UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 20-F

[ ]   REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
      EXCHANGE ACT OF 1934

                                       OR
[x]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934 For the Fiscal year ended December 31, 2002
                                       OR
[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

Commission File Number____________________________________________________

                                  FUNDTECH LTD.
                                  -------------
             (Exact Name of Registrant as specified in its charter)

                                 STATE OF ISRAEL
                                 ---------------
                 (Jurisdiction of incorporation or organization)

                         12 Ha'hilazon Street, 5th Floor
                                Ramat-Gan, Israel
                                -----------------
                    (Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

--------------------------------------------------------------------------------
     Title of each class             Name of each exchange on which registered
--------------------------------------------------------------------------------

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

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

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

Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:

_______________________________________________________________________________
                              (Title of Class)

Indicate the number of outstanding shares of each of issuer's classes of capital
or common stock as of the close of the period covered by the annual report:

As of December 31, 2002, the Registrant had outstanding 14,364,452 Ordinary
Shares, New Israeli Shekels 0.01 par value per share.

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 which  financial  statement  item the  Registrant has
elected to follow:                     Item 17 [ ]   Item 18 |X|

<PAGE>

            CAUTIONARY STATEMENT FOR FORWARD-LOOKING INFORMATION

      Except for the historical information contained herein, the statements
contained in this annual report are forward-looking statements, within the
meaning of the Private Securities Litigation Report Act of 1995 with respect to
our business, financial condition and results of operations. Actual results
could differ materially from those anticipated in these forward-looking
statements as a result of various factors, including, but not limited to, all
the risks discussed or identified in this annual report and our other public
filings, such as general economic and market conditions, changes in regulations
and taxes and changes in competition and pricing environments.

      We urge you to consider that statements which use the terms "believe," "do
not believe," "expect," "plan," "intend," "estimate," "anticipate," and similar
expressions are intended to identify forward-looking statements. These
statements reflect our current views with respect to future events and are based
on assumptions and are subject to risks and uncertainties. Except as required by
applicable law, including the securities laws of the United States, we do not
intend to update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise.

      As used in this annual report, the terms "we," "us," "our," the "Company"
and "Fundtech" mean Fundtech Ltd. and its subsidiaries, unless otherwise
indicated. All reference to dollars or "$" are to United States Dollars.



                                       2

<PAGE>

                                TABLE OF CONTENTS


ITEM 1.   IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS...............3

ITEM 2.   OFFER STATISTICS AND EXPECTED TIMETABLE.............................3

ITEM 3.   KEY INFORMATION.....................................................3

ITEM 4.   INFORMATION ON THE COMPANY.........................................12

ITEM 5.   OPERATING AND FINANCIAL REVIEW AND PROSPECTS.......................19

ITEM 6.   DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.........................27

ITEM 7.   MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS..................36

ITEM 8.   FINANCIAL INFORMATION..............................................38

ITEM 9.   THE OFFER AND LISTING..............................................40

ITEM 10.  ADDITIONAL INFORMATION.............................................40

ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
          MARKET RISK........................................................49

ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY
          SECURITIES.........................................................49

ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES....................49

ITEM 14.  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
          HOLDERS AND USE OF PROCEEDS........................................49

ITEM 15.  CONTROLS AND PROCEDURES............................................49

ITEM 16.  [RESERVED].........................................................50

ITEM 17.  FINANCIAL STATEMENTS...............................................50

ITEM 18.  FINANCIAL STATEMENTS...............................................50

ITEM 19.  EXHIBITS...........................................................50



                                       i

<PAGE>

                                     PART I

ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

         Not Applicable

ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE

         Not Applicable

ITEM 3.  KEY INFORMATION

A.  Selected Financial Data.

      The selected consolidated statement of operations data for each of the
three years ended December 31, 2000, 2001 and 2002, and the selected
consolidated balance sheet data as of December 31, 2001 and 2002 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 the two years
ended December 31, 1998 and 1999 and the selected consolidated balance sheet
data as of December 31, 1998, 1999 and 2000 have been derived from our audited
consolidated financial statements not included herein. All of the financial data
set forth below are in thousands (except per share amounts) 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. Historical results are not necessarily
indicative of any results to be expected in any future period.

<TABLE>
<CAPTION>

                                                                             YEAR ENDED DECEMBER 31,
                                                      -------------------------------------------------------------------------
                                                         1998           1999            2000            2001            2002
                                                      ---------       ---------       ---------       ---------       ---------

STATEMENT OF OPERATIONS DATA:
Revenues:
<S>                                                   <C>             <C>             <C>             <C>             <C>
  Software license fees..........................     $  14,007       $  17,667       $  28,492       $  17,067       $  10,068
  Maintenance and services fees..................         7,116          12,835          18,019          27,085          29,355
  Hardware sales.................................         2,009           1,493           1,437             842             405
                                                      ---------       ---------       ---------       ---------       ---------
    Total revenues                                       23,132          31,995          47,948          44,994          39,828
Operating expenses:
  Software license costs.........................           238             559             252             896             703
  Maintenance and services costs.................         4,549           8,355          12,960          19,153          17,612
  Hardware costs.................................         1,631           1,132           1,131             686             317
  Research and development.......................         6,636          12,880          17,747          19,185          14,525
  Selling and marketing, net.....................         2,970           6,464           9,637          10,325           9,453
  General and administrative.....................         2,080           3,737           6,133           9,116           7,230
  Amortization of acquisition, related
    goodwill and other intangible assets.........           206           1,275           2,462           2,525             911
  Amortization of capitalized software
    development costs............................            --              --              --              --           1,182
  Provision for doubtful accounts................           185             258             717           5,966           1,335
  Non recurring expenses.........................            --              --              --           4,073           3,252
  In-process research and development
    write-off....................................        16,600           2,802              --              --              --
                                                      ---------       ---------       ---------       ---------       ---------

    Total operating expenses.....................        35,095          37,462          51,039          71,925         56,5200
                                                      ---------       ---------       ---------       ---------       ---------
Operating income (loss)..........................       (11,963)         (5,467)         (3,091)        (26,931)        (16,692)
Impairment and realized losses on
  available for sale marketable securities.......            --              --              --          (7,826)           (282)
Financial income, net............................           571           3,756           5,542           3,343             691
Income taxes.....................................            --              --             (74)           (212)           (365)
                                                      ---------       ---------       ---------       ---------       ---------

Net income (loss)................................     $ (11,392)      $  (1,711)      $   2,377       $ (31,626)      $ (16,647)
                                                      =========       =========       =========       =========       =========

Basic earnings (loss) per share..................     $   (1.12)      $   (0.13)      $    0.17       $   (2.22)      $   (1.16)
                                                      =========       =========       =========       =========       =========

Diluted earnings (loss) per share................     $   (1.12)      $   (0.13)      $    0.16       $   (2.22)      $   (1.16)
                                                      =========       =========       =========       =========       =========
Shares used in computing:
  Basic earnings (loss) per share................        10,151          12,855          14,096          14,218          14,290
                                                      =========       =========       =========       =========       =========
  Diluted earnings (loss) per share..............        10,151          12,855          14,777          14,218          14,290
                                                      =========       =========       =========       =========       =========


                                       3

<PAGE>

<CAPTION>

CONSOLIDATED BALANCE SHEET DATA:
<S>                                                   <C>            <C>               <C>            <C>            <C>
Cash, cash equivalents, short-term bank
  deposits and short term investments.............    $  13,019       $  82,516          63,315       $  45,385       $  42,496
Working capital...................................    $  18,140       $  90,016          83,840       $  55,206       $  44,630
Total assets......................................    $  32,717       $ 125,142         126,872       $ 102,056       $  89,380

Short-term bank credits, including current
  maturities of long-term debt....................           --              --              --              --              --
Long-term debt....................................           --              --              --              --              --
Shareholders' equity..............................    $  25,048       $ 118,594       $ 119,714       $  91,220       $  75,166
</TABLE>


B.  Capitalization and Indebtedness.

      Not applicable.

C.  Reasons for the Offer and Use of Proceeds.

      Not applicable.

D.  Risk Factors.

Risk Relating to Our Business

Our business is impacted by the slowdown in the worldwide economy.

      Our business is dependent on current and anticipated market demand for our
software products, which has been negatively impacted by the slowdown in the
global economy that began in the second half of 2000 and by the terrorist
attacks of September 11, 2001. Many of our customers and prospective customers
are currently experiencing economic downturns, including those in the financial
services market. The uncertainty surrounding the growth rate of economies
worldwide has caused companies to reduce purchasing and capital investment.
Furthermore, this uncertainty has resulted in longer purchasing cycles with our
customers and in customers' requests for longer payment terms. We cannot predict
if or when the growth rate of the global economy will rebound or whether the
growth rate of our business will rebound when the global economy begins to grow.
The effects of the economic decline have resulted and are likely to continue to
result in excess product capacity, intensified price competition, reduced
margins, lower revenue growth rates and longer payment terms, which may result
in decreased revenues, increased losses and/or an inability to achieve
profitability. These global economic conditions may have a material adverse
impact on our business, operating results and financial condition.

Existing and any additional measures taken by us to address the recent downturn
in the global economy may have an adverse effect on our business.

      We have taken and may continue to take, if necessary, cost reduction
measures to address the recent downturn in the global economy and the particular
slowdown in the markets we serve, particularly the financial services market.
These measures are intended to reduce our expenses in the face of decreased
revenues due to decreased customer orders. Our implementation of these measures
and any additional measures taken in the future, if necessary, may be
unsuccessful in addressing the downturn in the global economy and the slowdown
in the markets we serve, particularly the financial services market. Current and
additional cost reduction actions, if necessary, may result in further cash and
non-cash charges, which would have a material adverse effect on our results of
operations and financial condition. In addition, each of these measures and any
additional measures taken in the future, if necessary, may have long-term
negative effects on our business and may make it more difficult to achieve our
current or future business objectives.

We have a history of losses.

      We incurred a net loss of approximately $11.4 million in 1998, $1.7
million in 1999, $31.6 million in 2001 and $16.6 million in 2002. As a result,
we will need to generate significant revenues to achieve and maintain
profitability. Revenue shortfalls are primarily due to issues related to current
adverse economic conditions that are causing our customers to defer their
technology purchasing. Such ongoing adverse economic conditions could cause our
revenues to continue to decrease and make it more difficult for us to reach
profitability.

                                       4

<PAGE>

We have a limited operating  history in our current principal market,  which
will make it difficult or impossible  for you to predict our future  results
of operations.

      We began operations in 1993 as "Fundtrust Technologies Ltd." Our name was
changed to "Fundtech Ltd." in June 1994. Our primary business at that time was
the automation of payments for community banks. In 1998, we acquired the assets
of the cash management division of CheckFree Holdings Corporation. In 1999 we
acquired the assets of the cash management division of Sterling Commerce. We
also acquired the assets of Biveroni Batschelet Partners AG, Switzerland, which
connects banks to the Central Bank of Switzerland for the processing and
settlement of payments, securities trading and settlement in 1999. From 1999
through 2002, we spent considerable time, effort and money developing our next
generation software, including: PAYplus USA(TM), a funds transfer solution for
use by banks, thrifts, and international agency banks operating in the United
States; Global PAYplus(TM) a client/server funds transfer solution handling both
local and global payments activity; CASHplus(TM), an Internet based cash
management solution that has multi-currency capabilities. If problems should
arise with these new solutions or delivery modes, they could adversely affect
our ability to market our products and services.

We may experience significant fluctuations in our quarterly results, which makes
it difficult for investors to make reliable period-to-period comparisons and may
contribute to volatility in the market price for our Ordinary Shares.

      Our quarterly revenues, margins and results of operations have fluctuated
significantly in the past as a result of various factors, many of which are
outside our control. These factors include:

      o     the size, timing and shipment of orders for our products and
            services;

      o     our customers' budget cycles;

      o     the timing of the release of new product upgrades;

      o     enhancements or introductions by us and our competitors;

      o     the mix of product sales;

      o     software "bugs" or other product quality problems;

      o     product pricing;

      o     effectively providing customer support;

      o     consolidation of our customers; and

      o     adverse economic conditions and currency fluctuations.

      A substantial portion of our expenses, including most product development
and selling and marketing expenses, must be incurred in advance of when revenue
is generated. If our projected revenue does not meet our expectations, we are
likely to experience an even larger shortfall in our operating profit relative
to our expectations. As a result, we believe that period-to-period comparisons
of our historical results of operations are not necessarily meaningful and that
you should not rely on them as an indication for future performance. It is also
possible that our quarterly results of operations may be below the expectations
of public market analysts and investors. If this happens, the price of our
Ordinary Shares will likely decrease.

Our sales cycle is variable  and  sometimes  long and  involves  significant
resources on our part, but may never result in actual sales.

      Our sales cycle from our initial contact with a potential customer to the
signing of a license agreement has historically been lengthy and is variable. We
generally must educate our potential customers about the use and benefit of our
products and services, which can require the investment of significant time and
resources. In addition, the purchasing decisions of our customers are subject to
the uncertainties and delays of the budgeting, approval and competitive
evaluation processes that typically accompany significant capital expenditures.
If our sales cycle lengthens, our quarterly operating results may become less
predictable and may fluctuate more widely than in the past. A number of
companies decide which products to buy through a request for proposal process.
In those situations, we run the risk of investing significant resources in a
proposal that does not

                                       5
<PAGE>

result in revenue to the Company because either a competitor obtains the desired
contract from the customer or decides not to proceed with the project.

If we are unable to  accurately  predict and respond to market  developments
or demands, our business will be adversely affected.

      The market for financial institutions payments and cash management
solutions is still developing and evolving. This makes it difficult to predict
demand and market acceptance for our products. We cannot guarantee that the
market for our products will grow or that our products will become widely
accepted. If the market for our products does not develop as quickly as we
expect or if our products are not accepted by customers, our future revenues and
profitability will be adversely affected. In addition, changes in technologies,
industry standards, the regulatory environment, customer requirements and new
product introductions by existing or future competitors could render our
existing products obsolete and unmarketable, or require us to develop new
products. A significant increase in the number of customers and/or a significant
increase in our development of new product offerings would require us to expend
significant amounts of money, time and other resources to meet demand. These
expenditures could strain our personnel and financial resources.

Undetected  defects may increase our costs and impair the market  acceptance
of our products and technology.

      Our software products are complex and may contain undetected defects,
particularly when first introduced or when new versions or enhancements are
released. Testing of our products is particularly challenging because it is
difficult to simulate the wide variety of customer environments into which our
products are deployed. Despite testing conducted by us and our customers, some
defects have been discovered after their commercial shipment.

      The finding of defects in current or future products and versions after
the start of commercial shipment may result in:

      o     a delay or failure of our products to achieve market acceptance;

      o     adverse customer reaction;

      o     negative publicity and damage to our reputation;

      o     diversion of resources; and

      o     increased service and maintenance costs.

      Defects could also subject us to legal claims. Although our license
agreements contain limitation of liability provisions, these provisions may not
be sufficient to protect us against these legal claims. The sale and support of
our products, as well as our professional services, may also expose us to
product liability claims.

Decisions  by customers  to develop  their own payments and cash  management
solutions or greater market  acceptance of our  competitors'  products could
result in reduced revenues.

      The market for payments and cash management solutions is continuing to
develop and competition is intense. We compete for the business of global or
nationwide organizations that seek to support complex and sophisticated
products.

      Our competitors may be in a better position to devote significant
resources to the development, promotion and sale of their products, thus
enabling them to respond more quickly to new or emerging technologies and
changes in customer requirements. Current and potential competitors have
established or may establish cooperative relationships among themselves or with
third parties to increase their ability to successfully market their products.
We also expect that competition will increase as a result of consolidation
within the industry. As we develop new products, we may begin to compete with
companies with which we have not previously competed. We cannot assure you that
competition will not result in price reductions for our products and services,
fewer customer orders, deferred payment terms, reduced revenues or loss of
market share, any of which could materially adversely affect our business,
financial condition and results of operations.

                                       6
<PAGE>

We are and  expect to  continue  to be  dependent  upon a limited  number of
customers for a significant portion of our future revenues.

      We believe that the market for our payments and cash management software
products and services consists of a relatively small number of customers who
have very large potential accounts as well as a great number of customers
comprising smaller account. These large accounts may from time to time comprise
a significant percentage of our revenues in a specific fiscal period. Our
failure to attract and retain these large accounts may have a material adverse
effect on our business, financial condition and results of operations.

      We have entered into a contract with one particular customer for the sale
of one of our payments products. This customer represented 18% of our revenue in
2002. The cessation of a project of this size could have a material adverse
effect on our business, financial condition and results of operations and could
also negatively impact the market acceptance of this product. See Item 5,
"Operating Results and Financial Review and Prospects - Major Customer."

We may not be able to compete  successfully in the very competitive  markets
for our products.

      We believe there are several principal competitive factors in the industry
in which we operate, including:

            o     product performance;

            o     technical features;

            o     compatibility with existing operating systems;

            o     reliability;

            o     security;

            o     relational database power;

            o     price;

            o     customer service and support; and

            o     ease of use.

      We may be unable to differentiate our products from the products of our
competitors or successfully develop and introduce new products that are less
costly than, or superior to, those of our competitors. In addition, existing and
new competitors may establish relationships with our existing and potential
customers. This could have a material adverse effect on our ability to compete.

      The industry in which we operate is highly competitive and evolving. Our
competitors include, but are not limited to, BankServ, Logica PLC, Magnet
Communications, Inc., Politzer & Haney, Transaction Software Technologies, Inc.
and Transaction Systems Architects, Inc. Furthermore, several large banks have
developed solutions internally which they have then marketed to other banks or
implemented in banks that they have acquired.

      In addition to our current competitors, we expect substantial competition
from both established and emerging companies. Many of our existing and potential
competitors have, or are likely to have, more extensive engineering,
development, marketing, distribution, financial, technological and personnel
resources than us. This increased competition may result in our loss of market
share and pricing pressure which may have a material adverse effect on our
business, financial condition and results of operations. See Item 4B,
"Information on the Company -- Business Overview -- Competition."

Our business is affected by conditions in the financial services industry.

      Our customers are highly concentrated in the financial services industry.
Our business is therefore susceptible to a downturn in that industry. For
example, a decrease in spending for software and related services within this
industry could result in a decrease in the number of potential customers for our
products and a decrease in demand by existing customers for additional products.
Financial institutions in the United States continue to consolidate which
increases our customers' ability

                                       7
<PAGE>

to negotiate price and decreases the overall potential market for our products
and services. These factors, as well as other changes occurring in the financial
services industry, could have a material adverse effect on our business,
financial condition and results of operations.

Government  regulatory  policy for the financial  services  industry affects
our business.

      Our current and prospective customers, which include state and federally
chartered banks and savings and loan associations, operate in markets that are
subject to extensive and complex regulation. While we are not ourselves directly
subject to this regulation, our products and services must be designed to work
within the regulatory constraints under which our customers operate. The
inability of our products and services to work properly within the regulatory
framework may have a material adverse effect on our business, financial
condition and results of operations.

We may be unable to expand our sales,  marketing  and support  organizations
which may hinder our ability to grow and meet customer demands.

      During 2002, in order to reduce costs we substantially reduced the number
of employees in both our research & development and administrative departments.
We believe we have sufficient resources available to meet and support our
current obligations, but, we may need to substantially expand our direct and
indirect sales and marketing operations in order to increase market awareness
and sales of our products. We may also need to increase our technical and
customer support staff to support new customers and the expanding needs of
existing customers. Qualified individuals are in demand throughout the software
industry and there is significant competition for qualified personnel.
Competition for qualified people may lead to increased labor and personnel
costs. If we do not succeed in retaining our personnel or in attracting new
employees, our business could suffer significantly. If we are unable to attract,
train and retain qualified personnel, we may not be able to achieve our
objectives and our business could be harmed.

We may be unable to adequately  protect our  proprietary  rights,  which may
limit our ability to compete effectively.

      Our success and ability to compete are substantially dependent upon our
internally developed technology. Other than our trademarks, our intellectual
property consists primarily of proprietary or confidential information that is
not subject to patent or similar protections. In general, we have relied on a
combination of technical leadership, trade secret, copyright and trademark law
and nondisclosure agreements to protect our proprietary know-how. Unauthorized
third parties may attempt to copy or obtain and use the technology protected by
those rights. Any infringement of our intellectual property could have a
material adverse effect on our business, financial condition and results of
operations. Policing unauthorized use of our products is difficult and costly,
particularly in countries where the laws may not protect our proprietary rights
as fully as in the United States.

      We have placed, and in the future may place, our software in escrow. The
software may, under specified circumstances, be made available to our customers.
We have provided our software directly to customers. This may increase the
likelihood of misappropriation or other misuse of our software.

      Substantial litigation over intellectual property rights exists in the
software industry. We expect that software products may be increasingly subject
to third-party infringement claims as the functionality of products in different
industry segments overlaps.

      We believe that many industry participants have filed or intend to file
patent and trademark applications covering aspects of their technology. We
cannot be certain that they will not make a claim of infringement against us
based on our products and technology. Any claims, with or without merit, could:

      o     be expensive and time-consuming to defend;

      o     cause product shipment and installation delays;

      o     divert management's attention and resources; or

      o     require us to enter into royalty or licensing agreements to obtain
            the right to use a necessary product or component.

                                       8
<PAGE>

      If we are required to enter into royalty or licensing agreements, such
agreements may not be available on acceptable terms, if at all. Therefore, a
successful claim of product infringement against us and our failure or inability
to license the infringed or similar technology at all or to license the
infringed or similar technology for reasonable commercial terms, could have a
material adverse effect on our business, financial condition and results of
operations.

Marketing  and  distributing  our products  outside of the United States may
require  increased  expenses  and greater  exposure to risks that we may not
be able to successfully address.

      We market and sell our products and services in the United States, Europe,
Israel, Asia and Australia. We received 42.5% of our total revenues in 2000,
29.7% of our total revenues in 2001 and 34% of our total revenues in 2002 from
sales to customers located outside of the United States. The expansion of our
existing operations and entry into additional international markets will require
significant management attention and financial resources. We are subject to a
number of risks customary for international operations, including:

      o     changing product and service requirements in response to the
            formation of economic and marketing unions, including the European
            Economic Union;

      o     economic or political changes in international markets;

      o     greater difficulty in accounts receivable collection and longer
            collection periods;

      o     unexpected changes in regulatory requirements;

      o     difficulties and costs of staffing and managing foreign operations;

      o     the uncertainty of protection for intellectual property rights in
            some countries;

      o     multiple and possibly overlapping tax structures; and

      o     currency and exchange rate fluctuations.

We may not be able to  achieve  compliance  with  the  listing  rules of the
NASDAQ National Market.

