United States
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    Form 10-K

      FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934


              |x| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934


                   For the Fiscal Year Ended December 31, 1998

            | |TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

        FOR THE TRANSITION PERIOD FROM _________________ TO _____________


                           Commission File No. 0-57495


                               SAVILLE SYSTEMS PLC
             (Exact Name of Registrant as Specified in its Charter)

                               Republic of Ireland
         (State or other jurisdiction of incorporation or organization)

                                 Not Applicable
                      (I.R.S. Employer Identification No.)

                       IDA Business Park, Dangan, Galway,
                     Ireland (Address of principal executive
                          offices, including zip code)

                               011-353-9-152-6611
   (Registrant's telephone number, including area code from the United States)

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

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


   American Depository Shares, Representing Ordinary Shares, $0.0025 par value
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes |x| No | |

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

The aggregate market value of voting Common Stock held by  non-affiliates of the
registrant  was  $522,053,616  based  on the  last  reported  sale  price of the
American  Depository  Shares on the Nasdaq  consolidated  transaction  reporting
system on March 11, 1999.

Number of shares outstanding of the registrant's  Ordinary Shares outstanding as
of March 11, 1999 was 39,101,506.

Documents incorporated by reference:
Proxy Statement for the 1999 Annual Meeting of Shareholders - Part III



                                     PART I

ITEM 1.   BUSINESS


GENERAL

Saville Systems PLC (together with its subsidiaries, "Saville" or the "Company")
provides  innovative,  convergent customer care and billing solutions to service
providers in the global telecommunications and energy industries. Saville offers
products and services designed to enable  telecommunications  and energy service
providers  to  bring  new  service  offerings  to  market  quickly,  and to bill
accurately  and reliably for multiple  services on one convergent  invoice.  The
Company's   telecommunications   solutions   are   designed   to  operate  in  a
multi-service  environment,  capable of billing local  exchange,  long distance,
wireless and data communications services. These systems are designed to support
the discrete service  offerings of large service  providers,  or to serve as the
complete customer care and billing systems of emerging and medium-sized  service
providers.

The  Company  has  developed,   and  continuously   refines,  its  sophisticated
convergent  billing  platform  (CBP(R))  software  products in order to meet the
current and evolving billing requirements of its customers. In 1998, the Company
released new versions of CBP for both the  UNIX/Oracle(R) and DB2/400 platforms,
with each  offering  additional  billing  functionality  to both the  energy and
telecommunications  industries.  In  addition,  in  February  1998,  the Company
purchased the interconnect  telecommunications software technology of Cap Gemini
Sverige A.B., a Swedish company,  for  approximately  $2.0 million in cash and a
commitment  of at least $2.0  million in  royalties to be paid in 1999 and 2000.
This  technology,  which has been  developed by the Company as its  interconnect
billing platform (IBP(TM)) software product, allows telecommunications companies
to bill for carrier-to-carrier transactions.

In  April   1998,   the   Company   acquired   the  net  assets  of   Australian
telecommunications  software company BHA Pty Ltd. ("BHA") and its majority-owned
subsidiary  BHA Computer Pty Ltd.  ("BHAC") for  approximately  $15.8 million in
cash and the settlement of  approximately  $3.3 million in related bank debt, as
well as $906,000 in acquisition related costs and expenses including  applicable
duties and taxes.  The Company  funded the  acquisition,  in part,  by borrowing
approximately  $15.1 million from the Company's  working capital line of credit.
The entire  amount  borrowed was repaid  during 1998,  in part from the proceeds
resulting from the issuance by the Company of 283,698 of its Ordinary  Shares to
BHA for aggregate  consideration to the Company of approximately  $14.0 million.
In addition to the billing technology purchased as part of the transaction,  the
Company  also has  enhanced  and  further  developed  customer  care  technology
acquired from BHA. This technology,  which the Company released in early 1999 as
SavilleCareTM,   allows   telecommunications   service  providers  to  integrate
SavilleCare's call center desktop with the providers' billing and other business
support systems.

In addition to its software  products,  the Company  offers its customers a full
range of  professional  services.  The Company assists each customer in defining
its  requirements  and then designs,  develops and  implements a  cost-effective
customer  care and billing  solution.  The Company  typically  continues to work
closely  with  its  customers  after  initial  implementation,  particularly  as
customers require additional  customized customer care and billing  applications
that enable them to offer new  features  and  services,  expand into  additional
geographic  markets or operate with new network  technologies and protocols.  In
addition, the Company provides ongoing support, maintenance and training related
to the customer's  customer care and billing system. The Company also offers its
customers  the option of  retaining  the  Company to operate  all or part of the
implemented  customer care and billing  system at a  Company-maintained  service
bureau or on a facilities management basis.

The Company was  incorporated in the Republic of Ireland in June 1993 as Saville
Systems Ireland  Limited,  a private limited  company.  On November 9, 1995, the
Company was  re-registered  as a public limited  company and changed its name to
Saville Systems PLC. Unless the context  otherwise  requires,  references to the
"Company"  or  "Saville"  are  to  Saville  Systems  PLC  and  its  consolidated
subsidiaries.  The  Company's  principal  executive  office  is  located  at IDA
Business Park, Dangan, Galway, Ireland, and its telephone number from the United
States is (011)  353-9-152-6611.  The address of the  Company's  North  American
headquarters is 1 Van de Graaff Drive,  Burlington,  MA 01803, and its telephone
number is (781) 270-6500.


CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

Forward-looking statements are made throughout this document.  Typically the use
of the words, "believe," "anticipate," "plan," "expect," "seek," "estimate," and
similar  expressions  identify  forward-looking  statements.  Unless  a  passage
describes  an  historical   event,   the   statement   should  be  considered  a
forward-looking  statement.  In keeping with the "Safe Harbor"  provision of the
Private  Securities  Litigation  Reform  Act of 1995,  it should  be noted  that
forward-looking  statements  regarding the  Company's  future  expectations  and
projections  are not  guarantees  of future  performance.  They  involve  risks,
uncertainties,  and  assumptions,  and many of the  important  factors that will
determine  the  Company's  future  results are beyond the  Company's  ability to
control or predict.  Therefore,  actual  results may differ  significantly  from
those  suggested  by  forward-looking  statements.  These  risks  include  those
detailed  under the heading  "Certain  Factors That May Affect  Future  Results"
immediately  following  the  Management's  Discussion  and Analysis of Financial
Condition and Results of Operations,  which is  incorporated in this document by
reference and attached hereto as Appendix B.


INDUSTRY

The  Telecommunications  Act of  1996  has  increased  competition  in the  U.S.
telecommunications  services market by allowing  local,  long distance and cable
companies to offer competing services,  provided they meet specified  regulatory
benchmarks.   Outside  of  the  U.S.,   privatization   and   telecommunications
liberalization  are  resulting in increased  international  competition  and the
emergence of newly authorized telecommunications service providers. Many service
providers are competing by offering multiple services, including combinations of
local exchange, long distance,  wireless (cellular,  paging,  satellite and PCS)
and data  communications  services,  to customers in a single geographic market.
New service-based  technologies have substantially  increased the complexity and
variety  of  telecommunications  services,  as  providers  seek to  compete  and
differentiate  themselves with enhanced  telecommunications  service  offerings.
These factors have created the need for sophisticated and flexible customer care
and billing solutions.  Telecommunications service providers can compete only if
they are able to efficiently  and accurately bill their customers for the varied
services and features they provide.

Telecommunications  customer  care  and  billing  involves  end to end  customer
management including customer acquisition, service initiation and collecting and
pricing customer  telecommunications  usage in order to generate residential and
business  telephone  invoices for local,  long  distance  and wireless  service.
Customer care and billing  systems  typically  interact with most aspects of the
telecommunications network and generally incorporate data collection, processing
and invoice generation.  The billing function continues to evolve from primarily
a service support  function to a revenue  enhancement tool used to differentiate
services.  The rapid pace of  technological  change coupled with the emphasis on
time to market for new services and features places significant  pressure on the
telecommunications  service  provider to install and to modify its customer care
and billing system quickly in order to adapt to technological advances. There is
therefore  significant  demand  for  software  that can  perform  a  variety  of
functions in a timely, accurate, cost-effective manner for multiple services.

Established  telecommunications service providers have existing billing systems,
many of which are maintained in-house.  Frequently,  however, these systems were
designed prior to deregulation  to provide a  single-service  billing  function.
These older systems generally are difficult to maintain and modify, and often do
not meet the  multiple  and  evolving  needs of the  telecommunications  service
provider.  Many of these service  providers are therefore  seeking to replace or
augment their existing billing systems through sophisticated outsourced customer
care and billing solutions.

Many  emerging  telecommunications  service  providers  lack  customer  care and
billing  systems.  One  of the  primary  challenges  that  these  newer  service
providers face is to bring new services to market quickly.  They typically focus
their capital resources on developing networking and switching  technologies and
on  creating  marketable  services  rather than on  creating  customer  care and
billing  systems.  These  providers  typically  seek external  customer care and
billing  solutions  because  efficient,   flexible  customer  care  and  billing
solutions are often too costly and time consuming to develop internally.

PRODUCTS AND SERVICES

The Company provides advanced customer care and billing solutions that address a
spectrum of billing and customer care functions,  ranging from sales support and
order processing through actual invoice  calculation and production,  as well as
management reporting and marketing analysis.  The Company's objective is to be a
market  leader in providing  customer  care and billing  solutions to the global
telecommunications and energy industries. Due to the flexibility inherent in the
Company's  software  products  and the  expertise  of its  software  development
personnel, the Company is able to develop solutions that allow service providers
to offer a wide  variety of services  as well as  collect,  process and bill for
multiple services on a single invoice.

The Company's customer relationships  typically begin with the customer directly
licensing the Company's software  products,  resulting in license fee revenue to
the Company.  The Company (or an authorized  systems  integrator)  then provides
system analysis and design,  customization  and  implementation  services to the
customer for the licensed software  products,  primarily on a time and materials
basis. After the system is in operation,  the Company continues the relationship
by providing software product upgrades,  maintenance,  ongoing system management
and system  enhancements  to  accommodate  new  telecommunications  services and
technologies.  Instead of licensing the software products from the Company,  the
customer can choose to retain the Company to perform all or a  substantial  part
of the customer's  customer care and billing operations in a  Company-maintained
DB2/400-based service bureau,  resulting in ongoing processing fees. The Company
also offers customers who license its software a facilities  management  option,
whereby the Company  manages the  operations  of the  customer  care and billing
solution on customer-owned hardware, on the Company's premises.

Software Products
Saville CBP for DB2/400 and CBP for Oracle. The Company's flagship products, CBP
for  DB2/400  and CBP for Oracle are  innovative  customer  care and  convergent
billing solutions  designed for the  telecommunications  and energy  industries.
Saville CBP provides billing and account  management  capabilities for a variety
of wireless  and  wireline  services,  as well as energy  services,  providing a
single  bill and a single  point of  contact  across  multiple  levels,  service
offerings,  languages,  currencies and  locations.  In September  1998,  Saville
released a new version of CBP for Oracle that provides certain GSM,  competitive
local exchange  carrier  (CLEC),  and web enablement  capabilities.  In December
1998,  Saville released a new version of CBP for DB2/400 which features improved
menu driven  installation  procedures,  expanded tax code compliance for utility
companies,  an  enhanced  user  interface  and an  upgraded  knowledge  transfer
program.

