------------------------
Gil Weiser

/s/ BEN-ZION ZILBERFARB Director March 26, 2002
- --------------------------------------------
Ben-Zion Zilberfarb

FUNDTECH CORP.

/s/ REUVEN BEN-MENACHEM Chief Executive Officer March 26, 2002
- --------------------------------------------
Reuven Ben-Menachem,

FUNDTECH LTD.

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2001

IN U.S. DOLLARS

INDEX

Page
----

Report of Independent Auditors F-2

Consolidated Balance Sheets F-3 - F-4

Consolidated Statements of Operations F-5

Statements of Changes in Shareholders' Equity F-6 - F-7

Consolidated Statements of Cash Flows F-8 - F-9

Notes to Consolidated Financial Statements F-10 - F-32

- - - - - - - - - - -

ERNST & YOUNG Kost Forer & Gabbay Phone: 972-3-6232525
3 Aminadav St. Fax: 972-3-5622555
Tel-Aviv 67067, Israel

REPORT OF INDEPENDENT AUDITORS

To the Shareholders of

FUNDTECH LTD.

We have audited the accompanying consolidated balance sheets of Fundtech
Ltd. ("the Company") and its subsidiaries as of December 31, 2000 and 2001, and
the related consolidated statements of operations, changes in shareholders'
equity and cash flows for each of the three years in the period ended December
31, 2001. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance as to whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by the 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, the consolidated financial statements referred to above,
present fairly, in all material respects, the consolidated financial position of
Fundtech Ltd. and its subsidiaries as of December 31, 2000 and 2001, and the
consolidated results of their operations and cash flows for each of the three
years in the period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States.

Tel-Aviv, Israel KOST, FORER & GABBAY
February 11, 2002 A Member of Ernst & Young International

F-2

FUNDTECH LTD.

CONSOLIDATED BALANCE SHEETS
- ------------------------------------------------------------------------------
(U.S. dollars in thousands)

December 31,
-------------------
2000 2001
--------- --------
ASSETS

CURRENT ASSETS:
Cash and cash equivalents $ 18,116 $ 39,923
Short-term bank deposits 3,132 --
Marketable securities (Note 3) 42,067 5,462
Trade receivables (net of allowance for doubtful
accounts of $ 1,315 and $ 5,005 at December 31, 2000
and 2001, respectively) (Note 4) 24,375 18,193
Other accounts receivable and prepaid expenses 2,623 1,406
Inventories 96 24
-------- --------

Total current assets 90,409 65,008
- ----- -------- --------

LONG-TERM INVESTMENTS:
Severance pay fund 343 413
Long - term trade receivables (net of allowance for
doubtful accounts of $ 0 and $ 961 at December 31, 2000
and 2001, respectively) (Note 5) 3,673 2,679
Lease deposits 476 607
-------- --------

Total long-term investments 4,492 3,699
- ----- -------- --------

PROPERTY AND EQUIPMENT, NET (Note 6) 11,038 9,276
-------- --------

OTHER ASSETS, NET (Note 7) 20,933 24,073
-------- --------

$126,872 $102,056
======== ========

The accompanying notes are an integral part of the consolidated financial
statements.

F-3

FUNDTECH LTD.

CONSOLIDATED BALANCE SHEETS
- ------------------------------------------------------------------------------
(U.S. dollars in thousands, except share data and per share data)

December 31,
----------------------
2000 2001
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:

Trade payables $ 3,090 $ 2,254
Deferred revenues 537 1,389
Accrued non recurring expenses (Note 9) -- 634
Employees and payroll accruals 1,489 2,393
Other accounts payable and accrued expenses (Note 8) 1,453 3,132
---------- ---------

Total current liabilities 6,569 9,802
- ----- ---------- ---------

LONG-TERM LIABILITIES:
Accrued severance pay 462 506
Accrued non recurring expenses (Note 9) -- 528
Other long-term liabilities 127 --
---------- ---------

Total long-term liabilities 589 1,034
- ----- ---------- ---------

Total liabilities 7,158 10,836
- ----- ---------- ---------

COMMITMENTS AND CONTINGENT LIABILITIES (Note 10)

SHAREHOLDERS' EQUITY(Note 11):
Share capital:
Ordinary shares of NIS 0.01 par value:
Authorized: 19,949,998 shares as of December 31, 2000
and 2001;
Issued and outstanding:14,184,474 and 14,278,096
shares at December 31, 2000 and 2001, respectively 42 43
Deferred shares of NIS 0.01 par value: Authorized,
issued and outstanding:
50,002 shares at December 31, 2000 and 2001 *) -- *) --
Additional paid-in capital 139,420 139,708
Deferred stock compensation (32) --
Accumulated other comprehensive loss (3,951) (1,140)
Accumulated deficit (15,765) (47,391)
---------- ---------

Total shareholders equity 119,714 91,220
- ----- ---------- ---------

$ 126,872 $ 102,056
========== =========

*) Represents an amount lower than $ 1.

The accompanying notes are an integral part of the consolidated financial
statements.

F-4

FUNDTECH LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------------
(U.S. dollars in thousands, except per share data)

Year ended December 31,
-----------------------------------
1999 2000 2001
---------- ---------- ----------

Revenues (Note 14a and 14b):

Software license fees $ 17,667 $ 28,492 $ 17,067
Maintenance and services fees 12,531 17,351 26,248
Hardware sales 1,493 1,437 842
-------- -------- --------

Total revenues 31,691 47,280 44,157
-------- -------- --------

Cost of revenues:

Software license costs 559 252 896
Maintenance and services costs 8,051 12,292 18,316
Hardware costs 1,132 1,131 686
-------- -------- --------

Total cost of revenues 9,742 13,675 19,898
-------- -------- --------

Gross profit 21,949 33,605 24,259
-------- -------- --------

Operating expenses:

Software development 12,880 17,747 19,185
Selling and marketing, net 6,464 9,637 10,325
General and administrative 3,737 6,207 9,328
Amortization of acquisition, related
goodwill and other intangible assets 1,275 2,462 2,525
Provision for doubtful accounts 258 717 5,966
Non recurring expenses (Note 9) -- -- 4,073
In-process research and development
write-off (Note 1b) 2,802 -- --
-------- -------- --------

Total operating expenses 27,416 36,770 51,402
-------- -------- --------

Operating loss (5,467) (3,165) (27,143)
Impairment and realized losses on available
for sale marketable securities (Note 3) -- -- (7,826)
Financial income, net (Note 14c) 3,756 5,542 3,343
-------- -------- --------

Net income (loss) $ (1,711) $ 2,377 $(31,626)
======== ======== ========

Basic net earnings (loss) per share (Note 12) $ (0.13) $ 0.17 $ (2.22)
======== ======== ========

Diluted net earnings (loss) per share (Note 12) $ (0.13) $ 0.16 $ (2.22)
======== ======== ========

The accompanying notes are an integral part of the consolidated financial
statements.

F-5

FUNDTECH LTD.