      The NASDAQ National Market has several maintenance standards for continued
listing, including the requirements (i) that the Company's Ordinary Shares have
a minimum bid price of at least $1.00 per share, (ii) that the Company shall
maintain a shareholders' equity of at least $10,000,000, (iii) that the Company
shall have at least 750,000 shares held by persons or entities other than
officers, directors and beneficial holders of more than 10% of the Company's
Ordinary Shares (the "Public Float"), (iv) that the Company shall have an
aggregate market value of Public Float of at least $5,000,000, (v) that the
Company shall have at least two market makers and (vi) that the Company shall
have at least 400 shareholders who hold at least 100 Ordinary Shares (the
foregoing requirements are collectively referred to as the "Maintenance
Standards"). We will have to comply with the all Maintenance Standards in order
to remain listed in the NASDAQ National Market. Although we believe that we are
currently in compliance will such Maintenance Standards, there is no assurance
that we will fully comply with such Maintenance Standards in the future. If we
fail to maintain compliance with one or more requirements of the Maintenance
Standards, our Ordinary Shares would be subject to delisting from the NASDAQ
National Market, but may qualify for inclusion on the NASDAQ SmallCap Market.
The delisting of our Ordinary Shares from the NASDAQ National Market may
materially impair the ability of our shareholders to buy and sell our Ordinary
Shares and could have an adverse effect on the market price and the efficiency
of the trading market for our Ordinary Shares. In addition, the delisting of our
Ordinary Shares could significantly impair our ability to raise capital should
we desire to do so in the future.

The market price of our  Ordinary  Shares may be volatile and you may not be
able to resell your shares at or above the price you paid, or at all.

      The stock market in general has recently experienced extreme price and
volume fluctuations. The market prices of securities of technology companies
have been extremely volatile, and have experienced fluctuations that have often
been unrelated or disproportionate to the operating performance of those
companies. These broad market fluctuations could adversely affect the market
price of our Ordinary Shares. The market price of the Ordinary Shares may
fluctuate substantially due to a variety of factors, including:

                                       9
<PAGE>

      o     any actual or anticipated fluctuations in our financial condition
            and operating results;

      o     public announcements concerning us or our competitors, or the
            Internet industry;

      o     the introduction or market acceptance of new service offerings by us
            or our competitors;

      o     changes in security analysts' financial estimates;

      o     changes in accounting principles;

      o     sales of our Ordinary Shares by existing shareholders;

      o     the loss of any of our key personnel; and

      o     changes in the political conditions in Israel.

      In the past, securities class action litigation has often been brought
against companies following periods of volatility in the market prices of their
securities. We may be the target of similar litigation in the future. Securities
litigation could result in substantial costs and divert our management's
attention and resources, which could cause serious harm to our business.

Future  sales of our  Ordinary  Shares in the public  market or issuances of
additional  securities  could cause the market price for our Ordinary Shares
to fall.

      As of May 1, 2003, we had 14,391,534 Ordinary Shares outstanding, and, in
addition, we have reserved up to 2,485,640 Ordinary Shares for issuance under
our option plans. If a large number of our Ordinary Shares are sold, the price
of our Ordinary Shares would likely decrease or if we continue to issue shares,
convertible securities, warrants and/or options the price of our Ordinary Shares
may decrease.

Our executive  officers,  directors and affiliated  entities will be able to
influence  matters  requiring  shareholder  approval and they may disapprove
actions that you voted to approve.

      As of May 1, 2003, our executive officers and directors serving as of such
date, and entities affiliated with them, in the aggregate, beneficially owned
approximately 39.5% of our outstanding Ordinary Shares. These shareholders, if
acting together, will be able to significantly influence all matters requiring
approval by our shareholders, including the election of directors and the
approval of mergers or other business combination transactions.

Any future  acquisitions  of  companies  or  technologies  may  distract our
management and disrupt our business.

      We may acquire or make investments in complementary businesses,
technologies, services or products, if appropriate opportunities arise, and we
may engage in discussions and negotiations with companies about our acquiring or
investing in those companies' businesses, products, services or technologies. We
cannot make assurances that we will be able to identify future suitable
acquisition or investment candidates, or if we do identify suitable candidates,
that we will be able to make the acquisitions or investments on commercially
acceptable terms or at all. If we acquire or invest in another company, we could
have difficulty assimilating that company's personnel, operations, customers,
technology or products and service offerings into our own. The key personnel of
the acquired company may decide not to work for us. These difficulties could
disrupt our ongoing business, distract our management and employees, increase
our expenses and adversely affect our results of operations. We may incur
indebtedness or issue equity securities to pay for any future acquisitions. The
issuance of equity securities could be dilutive to our existing shareholders.

Risks Related to Our Location in Israel

It may be  difficult  to effect  service of process  and  enforce  judgments
against directors, officers and experts in Israel.

      We are organized under the laws of the State of Israel. Many of our
executive officers and directors and some of the experts named in this annual
report are nonresidents of the United States, and a substantial portion of our
assets and the assets of these persons are located outside the United States.
Therefore, it may be difficult to enforce a judgment obtained in the United
States against us or any of those persons. It may also be difficult to enforce
civil liabilities under United States federal securities laws in actions
initiated in Israel.

                                       10
<PAGE>

Political, economic and military conditions in Israel and the Middle East as a
whole, could negatively impact our business.

      Political, economic and military conditions in Israel have a direct
influence on us because one of our significant research and development
facilities is located there. Any major hostilities involving Israel or the
interruption or curtailment of trade between Israel and its present trading
partners could adversely affect our operations. We cannot assure you that
ongoing or revived hostilities related to Israel will not have a material
adverse effect on our business and on our share price. Several Arab countries
still restrict business with Israeli companies and these restrictions may have
an adverse impact on our operating results, financial condition or the expansion
of our business. We could be adversely affected by restrictive laws or policies
directed towards Israel and Israeli businesses. Despite the progress towards
peace between Israel and its Arab neighbors, the future of these peace efforts
is uncertain. Since October 2000, there has been a significant deterioration in
Israel's relationship with the Palestinian Authority, and a series of armed
clashes between Israel and the armed forces of the Palestinian Authority. Also,
the recent war in Iraq led by coalition forces and the short and long term
consequences of such war may negatively impact our business.

      Generally, all male adult citizens and permanent residents of Israel under
the age of 54 are, unless exempt, obligated to perform up to 36 days of military
reserve duty annually. Additionally, all Israeli residents of this age are
subject to being called to active duty at any time under emergency
circumstances. Many of our officers and employees are currently obligated to
perform annual reserve duty. Although we have operated effectively under these
requirements since we began operations, we cannot assess the full impact of
these requirements on our workforce or business if political and military
conditions should change, and we cannot predict the effect on us of any
expansion or reduction of these obligations.

We may be  adversely  affected if the rate of  inflation  in Israel  exceeds
the rate of devaluation of the new Israeli shekel against the dollar.

      Most of our revenues are in dollars or are linked to the dollar, while a
portion of our expenses, principally salaries and the related personnel
expenses, are in new Israeli shekels, or NIS. As a result, we are exposed to the
risk that the rate of inflation in Israel will exceed the rate of devaluation of
the NIS in relation to the dollar or that the timing of this devaluation lags
behind inflation in Israel. This would have the effect of increasing the dollar
cost of our operations. In 1999 and in 2000, while the rate of inflation was
low, there was a devaluation of the dollar against the NIS, and in 2001 the rate
of devaluation of the NIS against the dollar exceeded the rate of inflation. In
2002, the rate of inflation was 6.9% and the rate of devaluation of the NIS
against the dollar was lower than the rate of inflation at 0.5%. We cannot
predict any future trends in the rate of inflation in Israel or the rate of
devaluation of the NIS against the dollar. If the dollar cost of our operations
in Israel increases, our dollar-measured results of operations will be adversely
affected.

The tax benefits available to us from government programs may be discontinued or
reduced at any time, which would likely increase our taxes.

      We have received grants in the past and receive tax benefits under Israeli
government programs. To maintain our eligibility for these programs and
benefits, we must continue to meet specified conditions. Some of these programs
restrict our ability to transfer particular technology outside of Israel. If we
fail to comply with these conditions in the future, the benefits received could
be canceled and we could be required to refund any payments previously received
under these programs or pay increased taxes. The government of Israel has
reduced the benefits available under these programs recently and these programs
and tax benefits may be discontinued or reduced in the future.

      On January 1, 2003 a comprehensive tax reform took effect in Israel.
Pursuant to the reform, resident companies are subject to Israeli tax on income
accrued or derived in Israel or abroad. In addition, the concept of "controlled
foreign corporation" was introduced according to which an Israeli company may
become subject to Israeli taxes on certain income of a non-Israeli subsidiary if
the subsidiary's primary source of income is passive income (such as interest,
dividends, royalties, rental income or capital gains). The tax reform also
substantially changed the system of taxation of capital gains.

Under current Israeli law, we may not be able to enforce covenants not to
compete and therefore may be unable to prevent our competitors from benefiting
from the expertise of some of our former employees.

      We currently have non-competition agreements with our employees. These
agreements prohibit our employees, if they cease working for us, from directly
competing with us or working for our competitors. Recently, Israeli courts have
required employers seeking to enforce non-compete undertakings of a former
employee to demonstrate that the competitive activities of the former employee
will harm one of a limited number of material interests of the employer which
have been recognized by the courts, such as the secrecy of a company's
confidential commercial information or its intellectual property.

                                       11
<PAGE>

If we cannot demonstrate that harm would be caused to us, we may be unable to
prevent our competitors from benefiting from the expertise of our former
employees.

Our United States investors could suffer adverse tax consequences if we are
characterized as a passive foreign investment company.

      We cannot assure you that we will not be treated as a passive foreign
investment company in 2002 or in future years. We would be a passive foreign
investment company if (i) 75% or more of our gross income in a taxable year,
including our pro rata share of the gross income of any company, US or foreign,
in which we are considered to own 25% of the shares by value, is passive income,
or (ii) the average value of our assets, including our pro rata share of the
assets of any company in which we are considered to own 25% of the shares by
value, in a taxable year that produce, or are held for the production of,
passive income is at least 50%. Passive income includes interest, dividends,
royalties, rents and annuities. If we are or become a passive foreign investment
company, our U.S. investors could be subject to adverse tax consequences,
including:

      o     being taxed at ordinary income tax rates on gain from the sale or
            other disposition of our Ordinary Shares;

      o     being subject to interest on the tax liability resulting from the
            sale or other disposition of our Ordinary Shares (and on certain
            distributions on such shares) as if the gain from such sale or such
            distribution had been recognized ratably over the U.S. investor's
            holding period and subject to the highest ordinary income tax rates
            in effect in the year to which allocated; and

      o     being denied the normally-available increase in tax basis to fair
            market value for Ordinary Shares acquired from decedents.

For additional information, see Item 10E, "Additional Information -- Taxation."

ITEM 4.  INFORMATION ON THE COMPANY.

A. History and Development of the Company

      Both our legal and commercial name is Fundtech Ltd. We were incorporated
in Israel in 1993 under the Israeli Companies Ordinance (New Version), 1983, as
a private limited company, under the name of "Fundtrust Technologies Limited".
The principal legislation under which we operate is the Israeli Companies Law,
5759-1999 (the "Companies Law").

      Our registered office is located at 12 Ha'hilazon Street, 5th Floor,
Ramat-Gan, Israel, and our telephone number is 972-3-575-2750.

      Our name was changed to "Fundtech Ltd." in June 1994. Our primary business
at that time was the automation of payments for community banks. In 1998, we
acquired the assets of the cash management division of CheckFree Holdings
Corporation. In 1999, we acquired the assets of the cash management division of
Sterling Commerce as well as 100% of the stock of Biveroni Batschelet Partners
AG, Switzerland ("BBP"), which connects banks to the Central Bank of Switzerland
for the processing and settlement of payments, securities trading and
settlement.

      Capital expenditures consisting primarily of purchases of property and
equipment were $1.3 million, $2.3 million and $5.9 million during the years
ended December 31, 2002, 2001 and 2000, respectively. We neither purchased nor
owned any real property during this same period. We did not consummate any
acquisitions of any company or portions of any company during 2002, 2001 and
2000.

      Capital expenditures for the year ended December 31, 2003 are expected to
be approximately $2.6 million, of which $1.6 will be spent in the U.S. and the
remainder of $1.0 will be expended outside the U.S., primarily by BBP. We
anticipate financing these capital expenditures with our own funds.

B.  Business Overview

      We are a leading provider of end-to-end financial transaction processing
software solutions for financial institutions. These solutions are grouped into
three broad categories: payment processing, foreign exchange settlement
processing and delivery channels for financial institutions cash management
products. These solutions enable banks to process and manage payments, foreign
exchange settlements and cash management communication between financial
institutions and their

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<PAGE>

customers. The solutions facilitate communication between financial institutions
and their customers for initiating payments, making inquiries and managing their
activities with the financial institutions. Our client/server web-enabled
software products automate the payment and settlement processes and provide
real-time transaction processing capabilities to financial institutions and
their customers.

      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), CASHplus(TM), PAYplus USA(TM), PAYplus
RTGS(TM), PAYplus for CLS(TM), Global PAYplus(TM), Recovery Services for
disaster recovery 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 outsourcing,
            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. that 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 CLS Bank's
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.


                                       13

<PAGE>

PRODUCT NAME                    DESCRIPTION
------------                    -----------

Payment Solutions

PAYplus USA(TM)                 A payments 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.


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.

CASHplus(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         A Web-based cash management system that runs
Internet(TM)                    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.


ASP/Outsourcing Solutions

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

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

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

Recovery Services               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, savings
and loans and international agency banks operating in the U.S.

                                       14
<PAGE>

      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 a 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(TM)

      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 the 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.

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.

CASHplus(TM)

      The CASHplus(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. CASHplus(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.

                                       15
<PAGE>

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.

ASP/Outsourcing Solutions

Fundtech Connect - PAYplus USA and CASHplus

      Fundtech Connect is an 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 is a software product that 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.

Recovery Services - Contingency Processing Centers

      Recovery Services - 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). Recovery
Services 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.

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<PAGE>

      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. - These banks are located in
            countries that have moved or will move into processing payments on a
            real time gross settlement basis.

      During the years 2001 and 2002, 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
foreign exchange "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(TM) 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, 2002, 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 18% of our 2002 revenues. See Item 5A, "Operating and
Financial Review and Prospects -- Operating Results -- Major Customer."

      Please see the table that presents our consolidated revenues according to
the geographical regions to which such revenues are attributable in Item 5A,
"Operating and Financial Review and Prospects -- Operating Results --
Significant Revenue Information."

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 local
distributors or independent marketing representatives. A number of our former
distributors 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 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 working relationship with the Federal Reserve Bank in
the U.S. to ensure that our products meet Federal Reserve requirements. We also
maintain a good working relationship with SWIFT, a utility for communication of
global financial institutions 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 98 full-time
employees on December 31, 2002. All of our products have been developed
internally by our product development staff. Some of these

                                       17
<PAGE>

products are embedded, or 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) requirements descriptions
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 requirements. 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, while
increasing our ability 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 for the
reporting of problems 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 marketing representatives and contractors also
provide sales, service and technical support functions for our products to
end-users in specific geographic territories.

Proprietary Rights

      We rely upon a combination of trademarks, contractual rights, trade secret
law, copyrights, nondisclosure agreements and technical measures to establish
and protect our proprietary rights in our products and technologies. We also
enter into non-disclosure and confidentiality agreements with our customers,
employees and marketing representatives and with certain contractors with access
to sensitive information. However, we have no registered patents and these
measures taken by us may not be adequate to protect our technology from
third-party infringement. In addition, our competitors may also independently
develop technologies that are substantially equivalent or superior to ours.

Competition

      The industry in which we operate is highly competitive and evolving. Our
competitors include, but are not limited to, BankServ, Logica PLC, Magnet
Communications, Inc., Politzer & Haney, S1 Corporation, Transaction Software
Technologies, Inc. and Transaction Systems Architects, Inc. Furthermore, several
large financial institutions have developed solutions internally which they have
then marketed to other banks or implemented in banks that they have acquired. In
order to maintain our competitive position, we must differentiate our products
from the products of our competitors and successfully develop and introduce new
products that are less costly than, or superior to, those of our competitors.

C.  Organizational Structure

      We are organized under the laws of the State of Israel. We are the parent
company of our wholly-owned operating subsidiaries that are specified in the
table below.
                                               Country of Incorporation/
      Name of Subsidiary                       Organization
      ------------------                       -------------------------

      Fundtech Corporation.....................United States, State of Delaware

      Fundtech U.K. Limited....................United Kingdom

      Fundtech Australia Pty Limited...........Australia


                                       18
<PAGE>

      Fundtech Netherlands BV..................Netherlands

      FCMS, LLC................................United States, State of Delaware

      Biveroni Batschelet Partners AG..........Switzerland

D. Property, Plants and Equipment.

      We do not own any real property. As of December 31, 2002, we leased an
aggregate of approximately 13,000, 17,000, 15,000, 3,000, 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 $1,982,000.

ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS.

YOU SHOULD READ THE FOLLOWING DISCUSSION AND ANALYSIS IN CONJUNCTION WITH ITEM
3A "SELECTED FINANCIAL DATA" AND OUR CONSOLIDATED FINANCIAL STATEMENTS AND
NOTES THERETO INCLUDED ELSEWHERE IN THIS ANNUAL REPORT. IN ADDITION TO
HISTORICAL INFORMATION, THE FOLLOWING DISCUSSION CONTAINS CERTAIN
FORWARD-LOOKING STATEMENTS THAT INVOLVE KNOWN AND UNKNOWN RISKS AND
UNCERTAINTIES, SUCH AS STATEMENTS OF OUR PLANS, OBJECTIVES, EXPECTATIONS AND
INTENTIONS. SEE "CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS."

Overview

      We are a leading provider of end-to-end financial transaction processing
software solutions for financial institutions. These solutions are grouped into
three broad categories: (i) payment processing and management, (ii) foreign
exchange settlement processing and (iii) delivery channels for financial
institutions cash management products, which enable banks to process and manage
communication between financial institutions and their customers. The solutions
facilitate communication between financial institutions and their customers for
initiating payments, making inquiries and managing their activities with the
financial institutions. Our client/server web-enabled software products automate
the payment and settlement processes and provide real-time transaction
processing capabilities to financial institutions 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. To date, we have derived substantially all of our
revenues from licenses of our ACCESS Banking(TM), CASHplus(TM), FEDplu$(TM),
PAY$tar(TM), PAYplus RTGS(TM), PAYplus for CLS(TM), Recovery Services and
service bureau solutions and related services and third-party hardware sales.

A. Operating Results.

Revenue Recognition

      Our revenues are generated from licensing the rights to use our software
products directly to end-users, sales of professional services, including
consulting, implementation and training. We also provide hosting services,
contingency and recovery services, as well as maintenance and sales of hardware.

      Revenue from software license agreements are recognized when all criteria
outlined in Statement of Position (SOP) 97-2 "Software Revenue Recognition" (as
amended) ("SOP 97-2") 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.

      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. 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 as prescribed by SOP 98-9 "Modification of SOP
97-2, Software Revenue Recognition With Respect to Certain Transactions." Under
the residual method, revenue is recognized for the delivered elements when (i)
there is VSOE of the fair values of all the undelivered elements, and (ii) all
revenue recognition

                                       19
<PAGE>

criteria of SOP 97-2, as amended, are satisfied. Under the residual method any
discount in the arrangement is allocated to the delivered element or elements.

      Although we generally do not grant rights of return to our customers, we
usually provide a warranty period of up to six months at no extra charge. As of
December 31, 2002 and 2001, the provision for warranty cost is immaterial.

      Through December 31, 2001 we applied Emerging Issues Task Force (EITF) No.
00-03 "Application of AICPA Statement of Position 97-2 to Arrangements That
Include the Right to Use Software Stored on Another Entity's Hardware" regarding
revenues from ASP/Outsourcing solutions and Wire-up contingency processing
centers arrangements. Such arrangements also included extended payment terms of
more than twelve months (generally 36 to 60 months). In accordance with SOP
97-2, 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 provides that the
software vendor can overcome the presumption that the software license fees are
not fixed or determinable if the vendor has a standard business practice of
using long-term or installment contracts and has a history of successfully
collecting the software license fees under the original payment terms of the
software license arrangement without making concessions. We have concluded that
for these arrangements the "fixed or determinable" presumption had been overcome
and the related software license fees had been recognized upon meeting the
remaining SOP 97-2 revenue recognition criteria. The present value of such
software license fees recognized in 2000, 2001 and 2002 totaled approximately
$5,000, $1,883 and $0, respectively.

      In 2002, we changed our business practice regarding ASP/outsourcing and
Wire-up arrangements in a manner that it no longer grants software license
rights in these arrangements. Revenues from such arrangements are recognized as
the related services are provided. Accordingly, no additional long-term trade
receivables arise from these arrangements.

      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 the 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.

      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.

      Revenue from maintenance is recognized over the life of the maintenance
agreement.

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

Other Critical Accounting Policies

      Our trade receivables and long-term trade receivables primarily include
amounts due from banks and large financial institutions. Although we generally
do not require collateral, in certain circumstances letters of credit, other
collateral or additional guarantees may be required. An allowance for doubtful
accounts is determined for those specific amounts that we believe are not likely
to be collected. 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 $717,000, and $5,966,000 and $1,335,000 for 2000, 2001 and 2002,
respectively.

      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. Held-to-maturity securities
include debt securities, which we are able, and intend, to hold to maturity.
Debt securities that we do not have the intent or ability to hold to maturity,
are classified as available-for-sale. We do not hold any equity securities
classified as trading securities.

                                       20
<PAGE>

      As of December 31, 2002 all marketable securities are designated as
held-to-maturity and, accordingly, are stated at amortized cost. Interest
income, including the amortization of premium and discount, are included in the
consolidated statement of operations.

      Software development costs incurred in the process of developing product
improvements or new products are generally charged to expenses as incurred.

      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, we capitalized development costs totaling
$7,876,000 in aggregate. In 2002 we started amortizing the capitalized
development costs and we did not capitalize any additional development costs.
The 2002 amortization costs relating to the capitalized development costs
totaled $1,182,000.

      In response to declines associated with the current cautious information
technology spending environment within the financial services industry, we
adopted three restructuring plans during the third and fourth quarters of 2002
and the second quarter of 2001.

      In 2002, two plans consisted of employee termination benefits associated
with the involuntary termination of 78 employees (61 research and development
and professional services employees, 12 administrative employees and 5 sales and
marketing employees) and the closure and sublet of portions of existing office
space.

      In 2001, a 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 sales and
marketing employees) and the sublet of portions of existing office space. As
part of the plan, we also consolidated aspects of our Dallas operations into our
existing Atlanta operations in order to improve efficiency and eliminate
duplicate costs.

      All restructuring plans were substantially completed by February 2003. We
began to realize the benefits of the plan in 2001 and continued to see such
benefits during 2002 as evidenced by the reduction in the total sum of
maintenance and services costs, research and development costs (including
capitalized development costs), selling and marketing costs and, general and
administrative costs (together, "Certain Costs"). Certain Costs declined from
$16.4 million in the second and third quarters of 2001 to $14.0 in the fourth
quarter of 2001 and continued to decline to $12.4, $12.5, $11.9 and $10.9
million in the first, second, third and fourth quarters of 2002, respectively.

      The currency of the primary economic environment in which our operations
are conducted is the U.S. dollar. Thus, we use the dollar as our functional and
reporting currency. Transactions and balances in other currencies are
re-measured into dollars in accordance with the principles set forth in FASB
Statement No. 52. Exchange gains and losses arising from re-measurement are
recorded as income or expense, as applicable. See Item 5A, "Operating and
Financial Review and Prospects -- Operating Results -- Impact of Inflation and
Currency Fluctuations; Market Risks."

      The financial statements of our foreign subsidiaries 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 income
(loss) in shareholders' equity.

      Israeli companies, such as ours, are generally subject to Israeli 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 subsection B of this Item 5, "Effective
Corporate Tax Rate" and Item 10E, "Additional Information -- Taxation."