Saville  IBP.  The   Company's   IBP  product  is  based  on  the   interconnect
telecommunications software technology purchased from Cap Gemini Sverige A.B. in
1998.  Saville IBP is a billing product that allows carriers to bill one another
for their  interconnect,  carrier-to-carrier  transactions,  in an efficient and
secure way.  Saville IBP includes  functionality  that allows  telecommunication
carriers to collect, validate, measure and price the actual traffic sent between
carriers and either generate  accurate  statements to  interconnect  partners or
validate incoming interconnect charges.

SavilleCare.  Released  in January  1999,  the  Company's  SavilleCare  software
product is based on the customer  care  technology  purchased  from BHA in April
1998.  SavilleCare,  which was specifically developed for the telecommunications
industry, is a fully independent,  enterprise-wide  customer care solution.  The
product  offers an  organization a single view of each customer on an integrated
call center desktop,  enabling one customer service  representative  (CSR) to be
the sole  point of contact  between an  organization  and its  customers  and to
efficiently  provide  customer  care by working  through  just one easy to learn
interface.  The SavilleCare call center desktop  functionality can be integrated
with a telecommunications  service provider's billing and other business support
systems.

SavilleExpress. Released in August 1998, the Company's SavilleExpressTM software
product is based on the  billing  technology  purchased  from BHA in April 1998.
SavilleExpress  is a modular  billing system  marketed  towards  smaller service
providers.  A provider  can choose  from a series of  pre-configured  modules to
support its business as it exists,  and may add functional modules in the future
to support its growth.  The Company is scheduled  to release its  SavilleExpress
GSM module to support the Global System for Mobile Communications (GSM) standard
for wireless telecommunications in the first half of 1999.

Services
Saville provides development and enhancement services to its customers primarily
on a time and materials  basis.  The Company  typically  begins its relationship
with a customer  by  assisting  the  customer  in  developing  a  business  case
definition  and needs  analysis  and then  working  with the customer to design,
develop and implement  customizations to the Company's software products to meet
those specific  customer  needs. A customer who licenses the Company's  software
products may also enter into a facilities management agreement with the Company,
whereby the Company manages the operations of the customer's billing solution on
customer-owned hardware, at the Company's data center. The Company continues its
relationship  with  the  customer  through  ongoing  development,   maintenance,
training,  systems  analysis and further  enhancements  of installed  systems to
accommodate  new products and  technologies.  The Company also provides users of
its software  products  technical  support via the Company's  technical  support
facilities  in  Australia,  Canada and the  Republic  of  Ireland.  The  Company
believes  that it is  essential  to provide a high level of reliable  service to
customers in order to solidify  customer  relationships  and to be the vendor of
choice when customers seek new services or system expansions.

Service Bureau
Customers may elect to contract with the Company to operate their  DB2/400-based
customer care and billing solution in a Company-maintained  service bureau. In a
typical service bureau arrangement, the Company develops the customer's customer
care and billing  solution  and  installs  it in the  Company's  technical  data
center.  The customer then transmits its customer usage data to the Company,  or
the Company  obtains the information  directly from the switch.  In either case,
the Company  processes  and rates the  information  using the customer  care and
billing  system  developed for the customer and then transmits the processed and
rated  information  to a third party or the  customer  for printing and mailing.
Customers  are charged a negotiated  fee for  utilizing  the  Company's  service
bureau.  This fee is typically  comprised of a charge per invoice produced and a
charge per call based on the amount  and type of  information  contained  in the
bill's call detail records.

CUSTOMERS

The Company provides its software and services to a range of  telecommunications
service  providers,  including those  providing  local exchange,  long distance,
wireless,  and audio- and  video-conferencing  services.  The Company's  typical
customers are  medium-sized  telecommunications  service  providers that require
complete  customer care and billing  systems,  and large service  providers that
require the Company's  software and services to support new market expansions or
as integral components of larger customer care and billing systems. In addition,
the Company has licensed  software  products and provided services to a customer
in the energy industry.

During  1998,  no  customer  represented  more than 10% of the  Company's  total
revenue.  The Company however is dependent on large and long-term  projects that
can cause the  Company's  revenue and  earnings  to  fluctuate  from  quarter to
quarter,  based on the customers'  requirements  and the timing of the projects.
Although  the  Company  believes  it has good  relationships  with  its  largest
customers and has in the past received a substantial portion of its revenue from
repeat  business  with  established  customers,  none  of  the  Company's  major
customers  has a  significant  obligation  to  purchase  additional  products or
services.  Therefore,  there can be no assurance that any of the Company's major
customers will continue its long-term projects or purchase new systems,  systems
enhancements  and services in amounts  similar to previous  years. A significant
decrease  in  business  from any of its major  customers  could  have a material
adverse effect on the Company's  results of operations and financial  condition.
Additionally,  the  acquisition  by a third party of one of the Company's  major
customers could result in the loss of that customer and have a material  adverse
effect on the Company's results of operations and financial condition.

COMPETITION

The market for customer care and billing systems is highly competitive,  and the
Company  expects this  competition to increase.  The Company  competes with both
independent providers of customer care and billing systems and services and with
the  internal  billing  departments  of  telecommunications  and energy  service
providers.   The   Company   expects   that   the   continued   growth   of  the
telecommunications   industry  will  encourage  new  competitors  to  enter  the
telecommunications  customer care and billing market in the future.  The Company
believes  that  the  principal   competitive   factors  in  its  market  include
responsiveness  to  client  needs,  timeliness  of  implementation,  quality  of
service,  price,  project  management  capability and technical  expertise.  The
Company also believes that its ability to compete depends in part on a number of
competitive factors outside its control,  including the development by others of
software that is competitive with the Company's services and products, the price
at which  competitors  offer  comparable  services and  products,  the extent of
competitors'  responsiveness  to customer needs and the ability of the Company's
competitors to hire, retain and motivate key personnel.

In  addition,  the  Company  competes  with a  number  of  companies  that  have
substantially  greater  financial,   technical,   sales,   marketing  and  other
resources, as well as greater name recognition than the Company. For example, in
February 1999, Lucent Technologies,  Inc., a telecommunications  equipment maker
with  substantially  greater resources and name recognition than the Company and
with which the Company had entered into several alliance  agreements,  purchased
Kenan  Systems  Corp.,  a customer care and billing  software  competitor of the
Company.  In addition,  Amdocs  Limited,  a customer  care and billing  software
competitor of the Company with substantially  greater resources than the Company
announced an  agreement  to purchase  Architel  Systems  Corporation,  a service
provisioning  software  company,  in order to enhance Amdocs' ability to provide
end-to-end billing solutions for its telecommunications customers. The Company's
competitors,  therefore,  may be able to adapt more  quickly to new or  emerging
technologies  and  changes  in  customer  requirements,  or  to  devote  greater
resources to the promotion and sale of their products than can the Company.


PROPRIETARY RIGHTS AND LICENSES

The Company does not currently hold any patents and relies upon a combination of
statutory and common law copyright, trademark and trade secret laws to establish
and maintain its proprietary rights to its products.  The Company believes that,
because of the rapid pace of technological change in the  telecommunication  and
software industries, the legal protections for its products are less significant
factors in the Company's  success than the knowledge,  ability and experience of
the  Company's  employees,   the  frequency  of  product  enhancements  and  the
timeliness and quality of support services provided by the Company.

The Company generally enters into invention and  non-disclosure  agreements with
its employees,  consultants, clients and potential clients and limits access to,
and distribution of, its proprietary information.  Use of the Company's software
products is usually  restricted  to specified  locations and is subject to terms
and conditions prohibiting unauthorized reproduction or transfer of the software
products. The Company also seeks to protect the source code of its software as a
trade secret and as a copyrighted work.


RESEARCH AND DEVELOPMENT

Research and development  expenses were $4.2 million,  $10.1 million,  and $21.4
million in 1996, 1997 and 1998,  respectively.  During 1998, the Company had two
major platform  releases of CBP,  providing  additional  functionality  for each
platform.  The first was the release of the second version of the Company's UNIX
based  product,  CBP for Oracle in September 1998 and the second was CBP release
3.5 for DB2/400 in December 1998. In addition, the Company further developed its
SavilleExpress,  SavilleCare and Saville IBP product technology purchased during
the year.  The  Company  intends to continue  its  investment  in  research  and
development efforts and therefore expects that research and development expenses
will remain at similar levels to 1998.

The Company is currently  reviewing  its products and  operations to ensure that
they will not be adversely  affected by year 2000 software  failures,  which can
arise in time-sensitive software applications that utilize a field of two digits
to define the applicable year. The Company has designed, tested and continues to
test the most current versions of its products to ensure that they are Year 2000
ready.  The Company  does not believe  that it will need to  undertake  material
research and development efforts in this regard.

EMPLOYEES

As of  December  31,  1998,  the  Company  employed  a total of 1,393  employees
including  38 involved in sales and  marketing  and related  services,  1,194 in
consulting,  implementation  and client support  services and 161 in management,
finance, human resources and administration.  None of the Company's employees is
represented by a labor union.  The Company has experienced no work stoppages and
believes that its employee relations are good.


EXECUTIVE OFFICERS OF THE COMPANY

The  following  table sets forth the names,  ages and  positions  of the current
executive officers of the Company.


Name                    Age   Position

John J. Boyle, III      52    President, Chief Executive Officer
                               and Chairman of the Board of Directors
Lawrence S. Barker      46    Executive Vice President, Operations
John J. Kiley           43    Executive Vice President, Global Sales and
                               Marketing
Andrew L. Campbell      37    Senior Vice President and Chief Technology Officer
Michael Durance         38    Senior Vice President, Australia
Susan J. Ernst          49    Senior Vice President, Global Consulting Services
Eric Fredine            34    Senior Vice President, Global Consulting Services
Christopher A. Hanson   40    Senior Vice President and Chief Financial Officer
Robin Winn              46    Senior Vice President, Human Resources


Mr. Boyle has served as the  Company's  President  and Chief  Executive  Officer
since August 1994 and as the Company's  Chairman of the Board of Directors since
April 1998.  From 1981 to August 1994,  Mr.  Boyle served in various  management
positions with CSC Intelicom, a global supplier of information technology,  most
recently as Senior Vice President of Work Process/Network Practice.

Mr.  Barker has served as Executive  Vice  President,  Operations of the Company
since  January  1999,  prior  to which  he  served  as  Senior  Vice  President,
Operations of the Company since October 1997. From October 1996 to October 1997,
Mr.  Barker  served  as  President  of  Stanford   Associates,   a  provider  of
telecommunications consulting services. From 1993 until October 1996, Mr. Barker
was  the  Division  President  for   Telecommunications   at  Computer  Services
Corporation.

Mr. Kiley has served as Executive Vice President,  Global Sales and Marketing of
the  Company  since  January  1999,  prior to which he  served  as  Senior  Vice
President,  Global Sales and Marketing of the Company  since October 1995.  From
January  1994 to  September  1995,  Mr.  Kiley  served  as  President  and Chief
Operating Officer of Performance  Software,  Inc., a provider of commercial UNIX
server based automated software testing products and services.

Mr. Campbell has served as Senior Vice President and Chief Technology Officer of
the  Company  since  January  1999,  prior to which he  served  as  Senior  Vice
President,  Research and  Development  of the Company since  January 1997.  From
February 1990 to December 1996, Mr.  Campbell  served in various  positions with
BHA Computer Pty Ltd, an Australian-based developer of customer care and billing
software  acquired by the Company in 1998,  most recently as the General Manager
for the company's projects division.