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
- ----------------------------------------------------------------------------
(U.S. dollars in thousands, except share data)

Ordinary shares Deferred shares Additional
----------------------- ---------------------- paid-in
Shares Amount Shares Amount capital
------------ ------------- ---------- ---------- ------------

Balance as of January 1, 1999 10,791,958 $ 34 50,002 $*) -- $ 41,664
Exercise of stock options, net 118,546 *) -- -- -- 530
Exercise of warrants, net 35,763 *) -- -- -- 427
Issuance of Ordinary shares, net 3,005,315 8 -- -- 95,376
Amortization of deferred stock compensation -- -- -- -- --
Comprehensive loss:
Foreign currency translation adjustments -- -- -- -- --
Unrealized losses on available for sale
marketable securities, net -- -- -- -- --
Net loss -- -- -- -- --
------------- ------------- ---------- ---------- ------------

Total comprehensive loss

Balance as of December 31, 1999 13,951,582 42 50,002 *) -- 137,997
Exercise of stock options, net 192,892 *) -- -- -- 966
Exercise of warrants, net 40,000 *) -- -- -- 520
Amortization of deferred stock compensation -- -- -- -- --
Forfeiture of stock options -- -- -- -- (63)
Comprehensive loss:
Foreign currency translation adjustments -- -- -- -- --
Unrealized losses on available for sale
marketable securities, net -- -- -- -- --
Net income -- -- -- -- --
------------- ------------- ---------- ---------- ------------

Total comprehensive loss

Balance as of December 31, 2000 14,184,474 42 50,002 *) -- 139,420
Exercise of stock options 93,622 1 -- 288
Amortization of deferred stock compensation -- -- -- -- --
Comprehensive loss:
Foreign currency translation adjustments -- -- -- -- --
Unrealized losses on available for sale
marketable securities, net -- -- -- -- --
Realization of losses on available for sale
marketable securities -- -- -- -- --
Net loss -- -- -- -- --
------------- ------------- ---------- ---------- ------------

Total comprehensive loss

Balance as of December 31, 2001 14,278,096 $ 43 50,002 $*) -- $ 139,708
============= ============ ========= ========== ===========

Accumulated
Deferred other Total Total
stock comprehensive Accumulated comprehensive shareholders'
compensation loss deficit loss equity
------------ ------------- ----------- ------------- -------------

Balance as of January 1, 1999 $ (219) $ -- $ (16,431) $ 25,048
Exercise of stock options, net -- -- -- 530
Exercise of warrants, net -- -- -- 427
Issuance of Ordinary shares, net -- -- -- 95,384
Amortization of deferred stock compensation 72 -- -- 72
Comprehensive loss:
Foreign currency translation adjustments -- (450) -- $ (450) (450)
Unrealized losses on available for sale
marketable securities, net -- (706) -- (706) (706)
Net loss -- -- (1,711) (1,711) (1,711)
------------ ------------ ------------- ----------- -------------

Total comprehensive loss $ (2,867)
==========

Balance as of December 31, 1999 (147) (1,156) (18,142) 118,594
Exercise of stock options, net -- -- -- 966
Exercise of warrants, net -- -- -- 520
Amortization of deferred stock compensation 52 -- -- 52
Forfeiture of stock options 63 -- -- --
Comprehensive loss:
Foreign currency translation adjustments -- (465) -- (465) (465)
Unrealized losses on available for sale
marketable securities, net -- (2,330) -- (2,330) (2,330)
Net income -- -- 2,377 2,377 2,377
------------ ------------ ------------ ------------ -------------

Total comprehensive loss $ (418)
=========

Balance as of December 31, 2000 (32) (3,951) (15,765) 119,714
Exercise of stock options -- -- -- 289
Amortization of deferred stock compensation 32 -- -- 32
Comprehensive loss:
Foreign currency translation adjustments -- (225) -- $ (225) (225)
Unrealized losses on available for sale
marketable securities, net -- (4,790) -- (4,790) (4,790)
Realization of losses on available for sale
marketable securities -- 7,826 -- 7,826 7,826
Net loss -- -- (31,626) (31,626) (31,626)
------------ ------------ ------------- -------------

Total comprehensive loss $(28,815)
=============

Balance as of December 31, 2001 $ -- $ (1,140) $ (47,391) $ 91,220
============ ============= ============= ===========

*) Represents an amount lower than $ 1.

The accompanying notes are an integral part of the consolidated financial
statements.

F-6

FUNDTECH LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS
- ------------------------------------------------------------------------------
(U.S. dollars in thousands)

Year ended December 31,
---------------------------------
1999 2000 2001
----------- ---------- ---------

Cash flows from operating activities:
- -------------------------------------

Net income (loss) $ (1,711) $ 2,377 $(31,626)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 3,179 5,187 6,303
Impairment and realized losses on
available for sale marketable securities -- -- 7,826
Write-off of other accounts receivable -- -- 1,035
Capital loss on abandonment of property
and equipment -- -- 270
Provision for doubtful accounts 258 717 5,966
In-process research and development
write-off 2,802 -- --
Amortization of deferred stock compensation 72 52 32
Trading marketable securities, net 1,176 -- --
Deferred income taxes, net -- -- (319)
Decrease (increase) in trade receivables
and long-term trade receivables (112) (15,989) 1,202
Decrease (increase) in other accounts
receivable, prepaid expenses and inventories (720) (856) 344
Increase (decrease) in trade payables 27 1,566 (832)
Increase (decrease) in deferred revenues,
employees and payroll accruals and other
accounts payable and accrued expenses (5,970) (2,905) 3,546
Increase in accrued non-recurring expenses -- -- 1,162
Accrued severance pay, net 23 74 (26)
Other (19) (2) (14)
-------- -------- --------

Net cash used in operating activities (995) (9,779) (5,131)
-------- -------- --------

Cash flows from investing activities:
- -------------------------------------

Payments for acquisitions (a) (17,040) -- --
Investments in available for sale
marketable securities (41,729) (3,374) (1,986)
Proceeds from (investments in) short-term -- (3,132) 3,170
bank deposits
Proceeds from sales of available for sale
marketable securities -- -- 33,801
Investments in long-term lease deposits -- (476) (143)
Purchase of property and equipment (5,156) (5,907) (2,322)
Proceeds from sale of property and equipment 7 81 --
Capitalization of software development costs -- (1,975) (5,901)
-------- -------- --------

Net cash provided by (used in) investing (63,918) (14,783) 26,619
activities
-------- -------- --------

The accompanying notes are an integral part of the consolidated financial
statements.

F-7

FUNDTECH LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------
(U.S. dollars in thousands)

Year ended December 31,
---------------------------------
1999 2000 2001
---------- ---------- ---------
Cash flows from financing activities:
- -------------------------------------

Proceeds from issuance of Ordinary shares and
exercise of stock options and warrants, net 93,387 1,486 289

-------- -------- --------

Net cash provided by financing activities 93,387 1,486 289
-------- -------- --------

Effect of exchange rate on cash and cash
equivalents -- (301) 30
-------- -------- --------

Increase (decrease) in cash and cash equivalents 28,474 (23,377) 21,807
Cash and cash equivalents at the beginning of
the year 13,019 41,493 18,116
-------- -------- --------

Cash and cash equivalents at the end of the year $ 41,493 $ 18,116 $ 39,923
======== ======== ========

(a) Payments for acquisitions: (see Note 1b)
-------------------------

Estimated fair value of assets acquired and
liabilities assumed at the date of
acquisition:

Working capital deficiency, excluding cash and
cash equivalents $ (2,171)
Property and equipment 1,001
Goodwill 18,511
In-process research and development 2,802
Deferred income taxes (149)
---------
19,994

Less - amount acquired by the issuance of (2,954)
Ordinary shares ---------

$ 17,040
=========

Supplemental disclosure of cash flows activities:
- -------------------------------------------------

Cash paid during the year for:

Interest $ 27 $ 34 $ 31
========== ======== =========
Non-cash transaction:
Unrealized losses on $ 706 $ 2,330 $ -
available-for-sale-securities ========= ======== ========

The accompanying notes are an integral part of the consolidated financial
statements.

F-8

FUNDTECH LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(U.S. dollars in thousands, except share data and per share data)

NOTE 1:- GENERAL

a. Fundtech Ltd. ("the Company") was incorporated in Israel in
April 1993, and commenced operations approximately at that
time. In 1995, Fundtech Corporation ("Fundtech Corp."), a
wholly-owned U.S. subsidiary of the Company was incorporated
in the U.S.A and commenced operations at that time. On
December 29, 1998 the Company established a wholly-owned
subsidiary in England ("Fundtech England"). This subsidiary
commenced its operations on January 6, 1999.

On July 26, 1999, the Company established a wholly-owned
subsidiary in the Netherlands under the name Fundtech Netherlands
BV ("BV"). On September 30, 1999, the Company established,
through Fundtech Corp., a wholly-owned U.S. subsidiary which is
incorporated in the State of Texas under the name FCMS, LLC.