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 approximately $18.8
million in cash (including acquisition expenses) for the acquired CheckFree
businesses. The transaction was accounted for as a

                                       21
<PAGE>

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. ("Sterling")
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 pre-acquisition 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 Pre-acquisition 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:

<TABLE>
<CAPTION>

                                                                   Year Ended December 31,
                                                        -------------------------------------------
                                                          2000               2001             2002
                                                        --------           -------          -------
Revenues:

<S>                                                        <C>               <C>              <C>
   Software license fees.........................          59.4%             37.9%            25.3%
   Maintenance and service fees..................          37.6              60.2             73.7
   Hardware sales................................           3.0               1.9              1.0
                                                        -------             -----            -----
     Total revenues                                       100.0             100.0            100.0
                                                        -------             -----            -----

Operating Expenses:
   Software license costs.......................            0.5               2.0              1.8
   Maintenance and service costs................           27.0              42.6             44.2
   Hardware Costs...............................            2.4               1.5              0.8
   Research and development.....................           37.0              42.6             36.5
   Selling and marketing, net...................           20.1              22.9             23.7
   General and administrative...................           12.8              20.3             18.1
   Amortization of capitalized software
     development costs..........................             --                --              3.0
   Amortization of acquisition, -
     related goodwill...........................            3.3               3.7               --
Amortization of other acquired
 intangible assets.............................             1.8               1.9              2.3
Provision for doubtful accounts.................            1.5              13.3              3.3
Restructuring expenses..........................             --               5.7              8.2
Non recurring expenses..........................             --               3.3

Total operating expenses........................          106.4             159.8            141.9
                                                        -------             -----            -----
Operating income (loss).........................           (6.4)            (59.8)           (41.9)
Impairment and realized losses on
   available for sale marketable
   securities...................................             --             (17.4)            (0.7)
Financial income, net...........................           11.6               7.4              1.7
                                                       --------           -------          -------
Income (loss) before income taxes...............            5.2             (69.8)           (40.9)
                                                       --------           -------          -------


                                       22
<PAGE>

<CAPTION>

                                                                   Year Ended December 31,
                                                        -------------------------------------------
                                                          2000               2001             2002
                                                        --------           -------          -------

<S>                                                        <C>               <C>              <C>
Income taxes....................................           (0.2)             (0.5)            (0.9)
                                                       --------           -------          -------
Net income (loss)...............................            5.0%            (70.3)%          (41.8)%
                                                       ========           =======          =======
</TABLE>



Significant Revenue Information

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

<TABLE>
<CAPTION>

                                   2000                       2001                        2002
                                   ----                       ----                        ----
                             TOTAL                      TOTAL                      TOTAL
                           REVENUES    PERCENTAGE     REVENUES    PERCENTAGE      REVENUES    PERCENTAGE
                           --------    ----------     --------    ----------      --------    ----------
<S>                        <C>             <C>        <C>              <C>        <C>             <C>
Israel                     $   574         1.2%       $   205          0.4%       $   142         0.4%
U.S.A                       27,610        57.5         31,610         70.3         26,272        66.0
Australia                    4,062         8.5             --           --            140         0.4
Switzerland                  6,313        13.2          7,381         16.4          7,801        19.6
Other                        9,389        19.6          5,798         12.9          5,473        13.6
                           -------     -------        -------        -----        -------       -----
                           $47,948       100.0%       $44,994        100.0%       $39,828       100.0%
                           =======     =======        =======        =====        =======       =====
</TABLE>


Major Customer

      We derived approximately 17% and 18% of our annual revenues from the
license, consulting and maintenance service fees earned in connection with an
agreement with a leading international financial institution in 2001 and 2002,
respectively. See Item 4B, "Information on the Company -- Business Overview -
Customers and Markets." In 2003 we have entered into new orders under this
agreement which will likely result in an increase in fees earned from this
customer in 2003. We also anticipate that these fees will represent a higher
percentage of our total annual revenue in 2003 as compared to 2002. 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.

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

      Software License Fees. Software license fees consist of revenues derived
from software license agreements we enter into with our customers. Software
license fees decreased by $6,999,000, or 41%, to $10,068,000 in the year ended
December 31, 2002 from $17,067,000 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
$2,270,000, or 8%, to $29,355,000 in the year ended December 31, 2002 from
$27,085,000 in the year ended December 31, 2001. 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 $437,000, or 52%, to $405,000 for the year ended
December 31, 2002 from $842,000 in the year ended December 31, 2001. The
decrease in hardware sales is attributable to a decrease in the number of
software license transactions in connection with which the customer also
purchased hardware through us.

      Software License Costs. Software license costs consist primarily of
royalty payments and other costs related to product media, duplication, manuals,
shipping and third party embedded software costs. Software license costs
decreased by $193,000, or 22%, to $703,000 in the year ended December 31, 2002,
from $896,000 in the year ended December 31, 2001. The decrease in costs is
primarily due to a decrease in royalty payments and third-party embedded
software costs.

      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 decreased by $1,541,000 or 8.0% to $17,612,000 in
the year ended December 31, 2002, from $19,153,000 in the year ended December
31, 2001. The decrease in costs is principally due to the cost cutting measures
we undertook during 2001 and 2002 which resulted in a reduction in personnel and
personnel related expenses.

                                       23
<PAGE>

      Hardware Costs. Hardware costs consist primarily of our cost of computer
hardware resold to our customers. The cost of hardware sales decreased by
$369,000, or 53.8%, to $317,000 in the year ended December 31, 2002 from
$686,000 in the year ended December 31, 2001. The reduction in costs is
commensurate with the decrease in hardware sales. Software Development. Software
development expenses are related to the development of new products, enhancement
of existing products and testing of products. Software development expenses
decreased by $4,660,000, or 24.3%, to $14,525,000 in the year ended December 31,
2002, from $19,185,000 in the year ended December 31, 2001. These amounts
exclude $5,901,000 of capitalized costs in the year ended December 31, 2001,
incurred for the development of our Global PAYplus product. We did not
capitalize any software development costs in 2002. The decrease in costs is
principally due to the cost cutting measures we undertook during 2001 and 2002,
which resulted in a reduction in personnel and personnel related expenses.

      Selling and Marketing, Net. Selling and marketing expenses decreased by
$872,000, or 8.4%, to $9,453,000 in the year ended December 31, 2002 from
$10,325,000 in the year ended December 31, 2001. Selling and marketing expenses
as a percentage of revenues increased slightly to 23.7% in the year ended
December 31, 2002 from 22.9% in the year ended December 31, 2001. The reduction
in sales and marketing expenses was principally due to a reduction in marketing
programs as well as lower sales costs associated with the reduced revenues.

      General and Administrative. General and administrative expenses decreased
by $1,886,000, or 20.7%, to $7,230,000 in the year ended December 31, 2002 from
$9,116,000 in the year ended December 31, 2001. This decrease is due to the
headcount reduction of general and administrative personnel and decreases in
professional and consulting fees.

      Amortization of Capitalized Software Development Costs. In 2002 we started
amortizing capitalized software development costs, which were incurred through
December 31, 2001 in connection with our Global PAYplus product. For the year
ended December 31, 2002 amortization costs amounted to $1,182,000 compared to
zero in the year ended December 31, 2001.

      Amortization of Acquisition-Related Goodwill and other Acquired Intangible
Assets. In July 2001, the Financial Accounting Standards Board (FASB) issued
SFAS No. 141 "Business Combinations" ("SFAS No. 141") and No. 142, "Goodwill and
Other Intangible Assets" ("SFAS No. 142"). SFAS No. 141 requires all business
combinations initiated after June 30, 2001 to be accounted for using the
purchase method. Under SFAS No. 142, goodwill and intangible assets with
indefinite lives are no longer amortized, effective January 1, 2002, but are
reviewed annually (or more frequently if impairment indicators arise) for
impairment. Identifiable intangible assets that are not deemed to have
indefinite lives will continue to be amortized over their useful lives (but with
no maximum life). The adoption of SFAS No. 142 resulted in a reduction of
amortization expenses in the amount of approximately $1,663,000 in the year
ended December 31, 2002 compared to the year ended December 31,2001.
Amortization expenses relating to other acquired intangible assets increased
$49,000, or 5.7%, from $862,000 in the year ended December 31, 2001 to $911,000
in the year ended December 31, 2002.

      Provision for Doubtful Accounts. Management's assessment for uncertainties
of outstanding debts collectibility resulted in a provision for doubtful
accounts totaling $1,335,000 for the year ended December 31, 2002. Of this
amount, $860,000 related to a settlement of a dispute with one customer. In 2001
the provision for doubtful accounts amounted to $5,966,000.

      Restructuring expenses. In connection with the three restructuring plans
we adopted in 2001 and 2002, we recorded non-recurring expenses totaling
$2,573,000 and $3,252,000 in 2001 and 2002, respectively. These non-recurring
expenses included: (i) facility closures and related costs in the amount of
$1,513,000 in 2001 and $1,794,000 in 2002; (ii) employee termination benefits
and related costs in the amount of $790,000 in 2001 and $1,458,000 in 2002 and
(iii) in 2001, property and equipment abandonment in the amount of $270,000. The
three plans resulted in the involuntary termination of 89 employees in 2001 and
78 employees in 2002.

      Impairment of Marketable Securities. The charge for impairment and
realized losses on available-for-sale marketable securities was $281,000 for the
year ended December 31, 2002, as compared to $7,826,000 for the year ended
December 31, 2001.

      Financial Income, Net. Net financial income decreased by $2,652,000, or
79.3%, to $691,000 in the year ended December 31, 2002 from $3,343,000 in the
year ended December 31, 2001. The decrease of the net financial income is
primarily due to a decrease in the interest and dividend rates we earned on our
cash, cash equivalents and marketable securities, as well as the decline in the
average balances of cash, cash equivalents and marketable securities.

                                       24
<PAGE>

      Income Taxes. Income tax increased $153,000, or 72%, to $365,000 for the
year ended December 31, 2002 as compared to $212,000 for the year ended December
31, 2001. The increase was primarily due to the elimination of a deferred tax
asset in 2002 and the recording of a deferred tax asset in 2001.

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

      Software License Fees. 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 increased by
$9,066,000, or 50.3%, to $27,085,000 in the year ended December 31, 2001 from
$18,019,000 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 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 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 increase in costs is primarily due to an
increase in third-party embedded software costs and royalties.

      Maintenance and Services Costs. Maintenance and services costs increased
by $6,193,000 or 47.8% to $19,153,000 in the year ended December 31, 2001, from
$12,960,000 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.

      Hardware Costs. 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. Software Development. 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),
CASHplus(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 2.8% to 22.9% in the year ended
December 31, 2001 from 20.1% 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 $2,983,000, or 48.6%, to $9,116,000 in the year ended December 31, 2001 from
$6,133,000 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.

      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

                                       25
<PAGE>

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 "Other Critical Accounting
Policies" in this subsection A of Item 5, above.

      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 not a temporary one,
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.

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
dollar. Inflation in Israel will have a negative effect on our profitability of
contracts under which we receive payments in dollars or 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 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
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
dollar against the NIS was at the rate of 9.3%. In 2002 the rate of inflation
was 6.7% and the rate of devaluation of the NIS against the dollar was at the
rate of 0.5%.

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

      Because exchange rates between the NIS and the 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.

B.  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, 2002, working capital was $44.6 million, of which cash and cash
equivalents and marketable securities were $42.5 million.

      Cash flows from operations. Net cash used in operating activities amounted
to $1.7 million for the year ended December 31, 2002 as compared to $5.1 million
for the year ended December 31, 2001. This decrease of $3.4 million was
primarily due to the decrease in our net loss, as well as the net decrease in
trade receivables and long-term trade receivables.

      Cash flows from investing activities. Net cash used in investing
activities amounted to $12.2 million for the year ended December 31, 2002 as
compared to net cash provided from investing activities which amounted to $26.6
million for the

                                       26
<PAGE>

year ended December 31, 2001. During the year ended December 31, 2002, proceeds
from sales of marketable securities amounted to $5.2 million compared to $33.8
million for the year ended December 31, 2001 while investments in marketable
securities amounted to $15.7 million compared to $0.0 million in the year ended
December 31, 2001. Purchase of property and equipment declined from $2.3 million
for the year ended December 31, 2001 to $1.3 million for the year ended December
31, 2002. 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 financing
activities was $0.1 million for the year ended December 31, 2002 as compared to
$0.3 million for the year ended December 31, 2001. The decrease was due to the
decrease in proceeds from the issuance of share capital and exercise of stock
options and warrants, net, offset by the purchase of treasury stock in the
amount of $88,000 in 2002.

      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.

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, 2002, we had net operating loss ("NOL") carry forwards of
approximately $46.6 million and $14.6 million in the U.S. and in Israel,
respectively. The U.S. NOL carry forwards begin to expire in 2010 through 2017
and the Israeli NOL carry forwards have no expiration. See Note 14 to the
Consolidated Financial Statements.

C. Research and Development, Patents and Licenses, etc.

      During 2002, $14,525,000 in current expense charges were made with no
capitalized costs. During 2001, the Company incurred $19,185,000 in current
expense charges and, in addition, capitalized $5,901,000 in research and
development costs relating to its Global PAYplus software. During 2000, the
Company incurred $17,747,000 in current expense charges and, in addition,
capitalized $1,975,000 in research and development costs relating to its Global
PAYplus software.

D.  Trend Information.

      Recently, the worldwide financial services industry has been experiencing
a slowdown, resulting in decreases and delays in the procurement and deployment
of new technology and services. In addition, many financial information
technology firms have experienced, and are continuing to experience, substantial
declines in sales and revenues and have incurred significant operating losses.
As a result, we experienced a significant decline in revenues in 2001 and 2002.

      Although spending on technology in the financial services industry appears
to be poised for an increase, the amount of the increase over the next twenty
four months appears to be small and we cannot predict the extent of any impact
that it may have on our revenues or results of operations. The slow growth or a
lack of growth in the amount of technology spending within our core market
sector may result from circumstances unrelated to us or our product offerings
and over which we do not have any control. See Item 5A, "Operating and Financial
Review and Prospects -- Operating Results."

ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.

A. Directors and Senior Management.

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

                                       27
<PAGE>


                 NAME               AGE    POSITION
                 ----               ---    --------
           Reuven Ben Menachem      42     Chief Executive Officer and Chairman
           Yeoshua Agassi           54     Director
           Rony Ross                57     Director
           Meir Shannie             57     Director
           Gil Weiser               61     Director
           George M. Lieberman      60     Director
           Ben-Zion Zilberfarb      53     Director

           Joseph J. Aulenti        56     Senior Vice President, General
                                           Counsel and Secretary
           Yoram Bibring            45     Chief Financial Officer
           Joseph P. Mazzetti       62     Executive Vice President,
                                           International Sales & Marketing
           Michael Sgroe            47     Chief Operating Officer
           George M. Stetter        57     Executive Vice President of
                                           Corporate and Strategic Planning(1)

           (1) Mr. Stetter resigned his position effective December 31, 2002.

      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
from 1986 until 1992, 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 to joining Manof, Mr. Ben Menachem
served as a senior programmer/analyst in the Israeli Air Force.

      Yeoshua Agassi, has served as a director of Fundtech since July 2001.
Since the spring of 2001, Mr. Agassi has served as Executive Vice President 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. In parallel, since September 2001, Mr. Agassi has served as the Chief
Executive Officer and President of Scitex Corporation Ltd., a leader in
industrial ink jet printing systems and technologies located in Tel Aviv,
Israel. 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,
Israel, which he co-founded in 1993. Before founding IDI, Mr. Agassi was
employed from 1987 until 1992 at The Magen Insurance Company, an insurance
company located in Tel Aviv, Israel, 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.

      Rony Ross has served as a Director since February 2002. She is the
Executive Chairman and founder of Panorama Software Ltd., a developer and
marketer of Business Intelligence and on-line analytical processing (OLAP)
systems and has been its CEO since 1993 till 2002. Ms. Ross has over 25 years
experience in the Software and Hi-Tech Industry. Ms. Ross is a director of
Radcom. She holds a B.Sc. degree in Mathematics and Statistics from Tel Aviv
University, an M.B.A. degree from the Recanati Management School of Tel Aviv
University and an M.Sc. degree 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.
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 Board of Directors of
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, and ECI Telecom Ltd., a provider of
integrated network solutions for digital telecommunications and

                                       28
<PAGE>

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 of Fundtech since July 2000 and as a
consultant to BBP, the Company's indirectly wholly owned Swiss subsidiary since
May 2001. Mr. Weiser is presently serving as a director of Tercom, Clicksoft,
VKB and Safebit. In addition, Mr. Weiser has served as a director of the Tel
Aviv Stock Exchange since January 2001. From 2000 until 2001, Mr. Weiser served
as the Vice Chairman of Orama, an Israeli/U.S. merchant bank located in Tel
Aviv, Israel. 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 until 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 in Haifa as well as an M.S.E.E. in Electronics
Computer Sciences from the University of Minnesota.

Currently Serving External Directors

      George M. Lieberman has served as a Director since 1998 and as an external
director since 2000. Mr. Lieberman is currently CEO of Gen3 Partners Inc., a
technology development firm serving the global 1000 located in Boston,
Massachusetts. 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.

      Ben-Zion Zilberfarb has served as an external 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.

Senior Management

      Joseph Aulenti was appointed Senior Vice President, General Counsel and
Secretary of Fundtech on October 1, 2002. Mr. Aulenti previously served as
Associate General Counsel since joining Fundtech in August 2001. Prior to
joining Fundtech, Mr. Aulenti was engaged in private practice representing
information technology companies from October 2000 until August 2001. From May
1995 until October 2000, Mr. Aulenti served as Senior Vice President and Chief
Legal Officer of Century Technology Group, Inc., a privately held technology
solutions provider located in Falls Church, Virginia. From 1991 to 1995, Mr.
Aulenti served as Senior Vice President - Group Counsel of Fiserv, Inc., a
leading provider of banking technology solutions located in Milwaukee,
Wisconsin. Mr. Aulenti was Senior Vice President and General Counsel of Citicorp
Information Resources, Inc., a leading financial information technology
solutions provider located in Stamford, Connecticut

                                       29
<PAGE>

from January 1986 until it was acquired by Fiserv in June 1991. Mr. Aulenti
graduated from the Catholic University of America with a B.A., holds a M.Sc.
from the University of Bridgeport and a J.D. from Fordham University.

      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 its 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.

      Joseph P. Mazzetti joined Fundtech in November 1994 and is currently
serving as EVP Global Sales and Marketing. 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.

      Michael Sgroe has served as Chief Operating Officer since January of 2003.
Mr. Sgroe was President of U.S. Products and Operations from January 2001 to
January of 2003 and Senior Vice President and General Manager of the U.S.
Payments Division since May 2000, when he joined Fundtech. 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. 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.

B. Compensation.

      We have entered into an employment agreement with Reuven Ben Menachem
which provides for annual review of his compensation by the Compensation
Committee and Board of Directors. Mr. Ben Menachem's compensation is also
subject to shareholder approval. It also provides for a notification period in
the event the agreement is terminated without cause.

      The aggregate remuneration we paid for the year ended December 31, 2002 to
our directors, executive officers and former executive officers as a group was
$1,191,105 in salaries. In addition, certain officers are provided a car
allowance that totaled $58,282.00 for 2002. The Company does not maintain any
pension or retirement plans requiring funds to be set aside.

      All directors are reimbursed for their expenses for each board meeting
attended. For our external directors, such reimbursement is made in accordance
with the applicable provisions of the Companies law. For additional information,
please see the discussion set forth under "External Directors," in subsection C
of this Item 6.

                                       30
<PAGE>

Directors Compensation

      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. All directors are reimbursed for their
expenses as noted above. Directors also receive options to purchase Ordinary
Shares as noted below.

Option Grants in Last Fiscal Year

      During 2002, options to purchase 212,000 Ordinary Shares were granted to
our directors and executive officers. The weighted average exercise price of
these outstanding options was $4.80 per share for directors and $3.55 per share
for officers, with vesting over a two to four year period. All options were
issued pursuant to the Director's Stock Option Plan and the 1999 Employee Option
Plan (the "Option Plans"). Options granted under the director's Stock Option
Plan expire five years from the date of grant. Options granted under the 1999
Employee Option Plan expire ten years from the date of grant.

      On July 16, 2002, certain directors and executive officers of Fundtech
tendered and irrevocably canceled options to purchase a total of 173,000
Ordinary Shares of Fundtech previously granted to them. On January 17, 2003 we
granted to such directors and executive officers 173,000 options in exchange for
such tendered options.

C. Board Practices.

      The following table sets forth certain information concerning our current
directors and executive officers:

<TABLE>
<CAPTION>

                                                    Commencement of         Termination/Renewal
      Name             Current Office(s) Held           Office                Date of Office
      ----             ----------------------       ----------------        -------------------

<S>                   <C>                          <C>                     <C>
Reuven Ben Menachem    Chief Executive Officer      October 28, 2002        2003 Annual Meeting
                       and Chairman

Yeoshua Agassi         Director, Member             October 28, 2002        2003 Annual Meeting
                       Compensation Committee

Rony Ross              Director (independent)       October 28, 2002        2003 Annual Meeting

Meir Shannie           Director                     October 28, 2002        2003 Annual Meeting

Gil Weiser             Director (independent),      October 28, 2002        2003 Annual Meeting
                       Member Audit Committee

George M. Lieberman    Director                     November 30, 2000       2003 Annual Meeting
                       (external/independent),
                       Member Audit and
                       Compensation Committees

Ben-Zion Zilberfarb    Director                     January 10, 2000        2004 Annual Meeting
                       (external/independent),
                       Member Audit and
                       Compensation Committees

Joseph Aulenti         Senior Vice President,       October 1, 2002         Not Applicable
                       General Counsel and
                       Secretary

Yoram Bibring          Chief Financial Officer      September 6, 2001       Not Applicable

Joseph P. Mazzetti     Executive Vice               June 1, 2001            Not Applicable
                       President, International
                       Sales & Marketing

Michael Sgroe          Chief Operating Officer      June 1, 2001            Not Applicable

George M. Stetter      Executive Vice President     February 1, 2001        December 31, 2002 (1)
                       of Corporate and
                       Strategic Planning
</TABLE>


                                       31

<PAGE>

      (1) Mr. Stetter resigned his position effective December 31, 2002.

      Our Articles of Association (the "Articles of Association"), provide that,
unless otherwise resolved by an ordinary resolution of the General Meeting, our
Board of Directors shall consist of not less than five and not more than seven
directors. 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
"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 and vote at a meeting in respect of which such notice has
been sent and 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 "external" directors under
the Companies Law, are elected by a 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.

      We have no service contracts in place with any of our directors that
provide for benefits upon termination of their services as directors.

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 to 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/or
      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 "external"
directors within the meaning prescribed by the Companies Law.

                                       32
<PAGE>

Independent Directors

      The Ordinary Shares offered in our initial public offering are listed for
quotation on the NASDAQ National Market and are subject to the rules of the
NASDAQ National Market applicable to quoted companies. Under the NASDAQ rules,
we are required to appoint a minimum of three independent directors. The
independence standard under the NASDAQ rules excludes any person who is a
current or former employee of a company as well as the immediate family members
of an executive officer of a company. George Lieberman, Gil Weiser, Ben-Zion
Zilberfarb and Rony Ross qualify as independent directors and meet the
independence standard of the NASDAQ rules.