Mr.  Durance has served as Senior Vice  President of the Company  since  January
1999, prior to which he served as Managing  Director for the Asia Pacific region
of the Company since September 1998 and as Vice President of product  management
since  September  1996.  From November 1994 to September  1996, Mr. Durance held
various   positions  at  Northern   Telecom,   most   recently  as  Director  of
Applications.

Ms. Ernst has served as Senior Vice President, Global Consulting Services of the
Company since July 1998.  From September 1991 to April 1998, Ms. Ernst served in
various  positions with MCI Systemhouse,  most recently as Senior Vice President
and Chief Delivery Officer.

Mr. Fredine has served as Senior Vice President,  Global Consulting  Services of
the Company  since  January  1999,  prior to which he served as Vice  President,
Global   Consulting   Services  of  the  Company   since   August  1997  and  as
Implementation  Manager since February 1997.  From January 1996 to January 1997,
Mr. Fredine was a Development  Manager at Northern Telecom and from January 1993
to January 1996, he was a Development Manager for Nortel Australia.

Mr. Hanson has served as Saville's  Senior Vice  President  and Chief  Financial
Officer since March 1997.  From  November 1991 to March 1997,  Mr. Hanson was in
charge of tax and treasury operations at System Software  Associates,  Inc. most
recently serving as its Treasurer.

Ms. Winn has served as Senior Vice  President,  Human  Resources  of the Company
since April 1998,  prior to which she served as Vice President,  Human Resources
of the Company since  December  1996.  From February 1993 to November  1996, Ms.
Winn served as Vice President, Human Resources for Bell Sygma.

Executive  officers of the Company are elected by and serve at the discretion of
the  Board of  Directors.  There are no  family  relationships  among any of the
executive officers or directors of the Company.


ITEM 2.   PROPERTIES

The  Company  leases  space at its office  locations:  The Galway  office is the
Company's corporate  headquarters and is used for sales and marketing,  software
development and customer  support.  The Burlington  office is the North American
headquarters   and  is  primarily  used  for  sales  and  marketing,   corporate
development and finance.  The Edmonton and Toronto  locations are primarily used
for software  development,  customer support and service bureau operations while
the Australian  offices in Brisbane and Sydney are used for sales and marketing,
software development and customer support. The Company and its subsidiaries also
lease additional sales offices in Miami, Florida, Crawthorne, UK, and Wiesbaden,
Germany.


The Company  believes that its facilities are adequate for its current needs and
that  suitable  additional  space will be available as required.  The  following
shows information concerning the Company's significant leased facilities:

Location                        Square Footage            Lease Expiration

Brisbane, Australia                 23,210                   June 30, 1999
Burlington, Massachusetts           12,417                   July 31, 2002
Crowthorne, United Kingdom          3,106                     July 7, 2013
Edmonton, Alberta                   58,298                   June 30, 2001
Edmonton, Alberta                   28,583               December 31, 2002
Edmonton, Alberta                   29,057                   July 31, 2003
Galway, Ireland                      4,000                   April 1, 2014
Galway, Ireland                     21,966                    July 1, 2007
Sydney, Australia                   3,638                    April 2, 2000
Toronto, Ontario                    35,269                October 31, 2000
Toronto, Ontario                    24,030                January 31, 2005
Toronto, Ontario                    42,958                   June 30, 2005
Toronto, Ontario                    14,400                   June 30, 2006


ITEM 3.   LEGAL PROCEEDINGS

The Company is not party to any material legal proceedings.



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

None.



                                     PART II


ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
         SHAREHOLDER MATTERS


MARKET INFORMATION AND HOLDERS

American  Depositary  Shares  ("ADSs")  representing  the Ordinary Shares of the
Company have been traded on the Nasdaq  National Market under the symbol "SAVLY"
since November 16, 1995.  Each ADS represents one Ordinary Share of the Company.
Prior to November 16, 1995,  neither the ADSs nor the Company's  Ordinary Shares
were publicly  traded.  Neither the ADSs nor the Ordinary  Shares of the Company
are traded on any market,  foreign or domestic,  other than the Nasdaq  National
Market. The following table sets forth, for the periods indicated,  the high and
low  sales  prices  of the  ADSs as  reported  on the  Nasdaq  National  Market,
retroactively adjusted for a two-for-one stock split in the form of a 100% share
dividend in November 1997.


                                            1998
                                    High            Low

First Quarter                      $53.00         $35.00

Second Quarter                      58.00          34.50

Third Quarter                       51.25          12.75

Fourth Quarter                      23.44           7.50


                                            1997
                                     High           Low

First Quarter                       $21.73        $14.06

Second Quarter                       26.25         13.56

Third Quarter                        37.88         25.63

Fourth Quarter                       41.50         28.00



The depositary for the American  Depositary  Receipts ("ADRs")  representing the
ADSs is the Bank of New York (the  "Depositary"),  48 Wall Street, New York, New
York 10286.  On March 11,  1999,  the Company  had  approximately  14 holders of
Ordinary Shares of record. The Bank of New York, as Depositary, is the holder of
record of the Ordinary  Shares  evidenced by ADSs. On March 11, 1999 the closing
price of the Company's ADSs on the Nasdaq National Market was $14.00.

DIVIDENDS

On September  25, 1995,  the Company paid a cash dividend of $3.0 million on its
Ordinary  Shares,  which it determined to pay primarily due to the incurrence of
certain  tax  liabilities  by its  majority  shareholders  as a result  of their
ownership interests in the Company and the Company's classification at that time
as a "Controlled  Foreign  Corporation."  Except for such  payment,  Saville has
never  declared or paid any cash dividends on its Ordinary  Shares.  The Company
currently intends to retain all future earnings to finance future operations and
therefore  does not  anticipate  paying any cash  dividends  in the  foreseeable
future. Moreover, under the Companies Acts of the Republic of Ireland, dividends
may  only be paid  out of the  profits  of the  Company  legally  available  for
distribution.

TAXATION

The  statements  of United  States and Irish tax laws set out below are based on
the laws, regulations, administrative rulings and practices of the United States
Internal Revenue Service (the "IRS") and the Revenue Commissioners of Ireland in
force and as interpreted by the relevant taxation authorities as of December 31,
1998 and are  subject to any  changes in United  States or Irish law,  or in the
interpretation  thereof by the relevant taxation  authorities,  or in the double
taxation  conventions between the Republic of Ireland and the United States (the
"Conventions")  (the  Conventions  were ratified in 1997 and 1951) and occurring
after such date.

The  following  is a general  summary of certain  Republic of Ireland and United
States  federal  income  tax   consequences  of  the  purchase,   ownership  and
disposition  of ADSs  evidenced  by ADRs to U.S.  Holders.  For purposes of this
discussion,  a "U.S.  Holder"  means an  individual  citizen or  resident of the
United States for United States  federal income tax purposes,  corporations,  or
partnerships  created or  organized  under the laws of the United  States or any
state  thereof or the  District  of  Columbia,  or  estates or trusts  which are
residents in the United States for United States Federal Income tax purposes, in
each  case who (i) is not also  resident  of, or  ordinarily  resident  in,  the
Republic  of Ireland  for Irish tax  purposes,  (ii) is not  engaged in trade or
business in the Republic of Ireland through a permanent  establishment and (iii)
does not own, directly,  indirectly or by attribution, 10% or more of the shares
of the Company (by vote or value).  This summary is of a general nature only and
does not  discuss all aspects of United  States and Irish  taxation  that may be
relevant to a  particular  investor.  The  summary  deals only with ADRs held as
capital  assets and does not  address  special  classes of  purchasers,  such as
dealers in securities,  U.S. Holders whose functional currency is not the United
States dollar and certain U.S. Holders (including, but not limited to, insurance
companies, tax-exempt organizations,  financial institutions and persons subject
to the  alternative  minimum  tax)  who may be  subject  to  special  rules  not
discussed  below.  In  particular  the  following  summary  does not address the
adverse tax treatment of U.S. Holders who own, directly, or by attribution,  10%
or more of the Company's  outstanding voting stock in the event that the Company
were to be classified as a "Controlled  Foreign  Corporation"  for United States
federal  income tax  purposes.  Although  the  Company was not  classified  as a
Controlled  Foreign  Corporation at December 31, 1998, there can be no assurance
that it will not be a Controlled Foreign Corporation in the future.

OWNERS OF ADSs ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
UNITED STATES FEDERAL, STATE AND LOCAL TAX CONSEQUENCES, AS WELL AS WITH RESPECT
TO THE TAX CONSEQUENCES IN THE REPUBLIC OF IRELAND AND OTHER  JURISDICTIONS,  OF
THE OWNERSHIP OF ADSs AND THE ORDINARY SHARES REPRESENTED  THEREBY APPLICABLE IN
THEIR PARTICULAR TAX SITUATIONS.

For  purposes of the  Conventions  and the  Internal  Revenue  Code of 1986,  as
amended (the "Code"), U.S. Holders will be treated as the owners of the Ordinary
Shares represented by ADSs evidenced by ADRs.


Taxation of Dividends

Republic of Ireland Taxation.  The Company does not expect to pay cash dividends
for the  foreseeable  future.  Persons who are neither  resident nor  ordinarily
resident in the  Republic of Ireland at present do not have an Irish  income tax
liability on dividends  received from Irish resident  companies.  Although a net
Irish  income tax is imposed,  the income tax  liability  of each such person is
restricted to the amount of the Tax Credit attaching to the dividend and, as the
Tax Credit is allowed  against the  restricted  liability,  the Irish income tax
liability is fully offset by the Tax Credit.  There is no Irish  withholding tax
on dividends paid by an Irish resident company.

The Finance Bill 1999, if passed by the Irish parliament, will impose, with some
exceptions,  a  withholding  tax at 24% on  dividends  paid  by  Irish  resident
companies.  The proposed  exceptions  include dividends paid to residents of tax
treaty  countries (the United States is such a country),  residents of EU Member
States and companies the principal class of the shares of which is substantially
and regularly  traded on a recognized  stock exchange in a tax treaty country or
in an EU Member State.

United States Taxation. For United States federal income tax purposes, the gross
amount  (i.e.,  including the amount of Tax Credit) of any dividend paid (to the
extent of the current or  accumulated  earnings and profits of the Company) will
be included in gross income and treated as foreign source dividend income in the
year the shareholder becomes entitled to such dividend. The dividend will not be
eligible  for  the   dividends-received   deduction  allowed  to  United  States
corporations.  The amount  includable in income will be the United States dollar
value of the payment on the date of payment regardless of whether the payment is
in fact converted into United States dollars.  Generally,  gain or loss (if any)
resulting  from  currency  fluctuations  during  the  period  from  the date any
dividend  is paid to the date such  payment  is  converted  into  United  States
dollars will be treated as ordinary income or loss.

Taxation of Capital Gains

A U.S.  Holder is not subject to Irish capital gains tax on the disposal of ADSs
quoted on the Nasdaq  National  Market.  It is the  intention  of the  Company's
management to continue the Company's quotation on the Nasdaq National Market.

Subject to the discussion below under the heading  "Passive  Foreign  Investment
Company  Considerations," a U.S. Holder will be liable for United States federal
income tax on such gains to the same  extent as on any other gains from sales or
dispositions of shares. A U.S. Holder that is liable for both Irish and U.S. tax
on a gain on the disposal of the ADSs will  generally  be  entitled,  subject to
certain  limitations  and pursuant to the Income Tax  Convention,  to credit the
amount of Irish  capital gains or  corporation  tax, as the case may be, paid in
respect of such gain against such U.S. Holder's United States federal income tax
liability.  Such gain is,  however,  likely to be  considered to be from sources
within the United States,  which may effectively limit the amount of foreign tax
credit allowed to the U.S. Holder.