On November 26, 1999, the Company established a wholly-owned
subsidiary in Australia under the name Fundtech Australia PTY
Limited ("Fundtech Australia") This subsidiary commenced
operations in January 2000.

The Company and its subsidiaries design, develop, market and
support a suite of mission critical client/server software and
internet software which automate the process of transferring
funds among corporations, banks and clearance systems, and enable
businesses to manage global cash positions efficiently and in
real time.

For a description of principal markets and customers, see Note
14.

b. Acquisitions:

1. In June 1999, the Company acquired through its wholly-owned
subsidiary (BV) all the outstanding shares of Biveroni
Batchelet Partners AG ("BBP"), a Swiss corporation in the
field of electronic payment solutions, for an aggregate
purchase price of approximately $ 13,963, of which $ 11,009
was paid in cash and $ 2,954 in stock (105,315 Ordinary
shares).

The acquisition has been accounted for using the purchase
method of accounting and accordingly, the purchase price has
been allocated to the assets acquired and the liabilities
assumed based on their fair values at the date of
acquisition. The excess of the purchase price over the
estimated fair value of the net assets acquired has been
recorded as goodwill which is amortized using the
straight-line method over an average of eight and a half
years. (see also Note 2u).

The Company recorded an expense in the amount of $ 2,802
which represents the estimated value of the software acquired
for which technological feasibility has not yet been
established and for which no alternative future use exists
("in process research and development write-off").

BBP's financial statements are consolidated with those of the
Company commencing with the second quarter of 1999.

F-9

FUNDTECH LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(U.S. dollars in thousands)

NOTE 1:- GENERAL (Cont.)

The estimated fair value of the assets acquired and
liabilities assumed at the date of acquisition are summarized
as follows:

Working capital deficiency $ (578)
Deferred income taxes (149)
Property and equipment 701
In process research and
development 2,802
Technology 3,390
Goodwill 7,797
-----------

$ 13,963
===========

See also Note 2(j) - for reallocation of the purchase price
during 2000.

2. On September 30, 1999, the Company acquired through its
wholly-owned subsidiary (FCMS, LLC) certain assets and
certain liabilities of Sterling Commerce, Inc., a U.S.
company engaged in the field of electronic data interchange,
for an aggregate purchase price of approximately $ 6,982.

The acquisition has been accounted for using the purchase
method of accounting, and accordingly the purchase price has
been allocated to the assets acquired and the liabilities
assumed based on their fair values at the date of
acquisition. The excess of the purchase price over the
estimated fair values of net assets acquired has been
recorded as goodwill which is being amortized by the
straight-line method over an average of 9.2-year period (see
also Note 2u).

Sterling's financial statements are consolidated with those
of the Company since September 30, 1999.

The estimated fair value of the assets acquired and
liabilities assumed at the date of acquisition are summarized
as follows:

Working capital deficiency $ (642)
Property and equipment 300
Technology 1,100
Goodwill 6,224
------------

$ 6,982
============

See also Note 2(j) - for reallocation of the purchase price
during 2000.

c. The following represents the unaudited pro forma results of
operations for the year ended December 31, 1999, assuming the
1999 acquisitions occurred on January 1, 1999, excluding the
write-off of the acquired in-process research and development.

F-10

FUNDTECH LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(U.S. dollars in thousands)

NOTE 1:- GENERAL (Cont.)

The pro-forma financial information is not necessarily indicative
of the consolidated results that would have been attained had the
acquisition taken place at the beginning of 1999, nor is it
necessarily indicative of future results.

Year ended
December 31,
1999
------------

Revenues $ 37,957
=========

Net loss $ (696)
=========

Basic and diluted net loss per share $ (0.05)
=========

d. Restructuring charges - see Note 9a.

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared in accordance
with generally accepted accounting principles in the United States
("US GAAP").

a. Use of estimates:

The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual
results could differ from those estimates.

b. Financial statements in U.S. dollars:

A majority of the revenues of the Company and certain of its
subsidiaries is generated in U.S. dollars ("dollar" or
"dollars"). In addition, a substantial portion of their costs are
incurred in dollars. The Company and these subsidiaries'
management believes that the dollar is the primary currency of
the economic environment in which the Company and these
subsidiaries operates. Thus, the functional and reporting
currency of the Company and these subsidiaries is the dollar.

Accordingly, monetary accounts maintained in currencies other
than the dollar are remeasured into U.S. dollars in accordance
with Statement of Financial Accounting Standard No. 52
"Foreign Currency Translation" ("SFAS No. 52"). All
transaction gains and losses from the remeasurement of
monetary balance sheet items are reflected in the statements
of operations as financial income or expenses, as appropriate.

The financial statements of a foreign subsidiary whose functional
currency is not the dollar, have been translated into dollars.
All balance sheet accounts have been translated using the
exchange rates in effect at the balance sheet date. Statement of
operations amounts have been translated using the average
exchange rate for the period. The resulting translation
adjustments are reported as a separate component of accumulated
other comprehensive loss in shareholders' equity.

F-11

FUNDTECH LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(U.S. dollars in thousands)

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (cont.)

c. Principles of consolidation:

The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. Intercompany balances
and transactions have been eliminated in consolidation.

d. Cash equivalents:

Cash equivalents include short-term, highly liquid investments
that are readily convertible to cash, with original maturities of
three months or less.

e. Short-term bank deposits:

Bank deposits with maturities of more than three months but less
than one year, are included in short-term deposits. The
short-term deposits are presented at their cost, including
accrued interest.

f. Marketable securities:

The Company accounts for its investments in marketable securities
using Statement of Financial Accounting Standard No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS No. 115").

Management determines the appropriate classification of its
investments in marketable debt and equity securities at the time
of purchase and reevaluates such determinations at each balance
sheet date. Debt securities for which the Company does not have
the intent or ability to hold to maturity are classified as
available-for-sale, along with any investments in equity
securities that have not been classified as "trading securities".

As of December 31, 2000 and 2001 all marketable securities
covered by SFAS No. 115 were designated as available-for-sale.
Accordingly, these securities are stated at fair value, with the
unrealized gains and losses, reported as a separate component of
shareholders' equity, accumulated other comprehensive loss.
Realized gains and losses on sales of investments, as determined
on a specific identification basis, are included in the
consolidated statement of operations.

According to the SEC's issued Staff Accounting Bulletin No. 59
("SAB 59") management is required to evaluate each period whether
a securities' decline in value is other than temporary.

As of December 31, 2001, the Company's management evaluation
indicated that the decline in available-for-sale marketable
securities was other than temporary. Therefore, the Company
realized its losses on available-for-sale marketable securities
which are included in the statement of operations as impairment
and realization of losses on marketable securities.

F-12

FUNDTECH LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(U.S. dollars in thousands)

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

g Inventories:

Inventories are stated at the lower of cost or market value.
Inventory write-offs are provided to cover risks arising from
slow-moving items or technological obsolescence. In 2001, the
Company recorded a write-offs expenses in a total amount of $ 22,
which are included in the statement of operations as hardware
costs, as appropriate.

Cost is determined as follows:

Finished products - on the basis of direct costs with the
addition of allocable indirect costs.

h. Long-term trade receivables:

Long-term receivables from extended payment agreements (See Note
2m) are recorded at estimated present values determined based on
current rates of interest and reported at the net amounts in the
accompanying financial statements. Imputed interest is
recognized, using the effective interest method as a component of
interest income in the accompanying statements.

i. Property and equipment:

Property and equipment are stated at cost, net of accumulated
depreciation. Depreciation is calculated by the straight-line
method over the estimated useful lives of the assets, at the
following annual rate:
%
--------------------

Office furniture and equipment 6 - 15
Computers and software 20 - 33
Motor vehicles 15
Leasehold improvements Over the term of the lease

The Company and its subsidiaries periodically assess the
recoverability of the carrying amount of property and equipment
and provide for any possible impairment loss based upon the
difference between the carrying amount and fair value of such
assets. In accordance with Statements of Financial Accounting
Standard No. 121 "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" ("SFAS No.
121"). As of December 31, 2001, no impairment losses has been
identified.

j. Goodwill and technology:

Goodwill and technology are stated at amortized cost.
Amortization is calculated using the straight-line method over
the estimated useful lives at the following annual rates:

%
-------------

Goodwill 10 - 12
Technology 20

F-13

FUNDTECH LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(U.S. dollars in thousands)

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The carrying values of goodwill and technology assets are
periodically reviewed by management, based on the expected future
undiscounted operating cash flows over the remaining goodwill and
technology amortization periods. If this review indicates that
goodwill and technology will not be recoverable, the carrying
value of the goodwill and technology is reduced to estimated fair
value.