Duties under the Companies Law

      The Companies Law codifies the fiduciary duties that an "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.

Audit Committee

      Pursuant to the Companies Law, the Board of Directors of a public company
must appoint an Audit Committee. 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 we employ
or any director who provides significant services to us on a regular basis or a
controlling shareholder or his relative. The roles of our audit committee under
the Companies Law include identifying irregularities in the management of the
company's business and approving related party transactions as required by law.
The responsibilities of the audit committee under the NASDAQ rules include,
among other things, evaluating the independence of a company's outside auditors.

      In addition to such functions as the audit committee may have under the
Companies Law or under the NASDAQ rules, the primary purpose of our audit
committee is to assist the board of directors in fulfilling its responsibility
to oversee management's conduct of the financial reporting process, the systems
of internal accounting and financial controls and the annual independent audit
of the company's financial statements. The audit committee reviews with
management and our outside auditors the audited financial statements included in
our Annual Report on Form 20-F and our interim quarterly financial results
included on Form 6-K.

      The audit committee must observe the independence of our outside auditors
and has the authority and responsibility to nominate for shareholder approval,
evaluate and, where appropriate, replace our outside auditors.

      In discharging its oversight role, our audit committee is empowered to
investigate any matter brought to its attention with full access to all books,
records, facilities and personnel of our company and the power to retain outside
counsel, auditors or other experts for this purpose.

Internal Auditor

      Under the Companies Law, the board of directors of a public company must
appoint an internal auditor proposed by the audit committee. The duty of the
internal auditor is to examine, inter alia, whether the company's conduct
complies with applicable law and orderly business procedure. The internal
auditor may participate in all audit committee meetings and has the right to
demand that the chairman of the audit committee convenes a meeting. Under the
Companies Law, the internal auditor may not be an interested party, an office
holder or a relative of any of the foregoing, nor may the internal auditor be
the

                                       33
<PAGE>

company's independent accountant or its representative. The Companies Law
defines the term "interested party" to include a person who holds 5% or more of
the company's outstanding share capital or voting rights, a person who has the
right to appoint one or more directors or the general manager, or any person who
serves as a director or as the general manager. We have appointed BKR Yarel,
Haguel & Co., as the internal auditor.

NASDAQ National Market

      Our Ordinary Shares are listed for quotation on the NASDAQ National Market
and we are subject to the rules of the NASDAQ National Market applicable to
listed companies. Under the NASDAQ rules companies quoted on NASDAQ are required
to have at least three independent directors, maintain an audit committee, all
of whose members are independent and adopt an audit committee charter. The
responsibilities of the audit committee under the new NASDAQ rules include,
among other things, evaluating the independence of a company's outside auditors.
In addition, the Audit Committee is responsible for pre-approving all services
provided to us by our independent auditors. George Lieberman, Gil Weiser,
Ben-Zion Zilberfarb and Rony Ross qualify as independent directors under the
current NASDAQ National Market requirements. George Lieberman, Gil Weiser and
Ben-Zion Zilberfarb are members of the Audit Committee.

Compensation Committee Interlocks and Insider Participation

      The members of the Compensation Committee for the fiscal year ended
December 31, 2002 were Ben-Zion Zilberfarb, George Lieberman and Yeoshua 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.

D. Employees.

      As of December 31, 2002, we had 277 employees, of which 172 were located
in the United States, 44 were located in Israel, 46 were located in Switzerland,
12 were located in the United Kingdom, 2 were located in Australia and 1 was
located in Singapore. Of the 172 employees located in the United States, 64 were
employed in software development, 58 were employed in operations, 28 were
employed in sales and marketing and 22 were employed in administration. Of the
44 employees in Israel, 22 were employed in software development, 15 were
employed in operations, 3 were employed in sales and marketing and 4 were
employed in administration. Of the 46 employees in Switzerland, 12 were employed
in software development, 20 were employed in operations, 7 were employed in
sales and marketing and 7 were employed in administration. Of the 12 employees
in the United Kingdom, 5 were employed in operations, 7 were employed in sales
and marketing and 0 were employed in administration. Of the 2 employees in
Australia, 2 were employed in operations and 0 were employed in sales and
marketing. Our 1 employee in Singapore was employed in sales and marketing.

      In response to the business slowdown experienced during 2002 and its
impact on our revenues, we reduced our number of employees by 78. See Item 5D,
"Operating Results and Financial Review and Prospects -- Trend
Information."

      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(l) to the
Consolidated Financial Statements.

                                       34
<PAGE>

      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.

E. Share Ownership.

Security Ownership of Directors and Senior Management and Certain Key Employees

      As of May 1, 2003, the aggregate number of our Ordinary Shares
beneficially owned by our directors, senior managers and certain key employees
was 5,789,108 shares. This number includes beneficial ownership by a person, as
of a particular date, assumes the exercise of all options and warrants held by
such person that are currently exercisable or are exercisable within 60 days of
such date. Included in this number are 5,161,197 shares deemed beneficially held
by both Yeoshua Agassi and Meir Shannie who are affiliated with Clal Industries
and Investments Ltd.

Stock Option Plans

      Fundtech has established five plans for granting options to our employees
and one plan for granting options to our directors: the Fundtech Ltd. 1996
Israeli Stock Option Plan for the Employees of Fundtech Ltd. (the "1996 Israel
Plan"); the Fundtech Ltd. 1996 Stock Option Plan for Fundtech Corporation (the
"1996 U.S. Plan," and together with the 1996 Israel Plan, the "1996 Plans"); the
Fundtech Ltd. 1997 Stock Option Plan for Fundtech Corporation (the "1997 U.S.
Plan"); the Fundtech Limited the 1997 Israeli Share Option Plan for the
Employees of Fundtech Ltd. (the "1997 Israel Plan," and together with the 1997
U.S. Plan, the "1997 Plans"); the Fundtech Ltd. 1999 Employee Option Plan (the
"1999 Option Plan"); and the Fundtech Ltd. Directors' Option Plan (the
"Directors' Option Plan," and together with the 1996 Plans, the 1997 Plans and
the 1999 Option Plan, the "Company Option Plans"). The 1996 Israel Plan and 1996
U.S. Plan have expired. All of the other Company Option Plans are still active

      Pursuant to the Company Option Plans, a total of 2,485,640 options were
allocated for grant to employees and directors of Fundtech and its subsidiaries,
and an equal number of Ordinary Shares have been reserved for issuance upon the
exercise of such options. As of May 1, 2003, 1,698,137 of these options were
outstanding, 512,054 of these options had been exercised, and 787,509 options
remain available to be granted. On January 17, 2003, we issued 969,311 options
pursuant to the Offer To Exchange (as defined below). The following options have
been reserved and granted pursuant to the following plans.

1996 Stock Option Plans

      The 1996 Israel Plan was adopted in May 1996 and expired five years later.
As of May 1, 2003, 112,504 options had been exercised, no options remained
outstanding and no options remained available to be issued under the 1996 Israel
Plan.

      The 1996 U.S. Plan was adopted in October 1996 and expired five years
later. The options granted under the 1996 U.S. Plan vest over a period of four
years and expire five years from the date of grant. As of May 1, 2003, 182,572
options had been exercised, no options remained outstanding and no options
remained available to be issued under the 1996 U.S. Plan.

1997 Stock Option Plans

      The 1997 U.S. Plan was adopted in September 1997. The options granted
under the 1997 U.S. Plan expire five years from the date of grant and vest as
determined by the Compensation Committee at the time of the grant, generally
over a period of four years. As of May 1, 2003, 159,905 Ordinary Shares were
reserved and allocated to the 1997 U.S. Plan for option grants of which 2,000
options were outstanding and 157,905 options have been exercised. By
authorization of the shareholders granted on October 28, 2002, 330,956 options
were transferred to the 1999 Plan and no options remain available.

      The 1997 Israel Plan was adopted in December 1997. The options granted
under the 1997 Israel Plan expire five years from the date of grant and vest as
determined by the Compensation Committee at the time of the grant, generally
over a period of four years. As of May 1, 2003, 49,904 Ordinary Shares were
reserved and allocated to the 1997 Israel Plan of which 1,250 options were
outstanding and 48,654 options have been exercised. By authorization of the
shareholders granted on October 28, 2002, 491,814 options were transferred to
the 1999 Plan and no options remain available.


                                       35
<PAGE>

1999 Stock Option Plan

      The 1999 Option Plan was adopted in September 1999. The Compensation
Committee determines the vesting period and expiration period for options
granted under the 1999 Option Plan at the time of the grant. Other than
commitments under the Offer to Exchange (see Offer To Exchange/Tender Offer,
below), the options generally vest over a period of between three and four years
and expire between five and ten years from the date of grant. As of May 1, 2003,
2,155,815 Ordinary Shares were reserved and allocated to the 1999 Option Plan.
Of the 2,155,815 options available for grant under the 1999 Option Plan, as of
May 1, 2003, 1,048,897 options were outstanding, 10,419 options have been
exercised, and 1,036,749 options remain available to be issued.

Directors' Option Plan

      The Directors' Option Plan was adopted in May 1998. The options granted
under the Directors' Option Plan generally vest over a period between one and
two years and expire five years from the date of grant. As of May 1, 2003,
337,000 Ordinary Shares were reserved and allocated to the Directors' Option
Plan. Of the 337,000 options available for grant under the Directors' Option
Plan, as of May 1, 2003, 202,500 options were outstanding, no options have been
exercised, and 134,500 options remain available to be issued.

Offer To Exchange/Tender Offer

      In June 2002, we initiated an offer to exchange certain options held by
certain officers and employees under the 1997 Plans and the 1999 Option Plan
(the "Offer To Exchange"). The offer and withdrawal rights expired on July 15,
2002. We were obligated under the Offer to Exchange to grant 969,311 options to
our officers and employees who were continuously employed by and on active
service with Fundtech or one of its subsidiaries from the date the officers or
employees tendered their options through the date on which the new options were
granted. We issued the options pursuant to the Offer to Exchange on January 17,
2003.

ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.

A.  Major Shareholders.

      Filings made with the Securities and Exchange Commission between January
1, 2002 and April 30, 2003 reflect that: (i) the percentage of Ordinary Shares
held by Clal Industries and Investments Ltd. increased from 33.43% to 36.02% of
shares issued and outstanding and (ii) on May 2, 2002, Cannell Capital LLC filed
a Schedule 13G to report its ownership of 5.41% of our Ordinary Shares as of
April 22, 2002 which subsequently increased to 16.7% as of December 31, 2002.

      88.9% of our Ordinary Shares are held by record holders located in the
United States. 38 record holders are in the United States.

      Clal Industries and Investments Ltd. holds 36% of the voting stock of the
Company. Please see the beneficial ownership chart set forth below and footnote
1 thereto for further information.

      Our major shareholders do not have voting rights that differ from those of
our other shareholders.

      The following table summarizes information about the beneficial ownership
of our outstanding Ordinary Shares as of May 1, 2003 for each person or group
that we know owns 5% or more of our Ordinary Shares.

                                             NUMBER OF SHARES    PERCENTAGE
                                               BENEFICIALLY     BENEFICIALLY
           NAME OF BENEFICIAL OWNER               OWNED            OWNED*
           ------------------------          ----------------   ------------

               Principal Shareholders
               ----------------------

           Clal Industries and
           Investments Ltd.(1)........           5,161,197         35.9%

           Cannell Capital LLC(2) ....           2,383,800         16.6%

           All directors and executive
           officers as a group (11
           persons)(3)................           5,789,108         39.5%

                                       36
<PAGE>

   *  Based on 14,391,534 Ordinary Shares outstanding as of May 1, 2003.
      Ordinary Shares deemed beneficially owned by virtue of the right 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
      percentage owned by such person or group.

1.    As of December 4, 2002, Clal Industries and Investments Ltd. owns
      5,161,197 Ordinary Shares. IDB Development Corporation Ltd., IDB Holding
      Corporation Ltd., Leon Recanati, Oudi Recanati, Elaine Recanati and Judith
      Yovel Recanati have shared power to vote and dispose of the 5,161,197
      Ordinary Shares held by Clal Industries and Investments Ltd. In addition,
      Mr. Leon Recanati had the sole power to vote and dispose of 3,200 Ordinary
      Shares.

2.    Beneficial ownership consists of 2,383,800 Ordinary Shares held by
      investment advisory clients who have granted Cannell Capital LLC, for
      which J. Carlo Cannell is the Managing Member, discretionary authority to
      buy, sell and vote shares. Shares are held by The Anegada Fund Limited
      (572,000 Ordinary Shares); The Cuttyhunk Fund Limited (477,700 Ordinary
      Shares); Tonga Partners, L.P. (990,700 Ordinary Shares); GS Cannell
      Portfolio, LLC (235,200 Ordinary Shares); Pleiades Investment Partners,
      L.P. (108,200 Ordinary Shares). The address of Cannell Capital LLC is 150
      California Street, Fifth Floor, San Francisco, CA 99111.

3.    This number includes 5,161,197 Ordinary Shares deemed beneficially owned
      by Yeoshua Agassi and Meir Shannie who are affiliated with Clal Industries
      and Investments Ltd.

      We determine beneficial ownership of shares under the rules of the
Securities and Exchange Commission and include any Ordinary Shares over which a
person exercises sole or shared voting or investment power, or of which a person
has the right to acquire ownership at any time within 60 days. Applicable
percentage ownership in the table set forth above is based on 14,391,534
Ordinary Shares outstanding as of May 1, 2003.

B. Related Party Transactions.

      Gil Weiser, a member of the Board of Directors, receives $2,200 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 2004, 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.

Insurance

      We have obtained directors and officers liability insurance for the
benefit of our office holders and intend to continue to maintain such coverage
and pay all premiums thereunder to the fullest extent permitted by the Companies
Law. Under the Companies Law, an Israeli company may not exempt an office holder
from liability for a breach of his duty of loyalty, but may exempt in advance an
office holder from his liability to the company, in whole or in part, for a
breach of his duty of care.

      Our Articles of Association provide that, subject to the provisions of the
Companies Law, we may enter into a contract for the insurance of the liability
of any of our office holders for acts which he or she performed in his or her
capacity as an office holder in relation to:

      o     a breach of his/her duty of care to us or to another person;

      o     a breach of his/her duty of loyalty to us, provided that the office
            holder acted in good faith and had reasonable cause to assume that
            his/her act would not prejudice our interests; or

      o     a financial liability imposed upon him/her in favor of another
            person.

Indemnification

      We previously undertook to undertake to indemnify in advance our directors
and office holders for the breach of his or her duty of care to the fullest
extent permitted by the Companies Law.

                                       37
<PAGE>

      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.

C. Interests of Experts and Counsel.

      Not applicable.

ITEM 8.  FINANCIAL INFORMATION.

A. Consolidated Statements and Other Financial Information.

      The following Consolidated Financial Statements of Fundtech Ltd. and its
subsidiaries for the years ended December 31, 2000, 2001 and 2002, together with
the report of the independent auditors thereon, are presented under Item 18 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

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
we believe may have a material adverse effect on us or our business.



                                       38

<PAGE>

Dividend Distribution 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, 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 of Directors 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.

B.  Significant Changes.

      None



                                       39

<PAGE>

ITEM 9.  THE OFFER AND LISTING.

Market Price Information

      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
                                                        ----         ---
                    1998                               24 5/8       8 3/4
                    1999                               44 1/4      10 9/16
                    2000                               41 5/8      14 5/16
                    2001                              18 1/25        3.42
                    2002                                5.24         3.04

                    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                     5.24         3.54
                      Second Quarter                    4.58         3.61
                      Third Quarter                     4.00         3.04
                      Fourth Quarter                    4.35         3.19

                    2003                                4.20         3.38
                      First Quarter

                                       Most recent six months
                                       ----------------------
                    December 2002                       4.30         3.28
                    January 2003                        4.20         3.92
                    February 2003                       3.98         3.66
                    March 2003                          3.80         3.38
                    April 2003                          3.98         3.30
                    May 2003                            5.52         4.40


      On May 1, 2003, the last closing sale price of the Ordinary Shares, as
reported by the NASDAQ National Market, was $4.40 per share. As of May 1, 2003,
we had 55 shareholders of record. We believe that the number of beneficial
owners of the Ordinary Shares is approximately 1,360.

ITEM 10.  ADDITIONAL INFORMATION.

A.  Share Capital.

      Not Applicable.

B.  Memorandum and Articles of Association.

Company's objectives

      The Company's objectives, as set forth in our Articles of Association, are
to carry on any business and do any act which is not prohibited by law. We may
also make contributions of reasonable sums to worthy purposes even if such
contributions are not made on the basis of business considerations.


                                       40
<PAGE>

Directors

      Any director is entitled to vote in a meeting of our Board of Directors,
except that a director who has a personal interest in an "extraordinary
transaction" (as defined below) which is considered at a meeting of our Board of
Directors, may not be present at this meeting or vote on this matter. An
"extraordinary transaction" is defined in the Companies Law as a transaction
that is either (i) not in the ordinary course of business; (ii) not on market
terms; or (iii) that is likely to have a material impact on the Company's
profitability, assets or liabilities.

      A quorum at a meeting of our Board of Directors shall be constituted by
the presence in person, by alternate or by telephone or similar communication
equipment, of a majority of the directors then in office who are lawfully
entitled to participate and vote at the meeting.

      If within one-half hour (or within such longer time not to exceed one (1)
hour, as the Chairman of the meeting, at his discretion, may decide) from the
time appointed for the convening of the board meeting, a quorum is not present,
the board meeting shall stand adjourned to the same day in the next week at the
same time and place (unless such day shall fall on a public holiday either in
Israel or the United States, in which case the meeting will be adjourned to the
first day, not being a Friday, Saturday or Sunday, which follows such public
holiday). If, at such adjourned board meeting, a quorum is not present within
half an hour from the time appointed for holding the meeting, the directors
present, in person, by alternate or by telephone or similar communication
equipment who are lawfully entitled to participate and vote at such meeting,
shall be a quorum.

      Our business is managed by the Board of Directors, which may exercise all
such company powers and perform on our behalf all such acts as are not, by the
Companies Law or by our Articles of Association, required to be exercised or
performed through a general meeting of our shareholders. Our Articles of
Association provide that the Board of Directors may from time to time, at its
discretion, cause us to borrow or secure the payment of any sum or sums of money
for the Company's purposes, and may secure or provide for the repayment of such
sum or sums in such manner, at such times and upon such terms and conditions as
it deems fit, and, in particular, by the issuance of bonds, perpetual or
redeemable debentures, debenture stock, or any mortgages, charges, or other
securities on the undertaking of the whole or any part of our property, both
present and future, including its uncalled or called but unpaid capital for the
time being.

      There is no age limit as to the ability of individuals to serve as members
of our Board of Directors.

      A director is not required to hold our shares as a condition to his
nomination or election as a director.

Rights attached to our shares

      All dividends shall be declared by our Board of Directors and paid in
proportion to the amount paid up on account of the nominal value of the Ordinary
Shares in respect of which the dividend is being paid. As regards to Ordinary
Shares not fully paid throughout the period in respect of which the dividend is
paid, dividends in respect thereto shall be apportioned and paid pro rata
according to amounts deemed under our Articles of Association to be paid up on
account of the nominal value of such shares during any portion or portions of
the period in respect of which the dividend is paid.

      Under our Articles of Association, every shareholder who is present, in
person, by proxy, or by written ballot or is deemed under the Companies Law to
be present at a general meeting of the shareholders, shall be entitled to one
vote for each Ordinary Share of which he or she is the holder.

      The distribution of dividends is under the discretion of our Board of
Directors, which is under no obligation to distribute dividends to our
shareholders out of the Company's profits.

      Upon liquidation, all available surplus, after payments of all debts,
shall be distributed to our shareholders on a pro-rata basis.

Changes of rights attached to our shares

      Changes to the rights attached to our Ordinary Shares require the approval
of shareholders present, in person, by proxy, or by written ballot, or deemed
under the Companies Law to be present, holding greater than fifty percent (50%)
of the total voting power attached to the Ordinary Shares whose holders were
present, in person, by proxy, or by written ballot, or deemed under the
Companies Law to be present, at such general meeting, and voted thereon. If, at
any time, the share capital of

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<PAGE>

the Company is divided into different classes of shares, the right attached to
any class (unless otherwise provided by the terms of issue of the shares of that
class) may be varied only upon consent of a separate general meeting of the
holders of the shares of that class and the provisions of our Articles of
Association relating to general meetings shall apply to every such separate
general meeting. The enlargement of an authorized class of shares, or the
issuance of additional shares thereof out of the authorized and unissued share
capital, shall not be deemed to vary, modify or abrogate the rights attached to
previously issued shares of such class or of any other class of shares.

General Meetings

      We are required to hold an annual general shareholders meeting once in
every calendar year within a period of not more than fifteen (15) months after
the last preceding annual general shareholders meeting. All general shareholders
meetings other than the annual general shareholders meeting are deemed to be
special shareholders meetings. Our Board of Directors may call for a general
meeting whenever it sees fit, and, under the Companies Law, is required to call
a general meeting upon a demand in writing by (i) a shareholder or shareholders
holding at least 5% of the outstanding shares and 1% of the voting rights in the
company or (ii) a shareholder or shareholders holding at least 5% of the voting
rights in the company. Subject to applicable law and regulations, prior notice
of at least 21 days of any general shareholders meeting, specifying the place,
date and hour of the meeting, shall be given to the shareholders of the Company.
No business shall be transacted at any general shareholders meeting unless a
quorum is present when the meeting proceeds to business. For all purposes, the
quorum shall not be less than two (2) shareholders present in person, or by
proxy, or deemed by the Companies Law to be present at such meeting, holding, in
the aggregate, at least, thirty-three and one-third percent (33 1/3%) of the
voting rights in our issued share capital. If, within half an hour from the time
appointed for the meeting, a quorum is not present (or within such longer time
not exceeding one (1) hour as the Chairman of the meeting may decide), the
meeting, if convened upon the requisition of the shareholders, shall be
dissolved; in any other case, it shall stand adjourned to the same day in the
next week at the same place and time (unless such day shall fall on a public
holiday either in Israel or the United States, in which case the meeting will be
adjourned to the first day, not being a Friday, Saturday or Sunday, which
follows such public holiday), or any other day, hour and/or place as the
directors shall notify the shareholders. If a quorum is not present at the
second meeting within half an hour from the time appointed for the meeting, any
two shareholders present personally or by proxy or any other valid instrument,
shall constitute a quorum, and shall be entitled to deliberate and to resolve in
respect of the matters for which the meeting was convened.

Ownership of Our Shares

      Our Articles of Association and the laws of the State of Israel do not
restrict in anyway the ownership or voting of our shares by non-residents of
Israel.

Change of Control

      Our Articles of Association do not contain specific provisions intended to
delay, defer or prevent a change of control.

C.  Material Contracts.

      We have no material contracts which have been entered into outside the
ordinary course of business in the past two years.

D.  Exchange Controls.

      Until May 1998, Israel imposed restrictions on transactions in foreign
currency. These restrictions affected our operations in various ways, and also
affected the right of non-residents of Israel to convert into foreign currency
amounts they received in Israeli currency, such as the proceeds of a judgment
enforced in Israel. Despite these restrictions, foreign investors who purchased
shares with foreign currency were able to repatriate in foreign currency both
dividends (after deduction of withholding tax) and the proceeds from the sale of
the shares. In 1998, the Israeli currency control regulations were liberalized
significantly, as a result of which Israeli residents generally may freely deal
in foreign currency and non-residents of Israel generally may freely purchase
and sell Israeli currency and assets. There are currently no Israeli currency
control restrictions on remittances of dividends on the Ordinary Shares or the
proceeds from the sale of the shares; however, legislation remains in effect
pursuant to which currency controls can be imposed by administrative action at
any time.