Passive Foreign Investment Company Considerations

The Company will be classified as a passive foreign  investment company ("PFIC")
for United  States  federal  income tax purposes if the fair market value of its
passive  income-producing  assets equals or exceeds 50% of the sum of the market
value of its outstanding stock plus its liabilities. Based on an analysis of its
income,  assets and equity  during 1998,  the Company  believes that it is not a
PFIC. While there can be no assurance, the Company expects, based on projections
of its income and assets and the manner in which the  Company  intends to manage
its business,  that it will not be a PFIC.  The Company will continue to monitor
its status and will,  promptly  following the end of each taxable  year,  notify
shareholders  if it believes  that it is properly  classified as a PFIC for that
taxable year.

U.S. Information Reporting and Backup Withholding

Generally,  the amount of dividends  paid to U.S.  Holders of ADSs, the name and
address  of the  recipient  and the  amount,  if any,  of tax  withheld  must be
reported  annually  to the IRS.  A similar  report  is sent to the U.S.  Holder.
Backup withholding tax at the rate of 31% will apply to certain payments made to
U.S.  Holders  who fail to furnish  certain  identifying  information  under the
United States information  reporting rules.  Amounts withheld from payments will
be allowed as a credit against such U.S.  Holders'  United States federal income
tax liability.

Irish Capital Acquisitions Tax

    Irish capital acquisitions tax ("CAT") applies to gifts and inheritances (i)
where the person making the gift or  inheritance is domiciled in the Republic of
Ireland at the date of the gift or  inheritance  or (ii) to the extent  that the
property of which the gift or  inheritance  consists is situated in the Republic
of  Ireland  at the date of the gift or  inheritance.  The person by whom CAT is
primarily  payable is the person who receives the gift or  inheritance.  Persons
who are secondarily liable include the donor, an agent, personal representative,
trustee or other  person in whose  care the  property  constituting  the gift or
inheritance  or  the  income   therefrom  is  placed.   All  taxable  gifts  and
inheritances received by an individual since December 2, 1988 are aggregated and
only the  excess  over a  certain  tax-free  threshold  is taxed.  The  tax-free
threshold  is  dependent  on the  relationship  between the  deceased/donor  and
successor/donee and the aggregation of all previous gifts and inheritances.  The
tax-free threshold amounts currently range from IR(pound) 12,860  (approximately
$19,088 at December  31, 1998) in the case of persons who are not related to one
another to IR(pound) 25,720 (approximately  $38,176 at December 31, 1998) in the
case of gifts and inheritances received from a brother, sister or from a brother
or sister of a parent or from a grandparent to IR(pound) 192,900  (approximately
$286,321 at December  31, 1998) in the case of gifts and  inheritances  received
from a parent.  Gifts and  inheritances  passing between spouses are exempt from
CAT. CAT is charged at  progressive  rates ranging in the case of gifts from 15%
to 30% and in the case of  inheritances  from 20% to 40%.  Although  ADSs may be
held by persons  who are  neither  domiciled  nor  resident  in the  Republic of
Ireland,  the  underlying  Ordinary  Shares  are  deemed to be  situated  in the
Republic of Ireland  because the  Company is required to maintain  its  Ordinary
Share register in the Republic of Ireland.  Accordingly,  ADSs may be subject to
CAT  notwithstanding  the fact that the holder may be domiciled  and/or resident
outside of the Republic of Ireland. The Convention between the United States and
the Republic of Ireland relating to estate taxes generally provides for CAT paid
on inheritances in the Republic of Ireland to be credited against tax payable in
the United States and for tax paid in the United  States to be credited  against
tax payable in the Republic of Ireland, based on priority rules set forth in the
Convention,  in a case where an ADS is subject to both Irish CAT with respect to
inheritance and U.S. federal estate tax. The Convention does not apply to gifts.
In addition to gift and  inheritance  taxes,  a probate tax of 2% applies to the
value of all assets  passing  under the will or intestacy of an  Irish-domiciled
person  other than to the spouse of the  deceased.  Where the  deceased  was not
domiciled in the Republic of Ireland, only assets situated in Ireland are liable
for this tax.

United States Gift And Estate Tax

An individual U.S. Holder will be subject to United States gift and estate taxes
with  respect  to the ADSs in the same  manner  and to the same  extent  as with
respect to other types of personal property.

Irish Stamp Duty

Irish stamp duty, which is tax on certain documents, is payable on all transfers
of Ordinary Shares in companies incorporated in the Republic of Ireland wherever
the  instrument of transfer may be executed.  In the case of a sale,  stamp duty
will be charged at the rate of  IR(pound)1.00  for every  IR(pound)100  (or part
thereof) of the amount of value of the  consideration  (i.e.,  purchase  price).
Where the consideration for the sale is expressed in a currency other than Irish
pounds, the duty will be charged on the Irish pound equivalent calculated at the
rate of  exchange  prevailing  on the  date of the  transfer.  In the  case of a
transfer by way of gift (subject to certain  exceptions) or for a  consideration
less than the market value of the shares transferred, stamp duty will be charged
at the  above  rate on such  market  value.  A  transfer  to the  Depositary  or
custodian of Ordinary  Shares for deposit under the Deposit  Agreement in return
for ADRs will be  similarly  chargeable  with stamp  duty as will a transfer  of
Ordinary  Shares from the  Depositary or the custodian  upon surrender of an ADR
for  the  purpose  of  the  withdrawal  of the  underlying  Ordinary  Shares  in
accordance with the terms of the Deposit Agreement,  unless, in either case, the
transfer does not relate to a sale or  contemplated  sale or any other change in
the  beneficial  ownership of such Ordinary  Shares,  in which case the transfer
will be chargeable with nominal duty of IR(pound)10.

Transfers  of ADRs are  exempt  from  Irish  stamp  duty as long as the ADSs are
quoted on the Nasdaq  National  Market or any  recognized  stock exchange in the
United States.

The person  accountable  for payment of stamp duty is the  transferee or, in the
case of a transfer  by way of gift or for a  consideration  less than the market
value,  both parties to the transfer.  Stamp duty is normally  payable within 30
days after the date of execution of the transfer.  Late or inadequate payment of
stamp duty will result in liability to interest, penalties and fines.


ITEM 6.   SELECTED FINANCIAL DATA

The  information  required  by this Item is  attached  hereto as  Appendix A and
incorporated herein by this reference.



<PAGE>



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

The  information  required  by this Item is  attached  hereto as  Appendix B and
incorporated herein by this reference.


ITEM 7A.  MARKET RISK

The  Company is exposed  to market  risks,  which  include  changes in  currency
exchange  rates as measured  against the U.S.  dollar and each other which could
positively or negatively affect results of operations and retained earnings.

As of December 31, 1998, the Company has evaluated its risk and determined  that
any exposure to currency  exchange is not  significant to the Company's  overall
consolidated  financial  results.  There can be no assurance  that the Company's
exposure will remain at these levels, especially in the event of significant and
sudden fluctuations in the value of local currencies.


ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The  information  required  by this Item is  attached  hereto as  Appendix C and
incorporated herein by this reference.


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

On October 15, 1998,  Ernst & Young ("Ernst & Young")  informed  Saville Systems
PLC (the  "Registrant")  that it was resigning as the  Registrant's  independent
auditors and  principal  accountants.  The reason given by Ernst & Young for its
resignation was the existence of certain mutual business  opportunities on which
both Ernst & Young and the  Registrant  desired to  collaborate  which  affected
Ernst & Young's  independence  with respect to the  Registrant.  Ernst & Young's
report on Saville's financial statements during the two most recent fiscal years
and all  subsequent  interim  periods  preceding  the date hereof  contained  no
adverse  opinion  or a  disclaimer  of  opinions,  and was not  qualified  as to
uncertainty,  audit scope or accounting principles. The decision to accept Ernst
& Young's resignation was made by the Board of Directors of the Registrant.

During the Registrant's two most recent fiscal years and the subsequent  interim
periods immediately  preceding the date of the resignation of Ernst & Young, the
Registrant had no  disagreements  with Ernst & Young on any matter of accounting
principles or practices,  financial  statement  disclosure or auditing  scope or
procedure, which disagreement(s), if not resolved to the satisfaction of Ernst &
Young, would have caused Ernst & Young to make a reference to the subject matter
of the  disagreement  in connection  with its reports.  None of the  "reportable
events"  listed in Item 304 (a) (1) (ii) of Regulation  S-K under the Securities
Exchange Act of 1934 occurred with respect to the Registrant within the last two
fiscal years and the subsequent interim period to the date hereof.

Ernst & Young  furnished the Company with a letter  addressed to the  Commission
stating  whether it agrees with the  statements  set forth above. A copy of this
letter was incorporated by reference to the Company's Current Report on Form 8-K
dated October 15, 1998.

Effective October 22, 1998, the Registrant  engaged  PricewaterhouseCoopers  LLP
("PwC") as its principal accountants and independent auditors to replace Ernst &
Young.  The  decision  to engage PwC was made by the Board of  Directors  of the
Registrant.  During the last two fiscal years and the subsequent  interim period
to the date hereof,  neither the Registrant  nor anyone on its behalf  consulted
PwC regarding the application of accounting  principles to a specific  completed
or contemplated transaction, or the type of audit opinion that might be rendered
on  the  Registrant's  Financial  statements,  and no  written  or  oral  advice
concerning the same was provided to the Registrant that was an important  factor
considered  by the  Registrant  in  reaching  a decision  as to any  accounting,
auditing or financial reporting issue.

There have been no disagreements on accounting and financial disclosure matters.


                                    PART III

ITEMS 10-13.

The  information  required  for Part III in this  Annual  Report on Form 10-K is
incorporated by reference from the Company's  definitive proxy statement for the
Company's  1999 Annual  General  Meeting of  Shareholders.  Such  information is
contained in the sections of such proxy statement  captioned "Share Ownership of
Certain  Beneficial Owners and Management,"  "Election of Directors," "Board and
Committee  Meetings,"  "Determination  of Ordinary  Remuneration  of Directors,"
"Executive  Compensation"  and  "Compliance  with Section  16(a) of the Exchange
Act." Information  regarding executive officers of the Company is also furnished
in Part I of this  Annual  Report on Form  10-K  under  the  heading  "Executive
Officers of the Company."




                                     PART IV

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

 (a) The following  documents are  incorporated by reference or included as part
of this Annual Report on Form 10-K.


1. The following  financial  statements  (and related  notes) of the Company are
filed as Appendix C

                      Report of Independent Accountants

                      Consolidated Balance Sheets as of December 31, 1998
                      and 1997

                      Consolidated Statements of Income for the
                      Years Ended December 31, 1998, 1997 and 1996

                      Consolidated Statements of Changes in
                      Shareholders' Equity for the Years Ended
                      December 31, 1998, 1997 and 1996

                      Consolidated Statements of Cash Flows for the
                      Years Ended December 31, 1998, 1997 and 1996

                      Notes to Consolidated Financial Statements

2. Except for the  schedules  listed  below,  all  schedules  are omitted as the
information  required is  inapplicable  or the  information  is presented in the
consolidated financial statements or the related notes.

                        Schedule II - Valuation and Qualifying Accounts

3. The Exhibits listed in the Exhibit Index  immediately  preceding the Exhibits
are filed as a part of this Annual Report on Form 10-K.