Certain preacquisition contingency reserves were established as
of the acquisition dates that are subject to adjustment during
the "allocation period" in accordance with Statement of Financial
Standard No. 38 "Accounting for Preacquisition Contingencies"
("SFAS No. 38"). The fair value of the net assets acquired from
BBP and Sterling have been adjusted to reflect the resolution of
these contingencies established relating to certain litigation
and liabilities associated with acquired contractual commitments.

During 2000, the purchase price reallocation resulted in a total
reduction to the fair value of Sterling and BBP acquisitions of
approximately $ 1,573 and $ 214, respectively, as well as a
corresponding increase to goodwill.

k. Income taxes:

The Company and its subsidiaries account for income taxes in
accordance with Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" ("SFAS No. 109"). This
Statement prescribes the use of the liability method whereby
deferred tax asset and liability account balances are determined
based on differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax
rates and laws that will be in effect when the differences are
expected to reverse. The Company and its subsidiaries provide a
valuation allowance, if necessary, to reduce deferred tax assets
to their estimated realizable value.

l. Revenue recognition:

The Company and its subsidiaries generate revenues from licensing
the rights to use their software products directly to end-users
and, to the lesser extent, indirectly through sub-license fees
from resellers, both of whom are considered end users. The
Company and its subsidiaries also generate revenues from sales of
professional services, including consulting, implementation,
training, maintenance and hardware.

Revenue from software license agreements are recognized when all
criteria outlined in Statement Of Position (SOP) 97-2 "Software
Revenue Recognition" (as amended) are met. Therefore, revenue
from license fees is recognized when persuasive evidence of an
agreement exists, delivery of the product has occurred, no
significant obligations with regard to implementation remain, the
fee is fixed or determinable and collectibility is probable.

F-14

FUNDTECH LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(U.S. dollars in thousands)

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

Where software arrangements involve multiple elements, revenue is
allocated to each element based on vendor specific objective
evidence ("VSOE") of the relative fair values of each element in
the arrangement, in accordance with the "residual method"
prescribed by SOP 98-9 "Modification of SOP 97-2, Software
Revenue Recognition With Respect to Certain Transactions". The
Company's VSOE used to allocate the sales price to services and
maintenance is based on the price charged when these elements are
sold separately. License revenue is recorded based on the
residual method. Under the residual method, revenue is recognized
for the delivered elements when (1) there is VSOE of the fair
values of all the undelivered elements, and (2) all revenue
recognition criteria of SOP 97-2, as amended, are satisfied.
Under the residual method any discount in the arrangement is
allocated to the delivered element.

The Company generally does not grant right of return to its
customers. The Company generally provides a warranty period for
up to six months at no extra charge. No provision is recorded at
the time revenues are recognized for estimated warranty costs
since according to the Company's experience it is immaterial.

SOP 97-2 specifies that extended payment terms in a software
licensing arrangement may indicate that the software license fees
are not deemed to be fixed or determinable. In addition, if
payment of a significant portion of the software license fees is
not due until more than twelve months after delivery, the
software license fees should be presumed not to be fixed or
determinable, and thus should be recognized as the payments
become due. However, SOP 97-2 specifies that if the Company has a
standard business practice of using extended payment terms in
software licensing arrangements and has a history of successfully
collecting the software license fees under the original terms of
the software licensing arrangement without making concessions,
the Company overcomes the presumption that the software license
fees are not fixed or determinable. Thus, the Company should
recognize the software license fees when all other SOP 97-2
revenue recognition criteria are met. The Company has concluded
that for certain software arrangements with extended payment
terms, the "fixed or determinable" presumption has been overcome
and software license fees have been recognized upon meeting the
remaining SOP 97-2 revenue recognition criteria. The present
value of such software license fees recognized in fiscal years
1999, 2000 and 2001 totaled approximately $1,700, $ 5,000 and $
1,883, respectively.

When contracts contain hosting services arrangements, the Company
applies Emerging Issues Task Force No. 00-03 ("EITF 00-03")
"Software Revenue Recognition, to Arrangements That Include the
Right to Use Software Stored on Another Entity's Hardware".

Arrangements that include professional services are evaluated to
determine whether those services are essential to the
functionality of other elements of the arrangement. When services
are considered essential, revenue under the arrangement is
recognized using contract accounting. When services are not
considered essential, the revenue allocable to the software
services is recognized as the services are performed.

F-15

FUNDTECH LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(U.S. dollars in thousands)

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

Revenue from software licenses that require significant
customization, integration and installation are recognized based
on SOP 81-1 "Accounting for Performance of Construction - Type
and Certain Production - Type Contracts", using contract
accounting on a percentage of completion method, based on the
relationship of actual labor costs incurred to total labor costs
estimated to be incurred over the duration of the contract.

Provisions for estimated losses on uncompleted contracts are made
in the period in which such losses are first determined, in the
amount of the estimated loss on the entire contract. As of
December 31, 2001, no such estimated losses were identified.

Revenue on arrangements with customers who are not the ultimate
users (such as resellers) is not recognized until the product has
been delivered to the end user.

Revenue from maintenance and services is recognized over the life
of the maintenance agreement or at the time that services are
rendered.

Revenue from hardware sales is recognized in accordance with
Staff Accounting Bulleting No. 101 ("SAB No. 101") as amended,
when persuasive evidence of an agreement exists, delivery has
occurred, the fee is fixed or determinable and collectibility is
probable.

Deferred revenues include unearned amounts received under
maintenance and support contracts and amounts billed to customers
but not yet recognized as revenues.

m. Severance pay:

The Company's liability for severance pay is calculated pursuant
to Israeli severance pay law based on the most recent salary of
the employees multiplied by the number of years of employment, as
of the balance sheet date. Employees are entitled to one month's
salary for each year of employment or a portion thereof. The
Company's liability for all of its employees is fully provided
for by monthly deposits with insurance policies and by an
accrual. The value of these policies is recorded as an asset in
the Company's balance sheet.

The deposited funds include profits accumulated up to the balance
sheet date. The deposited funds may be withdrawn only upon the
fulfillment of the obligation pursuant to Israeli severance pay
law or labor agreements. The value of the deposited funds is
based on the cash surrender value of these policies, including
immaterial profits.

Severance expenses for the years ended December 31, 1999, 2000
and 2001, amounted to approximately $ 143, $ 74 and $ 89,
respectively.

F-16

FUNDTECH LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(U.S. dollars in thousands)

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

n. Software development costs:

Statement of Financial Accounting Standard No. 86 "Accounting
for the Costs of Computer Software to be Sold, Leased or
Otherwise Marketed," ("SFAS No. 86") requires capitalization
of certain software development costs subsequent to the
establishment of technological feasibility. Based on the
Company and its subsidiaries' product development process,
technological feasibility is established upon completion of a
detailed program design.

Costs incurred by the Company and its subsidiaries in certain
projects between completion of the detailed program design and
the point at which the product is ready for general release have
been capitalized.

Capitalized development costs are not yet amortized as the
products are not ready for general release for customers.

o. Royalties-bearing grants:

The Company received royalty-bearing grants from the Israeli Fund
for Encouragement of Marketing Activity. These grants are
recognized at the time the Company is entitled to such grants on
the basis of the costs incurred and included as a deduction of
selling and marketing expenses.