      Neither our Memorandum of Association nor our Articles of Association nor
the laws of the State of Israel restrict in any way the ownership or voting of
Ordinary Shares by non-residents of Israel.

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<PAGE>

E.  Taxation.

United States Federal Income Tax Considerations

      Subject to the limitations described herein, the following discussion
summarizes the material United States federal income tax consequences to a U.S.
Holder of our Ordinary Shares. A "U.S. Holder" means a holder of our Ordinary
Shares who is:

      o     a citizen or resident of the United States;

      o     a corporation (or other entity taxable as a corporation) created or
            organized in the United States or under the laws of the United
            States or any political subdivision thereof;

      o     an estate, the income of which is subject to United States federal
            income tax regardless of its source; or

      o     a trust, (i) if, in general a court within the United States is able
            to exercise primary supervision over its administration and one or
            more U.S. persons have the authority to control all of its
            substantial decisions, or (ii) that has in effect a valid election
            under applicable U.S. Treasury regulations to be treated as a U.S.
            person.

      This discussion considers only U.S. Holders that will own their Ordinary
Shares as capital assets and does not purport to be a comprehensive description
of all of the tax considerations that may be relevant to each person's decision
to purchase Ordinary Shares.

      This discussion is based on current provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), current and proposed Treasury regulations
promulgated thereunder, and administrative and judicial decisions as of the date
hereof, all of which are subject to change, possibly on a retroactive basis.
Various legislative proposals are currently under consideration. Under such
proposals, among other things, certain dividends would be excluded from income
and individual income tax rates on ordinary income would be reduced. It is not
clear at this time whether, or in what form, any of such legislative proposals
(or other proposals) will be enacted, what the effective date of any such
changes would be, and what other changes would be made that could further affect
the tax consequences discussed herein. This discussion does not address all
aspects of United States federal income taxation that may be relevant to any
particular U.S. holder in light of such Holder's individual circumstances. In
particular, this discussion does not address the potential application of the
alternative minimum tax or United States federal income tax consequences to
shareholders that are subject to special treatment, including Holders that :

      o     are broker-dealers or insurance companies;

      o     have elected mark-to-market accounting;

      o     are tax-exempt organizations or retirement plans;

      o     are financial institutions or "financial services entities";

      o     hold Ordinary Shares as part of a straddle, "hedge" or "conversion
            transaction" with other investments;

      o     acquired their shares upon the exercise of employee stock options or
            otherwise as compensation;

      o     hold their shares through partnerships or other pass-through
            entities;

      o     own directly, indirectly or by attribution at least 10% of our
            voting power; or

      o     have a functional currency that is not the U.S. dollar.

      In addition, this discussion does not address any aspect of state, local
or non-United States tax laws or the possible application of United States
federal gift or estate tax.

                                       43
<PAGE>

      Each holder of Ordinary Shares is advised to consult such person's own tax
advisor with respect to the specific tax consequences to such person of
purchasing, holding or disposing of our Ordinary Shares, including the
applicability and effect of federal, state, local and foreign income tax and
other tax laws in such person's particular circumstances.

Taxation of Ordinary Shares

      Taxation of Dividends Paid On Ordinary Shares. A U.S. Holder will be
required to include in gross income as ordinary dividend income the amount of
any distribution paid on Ordinary Shares, including any Israeli taxes withheld
from the amount paid, on the date the distribution is received to the extent the
distribution is paid out of our current or accumulated earnings and profits as
determined for United States federal income tax purposes. Distributions in
excess of such earnings and profits will be applied against and will reduce the
U.S. Holder's basis in our Ordinary Shares and, to the extent in excess of such
basis, will be treated as gain from the sale or exchange of our Ordinary Shares.
The dividend portion of such distributions generally will not qualify for the
dividends received deduction available to corporations.

      Distributions of current or accumulated earnings and profits paid in
foreign currency to a U.S. Holder (including any Israeli taxes withheld
therefrom) will be includible in the income of a U.S. Holder in a U.S. dollar
amount calculated by reference to the exchange rate on the day the distribution
is received. A U.S. Holder that receives a foreign currency distribution and
converts the foreign currency into U.S. dollars subsequent to receipt will have
foreign exchange gain or loss based on any appreciation or depreciation in the
value of the foreign currency against the U.S. dollar, which will generally be
U.S. source ordinary income or loss.

      U.S. Holders will have the option of claiming the amount of any Israeli
income taxes withheld at source either as a deduction from gross income or as a
dollar-for-dollar credit against their United States federal income tax
liability. Individuals who do not claim itemized deductions, but instead utilize
the standard deduction, may not claim a deduction for the amount of the Israeli
income taxes withheld, but such amount may be claimed as a credit against the
individual's United States federal income tax liability. The amount of foreign
income taxes which may be claimed as a credit in any year is subject to complex
limitations and restrictions, which must be determined on an individual basis by
each shareholder. These limitations include, among others, rules which limit
foreign tax credits allowable with respect to specific classes of income to the
United States federal income taxes otherwise payable with respect to each such
class of income. The total amount of allowable foreign tax credits in any year
cannot exceed regular U.S. tax liability for the year attributable to foreign
source taxable income. A U.S. Holder will be denied a foreign tax credit with
respect to Israeli income tax withheld from a dividend received on the Ordinary
Shares if such U.S. Holder has not held the Ordinary Shares for at least 16 days
of the 30-day period beginning on the date which is 15 days before the
ex-dividend date with respect to such dividend, or to the extent such U.S.
Holder is under an obligation to make related payments with respect to
substantially similar or related property. Any days during which a U.S. Holder
has substantially diminished its risk of loss on the Ordinary Shares are not
counted toward meeting the required 16 day holding period. Distributions of
current or accumulated earnings and profits will be foreign source passive
income for United States foreign tax credit purposes.

      Taxation of the Disposition of Ordinary Shares. Upon the sale, exchange or
other disposition of our Ordinary Shares, a U.S. Holder will recognize capital
gain or loss in an amount equal to the difference between such U.S. Holder's
basis in such Ordinary Shares, which is usually the cost of such shares, and the
amount realized on the disposition. A U.S. Holder that uses the cash method of
accounting calculates the U.S. dollar value of the proceeds received on the sale
as of the date that the sale settles, while a U.S. Holder that uses the accrual
method of accounting is required to calculate the value of the proceeds of the
sale as of the "trade date," unless such U.S. Holder has elected to use the
settlement date to determine its proceeds of sale. Capital gain from the sale,
exchange or other disposition of Ordinary Shares held more than one year is
long-term capital gain, and is eligible for a reduced rate of taxation for
individuals. Gains recognized by a U.S. Holder on a sale, exchange or other
disposition of Ordinary Shares will be treated as United States source income
for United States foreign tax credit purposes. A loss recognized by a U.S.
Holder on the sale, exchange or other disposition of Ordinary Shares is
allocated to U.S. source income. The deductibility of a capital loss recognized
on the sale, exchange or other disposition of Ordinary Shares is subject to
limitations. A U.S. Holder that receives foreign currency upon disposition of
Ordinary Shares and converts the foreign currency into U.S. dollars subsequent
to the settlement date or trade date (whichever date the taxpayer was required
to use to calculate the value of the proceeds of sale) will have foreign
exchange gain or loss based on any appreciation or depreciation in the value of
the foreign currency against the U.S. dollar, which will generally be U.S.
source ordinary income or loss.

      Anti-Deferral Regimes. Notwithstanding the above rules regarding
distributions and dispositions, special rules may apply to some U.S. Holders (or
to the direct or indirect beneficial owners of some non-U.S. Holders) if one or
more anti-deferral regimes discussed below are applicable. The rules regarding
each of these regimes, as well as their interaction with each other, are
complex, and holders should consult their tax advisers with respect to any
impact these regimes may have on the tax consequences of their ownership of our
shares.

                                       44
<PAGE>

      Foreign Personal Holding Company Status. If at any time during a taxable
year more than 50% of the total combined voting power or the total value of our
outstanding shares is owned, actually or constructively, by five or fewer
individuals who are citizens or residents of the United States and 60% or more
of our gross income for such year was derived from certain passive sources
(e.g., from dividends received from our subsidiaries), we would be treated as a
"foreign personal holding company." In that event, U.S. Holders that hold
Ordinary Shares would be required to include in income for such year their
allocable portion of our passive income which would have been treated as a
dividend had that passive income actually been distributed.

      Controlled Foreign Corporation Status. If more than 50% of the voting
power of all classes of our stock or the total value of the stock of our company
is owned, directly or indirectly, by U.S. Holders, each of whom own after
applying rules of attribution 10% or more of the total combined voting power of
all classes of our stock, we would be treated as a "controlled foreign
corporation" or "CFC" under Subpart F of the Code. This classification would
bring into effect many complex rules including the required inclusion by such
10% U.S. Holders in income of their pro rata share of our "Subpart F income" (as
defined by the Code) and our earnings invested in "U.S. property" (as defined by
Section 956 of the Code). In addition, under Section 1248 of the Code if we are
considered a CFC at any time during the five year period ending with the sale or
exchange of our Ordinary Shares, gain from the sale or exchange of our Ordinary
Shares by a 10% U.S. Holder is treated as ordinary dividend income to the extent
of our earnings and profits attributable to the stock sold or exchanged. If we
were a CFC, we would not be a passive foreign investment company, as discussed
below, with regard to any such 10% U.S. Holder. Because of the complexity of
Subpart F, and because we may never be a CFC, a more detailed review of these
rules is beyond of the scope of this discussion.

      Passive Foreign Investment Company Status. We would be a passive foreign
investment company (a "PFIC") for 2002 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. As discussed below, we believe that we were
not a PFIC for 2002.

      If we were a PFIC, each U.S. Holder would (unless it made one of the
elections discussed below on a timely basis) be taxable on gain recognized from
the disposition of Ordinary Shares (including gain deemed recognized if the
Ordinary Shares are used as security for a loan) and upon receipt of certain
distributions with respect to Ordinary Shares as if such income had been
recognized ratably over the U.S. Holder's holding period for the Ordinary
Shares. The U.S. Holder's income for the current taxable year would include (as
ordinary income) amounts allocated to the current year and to any period prior
to the first day of the first taxable year for which we were a PFIC. Tax would
also be computed at the highest ordinary income tax rate in effect for each
other period to which income is allocated, and an interest charge on the tax as
so computed would also apply. Additionally, if we were a PFIC, U.S. Holders who
acquire our Ordinary 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. Holder
could elect to treat us as a "qualified electing fund" (a "QEF"), in which case
the U.S. Holder 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). Special rules apply
if a U.S. Holder makes a QEF election after the first year in its holding period
in which we are a PFIC. We have agreed to supply U.S. Holders with the
information needed to report income and gain under a QEF election if we were a
PFIC. As another alternative to the tax treatment described above, a U.S. Holder
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 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.
Holder.

      As indicated above, we will be a PFIC for any tax year if the average
percentage (by value) of our assets held for the production of, or that produce,
passive income is at least 50 percent. Based on discussions with our advisors,
we believe that we were not a passive foreign investment company for our tax
year ended December 31, 2002. However, there can be no assurance that the
Internal Revenue Service will not challenge this conclusion. The tests for
determining PFIC status are applied annually and it is difficult to make
accurate predictions of future income and assets, which are relevant to this
determination. Accordingly, there can be no assurance that we will not become a
PFIC in 2003 or in subsequent years. U.S. Holders who hold Ordinary Shares
during a period when we are a PFIC (whether we were determined to be a PFIC in
2003, 2002 or any earlier year) will be subject to the foregoing rules, even if
we cease to be a PFIC, subject to certain exceptions for U.S. Holders who made a
QEF election or the mark-to-market election.

      Although a U.S. Holder normally is not permitted to make a retroactive QEF
election for a foreign corporation, a retroactive election may be made for a
taxable year of the U.S. Holder (the "retroactive election year") if the U.S.
Holder (i)

                                       45
<PAGE>

reasonably believed that, as of the date the QEF election was due, the foreign
corporation was not a PFIC for its taxable year that ended during the
retroactive election year and (ii) filed a protective statement with respect to
the foreign corporation, applicable to the retroactive election year, in which
the U.S. Holder described the basis for its reasonable belief and extended the
period of limitation on the assessment of taxes determined under Sections 1291
through 1298 of the Code with respect to the foreign corporation (PFIC related
taxes) for all taxable years of the shareholder to which the protective
statement applies. U.S. Holders should consult their tax advisors regarding the
advisability of filing a protective statement.

      U.S. Holders are urged to consult their tax advisors about the PFIC rules,
including eligibility for and the manner and advisability of making, the QEF
election (or a protective QEF election) or the mark-to market election.

   Tax Consequences for Non-U.S. Holders of Ordinary Shares

      Except as described in "Information Reporting and Back-up Withholding"
below, a non-U.S. Holder of Ordinary Shares will not be subject to U.S. federal
income or withholding tax on the payment of dividends on, and the proceeds from
the disposition of, Ordinary Shares, unless:

      o     such item is effectively connected with the conduct by the non-U.S.
            Holder of a trade or business in the United States and, in the case
            of a resident of a country which has a treaty with the United
            States, such item is attributable to a permanent establishment or,
            in the case of an individual, a fixed place of business, in the
            United States;

      o     the non-U.S. Holder is an individual who holds the Ordinary Shares
            as a capital asset and is present in the United States for 183 days
            or more in the taxable year of the disposition and does not qualify
            for an exemption; or

      o     the non-U.S. Holder is subject to tax pursuant to the provisions of
            United States tax law applicable to U.S. expatriates.

Information Reporting and Back-up Withholding

      U.S. Holders generally are subject to information reporting requirements
with respect to dividends paid in the United States on Ordinary Shares. Under
the Code, a U.S. Holder may be subject, under certain circumstances, to backup
withholding at a rate of up to 30% with respect to dividends paid on our
Ordinary Shares unless the holder provides proof of an applicable exemption or
correct taxpayer identification number and otherwise complies with applicable
requirements of the backup withholding rules.

      A holder of Ordinary Shares who does not provide a correct taxpayer
identification number may be subject to penalties imposed by the IRS. Amounts
withheld under the backup withholding rules are not an additional tax and may be
refunded or credited against the holder's federal income tax liability, provided
the required information is furnished to the IRS.

      Non-U.S. Holders generally are not subject to information reporting or
back-up withholding with respect to dividends paid on, or the proceeds from the
disposition of, Ordinary Shares, provided that such non-U.S. Holder provides a
taxpayer identification number, certifies to its foreign status, or otherwise
establishes an exemption.

      The following is a summary of the current tax structure applicable to
companies in Israel, with special reference to its effect on us. The following
also contains a discussion of certain Israeli Government programs benefiting us.
To the extent that the discussion is based on new tax legislation that has not
been subject to judicial or administrative interpretation, there can be no
assurance that the views expressed in the discussion will be accepted by the tax
authorities in question. The discussion is not intended, and should not be
construed, as legal or professional tax advice and is not exhaustive of all
possible tax considerations.

General Corporate Tax Structure

      Israeli companies are subject to corporate tax at the rate of 36%.
However, the effective rate of tax of a company that derives income from an
"approved enterprise" (as referred to below) may be considerably lower. See "Law
for the Encouragement of Capital Investments, 1959" in this Item 10E, below.

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<PAGE>

Law for the Encouragement of Industry (Taxes), 1969

      We currently qualify as an "industrial company" under the Law for the
Encouragement of Industry (Taxes), 1969 (the "Industry Encouragement Law"). A
company qualifies as an "industrial company" if it is resident in Israel and at
least 90% of its income in a given tax year, determined in NIS (other than
income from certain types of loans, capital gains, interest and dividends), is
derived from industrial enterprises owned by that company. An "industrial
enterprise" is defined as an enterprise whose major activity in a particular tax
year is industrial manufacturing activity.

      Under the Industry Encouragement Law, an industrial company is entitled to
deduct the purchase price of patents and certain other intangible property
rights (other than goodwill) over a period of eight years, beginning with the
year in which such rights were first used.

      An industrial company may be eligible for special depreciation rates for
machinery, equipment and buildings. These rates differ based on various factors,
including the date of commencement of operation and the number of work shifts.
An industrial company owning an approved enterprise may choose between such
special depreciation rates and the depreciation rates available to approved
enterprises.

      Qualification as an industrial company under the Industry Encouragement
Law is not conditioned upon the receipt of prior approval from any Israel
government authority. No assurance can be given that we will continue to qualify
as an industrial company or that we will, in the future, be able to take
advantage of any tax benefits available to industrial companies.

Law for the Encouragement of Capital Investments, 1959

      An approved enterprise approved after April 1, 1986, may elect to forego
any entitlement to the grants otherwise available under the Investment Law and,
in lieu of the foregoing, participate in an alternative benefits program, under
which the undistributed income from the approved enterprise is fully exempt from
corporate tax for a defined period of time. The period of tax exemption ranges
between two and ten years, depending upon the location within Israel of the
approved enterprise and the type of approved enterprise. Upon expiration of the
exemption period, the approved enterprise would be eligible for the otherwise
applicable reduced tax rates under the Investment Law for the remainder, if any,
of the otherwise applicable benefits period.

      The reduced corporate tax rate is generally 25%. However, further
reductions in tax rates depending on the percentage of the foreign investment in
a company's share capital (conferring rights to profits, voting and appointment
of directors) and the percentage of its combined share and loan capital owned by
non-Israeli residents, would apply. The tax rate is 20% if the foreign
investment level is 49% or more but less than 74%, 15% if the foreign investment
level is 74% or more but less than 90%, and 10% if the foreign investment level
is 90% or more. The lowest level of foreign investment during the year will be
used to determine the relevant tax rate for that year. These tax benefits are
granted for a limited period not exceeding seven or ten years for a company
whose foreign investment level exceeds 25% from the first year in which the
approved enterprise has taxable income. The period of benefits may in no event,
however, exceed the lesser of 12 years from the year in which the production
commenced or 14 years from the year of receipt of approved enterprise status.

      We have three approved enterprises. We elected to participate in the
alternative benefits program. Since March 1998, following our initial public
offering in the United States, we have been a "foreign investors' company," as
defined by the Investment Law and we are therefore entitled to a ten year period
of benefits (instead of a seven-year period), for enterprises approved after
March 1998. The period of benefits of our approved enterprises will expire
during the period 2004 through 2014, and is conditioned upon maintaining our
approved enterprise status. There can be no assurance that the current benefit
program will continue to be available or that we will continue to qualify for
such benefits.

      A company that has elected to participate in the alternative benefits
program and that subsequently pays a dividend out of the income derived from the
approved enterprise during the tax exemption period will be subject to corporate
tax in respect of the amount distributed (including withholding tax thereon) at
the rate that would have been applicable had the company not elected the
alternative benefits program (generally 10% - 25%). The dividend recipient is
taxed at the reduced withholding tax rate of 15%, applicable to dividends from
the approved enterprises if the dividend is distributed within 12 years after
the benefits period or other rate provided under a treaty. The withholding tax
rate will be 25% after such period. In the case of a company with a foreign
investment level (as defined by the Investment Law) of 25% or more, the 12-year
limitation on reduced withholding tax on dividends does not apply. Tax should be
withheld by the company at source, regardless of whether the dividend is
converted into foreign currency.

                                       47
<PAGE>

      The Law for the Encouragement of Capital Investments, 1959, as amended
(the "Investment Law"), provides that a capital investment in eligible
facilities may, upon application to the Investment Center, be designated as an
approved enterprise. Each certificate of approval for an approved enterprise
relates to a specific investment program delineated both by its financial scope,
including its capital resources, and by its physical characteristics, e.g., the
equipment to be purchased and utilized pursuant to the program. The tax benefits
derived from any such certificate of approval relate only to taxable income
attributable to the specific approved enterprise. If a company has more than one
approval, its effective tax rate is the result of a weighted combination of the
applicable rates. Income derived from activity that is not integral to the
activity of the enterprise should not be divided between the different
enterprises and should not enjoy tax benefits.

Taxation under Inflationary Conditions

      The Income Tax (Inflationary Adjustments) Law, 1985 (the "Inflationary
Adjustments Law"), was designed to neutralize the erosion of capital investments
in business and to prevent tax benefits resulting from deduction of inflationary
expenses. This law applies a supplementary set of inflationary adjustments to
the normal taxable profits computed under regular historical cost principles.

      The Inflationary Adjustments Law introduced a special tax adjustment for
the preservation of equity based on changes in the Israeli CPI, whereby certain
corporate assets are classified broadly into fixed (inflation-resistant) assets
and non-fixed assets. Where a corporation's equity exceeds the depreciated cost
of fixed assets, a tax deduction that takes into account the effect of the
annual rate of inflation on such excess is allowed (up to a ceiling of 70% of
taxable income for companies in any single year, with the unused portion carried
forward on a linked basis, without limit). If the depreciated cost of fixed
assets exceeds shareholders' equity, then such excess, multiplied by the annual
inflation rate, is added to taxable income.

      Under the Inflationary Adjustments Law, results for tax purposes are
measured in real terms, in accordance with changes in the Israeli CPI. We are
taxed under this law. The discrepancy between the change in (1) the Israeli CPI
and (2) the exchange rate of Israeli currency in relation to the dollar, may in
future periods cause significant differences between taxable income and the
income measured in dollars as reflected by our financial statements (which are
measured in dollars). In addition, subject to certain limitations, depreciation
of fixed assets and losses carried forward are adjusted for inflation on the
basis of changes in the Israeli CPI.

Withholding and Capital Gains Taxes Applicable to Non-Israeli Shareholders

      The State of Israel imposes income tax on nonresidents of Israel on income
accrued or derived from sources in Israel or received in Israel. These sources
of income include passive income such as dividends, royalties and interest, as
well as non-passive income from services rendered in Israel. We are required to
withhold income tax at the rate of 25%, or 15% for dividends of income generated
by an approved enterprise, on all distributions of dividends other than bonus
shares (stock dividends), unless a different rate is provided in a treaty
between Israel and the shareholder's country of residence. Under the income tax
treaty between the United States and Israel, the maximum tax on dividends paid
to a holder of Ordinary Shares who is a U.S. resident (as defined in the treaty)
is 25%.

Capital Gains Taxes on Sales of our Ordinary Shares

      Until the end of the year 2002, capital gains from the sale of our
securities were generally exempt from Israeli Capital Gains Tax. This exemption
did not apply to a shareholder whose taxable income was determined pursuant to
the Israeli Income Tax Law (Inflationary Adjustments), 1985, or to a person
whose gains from selling or otherwise disposing of our securities were deemed to
be business income.

      As a result of the recent tax reform legislation in Israel, gains from the
sale of our Ordinary Shares and warrants to purchase our Ordinary Shares derived
from January 1, 2003 and on will in general be liable to capital gains tax of up
to 15% while our shares are eligible for sale on a designated foreign stock
market such as the NASDAQ. However, according to the tax reform legislation,
non-residents of Israel will be exempt from any capital gains tax from the sale
of our securities so long as the gains are not derived through a permanent
establishment that the non-resident maintains in Israel, and so long as our
securities remain listed for trading as described above. These provisions
dealing with capital gains are not applicable to a person whose gains from
selling or otherwise disposing of our securities are deemed to be business
income or whose taxable income is determined pursuant to the Israeli Income Tax
Law (Inflation Adjustments), 1985. The Israeli Income Tax Law (Inflation
Adjustments) would not normally be applicable to non-resident shareholders who
have no business activity in Israel.