(b) "Changes in Registrant's  Certifying  Accountant" on Form 8-K, dated October
15, 1998 was filed by the Company on October 22, 1998 pursuant to Item 4 of Form
8-K.

The  following  trademarks of the Company are mentioned in this Annual Report on
Form 10-K:  "Saville  Systems",  "CBP", each of which is registered,  and "IBP",
"SavilleCare" and "SavilleExpress".


<PAGE>


                                   SIGNATURES

    Pursuant to the  requirements  of the Section 13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the  undersigned,  thereunto  duly  authorized  on the 12th day of
March 1999.

                                         SAVILLE SYSTEMS PLC

                                         By: /s/John J. Boyle III
                                              John J. Boyle III, Chairman
                                              and Chief Executive Officer


<PAGE>


                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities and on the dates indicated.


Signature                    Title                                     Date

/s/ John J. Boyle III        Chairman, Chief                      March 12, 1999
---------------------        Executive Officer and Director
John J. Boyle III            (Principal Executive Officer)            
                                           

/s/ Christopher A. Hanson    Chief Financial Officer              March 12, 1999
--------------------         (Principal Financial  and
Christopher A. Hanson        Accounting Officer)
       

/s/ Bruce A. Saville         Chairman Emeritus                    March 12, 1999
--------------------
Bruce A. Saville


/s/ John A. Blanchard III    Director                             March 12, 1999
-------------------------
John A. Blanchard III


/s/Brian E. Boyle            Director                             March 12, 1999
-------------------------
Brian E. Boyle


/s/ William F. Cunningham    Director                             March 12, 1999
-------------------------
William F. Cunningham


/s/Richard A. Licursi        Director                             March 12, 1999
-------------------------
Richard A. Licursi


/s/Fergus G. McGovern        Director                             March 12, 1999
-------------------------
Fergus G. McGovern


/s/David P. Mixer            Director                             March 12, 1999
-------------------------
David P. Mixer


/s/James B. Murray, Jr.      Director                             March 12, 1999
-----------------------
James B. Murray, Jr.


/s/John W. Sidgmore          Director                             March 12, 1999
-------------------------
John W. Sidgmore



<PAGE>



                               SAVILLE SYSTEMS PLC

                 SCHEDULE II (VALUATION AND QUALIFYING ACCOUNTS)

<TABLE>


         Col. A           Col. B               Col. C                   Col. D         Col. E
---------------------- ------------------------------------------- -------------- ---------------
<S>                    <C>           <C>                           <C>            <C>    
                                              Additions               Deductions
                        Balance at                    Charged to
                       beginning of  Charged costs      other                      Balance at end
      Description         period      & expenses       accounts                      of period
---------------------- ----------------------------- ------------- -------------- ---------------
                            $              $                                             $
Allowance for doubtful
accounts

  December 31, 1998       1,687          3,160                         (2,904)         1,943
  December 31, 1997        756           1,010                           (79)          1,687
  December 31, 1996        370             386                                           756

</TABLE>


<PAGE>


                                                                      Appendix A

                      SELECTED CONSOLIDATED FINANCIAL DATA
               (in thousands of US dollars, except per share data)



<TABLE>


Year ended December 31                      1998        1997         1996        1995         1994
---------------------------------------- ----------- ------------ ----------- ------------ ------------
<S>                                       <C>        <C>          <C>         <C>          <C>   
Total revenue                              $167,705     $107,045     $53,920      $30,296      $20,073
Net income                                   27,052*      23,937      11,569        6,382        5,357
Diluted earnings per share                     0.67*        0.61        0.31         0.20         0.17

</TABLE>

<TABLE>


As of December 31                           1998        1997         1996        1995         1994
---------------------------------------- ----------- ------------ ----------- ------------ ------------
<S>                                       <C>        <C>          <C>         <C>          <C>    
Total assets                               $161,645     $105,375     $56,489      $36,031       $9,857
Long-term liabilities, excluding current
     portion                                  1,178          336      -                44          689

</TABLE>


*Financial  data for 1998  includes  the  effects of a  one-time  charge of $9.2
million  ($8.4  million  net of  related  tax  benefits)  for  the  purchase  of
in-process  research and  development.  Excluding  such  charge,  net income and
diluted earnings per share for the year ended December 31, 1998 were $35,447 and
$0.87,  respectively  (see  Note  5  of  the  Consolidated  Notes  to  Financial
Statements, December 31, 1998).

<PAGE>
                                                                      Appendix B

                               SAVILLE SYSTEMS PLC
           Management's Discussion and Analysis of Financial Condition
                           and Results of Operations


                                                                             
OVERVIEW

Saville  Systems  PLC (the  "Company"  or  "Saville")  is a leading  provider of
customer   care  and   billing   solutions   for   service   providers   in  the
telecommunications   and  energy  markets.  The  Company  offers  an  innovative
convergent  billing platform product called Saville CBP(R) ("CBP") that operates
on DB2/400 and Oracle/UNIX  platforms.  The  Oracle/UNIX-based  platform of this
software was introduced to the market in December 1997,  with the second version
of this software product released in September 1998. In addition, Saville offers
its  customers a full range of  professional  services.  The  Company  assists a
customer in analyzing its requirements and then designs, develops and implements
a customer care and billing  solution.  The customer can either license CBP from
Saville or CBP can be provided via a  Company-operated  service bureau.  Saville
has also introduced  facilities  management  services,  which allow customers to
license from Saville and have  Saville  manage the  operation of the software on
customer owned hardware. Additionally,  Saville has developed relationships with
authorized  integrators  to assist it in  providing  implementation  services to
purchasers of CBP products. The Company also assists its customers on an ongoing
basis by addressing  their changing  business needs through future  enhancements
and developments to their existing customer care and billing solutions.

The  Company's  strategy  is to target  growth-oriented  telecommunications  and
energy service providers, leverage its multi-market experience and establish and
maintain long-term  relationships with its customers.  The implementation of the
Company's  strategy has resulted in revenue  growth over the  preceding  year of
78.0%,  98.5% and 56.7% in 1996,  1997 and 1998,  respectively.  The Company has
been strategically expanding and developing its direct sales force over the past
three years in addition to enhancing its support  operations  to meet  worldwide
demand.  This strategy has resulted in continued  revenue growth and an increase
of the Company's customer base.

The  following  information  should  be read in  conjunction  with  the  Audited
Consolidated  Financial  statements and notes thereto included in Item 8 on Form
10-K for the year ended December 31, 1998.


<PAGE>



RESULTS OF OPERATIONS

The following  table sets forth,  for the periods  indicated,  the percentage of
total revenue  represented by the items  reported in the Company's  Consolidated
Statements of Income.

<TABLE>

                                                Percentage of Total Revenue
                                                  Year Ended December 31,
------------------------------------------- ------------------------------------
                                              1998           1997          1996
------------------------------------------- --------- ------------- ------------
<S>                                          <C>      <C>           <C>    
Revenue:
Services                                       74.4%         79.3%        82.5%
License fees                                   25.6%         20.7%        17.5%
------------------------------------------- --------- ------------- ------------
Total Revenue                                 100.0%        100.0%       100.0%
------------------------------------------- --------- ------------- ------------
Expenses:
Cost of services                               36.7%         37.0%        40.9%
Cost of license fees                            0.8%          0.5%         0.6%
Sales and marketing                             5.2%          5.9%         6.3%
Research and development                       12.8%          9.5%         7.7%
General and administrative                     19.2%         19.1%        19.9%
Charge for purchased in-process            
 research and development                       5.5%           -             -
------------------------------------------- --------- ------------- ------------
Total Expenses                                 80.1%         72.0%        75.4%
------------------------------------------- --------- ------------- ------------
Income from operations                         19.9%         28.0%        24.6%
Other income, net                               2.0%          2.0%         2.8%
------------------------------------------- --------- ------------- ------------
Income before income taxes                     21.9%         30.0%        27.4%
Provision for income taxes                      5.8%          7.5%         5.7%
------------------------------------------- --------- ------------- ------------

Income before minority interest                16.1%         22.5%        21.7%
Minority interest share in subsidiaries'    
 net income                                       -           0.2%         0.2%
------------------------------------------- --------- ------------- ------------
Net income                                     16.1%         22.3%        21.5%
------------------------------------------- --------- ------------- ------------
</TABLE>


YEARS ENDED DECEMBER 31, 1997 AND 1998

         Revenue.  The Company  earns  revenue from  services and license  fees.
Services revenue is comprised  primarily of consulting services and, to a lesser
extent,  service bureau processing,  facilities management and maintenance fees.
Consulting services consist primarily of systems requirements definition, system
design and analysis,  customization  and installation  services,  ongoing system
management,  system  enhancements,  software  maintenance and customer training.
Services  revenue from  consulting  services is  recognized  as the services are
performed,  primarily on a time and materials  basis and to a lesser extent on a
fixed fee basis  over the term of the  services  provided.  Service  bureau  and
facilities  management  revenue  is earned  when a customer  contracts  with the
Company to operate a customer designed billing system at the Company's  premises
on either Company-owned or customer-owned hardware,  respectively.  Revenue from
maintenance  contracts is  recognized  ratably  over the term of the  agreement,
generally one year.  Services  revenue  accounted for 82.5%,  79.3% and 74.4% of
total revenue for 1996, 1997 and 1998,  respectively.  License fees comprise the
remainder of the Company's revenue and are recognized at the time of delivery of
the product to the customer,  provided that the Company has no remaining service
obligations,  collectibility  is considered  probable and the fees are fixed and
determinable.  Where there are service  obligations  that are  essential  to the
functionality  of the software  delivered,  license  fees are recorded  over the
expected term of the initial customization period. Total revenue increased 56.7%
from $107.0 million in 1997 to $167.7  million in 1998 due to overall  increases
in services revenue and license fees, as discussed below.

         Services.  Services revenue  increased 47.0% from $84.9 million in 1997
to $124.7  million  in 1998 due  primarily  to an  increase  in  consulting  and
implementation  services provided to new customers as well as continued services
to existing customers. To a lesser extent,  increased service bureau revenue and
revenue from the  operations of the Company's  Australian  subsidiary  since the
acquisition of the net assets of Australian  telecommunications software company
BHA Pty Ltd.  ("BHA") and its majority  owned  subsidiary  BHA Computer Pty Ltd.
("BHAC") in April 1998, contributed to the increase.

         License Fees.  License fees revenue  increased 93.7% from $22.2 million
in 1997 to $43.0  million in 1998 due  primarily to the  recognition  of license
revenue on new customer projects commencing in late 1997 and in 1998.

         Cost of  Services.  Cost of  services  is  comprised  primarily  of the
salaries and related benefits of software development, technical, service bureau
and client service  personnel.  It also includes costs of external  contractors,
operating costs of computer  equipment,  training and travel  expenses.  Cost of
services expense  increased 55.5% from $39.6 million in 1997 to $61.6 million in
1998 and  increased  as a percentage  of services  revenue from 46.7% in 1997 to
49.4% in 1998.  The overall  increase in cost of services was  primarily  due to
additional  personnel  hired to support  the growth of the  Company,  as well as
incremental   costs  incurred  to  attract  and  retain   qualified   personnel.
Additionally,  computer system costs incurred to support the Company's headcount
growth and service bureau initiative  contributed to the overall increase in the
cost of services.  The increase in cost of services as a percentage  of services
revenue  was due  primarily  to the  training of current  personnel  on the UNIX
platform,  the hiring of additional  UNIX-skilled  personnel in  anticipation of
additional  services  related to the  Company's  UNIX-based  products,  and to a
lesser  extent,  higher cost of services as a percentage of services  revenue at
the Company's Australian subsidiary as a result of the acquisition of the assets
of BHA and BHAC. As the market  demands for skilled  employees  and  contractors
increase,  the  Company  expects  that the costs to  attract,  retain  and train
personnel will continue to increase.  Also, as the Company  continues to expand,
it expects the overall costs of services to increase accordingly.