Selling and marketing grants amounted to $ 0, $ 180 and $ 0 in
1999, 2000 and 2001, respectively.

p. Concentration of credit risks:

Financial instruments that potentially subject the Company and
its subsidiaries to concentrations of credit risk consist
principally of cash and cash equivalents, short-term bank
deposits marketable securities, trade receivables and long-term
trade receivables. The Company's cash and cash equivalents and
short-term bank deposits are invested mainly in deposits with
major banks in Israel, Europe and the United States. Such
deposits in the United States may be in excess of insured limits
and are not insured in other jurisdiction. Management believes
that the financial institutions that hold the Company and its
subsidiaries' investments are financially sound and, accordingly,
minimal credit risk exists with respect to these investments.

The Company marketable securities includes investments in mutual
funds of U.S. corporations. As of December 31, 2001, the Company
provided for impairment and realized losses on available-for-sale
marketable securities totaling $ 7,826.

F-17

FUNDTECH LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(U.S. dollars in thousands)

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The trade receivables and long-term trade receivables of the
Company and its subsidiaries include banks and large financial
institutions. The Company and its subsidiaries generally do not
require collateral; however, in certain circumstances, the
Company and its subsidiaries may require letters of credit, other
collateral or additional guarantees. An allowance for doubtful
accounts is determined with respect to those amounts that the
Company and its subsidiaries have determined to be doubtful of
collection. The Company and its subsidiaries perform ongoing
credit evaluations of its customers (see Note 4).

The Company has no off-balance sheet concentration of credit risk
such as foreign exchange contracts, option contracts or other
foreign hedging arrangements.

q. Basic and diluted net earnings (loss) per share:

Basic net earnings (loss) per share is computed based on the
weighted average number of Ordinary shares outstanding during
each year. Diluted earnings per share is computed based on the
weighted average number of Ordinary shares outstanding during
each year, plus dilutive potential Ordinary shares considered
outstanding during the year, in accordance with Statement of
Financial Accounting Standard No. 128, "Earnings Per Share"
("SFAS No. 128").

In 1999, 2000 and 2001, outstanding stock options and warrants
have been excluded from the calculation of the diluted net
earnings net per Ordinary share because all such securities are
anti-dilutive for all periods presented. The total weighted
average number of shares related to the outstanding options and
warrants excluded from the calculations of diluted net earnings
(loss) per share was 1,355,421, 543,120 and 398,428, for the
years ended December 31, 1999, 2000 and 2001, respectively (see
Note 12).

s. Accounting for stock-based compensation:

The Company has elected to follow Accounting Principles Board
Opinion No. 25 "Accounting for Stock Issued to Employees" ("APB
No. 25") and FASB Interpretation No. 44 "Accounting for Certain
Transactions Involving Stock Compensation" ("FIN 44") in
accounting for its employee stock option plans. Under APB No. 25,
when the exercise price of the Company's options are less than
the market price of the underlying shares on the date of grant,
compensation expense is recognized. The pro forma disclosures,
required by Statement of Financial Accounting Standard No. 123
"Accounting for Stock-Based Compensation" ("SFAS No. 123"), are
provided in Note 11d.

The Company applies SFAS No. 123 and EITF 96-18 "Accounting for
Equity Instruments that are Issued to Other than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services"
with respect to options and warrants issued to non-employees.
SFAS No. 123 requires use of an option valuation model to measure
the fair value of the options at the grant date.

F-18

FUNDTECH LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(U.S. dollars in thousands)

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

s. Fair value of financial instruments:

The following methods and assumptions were used by the Company
and its subsidiaries in estimating their fair value disclosures
for financial instruments:

The carrying amounts of cash and cash equivalents, short-term
bank deposits, trade receivable and trade payables approximate
their fair value due to the short-term maturity of such
instruments.

The fair value of marketable securities is based on quoted market
price (see Note 3).

The fair value of long-term receivables is estimated by
discounting the future cash flows using the current rates of
which similar credits would be made to customers with similar
credit ratings and for the same remaining maturities. The
carrying amount of long-term trade receivables approximates their
fair value since the interest rate which was used in order to
discount future cash flows remained unchanged.

t. Reclassification:

Certain prior years amounts have been reclassified in conformity
with current year's financial statement.

u. Impact of recently issued accounting standards:

In June 2001, the Financial Accounting Standards Board issued
SFAS No. 141, "Business Combinations" and No. 142, "Goodwill and
other Intangible Assets" ("the Statements"), effective for fiscal
years beginning after December 15, 2001. Under the new rules,
goodwill and intangible assets deemed to have indefinite lives
will no longer be amortized but will be subject to annual
impairment tests in accordance with the Statements. Other
intangible assets will continue to be amortized over their useful
lives.

The Company will apply the new rule beginning in the first
quarter of 2002. Application of the non-amortization provisions
of the Statement is expected to result in an increase in net
income of approximately $ 2,500 per year, before the effect of
any impairment test as described next. During 2002, the Company
will perform the first of the required impairment tests of
goodwill and indefinite lived intangible assets. The Company can
not yet estimate what the effect, if any, of these tests will be
on its financial position and results of operations.

F-19

FUNDTECH LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(U.S. dollars in thousands)

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

In August 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets" ("SFAS No.
144"), which addresses financial accounting and reporting for the
impairment or disposal of long-lived assets and superseded SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Dispensed Of", and the accounting and
reporting provisions of APB Opinion No. 30, "Reporting the
Results of Operations for a Disposal of a Segment of a Business".
SFAS No. 144 is effective for fiscal years beginning after
December 15, 2001, with earlier application encouraged. The
Company expects to adopts SFAS No. 144 as of January 1, 2002 and
it does not expect that the adoption of the statement will have a
significant impact, if any, on the Company's financial position
and results of operations.

NOTE 3:- MARKETABLE SECURITIES

December 31,
-----------------------
2000 2001
------------ ----------

Amortized cost and estimated fair value $ 45,103 $ 5,462
Gross unrealized losses (3,036) -
------------ ----------

Fair value $ 42,067 $ 5,462
============ ==========

a. All marketable securities are mutual funds issued by an
investment bank in the U.S.

b. As of December 31, 2001 due to the market conditions, and since
the Company's management believes that the decline in the fair
value is other than temporary, the cost basis of these securities
was written down to fair value as a new cost basis. During the
fourth quarter of 2001, the Company sold approximately 86% of its
investment in marketable securities. As of December 31, 2001 an
impairment and realized losses on available-for-sale marketable
securities amounting to $ 7,826 was included in earnings.

c. During 1999, one of the Company's subsidiaries sold trading
securities in the amount of $ 1,176. The total realized loss from
these securities amounted to $ 19 and was charged to financial
expenses. As of December 31, 2000 and 2001 the Company and its
subsidiaries do not hold any trading securities.

F-20

FUNDTECH LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(U.S. dollars in thousands)

NOTE 4: - TRADE RECEIVABLES

December 31,
-------------------------
2000 2001
------------ ------------

Accounts receivable, net (1) $ 10,094 $ 5,571
Unbilled receivables, net (1) 14,281 12,622
------------ ------------

$ 24,375 $ 18,193
============ ============

(1) allowance for doubtful accounts

Management's assessment for uncertainties of outstanding debts
collectability resulted in a provision for doubtful accounts
expenses in a total amount of $ 258, $ 717 and $ 5,966 for 1999,
2000 and 2001.