                                       48
<PAGE>

      In any event, under the US-Israel Tax Treaty, a US treaty resident may
only be liable for Israeli capital gains tax on the sale of our Ordinary Shares
(subject to the provisions of Israeli domestic law as described above) if that
US treaty resident holds 10% or more of the voting power in our company.

      Israel presently has no estate or gift tax.

F.  Dividend and Paying Agents.

      Not Applicable.

G.  Statement by Experts.

      Not Applicable.

H.  Documents on Display.

      We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, applicable to foreign private issuers and
fulfill the obligation with respect to such requirements by filing reports with
the Securities and Exchange Commission. You may read and copy any document we
file with the Securities and Exchange Commission without charge at the
Securities and Exchange Commission's public reference room at 450 Fifth Street,
N.W., Washington, D.C. 20549. Copies of such material may be obtained by mail
from the Public Reference Branch of the Securities and Exchange Commission at
such address, at prescribed rates. Please call the Securities and Exchange
Commission at l-800-SEC-0330 for further information on the public reference
room.

      As a foreign private issuer, we are exempt from the rules under the
Exchange Act prescribing the furnishing and content of proxy statements, and our
officers, directors and principal shareholders are exempt from the reporting and
"short-swing" profit recovery provisions contained in Section 16 of the Exchange
Act. In addition, we are not be required under the Exchange Act to file periodic
reports and financial statements with the Securities and Exchange Commission as
frequently or as promptly as United States companies whose securities are
registered under the Exchange Act. A copy of each report submitted in accordance
with applicable United States law is available for public review at our
principal executive offices.

I.  Subsidiary Information.

      Not Applicable.

ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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

ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.

      Not Applicable.


                                     PART II

ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.

      None.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
         PROCEEDS.

      Not Applicable

ITEM 15.  CONTROLS AND PROCEDURES.


                                       49

<PAGE>

      Within 90 days prior to the filing date of this Annual Report on Form
20-F, management, including the Chief Executive Officer and Chief Financial
Officer, carried out an evaluation of the effectiveness of our disclosure
controls and procedures as defined in Exchange Act Rule 13a-14. Based upon that
evaluation, the Chief Executive Officer and Chief Financial Officer have
concluded that our current disclosure controls and procedures are effective.
There have been no significant changes in our internal controls or in other
factors that could significantly affect internal controls subsequent to the date
of the evaluation by the Chief Executive Officer and Chief Financial Officer.

      The design of any system of controls and procedures is based in part upon
certain assumptions about the likelihood of future events. There can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions, regardless of how remote.

ITEM 16.  [RESERVED]


                                    PART III

ITEM 17.  FINANCIAL STATEMENTS.

      Not Applicable.

ITEM 18.  FINANCIAL STATEMENTS.

      The Financial Statements required by this item are found at the end of
this Annual Report, beginning on page F-1.

ITEM 19.  EXHIBITS.

      The exhibits filed with or incorporated into this annual report are listed
on the index of exhibits below.


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

   1.1       Amended Memorandum of Association of Registrant(1)

   1.2       Amended and Restated Articles of Association of  Registrant(1)

   2.1       Form of Ordinary Share Certificate(1)

   2.2       Form of Registration Rights(1)

   4.1       Fundtech Ltd. 1996 Employee Stock Option Plan for the Employees of
             Fundtech Ltd. and the Employees of Fundtech Corp.(1)

   4.2       Fundtech Ltd. 1997 Stock Option Plan for Fundtech Corporation(1)

   4.3       Fundtech Ltd. December 1997 Israeli Share Option Plan (English
             summary)(1)

   4.4       Fundtech Ltd. 1999 Employee Option Plan(3)

   4.5       Fundtech Ltd. Directors Option Plan(4)

   4.6       Grant Approvals issued by the Marketing Fund to Fundtech (English
             summary)(1)

   4.7       Employment Agreement between Reuven Ben Menachem and Fundtech
             Corporation, dated November 25, 1997(2)

   4.8       Lease Agreement relating to Fundtech's Facility in Ramat-Gan,
             Israel (English summary)(2)

   4.9       Lease Agreement relating to Fundtech's Facility in Norcross,
             Georgia(2)

   4.10      Lease Agreement relating to Fundtech's Facility in Jersey City, New
             Jersey*


                                       50

<PAGE>

   4.11      Lease Agreement relating to Fundtech's Facility in Burlington,
             Massachusetts*

   8         Subsidiaries of Registrant*

   10.1      Consent of Brightman Almagor & Co.*

   10.2      Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
             2002*

   10.3      Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
             2002*

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

(1)   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.
(2)   Previously filed as an exhibit to the Registrant's Report on Form 10-K,
      dated March 30, 1999, and incorporated herein by reference.
(3)   Previously filed as an annex to the Registrant's Proxy Statement, dated
      August 23, 1999.
(4)   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.
*     Filed herewith.



                                       51

<PAGE>


                                  FUNDTECH LTD.
                                  -------------

                        CONSOLIDATED FINANCIAL STATEMENTS
                        ---------------------------------

                                      INDEX


                                                                       Page
                                                                    ----------

Report of Independent Auditors                                          F-1

Consolidated Financial Statements:

Balance Sheets
as of December 31, 2002 and 2001                                     F-2 - F-3

Statements of Operations
for the years ended December 31, 2002, 2001 and 2000                    F-4

Statements of Changes in Shareholders' Equity
for the years ended December 31, 2002, 2001 and 2000                 F-5 - F-6

Statements of Cash Flows
for the years ended December 31, 2002, 2001 and 2000                 F-7 - F-8

Notes to Financial Statements                                        F-9 - F-28


<PAGE>

Brightman Almagor
1 Azrieli Center
Tel Aviv 67021
P.O.B. 16593, Tel Aviv 61164
Israel

Tel: +972 (3) 608 5555
Fax: +972 (3) 609 4022
info@deloitte.co.il
www.deloitte.co.il



REPORT OF INDEPENDENT AUDITORS


To the Shareholders of
Fundtech Ltd.

We have audited the accompanying consolidated balance sheet of Fundtech Ltd.
("the Company") and its subsidiaries at December 31, 2002 and the related
statements of operations, changes in shareholders' equity and cash flows for the
year then ended. 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 audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about 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 management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements present fairly, in all
material respects, the consolidated financial position of the Company and its
subsidiaries at December 31, 2002 and the consolidated results of their
operations and their consolidated cash flows for the year then ended, in
conformity with accounting principles generally accepted in the United States of
America.



Brightman Almagor & Co.
Certified Public Accountants
A member of Deloitte Touche Tohmatsu


Tel Aviv, Israel February 12, 2003



                                       F-1


<PAGE>

<TABLE>
<CAPTION>

                                  FUNDTECH LTD.
                           CONSOLIDATED BALANCE SHEETS
                                 (In thousands)


                                                                                   December 31,
                                                                             ------------------------
                                                                              2 0 0 2         2 0 0 1
                                                                             ---------       --------
ASSETS

<S>                                                                         <C>             <C>
CURRENT ASSETS
   Cash and cash equivalents                                                  $ 26,571       $ 39,923
   Marketable securities (Note 3)                                               15,925          5,462
   Trade receivables (net of allowance for doubtful
     accounts of $ 3,551 and $ 5,005 at December 31, 2002
     and 2001, respectively) (Note 4)                                           13,386         18,193
   Other accounts receivable and prepaid expenses                                1,208          1,406
   Inventories                                                                      48             24
                                                                              --------       --------

    Total current assets                                                        57,138         65,008
                                                                              --------       --------

LONG-TERM ASSETS
   Severance pay fund                                                              474            413
   Long - term trade receivables (net of allowance for
     doubtful accounts of $961 at December 31, 2002 and 2001)
     (Note 5)                                                                    1,497          2,679
   Long term deposits                                                            1,027            607
   Property and equipment, net (Note 6)                                          7,265          9,276
   Other assets, net (Note 7)                                                   21,979         24,073
                                                                              --------       --------

    Total long-term assets                                                      32,242         37,048
                                                                              --------       --------

                                                                              ________       ________
                                                                              $ 89,380       $102,056
                                                                              ========       ========


    The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>


                                      F-2

<PAGE>

<TABLE>
<CAPTION>

                                  FUNDTECH LTD.
                           CONSOLIDATED BALANCE SHEETS
                                 (In thousands)
                               (except share data)


                                                                                 December 31,
                                                                            ---------------------
                                                                             2 0 0 2      2 0 0 1
                                                                            ---------    ---------

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
<S>                                                                         <C>          <C>
   Trade payables                                                           $   1,221    $   2,254
   Deferred revenues                                                            4,959        1,389
   Accrued restructuring expenses (Note 9b)                                     1,523          634
   Employees and payroll accruals                                               1,496        2,393
   Other accounts payable and accrued expenses (Note 8)                         3,309        3,132
                                                                              -------    ---------

      Total current liabilities                                                12,508        9,802
                                                                              -------    ---------

LONG-TERM LIABILITIES
   Accrued severance pay                                                          527          506
   Accrued restructuring expenses (Note 9b)                                     1,179          528
                                                                              -------    ---------

      Total long-term liabilities                                               1,706        1,034
                                                                              -------    ---------
                                                                              _______    _________
      Total liabilities                                                        14,214       10,836
                                                                              -------    ---------

COMMITMENTS AND CONTINGENCIES (Note 11)

SHAREHOLDERS' EQUITY (Note 12)
   Share capital:
   Ordinary shares of NIS 0.01 par value: Authorized: 19,949,998
     shares as of December 31, 2002 and 2001; Issued and
     outstanding:14,321,452 and 14,278,096 shares at
     December 31, 2002 and 2001, respectively                                      43           43
   Deferred shares of NIS 0.01 par value: Authorized, issued
     and outstanding: 50,002 shares at December 31, 2002 and 2001            (*)    -     (*)    -
   Additional paid-in capital                                                 139,851      139,708
   Accumulated other comprehensive loss                                          (602)      (1,140)
   Accumulated deficit                                                        (64,038)     (47,391)
                                                                              -------    ---------
                                                                               75,254       91,220

   Treasury shares at cost, 21,500 shares at December 31, 2002                    (88)           -
                                                                              -------    ---------

      Total shareholders' equity                                               75,166       91,220
                                                                              -------    ---------

                                                                              $89,380    $ 102,056
                                                                              =======    =========

(*) Represents an amount lower than $ 1.


     The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>


                                       F-3

<PAGE>

<TABLE>
<CAPTION>

                                  FUNDTECH LTD.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (In thousands)
                             (except per share data)

                                                                                 Year ended December 31,
                                                                           ------------------------------------
                                                                            2 0 0 2       2 0 0 1       2 0 0 0
                                                                           --------      --------      --------

<S>                                                                      <C>            <C>            <C>
Revenues (Note 15)

   Software license fees                                                   $ 10,068      $ 17,067      $ 28,492
   Maintenance and services fees                                             29,355        27,085        18,019
   Hardware sales                                                               405           842         1,437
                                                                           --------      --------      --------

      Total revenues                                                         39,828        44,994        47,948
                                                                           --------      --------      --------

Operating Expenses

   Software license costs                                                       703           896           252
   Maintenance and services costs                                            17,612        19,153        12,960
   Hardware costs                                                               317           686         1,131
   Research and development                                                  14,525        19,185        17,747
   Selling and marketing, net                                                 9,453        10,325         9,637
   General and administrative                                                 7,230         9,116         6,133
   Amortization of capitalized software development costs                     1,182             -             -
   Amortization of acquisition-related goodwill                                   -         1,663         1,597
   Amortization of other acquired intangibles assets                            911           862           865
   Provision for doubtful accounts                                            1,335         5,966           717
   Restructuring expenses (Note 9a)                                           3,252         2,573             -
   Non recurring expenses (Note 10)                                               -         1,500             -
                                                                           --------      --------      --------

      Total operating expenses                                               56,520        71,925        51,039
                                                                           --------      --------      --------
                                                                           ________      ________      ________

   Operating loss                                                           (16,692)      (26,931)       (3,091)
   Impairment and realized losses on available for sale
          marketable securities (Note 3)                                       (281)       (7,826)            -
   Financial Income, net (Note 16)                                              691         3,343         5,542
                                                                           --------      --------      --------

   Income (loss) before income taxes                                        (16,282)      (31,414)        2,451

   Income taxes                                                                (365)         (212)          (74)
                                                                           --------      --------      --------
   Net income (loss)                                                       $(16,647)     $(31,626)     $  2,377
                                                                           ========      ========      ========

      Basic earnings (loss) per share (Note 13)                            $  (1.16)     $  (2.22)     $   0.17
                                                                           ========      ========      ========

      Diluted earnings (loss) per share                                    $  (1.16)     $  (2.22)     $   0.16
                                                                           ========      ========      ========

          The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>


                                       F-4

<PAGE>

<TABLE>
<CAPTION>

                                                             FUNDTECH LTD.
                                        CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                                            (In thousands)
                                                          (except share data)


                                                     Ordinary shares            Deferred shares          Additional        Deferred
                                                 ----------------------        -----------------         paid-in        Stock-based
                                                   Shares       Amount         Shares     Amount         capital       compensation
                                                 ----------     -------        ------     ------        ----------     ------------

<S>                                            <C>             <C>           <C>        <C>            <C>           <C>
Balance as of January 1, 2000                    13,951,582      $   42        50,002     (*)     -      $137,997       $  (147)
Exercise of stock options, net                      192,892     (*)   -             -             -           966             -
Exercise of warrants, net                            40,000     (*)   -             -             -           520             -
Amortization of deferred stock-based
     Compensation                                         -           -             -             -             -            52
Forfeiture of stock options                               -           -             -             -           (63)           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           (32)
Exercise of stock options                            93,622           1             -             -           288             -
Amortization of deferred stock-based
     compensation                                         -           -             -             -             -            32
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             -

<CAPTION>

                                                          Accumulated
                                                             other                                 Total          Total
                                            Treasury     comprehensive      Accumulated        comprehensive   shareholders'
                                             shares          loss            deficit               Loss           equity
                                            --------     -------------     -----------        -------------    ------------


<S>                                        <C>             <C>              <C>              <C>              <C>
Balance as of January 1, 2000               $     -         $ (1,156)        $ (18,142)               -        $ 118,594
Exercise of stock options, net                    -                 -                -                -              966
Exercise of warrants, net                         -                 -                -                -              520
Amortization of deferred stock-based
     Compensation                                 -                 -                -                -               52
Forfeiture of stock options                       -                 -                -                -                -
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                   -            (3,951)         (15,765)               -          119,714
Exercise of stock options                         -                 -                -                -              289
Amortization of deferred stock-based
     compensation                                 -                 -                -                -               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.
</TABLE>


                                       F-5

<PAGE>

<TABLE>
<CAPTION>

                                                   FUNDTECH LTD.
                               CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                                   (In thousands)
                                                 (except share data)


                                                 Ordinary shares          Deferred shares       Additional     Deferred
                                             ------------------------    ------------------      paid-in     Stock-based
                                               Shares         Amount     Shares      Amount      capital     compensation
                                             ----------      --------    -------     ------     ----------   ------------

<S>                                        <C>               <C>        <C>        <C>          <C>           <C>

Balance as of December 31, 2001              14,278,096      $   43      50,002     (*)    -     $139,708      $      -
Exercise of stock options                        64,856           -           -            -          143             -
Purchase of treasury shares                     (21,500)          -           -            -            -             -
Comprehensive loss:
Foreign currency translation
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, 2002              14,321,452      $   43      50,002     (*)    -     $139,851      $      -
                                            ===========      ======     =======     ========     ========      ========

<CAPTION>

                                                       Accumulated
                                                          other                               Total
                                          Treasury    comprehensive     Accumulated       comprehensive    shareholders'
                                           shares         loss            deficit              Loss           equity
                                          --------    -------------     -----------       -------------    ------------

<S>                                        <C>        <C>             <C>                  <C>              <C>

Balance as of December 31, 2001         $      -        $ (1,140)         $(47,391)                           $91,220
Exercise of stock options                      -                -                 -               -               143
Purchase of treasury shares                  (88)               -                 -               -               (88)
Comprehensive loss:
Foreign currency translation
Foreign currency translation adjustments       -              538                 -         $   538               538
Unrealized losses on available-for-sale
     marketable securities, net                -             (281)                -            (281)             (281)
Realization of losses on available-for-
     sale marketable securities                -              281                 -             281               281
Net loss                                       -                -           (16,647)        (16,647)          (16,647)
                                        --------         --------          --------       ---------         ---------

     Total comprehensive loss                                                             $ (16,109)
                                                                                          =========

Balance as of December 31, 2002         $    (88)        $   (602)         $(64,038)                        $  75,166
                                        ========         ========          ========                         =========

(*) Represents an amount lower than $ 1.


         The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>


                                       F-6

<PAGE>


                                               FUNDTECH LTD.
                                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                                              (In thousands)

<TABLE>
<CAPTION>

                                                                                       Year ended December 31,
                                                                               --------------------------------------
                                                                                 2 0 0 2       2 0 0 1       2 0 0 0
                                                                               ---------      --------       --------
Cash flows from operating activities:
------------------------------------

<S>                                                                           <C>            <C>            <C>
   Net income (loss)                                                           $(16,647)      $(31,626)      $  2,377
   Adjustments to reconcile net income (loss) to net cash
     used in operating activities:
        Depreciation and amortization                                             5,580          6,303          5,187
        Impairment and realized losses on available for sale
              marketable securities                                                 281          7,826              -
        Write-off of other accounts receivable                                        -          1,035              -
        Loss on abandonment of property and equipment                                 -            270              -
        Provision for doubtful accounts                                           1,335          5,966            717
        Amortization of deferred stock-based compensation                             -             32             52
        Deferred income taxes, net                                                  109           (319)             -
        Decrease (increase) in trade receivables and long-term trade
             receivables                                                          4,737          1,202        (15,989)
        Decrease (increase) in other accounts receivable, prepaid
             expenses and inventories                                                52            344           (856)
        Increase (decrease) in trade payables                                    (1,059)          (832)         1,566
        Increase (decrease) in deferred revenues, employees and
             payroll accruals and other accounts payable and accrued
             expenses                                                             2,609          3,546         (2,905)
        Increase in accrued restructuring expenses                                1,540          1,162              -
        Accrued severance pay, net                                                  (40)           (26)            74
        Accrued interest on marketable securities                                  (196)             -              -
        Other                                                                        39            (14)            (2)
                                                                               --------       --------       --------

        Net cash used in operating activities                                    (1,660)        (5,131)        (9,779)
                                                                               --------       --------       --------

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

   Investments in available for sale marketable securities                            -         (1,986)        (3,374)
   Proceeds from (investments in) short-term bank deposits                            -          3,170         (3,132)
   Proceeds from sales of available-for-sale marketable securities                5,181         33,801              -
   Investment in held-to-maturity marketable securities                         (15,729)             -              -
   Long-term lease deposits                                                        (365)          (143)          (476)
   Purchase of property and equipment                                            (1,298)        (2,322)        (5,907)
   Proceeds from sale of property and equipment                                      60              -             81
   Capitalized software development costs                                             -         (5,901)        (1,975)
                                                                               --------       --------       --------

       Net cash provided by (used in) investing activities                      (12,151)        26,619        (14,783)
                                                                               --------       --------       --------


        The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>


                                       F-7

<PAGE>

<TABLE>
<CAPTION>

                                                FUNDTECH LTD.
                                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                               (In thousands)

                                                                             Year ended December 31,
                                                                      ---------------------------------------
                                                                       2 0 0 2         2 0 0 1        2 0 0 0
                                                                      --------        --------       --------
Cash flows from financing activities:
------------------------------------

<S>                                                                   <C>             <C>            <C>
   Purchase of treasury shares                                        $    (88)       $      -         $    -
   Proceeds from exercise of stock options and warrants, net               143             289          1,486
                                                                      --------        --------       --------

       Net cash provided by financing activities                            55             289          1,486

   Effect of exchange rate on cash and cash equivalents                    404              30           (301)
                                                                      --------        --------       --------

   Increase (decrease) in cash and cash equivalents                    (13,352)         21,807        (23,377)
   Cash and cash equivalents at the beginning of the year               39,923          18,116         41,493
                                                                      --------        --------       --------

   Cash and cash equivalents at the end of the year                   $ 26,571        $ 39,923       $ 18,116
                                                                      ========        ========       ========

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

   Cash paid during the year for:
     Interest                                                         $    123        $     31       $     34
                                                                      ========        ========       ========
     Income taxes                                                     $    287        $    224       $     47
                                                                      ========        ========       ========


     The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>


                                       F-8

<PAGE>

                                  FUNDTECH LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (In thousands)


NOTE 1      - GENERAL OVERVIEW

              Fundtech Ltd, an Israeli corporation and its subsidiaries ("the
              Company"), is a leading provider of software solutions and
              services that facilitate payments, settlement and cash management
              by enabling banks and their customers to electronically manage
              cash, process payments and transfer funds. The Company's
              client-server and Internet software products 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.

              The company sells and supports its products mainly in the United
              States and Europe.

              The Company operates in three business segments: Cash Management,
              Payments and its Swiss subsidiary Biveroni Batschelet Partners AG
              ("BBP").

              The Company's cash management solutions enable small, mid and
              large-tier financial institutions to deliver a complete set of
              cash management services through the Internet and other delivery
              channels. The Company's payments solutions automate all aspects of
              the funds transfer, including foreign exchange settlement and
              customer notification process, enabling
              straight-through-processing (STP) of payments. BBP develops,
              implements, maintains and operates systems for the automatic
              processing and transport of data in the finance industry. BBP also
              provides interbank gateway services. Its products include system
              solutions for interbank applications, as well as integration
              modules for host connections.


NOTE 2      - SIGNIFICANT ACCOUNTING POLICIES

              The consolidated financial statements have been prepared in
              accordance with generally accepted accounting principles in the
              United States of America ("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 Fundtech Ltd. and certain of
                 its subsidiaries is generated in U.S. dollars ("dollar" or
                 "dollars"). In addition, substantial portions of the
                 company's costs are incurred in dollars. The Company
                 believes that the dollar is the primary currency of the
                 economic environment in which the Company operates. Thus,
                 the functional and reporting currency of the Company is the
                 dollar.

                 Accordingly, monetary accounts maintained in currencies
                 other than the dollar are remeasured into 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-9

<PAGE>

                                  FUNDTECH LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (In thousands)


NOTE 2      - SIGNIFICANT ACCOUNTING POLICIES (Cont.)

              c. Principles of consolidation:

                 The consolidated financial statements include the accounts
                 of Fundtech Ltd. and its subsidiaries, all of which are
                 wholly-owned. 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 bank deposits are presented at their cost,
                 including accrued interest.

              f. Marketable securities:

                 The Company accounts for its investments in marketable
                 securities using SFAS No. 115, "Accounting for Certain
                 Investments in Debt and Equity Securities".

                 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. Held-to-maturity securities
                 include debt securities for which the Company has the
                 intent and ability to hold to maturity. Debt securities for
                 which the Company does not have the intent or ability to
                 hold to maturity are classified as available-for-sale. The
                 Company does not hold any equity securities classified as
                 trading securities.