         Cost of License Fees.  Cost of license fees consists of the  commission
expense on new license fees earned by the Company.  Cost of license fees expense
increased  119.2%  from  $579,000  in  1997 to $1.3  million  in 1998  due to an
increase in commission  expenses  resulting  primarily  from the increase in the
license fees earned by the Company,  and to a lesser extent, from an increase in
license fees eligible for commissions in 1998 as compared to 1997.

         Sales  and  Marketing.  Sales and  marketing  expenses  consist  of the
salaries,  sales  commissions and benefits of those employees  performing  these
duties as well as the related travel,  marketing and promotional expenses. Sales
and marketing expenses increased 38.3% from $6.3 million in 1997 to $8.7 million
in 1998 but decreased as a percentage of total revenue from 5.9% in 1997 to 5.2%
in  1998.  The  overall  dollar  increase  was  primarily  due to the  Company's
continued  expansion  of its sales  force  globally,  including  North  America,
Europe,  Latin  America  and  Asia  Pacific,  the  associated  expansion  of its
infrastructure,  and to a lesser  extent,  the  incremental  sales and marketing
costs as a result of the  acquisition of the assets of BHA and BHAC. The Company
anticipates  that the  continued  emphasis on its North  American  and  European
marketing  efforts will  increase its sales and  marketing  expenses in absolute
dollars in 1999 but  expects any such  expense to remain at similar  levels as a
percentage of revenue.

         Research  and  Development.   Research  and  development  expenses  are
comprised  of the salaries and related  benefits of the  employees  and external
contractors  involved  in product  software  development,  as well as  computer,
travel and related expenses.  Research and development expenses increased 110.8%
from  $10.1  million  in 1997  to  $21.4  million  in 1998  and  increased  as a
percentage  of  revenue  from  9.5% in 1997 to 12.8% in 1998.  Both the  overall
increase  and  the  increase  as a  percentage  of  total  revenue  was  due  to
development  efforts by the  Company on its CBP  products  for both the  DB2/400
platform and UNIX  platform,  including the release of the second version of its
UNIX-based product and an additional release of its DB2/400 based product.  To a
lesser extent, the further development of technology acquired in 1998, including
Saville  Express,  Saville  Care and  Saville  IBP,  contributed  to the overall
increase in research and development  expenses.  The Company intends to continue
to invest  resources  to expand and enhance its product  offerings in the future
and  therefore  expects that  research and  development  expenses will remain at
similar levels in 1999.

         General and Administrative. General and administrative expenses consist
mainly of the salaries and related  benefits of  management  and  administrative
personnel,  related travel expenses, and general office administration  expenses
(rent and occupancy, telephone and other office supply costs) of the Company. It
also  includes  recruitment  expenses,   professional  fees,   depreciation  and
amortization, and provision for doubtful collections. General and administrative
expenses increased 57.5% from $20.4 million in 1997 to $32.2 million in 1998 and
increased  marginally  as a percentage of revenue from 19.1% in 1997 to 19.2% in
1998.  The overall  increase in costs was  attributable,  in part, to additional
senior and middle management and recruiting and infrastructure  costs associated
with  the  growth  in the  Company's  employee  base  and the  expansion  of the
Company's  business,  including the BHA  acquisition  in April 1998.  Additional
general and  administrative  expenses  in 1998 were  attributable  to  increased
provisions to maintain the Company's  allowance for doubtful  accounts  based on
current and future market  conditions and recent  write-offs of certain customer
balances  as well as  current  year  amortization  of  goodwill  arising  on the
acquisition  of the  assets  of  BHA  and  amortization  of  acquired  completed
technology. The Company expects that in 1999 general and administrative expenses
will remain at levels  consistent  with 1998 to support the continued  growth of
the Company and to properly assess risks associated with the Company's customers
based on market conditions.

         Charge for Purchased In-process Research and Development The charge for
purchased  in-process  research  and  development  is based on the fair value of
acquired technology that had not yet reached  technological  feasibility and has
no future alternative use. The value assigned to the intangible assets purchased
as  part  of  the  BHA  acquisition  and to the  interconnect  billing  software
technology  purchased  was  determined  based on fair market  value using a risk
adjusted  discounted  cashflow  approach with the  assistance of an  independent
appraiser.  The significant  assumptions  that affected the valuations  included
potential  revenue and cost of completion,  as well as the timing of the product
releases. In addition, the selection of an appropriate discount rate was a major
factor in the valuation analysis.  The valuation utilized a discount rate of 30%
for the BHA acquisition and 31% for the acquisition of the interconnect  billing
technology, each reflecting the difficulties and uncertainties in completing the
development  effort,  risks related to the  viability  and potential  changes to
target  markets and the inherent  uncertainty  of  predicting  cash flows in the
telecommunications billing industry.

Acquired incomplete  technology from the BHA acquisition,  specifically  billing
technology  (SavilleExpress)  and customer care  technology  (SavilleCare)  were
evaluated using a stage of completion approach.  The Company,  through extensive
interviews  and  analysis of data  concerning  the state of the  technology  and
required  development  work,  estimated the  stage-of-completion  at the date of
acquiring the products to be approximately  53% for  SavilleExpress  and 55% for
SavilleCare.   Each  of  the   purchased   technologies   required   significant
modifications  in  order  to  reach  technological  feasibility.  At the time of
acquisition,  additional development of SavilleExpress  included,  among others,
additional core functionality including tariffing, language support, data fields
to support different currencies, credit limit notification and automatic service
shut-off as well as revision of all existing software code to be compatible with
different  hardware  platforms.   SavilleCare  required  substantial  effort  to
complete   the   technology   and  ensure  that  it  was  more  focused  on  the
telecommunications  industry than the original  product  design.  This included,
among others,  ensuring scalability existed as well as full functionality in the
areas  of  provisioning,   call  reporting  and  billing.   SavilleExpress   and
SavilleCare were completed in August 1998 and January 1999, respectively. Actual
revenue received and costs incurred to complete  SavilleCare were not materially
different than estimates made. Also, for SavilleExpress, costs of completion did
not differ  significantly from estimates.  However,  actual revenue received was
less than expected due to a change in market conditions.

Saville  IBP  had  significant   functionality   deficiencies  at  the  date  of
acquisition that had to be corrected as part of further  development so that the
product could be commercialized.  Specifically,  these  modifications  included,
among others, the addition of a critical application program interface, improved
detailed reporting capability,  datawarehousing  capability without slowing down
overall   information    technology   systems   and   scalability   for   larger
telecommunication operations.  Saville IBP was completed in October 1998. Actual
costs to complete and revenue  received were not  significantly  different  from
estimates.

Based on this evaluation,  the Company assigned fair values to SavilleExpress of
$2.1 million, to SavilleCare of $3.0 million and to Saville IBP of $4.1 million.
These in-process  technologies had not reached technological  feasibility at the
time of  acquisition  and had no  alternative  future use in other  research and
development  projects or otherwise.  Accordingly,  the acquired  technology  was
expensed as  in-process  research  and  development  for a total  charge of $9.2
million to the Company's consolidated results in 1998.

         Other income, net. Other income, net of other expenses, increased 56.2%
from $2.2 million in 1997 to $3.4 million in 1998.  Increased interest income on
larger cash and short-term investment balances accounted for the majority of the
increase in other income.

         Provision for income taxes. The Company earns a significant  portion of
its  taxable  income in the  Republic  of  Ireland  of which its  "manufacturing
income"  qualifies  for a reduced tax rate of 10% which is  substantially  lower
than statutory rates in Ireland,  Canada,  the United States, the United Kingdom
and  Australia.  The Company  anticipates  that it will continue to benefit from
this tax treatment, although the extent of the benefit could vary from period to
period,  and there can be no assurance that the Company's tax situation will not
change.  The Irish  Minister  of Finance  announced  in  December  1998 that the
present standard Irish tax rate will be reduced to 28% as of January 1, 1999 and
will be reduced gradually to a tax rate of 12.5% for taxation years ending after
2002. Under the announced plan, the tax rate on manufacturing income will remain
at 10% until the tax relief  program is due to terminate in 2010,  at which time
the tax rate would  increase to be equal to the standard  rate of 12.5%.  If the
Company  should no longer  qualify  for this  lower tax rate or if tax laws were
rescinded or changed,  the Company's  net income would be  materially  adversely
affected.  The  Company  recorded  a tax  provision  of  $8.0  million  in  1997
representing an effective tax rate of 24.8%. Comparatively, a provision of $10.5
million  was  recorded  in 1998  (before  the  deferred  tax benefit of $773,000
recognized  on  the  one-time  charge  for  purchased  in-process  research  and
development of $9.2 million). This provision represents an effective tax rate of
22.9%. The Company's  effective tax rate is largely  dependent on the proportion
of the Company's income earned in different tax jurisdictions.

YEARS ENDED DECEMBER 31, 1996 AND 1997

          Revenue. Total revenue increased 98.5% from $53.9 million in 1996 to 
$107.0 million in 1997 due to overall  increases in services revenue and license
fees,as discussed below.

         Services.  Services revenue  increased 90.8% from $44.5 million in 1996
to $84.9  million in 1997 due to expansion of the  Company's  customer  base and
increases in projects  for existing  customers.  Consulting  services  increased
97.8% from 1996 to 1997,  and service bureau  revenue  increased  25.1% over the
same period.  The increase in services  revenue in 1997 was primarily due to the
increase in consulting and  implementation  services  provided to new customers.
Approximately  54% of the  services  revenue  reported  during  the  year  ended
December  31,  1997 was  derived  from  services  to  customers  existing in the
previous year compared to 69% in the year ended December 31, 1996.

         License Fees.  License fees revenue  increased 135.0% from $9.4 million
in 1996 to $22.2  million  in 1997 due  primarily  to  additional  license  fees
arrangements  for CBP that were negotiated  during 1997. The Company  introduced
the concept of  convergent  customer  care and billing  products in 1996 and the
market acceptance of this concept created opportunities for the Company in 1997.

         Cost of Services. Cost of services expense increased $17.5 million from
$22.1  million in 1996 to $39.6 million in 1997 but decreased as a percentage of
services  revenue from 49.6% in 1996 to 46.7% in 1997.  To support the growth of
the  Company's  business,  increased  expenditures  were  required  in 1997  for
additional personnel and hardware infrastructure.

         Cost of License Fees. Cost of license fees expense increased 71.8% from
$337,000 in 1996 to $579,000 in 1997 due to an increase in  commission  expenses
resulting from the increase in the license fees earned by the Company.

         Sales and Marketing.  Sales and marketing expenses increased 85.4% from
$3.4  million in 1996 to $6.3 million in 1997 but  decreased as a percentage  of
total  revenue  from  6.3% in 1996 to 5.9% in 1997.  The  increase  in sales and
marketing  expense in 1997  resulted  from the  expansion of the North  American
sales force and the associated  expansion of  infrastructure.  In addition,  the
Company  established  new sales offices in 1997 to strengthen its sales presence
in Europe,  Latin  America and Asia Pacific and created new alliances to further
expand the Company's market coverage in those areas.