NOTE 5:- LONG-TERM TRADE RECEIVABLES

December 31,
----------------------
2000 2001
----------- ----------

Maturity dates - long-term trade receivables:
First year (current maturities) $ 2,603 $ 2,256
Second year 1,125 1,516
Third year 971 1,136
Fourth year 713 720
Fifth year 864 268
---------- ----------

6,276 5,896
---------- ----------

Less - Current maturities 2,603 2,256
Allowance for doubtful accounts - 961
(see also Note 4) ---------- ----------

$ 3,673 $ 2,679
========== ==========

F-21

FUNDTECH LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(U.S. dollars in thousands)

NOTE 6:- PROPERTY AND EQUIPMENT, NET
December 31,
----------------------
2000 2001
----------- ----------
Cost:

Office furniture and equipment $ 2,426 $ 2,532
Computers and software 13,401 15,065
Motor vehicles 293 298
Leasehold improvements 1,094 1,228
------- -------

17,214 19,123
------- -------

Accumulated depreciation 6,176 9,847
------- -------

Depreciated cost $11,038 $ 9,276
======= =======

Depreciation expenses for the years ended December 31, 1999, 2000 and 2001, are
$ 1,904, $ 2,725 and $ 3,778, respectively

NOTE 7:- OTHER ASSETS, NET

December 31,
----------------------
2000 2001
----------- ----------

Intangible assets
-----------------
Original amounts:

Goodwill $18,358 $18,061
Technology 4,490 4,490
Capitalized software development costs 1,975 7,876
------- -------

24,823 30,427
------- -------

Accumulated amortization 3,890 6,354
------- -------

Amortized cost $20,933 $24,073
======= =======

Amortization expenses amounted to $ 1,275, $ 2,462 and $ 2,525 for the years
ended December 31, 1999, 2000 and 2001, respectively

NOTE 8:- OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES

December 31,
----------------------
2000 2001
----------- ----------

Accrued expenses $ 728 $ 1,603
Deferred income taxes 83 --
Government authorities 407 1,176
Office of the
Chief Scientist and the Fund for the
Encouragement of Marketing Activities
(see also Note 10) 72 333
Others 163 20
------- -------

$ 1,453 $ 3,132
======= =======

F-22

FUNDTECH LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(U.S. dollars in thousands)

NOTE 9:- NON-RECURRING EXPENSES
Year ended
December 31,
2001
-------------

Restructuring costs (a) $ 2,573
Integration costs (b) 465
Write-off of other accounts receivables (c) 1,035
-------

$ 4,073
=======

In response to declines associated with the current cautious
information technology ("IT") spending environment within the
financial services industry, during the second quarter of 2001,
the Company adopted a restructuring and integration plan ("the
Plan").

a. Restructuring costs:

The restructuring was accounted for in accordance with EITF 94-3
"Liability Recognition for Certain Employee Termination Benefits
and Other Cost to Exit and Activity (Including Certain Costs
Included in a Restructuring) and in accordance with SAB 100
"Restructuring and Impairment Charges".

The Plan consisted of employee termination benefits associated
with the involuntary termination of 89 employees (71 research and
development and professional services employees, 13
administrative employees and 5 selling and marketing employees)
and sublet portions of their existing office space. As part of
the plan, the Company also consolidated aspects of its Dallas
operations into its existing Atlanta operations in order to
improve efficiency and eliminate duplicate cost structures.

Through the second quarter of 2001, the Plan and the benefit
arrangement were communicated to employees. The communication of
the benefit arrangement includes sufficient detail to enable
employees to determine the type and amount of benefits they will
receive if they are terminated.

The restructuring Plan was substantially completed by January
2002.

The following table summarizes the restructuring accruals status
as of December 31, 2001:

Balance at
Original Utilized December 31,
Accrual in Cash 2001
---------- -------- -----------

Employee termination benefits and
related costs $ 790 $ 628 $ 162
Facility closures and related costs 1,513 513 1,000
--------- ------- ---------

$ 2,303 $ 1,141 $ 1,162
========= ======= =========

F-23

FUNDTECH LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(U.S. dollars in thousands)

NOTE 9:- NON-RECURRING EXPENSES (Cont.)

Year ended
December 31,
Restructuring costs: 2001
-----------

Employee termination benefits and related costs $ 790
Facility closures and related costs 1,513
Property and equipment abandonment 270
-----------

$ 2,573
===========

b. Integration costs:

As part of the restructuring and integration plan, the Company
recorded $ 465 integration costs mainly for relocating employees
and abandonment of property and equipment pursuant to the Plan.

The Company does not anticipates material additional integration
charges in the future. All integration charges have been, and
will be, expensed as incurred.

c. Write-off of other accounts receivable:

In 2000 and 2001, the Company incurred expenses on behalf of
new ventures in the amount of approximately $ 924 and $ 111,
respectively. It was agreed between the investors that such
expenses would be reimbursed upon the formation of the new
entities, therefore such expenses in 2000 were recorded as other
accounts receivable. In April 2001 the Company and the other
investor decided not to proceed with the formation of the new
entities. Accordingly, the Company wrote-off the related other
account receivable.

NOTE 10: - COMMITMENTS AND CONTINGENT LIABILITIES

a. Royalty commitments

The Company participated in programs sponsored by the Israeli
Government for the support of research and development
activities. From the date of establishment, the Company had
obtained grants from the Office of the Chief Scientist in the
Israeli Ministry of Industry and Trade ("the OCS") aggregating $
1,115 for certain of the Company's software development projects.
The Company is obligated to pay royalties to the OCS, amounting
to 3%-5% of the sales of the products and other related revenues
generated from such projects, up to an amount equal to 100% -
150% of the grants received linked to the US dollars. No grants
were obtained in 1999, 2000 and 2001.

Through December 31, 2001, the Company has paid or accrued for
OCS royalties liability in a total amount of $ 1,232. Subject to
OCS final approval, as of December 31, 2001, the Company paid or
accrued for the entire amount.

F-24

FUNDTECH LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(U.S. dollars in thousands)

NOTE 10: - COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)

The Israeli Government, through the Fund for the Encouragement of
Marketing Activities, awarded the Company grants for
participation in expenses for overseas marketing. The Company
received an accumulated amount of grants of $ 614 for the years
up to and including 2000. The Company is committed to pay
royalties at the rate of 3% of the increase in export sales.
Subject to final approval, as of December 31, 2001, the Company
paid and accrued for the entire amount.

b. Litigations:

On October 22, 1999, an investor filed a class action against the
Company in the United States District Court for the District of
New Jersey, alleging violation of section 10(b) of the Securities
Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, by
making statements at an analysts conference before the opening of
the market on October 6, 1999 that did not reveal that later that
day the Company would announce an earnings decrease. Plaintiff
purports to represent a class action consisting of persons and
entities who purchased or acquired Ordinary shares of the Company
on October 6, 1999.

As of December 31, 2001 the case was dismissed without prejudice.

c. Lease commitments:

The Company leases its facilities and vehicles under various
operating lease agreements, which expire on various dates, the
latest of which is in 2014. The minimum lease commitments under
non-cancelable operating leases are as follows:

Year ended December 31,
-----------------------

2002 $ 2,146
2003 1,984
2004 1,921
2005 1,440
2006-2014 5,852
--------

13,343
Less - sublease rentals 16
--------

$ 13,327
==========

Total facilities lease expenses for the years ended December 31,
1999, 2000 and 2001, were approximately $ 1,056, $ 1,778 and $
2,150 (net of sublease rentals incurred of $ 4), respectively.

d. Guarantees:

The Company has obtained a bank guarantees (restricted deposit)
of $ 54, in connection with the Company's facilities operating
lease agreement in Israel.

F-25

FUNDTECH LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(U.S. dollars in thousands)

NOTE 11:- SHAREHOLDERS' EQUITY

a. General:

The Ordinary shares of the Company are traded on the NASDAQ
National Market.

On June 1, 1999, the Company acquired BBP, for the consideration
stated in Note 1b. As part of the acquisition, the Company issued
105,315 Ordinary shares.

On April 30, 1999, 2,900,000 Ordinary shares were issued in
consideration of approximately $ 92,400, net of expenses in a
secondary Public Offering.

b. The Ordinary shares confer upon the holders the right to receive
notice to participate and vote in general meetings of the Company
and the right to receive dividends, if declared.

Deferred shares are non-transferable and entitle their holders to
no voting, dividend or other rights except for the right to
receive the par value of the shares upon dissolution of the
Company.

c. Stock options:

1. Under the Company's 1996, 1997, 1998, 1999 Stock Option Plans
(the "Plans"), up to 2,786,248 options may be granted to
employees and directors of the Company or its subsidiaries.