                 As of December 31, 2002 all marketable securities are
                 designated as held-to-maturity and, accordingly, are stated
                 at amortized cost. Interest income including the
                 amortization of premium and discount are included in the
                 consolidated statement of operations.

                 As of December 31, 2001 all marketable securities are
                 designated as available-for-sale and accordingly are stated
                 at fair value, with the unrealized gains and losses
                 reported as a separate component of shareholders' equity
                 under 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.

                 As of December 31, 2001, the Company's evaluation indicated
                 that the decline in available-for-sale marketable
                 securities was other than temporary. Therefore, the Company
                 realized during 2001 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.

              g. Long-term trade receivables:

                 Long-term receivables from extended payment agreements (See
                 Note 2k) 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, as a component
                 of interest income using the effective interest method.

                                       F-10

<PAGE>

                                  FUNDTECH LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (In thousands)
                             (except per share data)

NOTE 2      - SIGNIFICANT ACCOUNTING POLICIES (Cont.)

              h. 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 rates:

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

                 The Company periodically assesses the recoverability of the
                 carrying amount of property and equipment based on expected
                 undiscounted cash flows. If an asset's carrying amount is
                 determent to be not recoverable, the Company recognizes an
                 impairment loss based upon the difference between the
                 carrying amount and the fair value of such assets, in
                 accordance with SFAS No. 144 "Accounting for the Impairment
                 or Disposal of Long-Lived Assets" ("SFAS No. 144").

              i. Acquisition-related intangible assets:

                 Acquisition-related intangible assets result from the
                 Company's acquisitions of businesses accounted for under
                 the purchase method and consist of the values of
                 identifiable intangible assets including mainly developed
                 technology and customer base, as well as goodwill. Goodwill
                 is the amount by which the acquisition cost exceeds the
                 fair values of the identifiable net assets on the date of
                 purchase. Acquisition-related intangible assets are
                 reported at cost, net of accumulated amortization.
                 Developed technology and customer base are amortized on a
                 straight-line basis over their estimated useful lives of
                 five and ten years, respectively.

                 In July 2001, the Financial Accounting Standards Board
                 (FASB) issued SFAS No. 141 "Business Combinations" ("SFAS
                 No. 141") and No. 142, "Goodwill and Other Intangible
                 Assets" ("SFAS No. 142"). SFAS No. 141 requires all
                 business combinations initiated after June 30, 2001 to be
                 accounted for using the purchase method. Under SFAS No.
                 142, goodwill and intangible assets with indefinite lives
                 are no longer amortized effective January 1, 2002, but are
                 reviewed annually (or more frequently if impairment
                 indicators arise) for impairment. Identifiable intangible
                 assets that are not deemed to have indefinite lives will
                 continue to be amortized over their useful lives (but with
                 no maximum life). The adoption of SFAS No. 142 resulted in
                 a reduction of amortization expense in the amount of
                 approximately $1,700 in 2002. A reconciliation of
                 previously reported net income (loss) and earnings (loss)
                 per share to the amounts adjusted for the exclusion of
                 goodwill amortization is as follows:

<TABLE>
<CAPTION>

                                                                 2 0 0 2             2 0 0 1            2 0 0 0

<S>                                                            <C>                 <C>                 <C>
Reported net income (loss)                                     $  (16,647)         $  (31,626)         $   2,377
Goodwill amortization                                                   -               1,663              1,597
                                                               ----------          ----------          ---------
Adjusted net income (loss)                                     $  (16,647)         $  (29,963)         $   3,974
                                                               ==========          ==========          =========

Reported basic earnings (loss) per share                       $    (1.16)         $    (2.22)         $    0.17
Goodwill amortization                                                   -                0.12               0.11
                                                               ----------          ----------          ---------
Adjusted basic earnings (loss) per share                       $    (1.16)         $    (2.10)         $    0.28
                                                               ==========          ==========          =========

Reported diluted earnings (loss) per share                     $    (1.16)         $    (2.22)         $    0.16
Goodwill amortization                                                   -                0.12               0.11
                                                               ----------          ----------          ---------
Adjusted diluted earnings (loss) per share                     $    (1.16)         $    (2.10)         $    0.27
                                                               ==========          ==========          =========
</TABLE>


                                      F-11

<PAGE>

                                  FUNDTECH LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (In thousands)


NOTE 2      - SIGNIFICANT ACCOUNTING POLICIES (Cont.)

              j.     Income taxes:

                     The Company accounts for income taxes in accordance with
                     SFAS 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 provides a valuation allowance, if
                     necessary, to reduce deferred tax assets to their estimated
                     realizable value.

              k.     Revenue recognition:

                     The Company generates revenues from licensing the rights to
                     use its software products directly to end-users, sales of
                     professional services, including consulting, implementation
                     and training. The Company also provides hosting services,
                     contingency and recovery services, as well as maintenance
                     and sales of hardware.

                     Revenue from software license agreements are recognized
                     when all criteria outlined in Statement of Position (SOP)
                     97-2 "Software Revenue Recognition" (as amended) ("SOP
                     97-2") 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.

                     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. 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 as prescribed by SOP 98-9
                     "Modification of SOP 97-2, Software Revenue Recognition
                     With Respect to Certain Transactions". 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. As of December 31,
                     2002 and 2001, the provision for warranty cost is
                     immaterial.

                     Through December 31, 2001 the Company applied Emerging
                     Issues Task Force (EITF) No. 00-03 "Application of AICPA
                     Statement of Position 97-2 to Arrangements That Include the
                     Right to Use Software Stored on Another Entity's Hardware"
                     regarding revenues from ASP/Outsourcing solutions and
                     Wire-up contingency processing centers arrangements. Such
                     arrangements also included extended payment terms of more
                     than twelve months (generally 36 to 60 months). In
                     accordance with SOP 97-2, 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 provides that the software vendor can
                     overcome the presumption that the software license fees are
                     not fixed or determinable if the vendor has a standard
                     business practice of using long-term or installment
                     contracts and has a history of successfully collecting the
                     software license fees under the original payment terms of
                     the software license arrangement without making
                     concessions. The Company had concluded that for these
                     arrangements the "fixed or determinable" presumption had
                     been overcome and the related software license fees had
                     been recognized upon meeting the remaining SOP 97-2 revenue
                     recognition criteria. The present value of such software
                     license fees recognized in 2000 and 2001 totaled
                     approximately $ 5,000 and $ 1,883, respectively.


                                      F-12

<PAGE>

                                  FUNDTECH LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (In thousands)


NOTE 2      - SIGNIFICANT ACCOUNTING POLICIES (Cont.)

              k.     Revenue recognition: (Cont.)

                     In 2002, the Company changed its business practice
                     regarding ASP/outsourcing and Wire-up arrangements in a
                     manner that it no longer grants software license rights in
                     these arrangements. Revenues from such arrangements are
                     recognized as the related services are provided.
                     Accordingly, no additional Long-term trade receivables
                     arise from these arrangements.

                     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 the 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.

                     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.

                     Revenue from maintenance is recognized over the life of the
                     maintenance agreement.

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

              l.     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. Israeli
                     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 Israeli 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 conditions 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, 2002,
                     2001 and 2000, amounted to approximately $ 138, $ 89 and $
                     74, respectively.


                                      F-13

<PAGE>

                                  FUNDTECH LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (In thousands)


NOTE 2      - SIGNIFICANT ACCOUNTING POLICIES (Cont.)

              m.     Software development costs:

                     The Company capitalizes software development costs in
                     accordance with SFAS No. 86 "Accounting for the Costs of
                     Computer Software to be Sold, Leased or Otherwise Marketed"
                     ("SFAS No. 86"). Capitalization of software development
                     costs begins upon the establishment of technological
                     feasibility, and continues up to the time the software is
                     available for general release to customers. The
                     establishment of technological feasibility and the ongoing
                     assessment of the recoverability of these costs requires
                     considerable judgment by management with respect to certain
                     external factors including, but not limited to, anticipated
                     future gross product revenue, estimated economic life and
                     changes in software and hardware technology.

                     Amortization of capitalized software development costs is
                     provided on a product-by-product basis and begins when the
                     product is available for general release to customers.
                     Annual amortization is the greater of the amount computed
                     using the ratio of current gross revenue for a product to
                     the total of current and anticipated product revenue or the
                     straight-line basis over the remaining economic useful life
                     of the software, which is not more than five years.

              n.     Concentration of credit risks:

                     Financial instruments that potentially subject the Company
                     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, cash equivalents and
                     marketable securities are maintained with high-quality
                     institutions, and the composition and maturities of
                     investments are regularly monitored by management.
                     Generally, these securities and deposits are traded in a
                     highly liquid market, may be redeemed upon demand and bear
                     minimal risk.

                     The Company's marketable securities include corporate bonds
                     and notes, Euro dollar bonds and asset-backed securities.

                     The trade receivables and long-term trade receivables of
                     the Company include banks and large financial institutions.
                     The Company generally does not require collateral; however,
                     in certain circumstances, the Company 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 has determined to be
                     doubtful of collection. The Company performs 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.

              o.     Basic and diluted earnings (loss) per share:

                     Basic 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 SFAS No. 128, "Earnings Per Share" ("SFAS
                     No. 128").

                     In 2002 and 2001, certain outstanding stock options and
                     warrants have been excluded from the calculation of the
                     diluted earnings per ordinary share because of the
                     anti-dilutive effect. The total weighted average number of
                     shares related to the outstanding options and warrants
                     excluded from the calculations of diluted loss per share
                     were 313,700 and 398,428 for the years ended December 31,
                     2002 and 2001, respectively. In 2000, 543,120 options and
                     warrants were excluded from the calculation of diluted net
                     earnings per share (see Note 12).


                                       F-14

<PAGE>

                                  FUNDTECH LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (In thousands)
                             (except per share data)


NOTE 2      - SIGNIFICANT ACCOUNTING POLICIES (Cont.)

              p.     Stock-based compensation:

                     The Company accounts for employee stock-based compensation
                     in accordance with Accounting Principles Board Opinion No.
                     25, "Accounting for Stock Issued to Employees" ("APB 25")
                     and in accordance with FASB Interpretation No. 44. Pursuant
                     to these accounting pronouncements, the Company records
                     compensation for stock options granted to employees over
                     the vesting period of the options based on the difference,
                     if any, between the exercise price of the options and the
                     market price of the underlying shares at that date. With
                     respect to variable awards, changes in the market price of
                     the underlying shares at each balance sheet date affect the
                     aggregate amount of compensation recorded. Deferred
                     compensation is amortized to compensation expense over the
                     vesting period of the options. See below for pro forma
                     disclosures required in accordance with SFAS No. 123,
                     "Accounting for Stock-Based Compensation" ("SFAS No.123"),
                     as amended by SFAS 148.

                     Pro forma Loss Per Share According to SFAS 123 and SFAS
                     148:

                     For purposes of estimating fair value in accordance with
                     SFAS 123, the Company utilized the Black & Scholes
                     option-pricing model. The following assumptions were
                     utilized in such calculations for the years 2002, 2001 and
                     2000 (all in weighted averages):

                                                    2002       2001       2000
                                                    ----       ----       ----
                     Risk-free interest rate       3.78%       6.0%       6.0%
                     Expected life of options     4 years     4 years    4 years
                     Expected volatility            64%         73%        73%
                     Expected dividend yield        none       none       none

                     Had compensation cost for the Company's stock option plans
                     been determined based on fair value at the grant dates for
                     all awards made in 2002, 2001 and 2000 in accordance with
                     SFAS 123, as amended by SFAS 148, the Company's pro forma
                     loss per share would have been as follows:

<TABLE>
<CAPTION>

                                                       2 0 0 2         2 0 0 1        2 0 0 0
                                                       -------         -------        -------

<S>                                                  <C>             <C>             <C>
Pro forma Net income (loss)
Net income (loss) for the year, as reported           $(16,647)       $(31,626)       $  2,377
Deduct  - stock-based compensation determined
  under APB-25                                               -              32              52
Add - stock-based compensation determined
  under SFAS 123                                        (4,390)         (2,897)         (3,409)
                                                      --------        --------        --------
Pro forma net income (loss)                           $(21,037)       $(34,491)       $   (980)
                                                      ========        ========        ========

Pro forma loss per share                              $  (1.47)       $  (2.43)       $  (0.07)
Basic and diluted earnings (loss) per share
  as reported                                         $  (1.16)       $  (2.22)       $   0.17
                                                      ========        ========        ========
</TABLE>

                 q.  Fair value of financial instruments:

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

                     The carrying amounts of cash and cash equivalents,
                     short-term bank deposits, trade receivables 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.


                                       F-15

<PAGE>

                                  FUNDTECH LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (In thousands)


NOTE 2      - SIGNIFICANT ACCOUNTING POLICIES (Cont.)

              r.     Reclassification:

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

              s.     Impact of recently issued accounting standards:

                     In November 2001, the EITF issued Topic No. D-103 (Topic
                     D-103), subsequently renumbered as EITF 01-14, relating to
                     the accounting for reimbursements received from customers
                     for the Company's out-of-pocket expenses for the delivery
                     of services. In accordance with EITF 01-14, reimbursements
                     received for out-of-pocket expenses incurred should be
                     characterized as revenue in the statement of operations.
                     The Company has historically accounted for reimbursements
                     received for out-of-pocket expenses incurred as a reduction
                     to the cost of service revenues in the statement of
                     operations to offset the costs incurred. The Company
                     adopted EITF 01-14 effective January 1, 2002 and
                     reclassified approximately $837 thousand and $668 thousand
                     into revenues from cost of revenues for the years ended
                     December 31, 2001 and 2000, respectively, to comply with
                     this guidance.

                     In June 2002, the FASB issued SFAS No. 146 "Accounting for
                     Costs Associated with Exit or Disposal Activities" ("SFAS
                     No. 146"). SFAS No. 146 requires that a liability for costs
                     associated with an exit or disposal activity be recognized
                     only when the liability is incurred, rather than at the
                     date of an entity's commitment to an exit plan. SFAS No.
                     146 requires that the liability be initially measured at
                     fair value. SFAS No. 146 is effective for exit or disposal
                     activities that are initiated after December 31, 2002.
                     Management does not expect that adoption of SFAS No. 146
                     will have material impact on its financial statements.

                     In November 2002, the FASB issued Interpretation No. 45
                     "Guarantor's Accounting and Disclosure Requirements for
                     Guarantees, Including Indirect Guarantees of Indebtedness
                     of Others" ("FIN 45"), which clarifies disclosure and
                     recognition/measurement requirements related to certain
                     guarantees. The disclosure requirements are effective for
                     financial statements issued after December 15, 2002 and the
                     recognition/measurement requirements are effective on a
                     prospective basis for guarantees issued or modified after
                     December 31, 2002. The application of the requirements of
                     FIN 45 did not have a material impact on the Company's
                     financial statements.

                     In December 2002, the FASB issued SFAS No. 148, "Accounting
                     for Stock-Based Compensation -- Transition and Disclosure"
                     ("SFAS No.148"). SFAS No. 148 amends SFAS No. 123, to
                     provide alternative methods of transition for a voluntary
                     change to the fair value based method of accounting for
                     stock-based employee compensation. In addition, SFAS No.
                     148 amends the disclosure requirements of SFAS No. 123 to
                     require prominent disclosures in both annual and interim
                     financial statements about the method of accounting for
                     stock-based employee compensation and the effect of the
                     method used on reported results. The transition guidance
                     and annual disclosure provisions of SFAS No. 148 are
                     effective for fiscal years ending after December 15, 2002.
                     The interim disclosure provisions are effective for
                     financial reports containing financial statements for
                     interim periods beginning after December 15, 2002. As the
                     Company did not make a voluntary change to the fair value
                     based method of accounting for stock-based employee
                     compensation in 2002, the adoption of SFAS No. 148 did not
                     have a material impact on the Company's financial position
                     and results of operations.


                                       F-16

<PAGE>

                                  FUNDTECH LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (In thousands)


NOTE 3      - MARKETABLE SECURITIES

<TABLE>
<CAPTION>

                                                                                   December 31,
                                                                              -----------------------
                                                                             2 0 0 2          2 0 0 1
                                                                             -------          -------
<S>           <C>                                                             <C>             <C>
              (*)    Available for sale - Mutual funds                        $    -          $ 5,462
                                                                             -------          -------
                     Held to maturity  -
                       Corporate bonds                                         5,698                -
                       Corporate notes                                         2,603                -
                       Euro-dollar bonds                                       2,660                -
                       Asset backed securities                                 4,964                -
                                                                            --------          -------
                                                                              15,925            5,462
                                                                            --------          -------
                                                                            ________          _______
                                                                            $ 15,925          $ 5,462
                                                                            ========          =======

              Fair value                                                    $ 15,924          $ 5,462
                                                                            ========          =======
</TABLE>

              (*)    As of December 31, 2001 due to the market conditions, and
                     since the Company's management believed 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. For the year ended December 31, 2001,
                     impairment and realized losses on available-for-sale
                     marketable securities amounting to $ 7,826 were included in
                     earnings.

NOTE 4      - TRADE RECEIVABLES

<TABLE>
<CAPTION>

                                                                                    December 31,
                                                                                ---------------------
                                                                                2 0 0 2       2 0 0 1
                                                                                -------       -------

<S>                                                                             <C>          <C>
              Accounts receivable, net of allowance for doubtful accounts       $ 10,535     $  5,571
              Unbilled receivables, net of allowance for doubtful accounts         2,851       12,622
                                                                                --------     --------
                                                                                $ 13,386     $ 18,193
                                                                                ========     ========
</TABLE>

                     Management's assessment for uncertainties of outstanding
                     debt collectibility resulted in doubtful accounts expenses
                     in the Statement of Operations of $1,335, $ 5,966 and $ 717
                     for 2002, 2001 and 2000, respectively.

NOTE 5      - LONG-TERM TRADE RECEIVABLES

<TABLE>
<CAPTION>

                                                                                    December 31,
                                                                              -----------------------
                                                                               2 0 0 2        2 0 0 1
                                                                              --------        -------

              Maturity dates - long-term trade receivables:
<S>                                                                           <C>            <C>
                  First year (current maturities)                             $  1,675       $  2,256
                  Second year                                                    1,452          1,516
                  Third year                                                       740          1,136
                  Fourth year                                                      266            720
                  Fifth year                                                         -            268
                                                                              --------       --------
                                                                                 4,133          5,896
                                                                              --------       --------

                  Less -  Current maturities                                     1,675          2,256
                          Allowance for doubtful accounts (see also Note 4)        961            961
                                                                              --------       --------
                                                                              $  1,497       $  2,679
                                                                              ========       ========
</TABLE>


                                       F-17

<PAGE>

                                              FUNDTECH LTD.
                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                            (In thousands)


NOTE 6      - PROPERTY AND EQUIPMENT, NET

<TABLE>
<CAPTION>

                                                                                    December 31,
                                                                               ----------------------
                                                                               2 0 0 2        2 0 0 1
                                                                               -------        -------
<S>                                                                             <C>          <C>
              Cost:
                  Office furniture and equipment                                $ 2,442      $  2,392
                  Computers and software                                         16,344        15,004
                  Motor vehicles                                                    225           298
                  Leasehold improvements                                          1,316         1,228
                                                                                -------      --------
                                                                                 20,327        18,922

                  Accumulated depreciation                                       13,062         9,646
                                                                                -------      --------
                       Net book value                                           $ 7,265      $  9,276
                                                                                =======      ========
</TABLE>

NOTE 7      - OTHER ASSETS, NET

<TABLE>
<CAPTION>

                                                                                    December 31,
                                                                               ----------------------
                                                                               2 0 0 2        2 0 0 1
                                                                               -------        -------
              Acquisition-related intangible assets
              -------------------------------------
<S>                                                                            <C>           <C>
              Cost:
                  Goodwill                                                     $ 14,791      $ 14,791
                  Developed technology                                            4,241         4,241
                  Customer base                                                   3,461         3,461
                  Other intangible assets                                            58            58
                                                                               --------      --------
                                                                                 22,551        22,551
                Accumulated amortization                                         (7,266)       (6,354)
                                                                               --------      --------
                                                                                 15,285        16,197
                                                                               --------      --------

              Capitalized software development costs
              --------------------------------------
              Cost                                                                7,876         7,876
                Accumulated amortization                                         (1,182)            -
                                                                               --------      --------
                                                                                  6,694         7,876
                                                                               --------      --------
                                                                               ________      ________
                Net book value                                                 $ 21,979      $ 24,073
                                                                               ========      ========
</TABLE>

NOTE 8     - OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES

<TABLE>
<CAPTION>

                                                                                   December 31,
                                                                               ----------------------
                                                                                2 0 0 2       2 0 0 1
                                                                                -------      --------

<S>                                                                            <C>            <C>
              Accrued expenses                                                  $ 2,426       $ 1,603
              Government authorities                                                677         1,176
              Office of the Chief Scientist and the Fund for the
                   encouragement of Marketing Activities                            180           333
              Other                                                                  26            20
                                                                                -------       -------
                                                                                $ 3,309       $ 3,132
                                                                                =======       =======
</TABLE>


                                       F-18

<PAGE>

                                  FUNDTECH LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (In thousands)


NOTE 9      - RESTRUCTURING EXPENSES

              In response to declines associated with the current cautious
              information technology ("IT") spending environment within the
              financial services industry, the Company adopted three
              restructuring plans during the third and fourth quarters of 2002
              and the second quarter of 2001.

              In 2002, two plans consisted of employee termination benefits
              associated with the involuntary termination of 78 employees (61
              research and development and professional services employees, 12
              administrative employees and 5 selling and marketing employees)
              and closure and sublet portions of existing office space.

              In 2001, a 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 costs.

              All restructuring plans were substantially completed by February
              2003.

           a. Restructuring expenses:

<TABLE>
<CAPTION>

                                                                                  Year ended December 31,
                                                                                  ----------------------
                                                                                   2 0 0 2      2 0 0 1
                                                                                  ---------     --------

<S>                                                                                <C>          <C>
                Employee termination benefits and related costs                    $  1,458     $   790
                Facility closures and related costs                                   1,794       1,513
                Property and equipment abandonment                                        -         270
                                                                                   --------     -------
                                                                                   $  3,252     $ 2,573
                                                                                   ========     =======
</TABLE>

           b. The following table summarizes the restructuring accruals status
              as of December 31, 2002:

<TABLE>
<CAPTION>

                                                   Employee termination   Facility closures
                                                    and related costs     and related costs      Total
                                                    -----------------     -----------------      ------
           <S>                                          <C>                   <C>               <C>
           Original Accrual
             Balance as of January 1, 2002               $  790                $1,513            $2,303
             Additional accruals                          1,458                 1,794             3,252
                                                         ------                ------            ------
              Total                                       2,248                 3,307             5,555
                                                         ------                ------            ------
           Utilized in cash
             During 2001                                    628                   513             1,141
             During 2002                                    900                   812             1,712
                                                         ------                ------            ------
              Total                                       1,528                 1,325             2,853
                                                         ------                ------            ------
                                                         ______                ______            ______

           Net Balance as of December 31, 2002           $  720                $1,982            $2,702
                                                         ======                ======            ======

           Net Balance as of December 31, 2001           $  162                $1,000            $1,162
                                                         ======                ======            ======
</TABLE>


                                       F-19

<PAGE>

                                  FUNDTECH LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (In thousands)


NOTE 10     - NON-RECURRING EXPENSES

              a.     Integration costs:

                     In 2001, as part of the restructuring and integration plan,
                     the Company recorded $ 465 of integration costs primarily
                     for relocating employees and abandonment of property and
                     equipment pursuant to the plan.