         Research and Development.  Research and development  expenses increased
143.3% from $4.2  million in 1996 to $10.1  million in 1997 and  increased  as a
percentage  of revenue from 7.7% in 1996 to 9.5% in 1997.  This increase was due
to development  efforts by the Company in creating new and enhanced  billing and
customer  care  products.  During the year,  the Company had two major  platform
releases.  The first was in July 1997 for CBP on the  DB2/400  platform  and the
second was the release of the Company's UNIX based product, CBP for Oracle(TM).

         General  and  Administrative.   General  and  administrative   expenses
increased  91.0%  from  $10.7  million  in 1996 to  $20.4  million  in 1997  and
decreased  as a  percentage  of  revenue  from  19.9%  in 1996 to 19.1% in 1997,
respectively.   The  increase  in  general  and   administrative   expenses  was
attributable to the additional costs of building  infrastructure  during 1997 to
support  the growth in the  Company's  employee  base and the  expansion  of the
Company's business.  Significant areas of increased spending included additional
senior and middle management, and recruiting and infrastructure costs related to
an increased number of employees.

         Other income, net. Other income, net of other expenses, increased 44.5%
from $1.5 million in 1996 to $2.2 million in 1997.  Increased interest income on
increased cash and short-term  investment balances accounted for the majority of
the increase in other income.

         Provision  for income  taxes.  The Company  recorded a tax provision of
$3.1 million in 1996  representing  an effective tax rate of 20.7% compared to a
provision of $8.0 million in 1997  representing  an effective tax rate of 24.8%.
The Company's  effective tax rate is largely  dependent on the proportion of the
Company's income earned in different tax jurisdictions. The Company is currently
eligible for a 10% tax rate on "manufacturing"  income earned in the Republic of
Ireland.  The  standard  rate of income tax that  applies  to  non-manufacturing
income,  such as income earned on the Company's cash  investments,  was 36% (38%
during 1996). The Company's  effective tax rate reflects the tax relief on Irish
manufacturing  income  subject to this reduced  rate of tax,  which is below the
statutory rates in Ireland, Canada and the United States.

QUARTERLY INFORMATION

The  following  tables  present  selected   unaudited   consolidated   financial
information for the Company's last eight quarters,  as well as the percentage of
the  Company's  total  revenue  represented  by each item. In the opinion of the
Company's  management,  this  unaudited  information  reflects all  adjustments,
consisting  only of normal  recurring  adjustments,  necessary to present fairly
this  information  when  read in  conjunction  with the  Consolidated  Financial
Statements and Notes thereto appearing  elsewhere in this report.  The Company's
operating results for any quarter are not necessarily  indicative of results for
any future period.

<TABLE>

                                                                     Quarter Ended
------------------------------- ----------------------------------------------------------------------------------------

(in thousands of U.S. dollars   March 31   June 30    Sept. 30   Dec. 31    March 31   June 30     Sept. 30   Dec. 31
except per share data)            1997       1997       1997       1997       1998        1998       1998       1998
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- ----------
<S>                             <C>        <C>        <C>        <C>        <C>        <C>         <C>        <C>
Revenue
 Services                         $16,515    $20,088    $22,575    $25,678    $29,939     $31,114    $31,332    $32,345
 License fees                       3,615      5,405      6,006      7,163      8,083      11,797     11,245     11,850
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- ----------
Total Revenue                      20,130     25,493     28,581     32,841     38,022      42,911     42,577     44,195
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- ----------
Expenses
 Cost of services                   8,037      9,448     10,852     11,266     14,048      16,063     15,505     15,972
 Cost of license fees                  88        128        165        198        280         270        372        347
 Sales and marketing                1,202      1,522      1,600      1,942      1,922       2,186      2,194      2,366
 Research and development           1,481      2,530      2,805      3,330      3,931       5,968      5,362      6,128
 General and administrative         3,909      4,913      5,325      6,297      6,543       8,108      9,373      8,170
 Charge for purchased
     in-process research
     & development                    -          -          -          -          -         9,168       -          -
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- ----------
Total Expenses                     14,717     18,541     20,747     23,033     26,724      41,763     32,806     32,983
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- ----------
  Income from operations            5,413      6,952      7,834      9,808     11,298       1,148      9,771     11,212
  Other income, net                   354        559        596        645        723         631        837      1,173
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- ----------
  Income before income taxes        5,767      7,511      8,430     10,453     12,021       1,779     10,608     12,385
  Provision for income taxes        1,325      1,995      2,096      2,573      2,825       1,743      2,440      2,733
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- ----------
 Income before minority
      Interest                      4,442      5,516      6,334      7,880      9,196          36      8,168      9,652
Minority interest share
    in subsidiaries'  net              40         75         50         70         -           -           -          -
    income
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- ----------
Net income                         $4,402     $5,441     $6,284     $7,810     $9,196        $ 36     $8,168      9,652
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- ----------

     Basic earnings per share       $0.12      $0.15      $0.17      $0.21      $0.24       $0.00      $0.21      $0.25
     Diluted earnings per           $0.11      $0.14      $0.16      $0.20      $0.23       $0.00      $0.20      $0.24
     share
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- ----------
(in thousands)
                                   36,209     36,449     36,965     37,356     37,822      38,554     38,679     38,827
Ordinary Shares
Ordinary Shares                    38,551     39,131     39,597     40,012     40,845      41,269     40,271     39,794
   assuming dilution
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- ----------
</TABLE>

<PAGE>

<TABLE>
                                                                     Quarter Ended
------------------------------- ----------------------------------------------------------------------------------------
                                March 31   June 30    Sept. 30   Dec. 31    March 31   June 30     Sept. 30   Dec. 31
(percentage of total revenue)     1997       1997       1997       1997       1998        1998       1998       1998
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- ----------
<S>                             <C>        <C>        <C>        <C>        <C>        <C>         <C>        <C>
Revenue
 Services                           82.0%      78.8%      79.0%      78.2%      78.7%       72.5%      73.6%      73.2%
 License fees                       18.0%      21.2%      21.0%      21.8%      21.3%       27.5%      26.4%      26.8%
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- ----------
Total Revenue                      100.0%     100.0%     100.0%     100.0%     100.0%      100.0%     100.0%     100.0%
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- ----------
Expenses
 Cost of services                   39.9%      37.1%      38.0%      34.3%      36.9%       37.4%      36.4%      36.1%
 Cost of license fees                0.4%       0.5%       0.6%       0.6%       0.7%        0.6%       0.9%       0.8%
 Sales and marketing                 6.0%       6.0%       5.6%       5.9%       5.1%        5.1%       5.2%       5.3%
 Research and development            7.4%       9.9%       9.8%      10.1%      10.3%       13.9%      12.6%      13.9%
 General and administrative         19.4%      19.3%      18.6%      19.2%      17.2%       18.9%      22.0%      18.5%
 Charge for purchased
     in-process research
     & development                    -          -          -          -          -         21.4%       -          -
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- ----------
Total Expenses                      73.1%      72.8%      72.6%      70.1%      70.2%       97.3%      77.1%      74.6%
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- ----------
 Income from operations             26.9%      27.2%      27.4%      29.9%      29.7%        2.7%      22.9%      25.4%
 Other income,  net                  1.8%       2.2%       2.1%       2.0%       1.9%        1.5%       2.0%       2.6%
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- ----------
 Income before income taxes         28.7%      29.4%      29.5%      31.9%      31.6%        4.2%      24.9%      28.0%
 Provision for income taxes          6.6%       7.8%       7.3%       7.8%       7.4%        4.1%       5.7%       6.2%
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- ----------
 Income before minority
      interest                      22.1%      21.6%      22.2%      24.1%      24.2%        0.1%      19.2%      21.8%
Minority interest share
    in subsidiaries'  net            0.2%       0.3%       0.2%       0.2%       -           -           -          -
    income
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- ----------
Net income                          21.9%      21.3%      22.0%      23.9%      24.2%        0.1%      19.2%      21.8%
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- ----------
</TABLE>


The Company's quarterly operating results have in the past and may in the future
vary  significantly.  Factors that may  influence  the  quarterly  results could
include items such as, but are not limited to, increased  competition,  the size
and timing of significant  client  projects and license fees,  cancellations  of
significant  projects by customers,  changes in operating  expenses,  changes in
Company  strategy,  personnel  changes,  foreign  currency  exchange rates,  and
general economic factors.

The  Company's  expense  levels are based,  in part, on its  expectations  as to
future revenue. If revenue levels are below expectations,  operating results are
likely to be adversely affected.  Net income may be disproportionately  affected
by a  reduction  in  revenue  because a  proportionately  smaller  amount of the
Company's  expenses varies with its revenue.  As a result,  the Company believes
that  period-to-period   comparisons  of  its  results  of  operations  are  not
necessarily  meaningful  and should not be relied upon as  indicators  of future
performance.


LIQUIDITY AND CAPITAL RESOURCES

On a  combined  basis,  cash and cash  equivalents  and  short-term  investments
increased $19.0 million from $68.8 million at December 31, 1997 to $87.8 million
at December 31, 1998. During the year, cash and cash equivalents decreased $15.5
million to $40.3  million at December 31,  1998,  while  short-term  investments
increased $34.5 million to $47.5 million at December 31, 1998.

         Operating Activities. During the year ended December 31, 1998, net cash
provided by operating  activities was $20.8 million.  Net income,  excluding the
non-cash  effect of the one-time  charge for purchased  in-process  research and
development,  offset primarily by an increase in accounts receivable,  comprised
the majority of cash provided by operations.

         Investing Activities.  The cash used in investing activities during the
year ended  December 31, 1998 was  comprised of $4.6 million of net purchases of
property and equipment,  $2.0 million to purchase in-process  technology,  $34.5
million of net purchases of short-term investments and $21.0 million to purchase
the assets of BHA and BHAC,  including  the repayment of $3.3 million in related
bank debt, as well as $906,000 in  acquisition  related costs and expenses.  The
Company  expects to continue  to make  property  and  equipment  investments  to
support  the growth and  expansion  of the  Company's  business  and for further
development of its internal software programs.

         Financing Activities. During the year ended December 31, 1998, net cash
provided from financing activities was $25.7 million.  This was primarily due to
the  issuance  of  Ordinary  Shares to acquire the assets of BHA and BHAC and to
employees pursuant to exercises of options under the 1995 Share Option Plan and,
to a lesser  extent,  to shares  issued under the 1996 Employee  Share  Purchase
Plan.  The  Company  and  its  subsidiaries   have  available  a  $15.0  million
multi-currency  operating line of credit (the "Line of Credit") from a financial
institution  that expires on August 31, 2000 and bears interest at rates varying
from 0.25% to 1% above the base rate.  This base rate depends on the currency of
the funds drawn of the facility and includes the Canadian U.S. Dollar Base rate,
the Canadian Bank Prime rate, the bank's London Interbank Offer Rate (LIBOR) and
the bank's Dublin Interbank Offer Rate (DIBOR). Total advances drawn on the Line
of Credit  during the year ended  December  31,  1998 were  approximately  $22.3
million and were used to fund, in part, the acquisition of the assets of BHA and
BHAC in April  1998.  The $15.1  million  borrowed as part of the funding of the
acquisition was repaid by the Company, in part, from the proceeds resulting from
the issuance of 283,698 of the  Company's  Ordinary  Shares to BHA for aggregate
consideration  of approximately  $14.0 million.  No advances were outstanding on
this facility as of December 31, 1998.