The 1996 Israeli stock option plan and the 1996 U.S.
stock-option plan expired prior to December 31, 2001.
Notwithstanding, no option remained outstanding pursuant to
the 1996 Israeli stock option plan and 63,426 options
remained outstanding pursuant to the 1996 U.S. stock option
plan of December 31, 2001.

2. Pursuant to the Plans, as of December 31, 2001, an aggregate
of 975,207 options of the Company are still available for
future grant.

3. Each option granted under the Plans to employees expires not
later than five years from the date of the grant. The options
vest primarily over four years. Any options that are canceled
or forfeited before expiration become available for future
grants. Options granted to directors are vested over a one
year period from their date of grant. The exercise price of
the options granted under the plans may not be less than the
nominal value of the shares into which such options are
exercised.

F-26

FUNDTECH LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(U.S. dollars in thousands)

NOTE 11:- SHAREHOLDERS' EQUITY(Cont.)

d. A summary of the Company's option activity under the Plans is
as follows:

Year ended December 31,
---------------------------------------------------------------------------------------------
1999 2000 2001
----------------------------- ----------------------------- ------------------------------
Weighted Weighted Weighted
Number average Number average Number average
of exercise of exercise of exercise
options price options price options price
------------- ------------- ------------- -------------- -------------- --------------

Outstanding - beginning
of the year 1,065,959 $ 8.16 1,355,421 10.84 1,830,893 $ 14.15
Granted 528,075 $ 16.58 818,100 17.38 - -
Exercised (118,546) $ 4.71 (192,892) 4.94 (93,622) $ 2.94
Forfeited (120,067) $ 18.36 (149,736) 12.10 (373,428) $ 14.54
------------- ------------- -------------

Outstanding at
December 31 1,355,421 $ 10.84 1,830,893 $ 14.15 1,363,843 $ 14.85
============ ========= ============= ========= ============ =========

Exercisable options at
December 31, 451,805 $ 7.93 624,269 $ 11.70 810,987 $ 13.85
============ ========= ============= ========= ============ =========

The options outstanding as of December 31, 2001, have been separated into ranges of exercise price, as follows:

Options Weighted Options
outstanding average exercisable
Ranges of as of remaining Weighted as of Weighted
exercise December 31, contractual average December 31, average
price 2001 life (years) exercise price 2001 exercise price
------------------------- ------------------ ---------------- ---------------- ------------------- ----------------

$ 3.33 101,831 0.5 $ 3.33 101,831 $ 3.33
$ 7.33 - $ 10.38 10,000 1.0 $ 7.64 9,750 $ 7.56
$ 11.50 - $ 17.00 810,219 2.6 $ 13.61 485,823 $ 13.34
$ 19.25 - $ 22.31 441,793 3.0 $ 19.93 213,583 $ 20.31
-------------- --------- ------------
1,363,843 2.6 $ 14.85 810,987 $ 13.85
============== ========= ========== ============ ============

Pro-forma information regarding net earnings (loss) and net
earnings (loss) per share is required by SFAS No. 123 (for grants
after December 1994), and has been determined as if the Company
had accounted for its employee stock options under the fair value
method of that Statement. The fair value for these options was
estimated at the date of grant using the Black-Scholes Option
Valuation Model with the following weighted-average assumptions
for each of the two years in the period ended December 31, 2000:
Volatility of 0.73 for each year; risk-free interest rates of
5.6% and 6.0% and 6.0%, respectively, dividend yields of 0% for
each year, and a weighted-average expected life of four years.

All options granted during 1999 and 2000 were at an exercise
price that is equal to the fair value of the stock at the grant
date. No options were granted during 2001.

F-27

FUNDTECH LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(U.S. dollars in thousands)

NOTE 11:- SHAREHOLDERS' EQUITY(Cont.)

Pro-forma information under SFAS No. 123 is as follows:

Year ended December 31,
------------------------------------
1999 2000 2001
---------- ---------- ----------

Net income (loss) as reported $ (1,711) $ 2,377 $ (31,626)
========= ========= ===========

Pro-forma net loss $ (3,580) $ (980) $ (34,491)
========= ========= ===========

Pro-forma basic and diluted net $ (0.28) $ (0.07) $ (2.43)
loss per share ========= ========= ===========

Compensation expenses recognized by the Company related to its
share based employee compensation awards amounted to $ 72, $ 52
and $ 32 for the years ended December 31, 1999, 2000 and 2001,
respectively. Such compensation expenses are amortized over the
vesting period.

e. Dividends:

In the event that cash dividends are declared in the future, such
dividends will be paid in NIS. The Company does not intend to pay
cash dividends in the foreseeable future.

The Company has decided to permanently reinvest its tax exempt
income (see Note 13b).

NOTE 12:- NET EARNINGS (LOSS) PER SHARE

The following table sets forth the computation of historical basic and
diluted net earnings (loss) per share:

Year ended December 31,
---------------------------------
1999 2000 2001
---------- ---------- ----------
Numerator:

Net income (loss) $ (1,711) $ 2,377 $ (31,626)
========= ========= ==========
Numerator for basic net earnings (loss)
per share - net income (loss) available
to Ordinary shareholders $ (1,711) $ 2,377 $ (31,626)
========= ========= ==========

Numerator for diluted net earnings
(loss) per share - net income (loss)
available to Ordinary shareholders
after assumed exercises $ (1,711) $ 2,377 $ (31,626)
========= ========= ==========

Number of shares
-----------------------------------
Denominator:
Denominator for basic net earnings

(loss) per share - weighted - average 12,854,999 14,096,298 14,218,388
shares
---------- ---------- ----------
Effect of dilutive securities:
Employee stock options *) - 674,510 *) -
Warrants *) - 5,807 *) -
---------- ---------- -----------

Dilutive potential Ordinary Shares *) - 680,317 *) -
---------- ---------- -----------

Denominator for diluted net earnings
(loss) per share 12,854,999 14,776,615 14,218,388
========== ========== ===========

*) Antidilutive.

F-28

FUNDTECH LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(U.S. dollars in thousands)

NOTE 13: - INCOME TAXES

a. Measurement of taxable income under the Israeli Income Tax
Law (Inflationary Adjustments), 1985:

Results for tax purposes are measured in real terms of earnings
in NIS after certain adjustments for increases in the Israeli
Customer Price Index. As explained in Note 2b, the financial
statements are measured in U.S. dollars. The difference between
the annual change in the CPI and in the NIS/dollar exchange rate
causes a difference between taxable income and the income before
taxes shown in the financial statements. In accordance with
paragraph 9(f) of SFAS No. 109, the Company has not provided
deferred income taxes on this difference between the reporting
currency and the tax bases of assets and liabilities.

b. Tax benefits under the Israeli Law for the Encouragement of
Capital Investments, 1959:

The Company has been granted in November 1995 the status of an
"Approved Enterprise", under the Israeli Law for the
Encouragement of Capital Investments, 1959 (the "Investment Law")
and the Company has elected the alternative benefits program,
waiver of grants in return for tax exemptions. Pursuant thereto,
the income of the Company derived from the "Approved Enterprise"
program is tax-exempt for two years commencing with the year it
first earns taxable income relating to each expansion program,
and subject to corporate taxes at the reduced rate of 10% to 25%,
for an additional eight years, (subject to an adjustment based
upon the foreign investors' ownership of the Company).

The Company completed its investment according to certain of its
first program on November 27, 1997. Income derived from this
program was tax exempt for two years commencing in 1998 and will
enjoy a reduced tax of 10% to 25% for eight years ending in 2005
(subject to an adjustment based upon the foreign investors'
ownership of the Company).

In 1998, the Company received approval for its first expansion
program of its "Approved Enterprise". In 2000, the Company
received approval for its second expansion program of its
"Approved Enterprise". Income derived from the expansion programs
will be tax-exempt for a period of two years and will be subject
to a reduced tax rate as mentioned above for an additional period
of eight years. The aforementioned benefits are in respect of the
taxable income that the Company derives from the expansion
programs. The period of benefits for these programs has not yet
commenced since no income was derived.