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

              b.     Write-off of other accounts receivable:

                     In 2001 and 2000, the Company incurred expenses on behalf
                     of a new venture in the amount of approximately $ 111 and $
                     924, respectively. It was agreed between the investors that
                     such expenses would be reimbursed upon the formation of the
                     new entity, therefore such expenses 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 entity. Accordingly, the Company wrote-off the
                     related other account receivable for the total amount of
                     $1,035.

NOTE 11     - COMMITMENTS AND CONTINGENCIES

              a.     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,
                     -----------------------

                     2003                                        $  2,281
                     2004                                           2,085
                     2005                                           1,444
                     2006                                             902
                     2007-2014                                      4,950
                                                                 --------
                                                                   11,662
                     Less - sublease rentals                         (210)
                                                                 --------
                                                                 $ 11,452
                                                                 ========

                     The above minimum lease commitments include amounts
                     previously accrued under the Company's restructuring plans
                     (see also Note 9b).

                     Total facilities lease expenses for the years ended
                     December 31, 2002, 2001 and 1999, were approximately
                     $1,982, $ 2,150 and $ 1,778 (net of sublease rentals
                     incurred of $31, $ 4, and $0), respectively.


                                       F-20

<PAGE>

                                  FUNDTECH LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (In thousands)


NOTE 11      -COMMITMENTS AND CONTINGENCIES (Cont.)

              b.     Guarantees:

                     1.  The Company has obtained a bank guarantee of $46,
                         secured by a restricted deposit, in connection with the
                         Company's facilities operating lease agreement in
                         Israel.
                     2.  The Company has obtained a bank guarantee of $312,
                         secured by a restricted bank deposit, for BBP as
                         required by Swiss Law.

              c.    Tax Notice:

                     BBP received a letter from the Tax Office of the Canton
                     Aargovia, Switzerland ("Aargovia") asserting deficiencies
                     in BBP's corporate income taxes for 1999 to 2001 tax years.
                     The Company intends to challenge the deficiencies asserted
                     by Aargovia. The Company believes that it has meritorious
                     defenses to those deficiencies and believes that the
                     ultimate outcome of the case will not result in a material
                     impact on the Company's consolidated results of operations
                     or financial position.

NOTE 12     - SHAREHOLDERS' EQUITY

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

              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.     Treasury shares:

                     On February 21, 2002, the Company's Board of Directors
                     authorized to purchase up to one million ordinary shares of
                     the company from time to time on an open market. By
                     December 31, 2002, the Company had purchased a total of
                     21,500 shares.

              d.     Stock options:

                     1.  Under the Company's 1998 Director's Stock Option Plan
                         and the 1999 Employee Stock Option Plan (collectively -
                         the "Plans"), up to 2,492,815 options may be granted to
                         employees and directors of the Company.

                     2.  Pursuant to the Plans, as of December 31, 2002, an
                         aggregate of 1,921,941 options of the Company are still
                         available for future grants. Subsequent to the balance
                         sheet date the Company granted 969,311 options under
                         the options exchange program (see 4 below).

                     3.  Each option granted under the Plans to employees
                         expires not later than ten years from the date of the
                         grant, except for grants to persons holding 10% or more
                         of the Company's stock, which expire in five years.
                         Each option granted under the Plans to directors
                         expires no later than five years from the date of
                         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-21

<PAGE>

                                  FUNDTECH LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (In thousands)
                               (expect share data)


NOTE 12     - SHAREHOLDERS' EQUITY (Cont.)

                     4.     In June 2002 the Company commenced a voluntary stock
                            option exchange program for its employees. Under the
                            program participating employees were given the
                            opportunity to have unexercised stock options
                            previously granted to them cancelled, and to receive
                            replacement options at a future date. Replacement
                            options will be granted at a ratio of one new option
                            for each option cancelled, at an exercise price
                            equal to the fair market value of the Company's
                            Ordinary Shares on the date of the re-grant.

                            Pursuant to the terms of the offer, 1,025,700
                            options were cancelled on July 16, 2002. The Company
                            granted the replacement options on January 17, 2003.

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

<TABLE>
<CAPTION>

                                                              Year ended December 31,
                                ------------------------------------------------------------------------------------------
                                           2 0 0 2                       2 0 0 1                       2 0 0 0
                                ----------------------------    ---------------------------     --------------------------
                                                    Weighted                       Weighted                      Weighted
                                                    average                        average                       average
                                   Number           exercise      Number           exercise       Number         exercise
                                 of options          price      of options          price       of options        price
                                 ----------        ---------    ----------        ---------     ----------       --------

<S>                               <C>              <C>          <C>               <C>          <C>              <C>
Outstanding at January 1          1,363,843        $   14.85     1,830,893        $   14.15     1,355,421        $   10.84
   Granted                          500,800             3.84             -                -       818,100            17.38
   Exercised                        (64,856)            3.33       (93,622)            2.94      (192,892)            4.94
   Option exchange program       (1,025,700)           15.65             -                -             -                -
   Forfeited/cancelled             (209,632)           10.23      (373,428)           14.54      (149,736)           12.10
                                 ----------                     ----------                      ---------

Outstanding at December 31          564,455        $    6.68     1,363,843        $   14.85     1,830,893        $   14.15
                                 ==========                     ==========                      =========

Exercisable options at
  December 31                       241,921        $   10.43       810,987        $   13.85       624,269        $   11.70
                                 ==========                     ==========                      =========
</TABLE>

The options outstanding as of December 31, 2002, have been separated into ranges
of exercise price, as follows:

<TABLE>
<CAPTION>

                                               Options          Weighted                          Options
                                              outstanding       average          Weighted       exercisable        Weighted
                                                as of          remaining         Average           as of            average
                     Ranges of exercise        December        contractual       Exercise         December         exercise
                     Price                     31, 2002        life (years)       Price           31, 2002           price
                     ------------------        --------        ------------      --------       ----------         -------

                     <S>                      <C>                <C>            <C>             <C>              <C>
                     $  3.55-5.00               452,955             7.7           $ 3.87          132,796           $ 4.04
                     $ 11.63-16.75               69,500             2.3            15.55           67,125            15.62
                     $ 22.31                     42,000             1.7            22.31           42,000            22.31
                                                -------                                           -------
                                                564,455             6.6           $ 6.68          241,921          $ 10.43
                                                =======                                           =======
</TABLE>

All options granted during 2002 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-22

<PAGE>

                                  FUNDTECH LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (In thousands)
                             (except per share data)

NOTE 12     - SHAREHOLDERS' EQUITY (Cont.)

              f.     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 13     - NET EARNINGS (LOSS) PER SHARE

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

<TABLE>
<CAPTION>

                                                                                  Year ended December 31,
                                                                          ------------------------------------------
                                                                          2 0 0 2          2 0 0 1         2 0 0 0
                                                                          -------          -------         ---------
<S>                                                                        <C>              <C>               <C>
              Numerator:
                Net income (loss)                                          $(16,647)        $(31,626)         $2,377
                                                                         ==========       ==========      ==========

                Numerator for basic earnings (loss) per share -
                  income (loss) available to Ordinary
                  shareholders                                             $(16,647)        $(31,626)         $2,377
                                                                         ==========       ==========      ==========

                Numerator for diluted net earnings (loss) per
                  share - income (loss) available to Ordinary
                  shareholders after assumed exercises                     $(16,647)        $(31,626)         $2,377
                                                                         ==========       ==========      ==========

              Denominator:                                                            Number of shares
                                                                         -------------------------------------------
                Denominator for basic net earnings (loss) per
                  share - weighted - average shares                      14,290,317       14,218,388      14,096,298
                                                                         ----------       ----------      ----------

                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                                                14,290,317       14,218,388      14,776,615
                                                                         ==========       ==========      ==========
              (*) Antidilutive.
</TABLE>


                                       F-23

<PAGE>

                                  FUNDTECH LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (In thousands)


NOTE 14      -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 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. 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 be subject
                     to the reduced tax rates 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. In 2000, the
                     Company received approval for its second expansion program.
                     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 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.

                     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,
                     2002, 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.

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


                                       F-24

<PAGE>

                                  FUNDTECH LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (In thousands)


NOTE 14     - INCOME TAXES (Cont.)


              c.     Net operating losses carryforwards:

                     As of December 31, 2002, the Company had approximately
                     $14,617 of Israeli net operating loss carryforwards. The
                     Israeli loss carryforwards have no expiration date.

                     As of December 31, 2002, Fundtech Corporation had a U.S.
                     federal net operating loss carryforward of approximately
                     $46,648 that can be carried forward and offset against
                     taxable income for 10-15 years and begin to expire in 2010
                     through 2017. Utilization of U.S. net operating losses may
                     be subject to 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.

              d.     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.

<TABLE>
<CAPTION>

                                                                                          December 31,
                                                                                     -----------------------
                                                                                      2 0 0 2        2 0 0 1
                                                                                      -------        -------
                     Deferred tax assets:
<S>                                                                                  <C>            <C>
                         U.S. net operating loss carryforwards                       $ 20,967       $ 14,538
                         Israel net operating loss carryforwards                        1,462          1,048
                         Swiss net operating loss carryforwards                             -            109
                         Other reserve and allowances                                   6,642          7,414
                                                                                     --------       --------
                     Total deferred tax assets before valuation allowance              29,071         23,109
                     Valuation allowance                                              (29,071)       (23,000)
                                                                                     --------       --------
                     Balance at the end of the year (all foreign)                    $      -       $    109
                                                                                     ========       ========
                     Deferred tax liabilities:
                     Deferred taxes due to assets acquired and liabilities
                            assumed (all foreign)                                    $      -       $      -
                                                                                     ========       ========
</TABLE>

                     As of December 31, 2002, the Company and its subsidiaries
                     have provided valuation allowances of approximately $29,071
                     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.

              e.     Tax assesments:

                     The Company received final tax assessments through the tax
                     year ended December 31, 1999. The subsidiaries of the
                     Company have not been assessed for income tax purposes
                     since incorporation.


                                       F-25

<PAGE>

                                  FUNDTECH LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (In thousands)


NOTE 14     - INCOME TAXES (Cont.)

                 f. Composition of income tax expenses

<TABLE>
<CAPTION>

                                                                             Year ended December 31,
                                                                       -----------------------------------
                                                                       2 0 0 2       2 0 0 1       2 0 0 0
                     Income (loss) before taxes on income:             -------       -------       -------
<S>                <C>                                               <C>            <C>            <C>

                     Domestic                                          $ (2,205)     $ (7,441)      $6,951
                     Foreign                                            (14,077)      (23,973)      (4,500)
                                                                       --------      --------       ------
                                                                       $(16,282)     $(31,414)      $2,451
                                                                       ========      ========       ======
</TABLE>

<TABLE>
<CAPTION>

                     Income tax provision (benefit):

                     Current:
<S>                                                                <C>             <C>                <C>
                         Domestic                                  $   51          $  136             $  8
                         Foreign                                      205             185               66
                                                                   ------          ------            -----
                                                                      256             321               74
                                                                   ------          ------            -----
                     Deferred:
                         Domestic                                       -               -                -
                         Foreign                                      109            (109)               -
                                                                   ------          ------            -----
                                                                      109            (109)               -
                                                                   ------          ------            -----
                                                                   $  365          $  212            $  74
                                                                   ======          ======            =====
</TABLE>

                 g.  Theoretical taxes

                     The following is a reconciliation of the theoretical taxes
                     on income assuming that all income is taxed at the ordinary
                     rate applicable to Israeli companies and the actual taxes
                     on income:

<TABLE>
<CAPTION>

                                                                              Year ended December 31,
                                                                        ----------------------------------
                                                                         2 0 0 2      2 0 0 1      2 0 0 0
                                                                         -------      -------      -------

<S>                                                                     <C>          <C>           <C>
                     Income (loss) before taxes on income               $ (16,282)   $ (31,414)    $  2,451
                                                                        =========    =========     ========

                     Theoretical tax on the above amount                $  (5,862)   $ (11,309)    $    882

                       Tax benefit arising from "Approved Enterprise"         396        1,602       (2,555)

                     Increase in valuation allowance                        6,071        8,388        2,544

                     Adjustments arising from differences in the
                         basis of measurement for tax purposes and
                         for financial reporting purposes                       -        2,095           -

                     Other, net                                              (240)        (564)        (797)
                                                                        ---------    ---------     --------
                                                                        $     365    $     212     $     74
                                                                        =========    =========     ========
</TABLE>


                                       F-26

<PAGE>

                                  FUNDTECH LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (In thousands)


NOTE 15     - OPERATING SEGMENT AND GEOGRAPHICAL INFORMATION

              a.     The Company evaluates its business activities in accordance
                     with the provisions of SFAS No. 131 "Disclosure about
                     Segments of an Enterprise and Related Information". In
                     prior years, the Company determined that its operating
                     segments had similar economic characteristics such as
                     products and services, customers' methods used to
                     distribute products and services, and regulatory
                     environment resulting in their aggregation.

                     As a result of the substantial completion of the Company's
                     restructuring and integration efforts that began in the
                     second quarter of 2001, in 2002 the Company aligned itself
                     into three operating business segments: Cash Management,
                     Payments and BBP.

                     The Company's cash management solutions enable small, mid
                     and large-tier financial institutions to deliver a complete
                     set of cash management services through the Internet and
                     other delivery channels. The Company's payments solutions
                     automate all aspects of the funds transfer, including
                     foreign exchange settlement and customer notification
                     process, enabling straight-through-processing (STP) of
                     payments. BBP develops, implements, maintains and operates
                     systems for the automatic processing and transport of data
                     in the finance industry. BBP also provides interbank
                     gateway services. Its products include system solutions for
                     interbank applications, as well as integration modules for
                     host connections. In the beginning of 2002, the Company
                     also changed it's management reporting structure to include
                     relevant operating data for each of its three segments. The
                     Company's chief operating decision makers evaluate
                     performance of each segment based on income (loss) from
                     operations before restructuring expenses, interest expenses
                     and income taxes.

                     The Company does not identify or allocate its assets by
                     operating segments as part of the assessment of segment
                     performance.

                     Summarized financial information for each of the reportable
                     segments is presented below. Segment information related to
                     Cash Management and Payments revenue or operating loss for
                     2001 and 2000 has not been provided as the Company's
                     operations and internal reporting were not organized in a
                     manner consistent with the current reportable segments and
                     the Company has determined it is impracticable to identify
                     such information.

                     The following table sets forth the Company's revenue and
                     operating income (loss) from all reportable segments for
                     the year 2002 as well as BBP for the years 2001 and 2000:

<TABLE>
<CAPTION>

                                                             Year ended December 31,
                                                        ----------------------------------
                                                        2 0 0 2      2 0 0 1       2 0 0 0
                                                        -------      -------       -------

                     Cash Management:
                     ---------------
<S>                                                     <C>          <C>           <C>
                         Revenues                       $ 8,098          --            --
                         Operating loss                 $(2,844)         --            --

                     Payments:
                     --------
                         Revenues                       $24,214          --            --
                         Operating loss                 $(2,681)         --            --

                     BBP:
                     ---
                         Revenues                       $ 7,516      $ 6,901       $ 6,450
                         Operating income (loss)        $    42      $  (914)      $(2,390)
</TABLE>

              b.     Following is a reconciliation of the operating loss of the
                     reportable segments to the data included in the
                     consolidated financial statements:


                                      F-27

<PAGE>

                                  FUNDTECH LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (In thousands)


<TABLE>
<CAPTION>

                                                                                  Year ended
                                                                                  December 31,
                                                                                      2002
                                                                                  -----------

<S>                                                                                   <C>
                     Total operating loss of the reportable segments:                 5,483

                     Amounts not allocated to segments:
                        General and administrative expenses                           6,172
                        Marketing expenses                                            1,785
                        Restructuring expenses                                        3,252
                                                                                   --------
                     Consolidated operating loss                                   $ 16,692
                                                                                   ========
</TABLE>


NOTE 15     - OPERATING SEGMENT AND GEOGRAPHICAL INFORMATION  (Cont.)

              c.     Geographic information:

                     The total revenues are attributed to geographic
                     information, based on the customers' location

<TABLE>
<CAPTION>

                                                               Year ended December 31,
                                      ----------------------------------------------------------------------------
                                              2 0 0 2                   2 0 0 1                    2 0 0 0
                                      ----------------------      ---------------------       --------------------
                                                      Long -                     Long -                     Long -
                                         Total        lived        Total         lived         Total        lived
                                       revenues       assets      revenues       assets       revenues      assets
                                       --------       ------      --------       ------       --------      ------

<S>                 <C>                <C>           <C>          <C>          <C>          <C>           <C>
                     Israel               $  142       $  827       $  205        $  737       $  574       $  830
                     U.S.                 26,272       20,844       31,610        24,140       27,610       20,942
                     Australia               140           11            -            10        4,062            7
                     Switzerland           7,801        8,451        7,381         8,847        6,313       10,529
                     Others                5,473          138        5,798           222        9,389          139
                                        --------      -------     --------       -------     --------      -------
                                        $ 39,828      $30,271     $ 44,994       $33,956     $ 47,948      $32,447
                                        ========      =======     ========       =======     ========      =======
</TABLE>

<TABLE>
<CAPTION>

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

                                                                                        Year ended December 31,
                                                                                    ------------------------------
                                                                                    2 0 0 2    2 0 0 1     2 0 0 0
                                                                                    -------    -------     -------

<S>                                                         <C>                      <C>        <C>         <C>
                     Customer A                                                         18%        17%          2%
                                                                                     ======      =====      ======
</TABLE>

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


NOTE 16 - FINANCIAL INCOME, NET:

<TABLE>
<CAPTION>

                                                                                     Year ended December 31,
                                                                               ----------------------------------
                                                                               2 0 0 2       2 0 0 1      2 0 0 0
                                                                               -------       -------      -------

                     Financial expenses:
<S>                                                                            <C>           <C>           <C>
                         Interest and other                                     $  172        $  325        $   2
                         Foreign currency translation
                           differences, net                                        161           205           33
                                                                                 -----       -------      -------
                                                                                   333           530           35
                                                                                 -----       -------      -------
                     Financial income:
                         Interest and other                                        930         3,787        5,577
                         Foreign currency translation
                           differences, net                                         94            86            -
                                                                                 -----       -------      -------

                                                                                 1,024         3,873        5,577
                                                                                 -----       -------      -------
                                                                                 _____       _______      _______

                                                                                $  691       $ 3,343      $ 5,542
                                                                                ======       =======      =======
</TABLE>


                                       F-28

<PAGE>

                                    SIGNATURE
                                    ---------

      The registrant hereby certifies that it meets all of the requirements for
filing on Form 20-F and that it has duly caused and authorized the undersigned
to sign this annual report on its behalf.

                                    FUNDTECH  LTD.



                                    By: /s/ Reuven Ben Menachem
                                       -----------------------------
                                        Reuven Ben Menachem
Date: June 11, 2003





<PAGE>


                                 CERTIFICATIONS
                                 --------------


I,  Reuven Ben Menachem, certify that:

1.  I have reviewed this annual report on Form 20-F of Fundtech Ltd.;

2.  Based on my knowledge, this annual report does not contain any untrue
    statement of a material fact or omit to state a material fact necessary to
    make the statements made, in light of the circumstances under which such
    statements were made, not misleading with respect to the period covered by
    this annual report;

3.  Based on my knowledge, the financial statements, and other financial
    information included in this annual report, fairly present in all material
    respects the financial condition, results of operations and cash flows of
    the registrant as of, and for, the periods presented in this annual report;

4.  The registrant's other certifying officer and I are responsible for
    establishing and maintaining disclosure controls and procedures (as defined
    in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

    a.  designed such disclosure controls and procedures to ensure that material
        information relating to the registrant, including its consolidated
        subsidiaries, is made known to us by others within those entities,
        particularly during the period in which this annual report is being
        prepared;

    b.  evaluated the effectiveness of the registrant's disclosure controls and
        procedures as of a date within 90 days prior to the filing date of this
        annual report (the "Evaluation Date"); and

    c.  presented in this annual report our conclusions about the effectiveness
        of the disclosure controls and procedures based on our evaluation as of
        the Evaluation Date;

5.  The registrant's other certifying officer and I have disclosed, based on our
    most recent evaluation, to the registrant's auditors and the audit committee
    of registrant's board of directors (or persons performing the equivalent
    function):

    a.  all significant deficiencies in the design or operation of internal
        controls which could adversely affect the registrant's ability to
        record, process, summarize and report financial data and have identified
        for the registrant's auditors any material weaknesses in internal
        controls; and

    b.  any fraud, whether or not material, that involves management or other
        employees who have a significant role in the registrant's internal
        controls; and

6.  The registrant's other certifying officers and I have indicated in this
    annual report whether or not there were significant changes in internal
    controls or in other factors that could significantly affect internal
    controls subsequent to the date of our most recent evaluation, including any
    corrective actions with regard to significant deficiencies and material
    weaknesses.


Date: June 11, 2003

                               /s/ Reuven Ben Menachem
                               ------------------------------
                               Reuven Ben Menachem
                               Chief Executive Officer
                               (Principal Executive Officer)



                                       1

<PAGE>


I,  Yoram Bibring, certify that:

1.  I have reviewed this annual report on Form 20-F of Fundtech Ltd.;

2.  Based on my knowledge, this annual report does not contain any untrue
    statement of a material fact or omit to state a material fact necessary to
    make the statements made, in light of the circumstances under which such
    statements were made, not misleading with respect to the period covered by
    this annual report;

3.  Based on my knowledge, the financial statements, and other financial
    information included in this annual report, fairly present in all material
    respects the financial condition, results of operations and cash flows of
    the registrant as of, and for, the periods presented in this annual report;

4.  The registrant's other certifying officer and I are responsible for
    establishing and maintaining disclosure controls and procedures (as defined
    in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

    a.  designed such disclosure controls and procedures to ensure that material
        information relating to the registrant, including its consolidated
        subsidiaries, is made known to us by others within those entities,
        particularly during the period in which this annual report is being
        prepared;

    b.  evaluated the effectiveness of the registrant's disclosure controls and
        procedures as of a date within 90 days prior to the filing date of this
        annual report (the "Evaluation Date"); and

    c.  presented in this annual report our conclusions about the effectiveness
        of the disclosure controls and procedures based on our evaluation as of
        the Evaluation Date;

5.  The registrant's other certifying officer and I have disclosed, based on our
    most recent evaluation, to the registrant's auditors and the audit committee
    of registrant's board of directors (or persons performing the equivalent
    function):

    a.  all significant deficiencies in the design or operation of internal
        controls which could adversely affect the registrant's ability to
        record, process, summarize and report financial data and have identified
        for the registrant's auditors any material weaknesses in internal
        controls; and

    b.  any fraud, whether or not material, that involves management or other
        employees who have a significant role in the registrant's internal
        controls; and

6.  The registrant's other certifying officers and I have indicated in this
    annual report whether or not there were significant changes in internal
    controls or in other factors that could significantly affect internal
    controls subsequent to the date of our most recent evaluation, including any
    corrective actions with regard to significant deficiencies and material
    weaknesses.

Date: June 11, 2003


                               /s/ Yoram Bibring
                               ----------------------------
                               Yoram Bibring
                               Chief Financial Officer
                               (Principal Financial Officer)



                                       2