The period of tax benefits detailed above is subject to limits of
12 years from the year of commencement of production, or 14 years
from the date of granting the approval, whichever is earlier.

F-29

FUNDTECH LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(U.S. dollars in thousands)

NOTE 13: - INCOME TAXES (Cont.)

The tax-exempt profits that will be earned by the Company's
"Approved Enterprise" can be distributed to shareholders, without
imposing tax liability on the Company only upon the complete
liquidation of the Company. As of December 31, 2001, retained
earnings included approximately $ 4,597 in tax exempt income
earned by the Company's "Approved Enterprise". The Company has
decided to permanently reinvest its tax exempt income.
Accordingly, no deferred income taxes have been provided on
income attributable to the Company's "Approved Enterprise". If
these retained tax-exempt profits are distributed in a manner
other than in the complete liquidation of the Company, they would
be taxed at the corporate tax rate applicable to such profits as
if the Company had not elected the alternative tax benefits
(currently between 10% to 25% for an "Approved Enterprise").

The Investment Law also grants entitlement to claim accelerated
depreciation on equipment used by the "Approved Enterprise"
during five tax years.

The entitlement to the above benefits is conditional upon the
Company fulfilling the conditions stipulated by the above law,
regulations published thereunder and the instruments of approval
for the specific investments in "approved enterprises". In the
event of failure to comply with these conditions, the benefits
may be canceled and the Company may be required to refund the
amount of the benefits, in whole or in part, including interest.

The Company expects that during the period in which these tax
losses are utilized, its income would be substantially tax
exempt. Accordingly, there will be no tax benefit available from
such losses and no deferred income taxes have been included in
these financial statements.

Income not eligible for "Approval Enterprise" benefits mentioned
above is taxed at the regular rate of 36%.

c. Tax benefits under the Israeli Law for the Encouragement of
Industry (Taxation), 1969:

The Company is an "industrial company" under the Law for the
Encouragement of Industry (Taxation), 1969 and, therefore, it is
entitled to certain tax benefits, including accelerated rates of
depreciation and deduction of public offering expenses.

d. Net operating losses carryforwards:

As of December 31, 2001, the Company had approximately $ 5,850 of
Israeli net operating loss carryforwards. The Israeli loss
carryforwards have no expiration date.

As of December 31, 2001, Fundtech Corporation had a U.S. federal
net operating loss carryforward of approximately $ 36,344 which
can be carried forward and offset against taxable income for
10-15 years and expire in 2010-2016. Utilization of U.S. net
operating losses may be subject to the substantial annual
limitation due to the "change in ownership" provisions of the
Internal Revenue Code of 1986 and similar state provisions. The
annual limitation may result in the expiration of net operating
losses before utilization.

As of December 31, 2001 BBP had a Swiss net operating loss
carryforwards of approximately $ 490, which can be offset against
taxable income for a period of up to 7 years.

F-30

FUNDTECH LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(U.S. dollars in thousands)

NOTE 13: - INCOME TAXES (cont.)

e. Deferred income taxes:

Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used
for income tax purposes.

Significant components of the Company and its subsidiaries assets
are as follows.

December 31
------------------------
2000 2001
------------ -----------
Deferred tax assets:

U.S. net operating loss carryforwards $ 6,201 $ 14,538
Israel net operating loss carryforwards 801 585
Swiss net operating loss carryforwards 331 109
Other reserve and allowances 4,915 7,414
----------- ----------

Total deferred tax assets before 12,248 22,646
valuation allowance
Valuation allowance (12,248) (22,537)
----------- ----------

Balance at the end of the year
(all foreign) $ - $ 109
========== ==========

Deferred tax liabilities:
Deferred taxes due to assets acquired
and liabilities assumed (all foreign) $ (210) $ -
=========== ==========

As of December 31, 2001, the Company and its subsidiaries have
provided valuation allowances of approximately $ 10,289 in
respect of deferred tax assets resulting from tax loss
carryforwards and other temporary differences. Management
currently believes that since the Company and its subsidiaries
have a history of losses, it is more likely than not that the
deferred tax regarding the loss carryforwards and other temporary
differences will not be realized in the foreseeable future. The
Company's deferred tax asset composed of net operating loss
carryforwards of BBP is included in other accounts receivable.

g. Income (loss) before taxes on income:

Year ended December 31,
--------------------------------------
1999 2000 2001
----------- ------------ -----------

Domestic $ 4,665 $ 6,943 $ (7,577)
Foreign (6,376) (4,566) (24,049)
----------- ----------- -----------
$ (1,711) $ 2,377 $ (31,626)
=========== =========== ===========

F-31

NOTE 14: - GEOGRAPHICAL INFORMATION, MAJOR CUSTOMERS AND FINANCIAL INCOME DATA

The Company and its subsidiaries have evaluated their business
activities in accordance with the provisions of Statement of Financial
Accounting Standard No. 131 "Disclosure about Segments of an
Enterprise and Related Information" ("SFAS No. 131") and determined
that its operating segments have similar economic characteristics such
as products and services, customers' methods used to distribute
products and services, and regulatory environment resulting in their
aggregation.

a. Summary information about geographic destinations:

The total revenues are attributed to geographic information,
based on the end customers' location (see Note 1 for a brief
description of the Company's business).

1999 2000 2001
------------------ ------------------- ------------------
Long- Long- Long-
Total lived Total lived Total lived
revenues assets revenues assets revenues assets
-------- ------- --------- -------- -------- --------

Israel 495 538 574 830 205 737
U.S. 23,257 16,273 26,942 20,942 30,773 24,140
Australia 239 -- 4,062 7 -- 10
Switzerland 4,156 10,902 6,313 10,529 7,381 8,847
Others 3,544 26 9,389 139 5,798 222
------- ------- ------- ------- ------- -------

$31,691 $27,739 $47,280 $32,447 $44,157 $33,956
======= ======= ======= ======= ======= =======

b. Major customer data as a percentage of total revenue:

Year ended December 31,
-------------------------------
1999 2000 2001
--------- --------- ----------

Customer A - - 18%
========== ========= =========

In 1999 and 2000 no customer exceeded 10% of the Company's
consolidated revenue.

c. Financial income, net:
Financial expenses:
Interest and other $ 64 $ 2 $ 325
Foreign currency translation
differences, net - 33 205
--------- -------- --------

64 35 530
--------- -------- --------

Financial income:
Interest and other 3,781 5,577 3,787
Foreign currency translation
differences, net 39 - 86
--------- -------- --------

3,820 5,577 3,873
--------- -------- --------

$ 3,756 $ 5,542 $ 3,343
========= ======== ========

- - - - - - - - - - - - -

F-32

EXHIBIT INDEX

EXHIBIT NO. DESCRIPTION OF EXHIBIT
- -------------- ----------------------------------------------------------------------------------------------------------------

* Previously filed as an exhibit to the Registrant's Registration
Statement on Form F-1, as amended, dated March 13, 1998, and
incorporated herein by reference.
** Previously filed as an exhibit to the Registrant's Report on Form 6-K,
dated April 30, 1998, and incorporated herein by reference.
*** Previously filed as an exhibit to the Registrant's Report on Form 10-K,
dated March 30, 1999, and incorporated herein by reference.
**** Previously filed as an annex to the Registrant's Proxy Statement, dated
August 23, 1999.
***** Previously filed as an Exhibit to Registrant's Report on Form 8-K,
dated October 11, 1999, and incorporated herein by reference.
****** Previously filed as an Exhibit to Registrant's Report on Form 8-K,
dated June 1, 1999, and incorporated herein by reference.
******* Previously filed as Exhibit to the Registrant's Registration Statement
on Form S-8, as amended (Commission Registration No. 333-9380), and
incorporated herein by reference.
+ Certain portions of this agreement have been omitted pursuant to a
request for confidential treatment.
^ Previously filed as Exhibit to the Registrant's Form 10-K, dated
April 2, 2001.
(1) Filed herewith.