The Company had capital lease obligations in principal amounts of $312,000 as of
December 31, 1998 and subsequent to such date has incurred no additional capital
lease  obligations.  Liabilities  include  approximately $2.0 million of minimum
royalty  payments  due  over  the next  two  years  as part of the  purchase  of
in-process  technology,  of which approximately $1.0 million was due and paid in
1999 and is included in the current portion of long-term liabilities.

During 1998,  irrevocable standby letters of credit were issued to a customer to
serve as  performance  bonds  associated  with the  completion  of the Company's
contract.  These letters of credit totaled  approximately  $854,000 and $493,000
and expire on January 31, 1999 and July 30, 1999, respectively, and reduce those
funds  available  for use by the  Company  under the Line of Credit.  Before the
customer can draw on these letters, the Company must be provided with sixty days
prior  written  notice.  No such  notice had been  received by the Company as of
December 31, 1998.

The Company believes that existing cash balances,  funds generated by operations
and the  availability  of the  Line of  Credit  will be  sufficient  to meet its
anticipated  liquidity and working  capital  requirements  for at least the next
twelve months.


FOREIGN CURRENCY EXPOSURE

The Company's  international  sales are predominately  invoiced and paid in U.S.
currency with the exception of certain  customers who are invoiced  primarily in
Canadian dollars,  Pounds Sterling,  Australian dollars, New Zealand dollars and
Swiss Francs.  The impact of foreign currency  translation has not been material
to the Company's overall operations.

EURO CONVERSION

On January 1, 1999, eleven of the fifteen member countries of the European Union
established  fixed  conversion rates between their existing  currencies  (legacy
currencies) and one common  currency,  the Euro. The Euro now trades on currency
exchanges and may be used in business  transactions.  Beginning in January 2002,
new  Euro-denominated  bills and coins will be issued and legacy currencies will
be withdrawn from circulation. The Company has begun to identify and ensure that
all Euro  conversion  compliance  issues are  addressed  during this  transition
period  ending in 2001.  The  Company  does not  expect  the  effect of the Euro
conversion  on its business  operations  to be  significant  since the Company's
international sales are predominately invoiced and paid in U.S. currency and the
cost of  modification  to internal  systems is not  expected to be  significant.
Therefore,  based on current  information,  the Company does not expect that the
Euro conversion will have a material adverse impact on its business or financial
condition.

RECENTLY ISSUED ACCOUNTING STANDARDS

The  Financial  Accounting  Standards  Board has issued  Statement  of Financial
Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities"
("SFAS 133").  SFAS 133 will be effective  for the Company's  fiscal year ending
December 31, 2000. The Company has not  determined  the impact,  if any, of this
pronouncement on its consolidated financial statements.

The  American  Institute  of  Certified  Public  Accountants  (AICPA) has issued
Statement of Position 98-5 "Reporting on the Costs of Start-Up Activities" ("SOP
98-5") which will be effective for the Company's December 31, 1999 year end. The
Company  does not expect any  significant  impact of this  pronouncement  on its
consolidated financial statements.

Statement  of  Position  of 98-9  "Modification  of SOP 97-2,  Software  Revenue
Recognition,  with Respect to Certain  Transactions"  ("SOP 98-9") has also been
issued by the AICPA.  Effective  December  15,  1998,  SOP 98-9 amends SOP 98-4,
Deferral of the Effective Date of a Provision of SOP 97-2, and Software  Revenue
Recognition,  to extend the deferral of the  application of certain  passages of
SOP 97-2 provided by SOP 98-4 through fiscal years  beginning on or before March
15,  1999.  All other  provisions  of SOP 98-9 are  effective  for  transactions
entered  into in fiscal years  beginning  after March 15,  1999.  The  Company's
current revenue recognition policies are expected to remain largely unaffected.

YEAR 2000 READINESS DISCLOSURE

The Company is currently  reviewing  its products and  operations to ensure that
they will not be adversely  affected by year 2000 software  failures,  which can
arise in time-sensitive software applications that utilize a field of two digits
to define the applicable  year. In such  applications,  a date using "00" may be
recognized  as the year 1900  rather than the year 2000.  The Company  considers
"Year  2000  Ready" to mean that a  product,  when used in  accordance  with its
associated documentation,  is capable of correctly processing,  providing and/or
receiving date data within and between the twentieth and twenty-first centuries,
provided that all non-Saville products (i.e.,  hardware,  software and firmware)
used with such product properly exchange accurate date data with it.

The Company's  internal systems include both its information  technology  ("IT")
and non-IT  systems.  The Company has  initiated an  assessment  of its material
internal IT systems  including its accounting and software  development  systems
and its non-IT  systems  including  security  systems,  building  equipment  and
utilities.  The Company expects to complete this assessment in the first half of
1999. To the extent that the Company is not able to test the technology provided
by third-party vendors, the Company is seeking assurances from such vendors that
their systems are Year 2000 Ready.  Although the  assessment is still  underway,
management  currently  believes that all material systems which the Company uses
will be Year 2000 Ready when  necessary  and that the cost to ensure  that those
systems are Year 2000 Ready will not be material.  It should be noted,  however,
that the  Company  depends on timely  and  uninterrupted  interactions  with its
vendors  and its  customers,  through  the use of  banking  systems,  commercial
airline  travel,   telecommunications   via   long-distance  and  local  service
providers,  and local  utilities,  including power. To the extent that Year 2000
Ready  alternatives  are not readily  available  at the time,  any  interruption
caused by a lack of Year 2000 Readiness on the part of such vendors could have a
material  adverse  effect  on the  Company's  business,  operating  results  and
financial condition.

The Company has designed, tested and continues to test the most current versions
of its products to ensure that they are Year 2000 Ready.  However,  a portion of
the Company's  currently  installed  customer base may require  upgrade or other
remediation to become Year 2000 Ready. The Company is currently taking inventory
of its existing customers and assessing on a case-by-case basis whether testing,
upgrade or modification for Year 2000 Readiness is required. The Company expects
to complete this  assessment in the first half of 1999. The Company's total cost
relating to these activities,  and any modifications  required thereby,  has not
been and is not  expected to be material to the  Company's  financial  position,
results of operations,  or cash flows. Any such  expenditures to date have been,
and any such  expenditures  in the future are expected to be,  treated as normal
business  expenses funded out of operating cash flow. The Company  believes that
its exposure to legal  liability  for any such Year 2000  Readiness  failures is
limited and that it will be able to make any necessary modifications on a timely
basis.  There can be,  however,  no  assurance  that there will not be increased
costs  associated  with the  implementation  of any such  activities or required
modifications  and there can be no assurance  that there will not be significant
legal  liabilities,  either of which could have a material adverse effect on the
Company's business, operating results and financial condition.

Despite  testing  by the  Company  and  current  and  potential  customers,  the
Company's new and installed  products and the IT and non-IT  systems used by the
Company may contain  undetected errors or defects associated with Year 2000 date
functions.  Known or  unknown  errors or defects in the  Company's  IT  systems,
non-IT systems, or products could result in delay or loss of revenue,  diversion
of  development  resources,  damage to the Company's  reputation,  and increased
service and warranty costs, any of which could  materially  adversely affect the
Company's business,  operating results, or financial condition. In addition, the
Company is aware of the potential for claims against it and other  companies for
damages  arising  from  products  and  services  provided  by it and third party
suppliers that were not Year 2000 Ready.  Because of the unprecedented nature of
such  litigation,  it is uncertain  whether or to what extent the Company may be
affected by any such claims.

The Company  believes that the most likely worst case  scenario  related to Year
2000  risks  is  a  material   business   interruption   that  leads  to  client
dissatisfaction  and the  termination  of a project or projects by  dissatisfied
clients.  Such an interruption in services could occur due to a breakdown in any
number of the Company's IT or non-IT  Systems,  or the systems of third parties.
The Company currently does not have a contingency plan in the event a particular
system or vendor is not Year 2000  Ready.  Such a plan will be  developed  if it
becomes clear that the Company is not going to achieve its scheduled  objectives
in respect of Year 2000  Readiness.  There can be no assurance  that  unexpected
Year 2000  Readiness  problems  of the  Company or its  vendors,  customers  and
service providers will not materially  adversely affect the Company's  business,
operating results and financial condition.  The foregoing assessment  represents
management's   best   estimates  at  the  present   time,   which  could  change
significantly in the future.


CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

This Annual Report contains forward-looking  statements that involve a number of
risks and uncertainties.  The Company's actual results may differ  significantly
from  the  results  discussed  in  the  forward-looking  statements,   including
statements  regarding  the  Company's  expectations  regarding  future growth in
revenue, the Company's plans to expand its product lines and international sales
presence,  the Company's plans to continue its research and development efforts,
the Company's  expectation  that it will continue to make property and equipment
investments  in 1999,  the  Company's  belief that its existing cash balance and
funds  generated  by  operations  will be  sufficient  to meet  its  anticipated
liquidity  and working  capital  requirements  for the next twelve  months,  the
possible  adverse  foreign  currency   exposure   involved  with   international
expansion, the Company's expectation that the result of Euro conversion will not
have a material  adverse  effect,  and the  Company's  general  expectations  of
growth. A number of  uncertainties  exist that could affect the Company's future
operating  results,  including,  without  limitation,  the Company's  ability to
retain existing  customers and attract new customers,  the Company's  ability to
attract and retain  qualified  employees,  the Company's  continuing  ability to
develop  products that are  responsive to the evolving  needs of its  customers,
increased competition,  changes in operating expenses, foreign currency exchange
rates,  the  Company's  continued  ability to take  advantage of  favorable  tax
treatment currently available to the Company and general economic factors.

Historically, the Company has been dependent on long-term customer relationships
and to date,  a  substantial  portion of the  Company's  total  revenue has been
derived from relatively large software development projects, which can cause the
Company's  revenue and earnings to fluctuate  from quarter to quarter,  based on
their  customers'  requirements  and the timing of the  projects.  The Company's
future  success  depends in large part on its  ability to  maintain  its current
relationships   and  develop  new   customer   relationships   with   successful
telecommunications and energy service providers.  There can be no assurance that
the Company will be able to develop and maintain such  long-term  relationships,
including obtaining  references from such existing  customers,  or that emerging
service  providers  that  are  or  become  customers  of  the  Company  will  be
successful. In addition, the telecommunications market is presently experiencing
significant  merger,  consolidation and alliance  formation  activity among both
established and start-up carriers.  A consolidation or alliance affecting any of
the  Company's  customers  could  result in such  customer  shifting  to another
billing system,  thus  decreasing such customer's use of the Company's  products
and services as well as the cancellation of any projects underway. A significant
decrease  in  business  from any of its major  customers  or the  failure of the
Company  to  compete   effectively   for  new   customers  or  projects  in  the
telecommunications  and energy markets,  would have a material adverse effect on
the Company's business, financial condition and results of operations.

The Company's  quarterly and annual operating results may fluctuate from quarter
to quarter and year to year depending on various  factors  including new product
development  and other  expenses,  introduction  of new products by competitors,
fluctuations in the numbers and types of customer contracts (i.e. service bureau
or license) signed in any given quarter, the hiring of additional staff, pricing
pressures, the effect of acquisitions,  the evolving and unpredictable nature of
the markets in which the  Company's  products  and services are sold and general
economic conditions.

The billing and customer  care  industry is intensely  competitive.  The Company
competes  with both  independent  providers of systems and  services  similar to
those offered by the Company and with internal  billing  departments of existing
telecommunications   and   energy   service   providers,   many  of  which  have
substantially  greater  financial,   technical,   sales,   marketing  and  other
resources,  as well as greater name recognition,  than the Company. For example,
in February 1999,  Lucent  Technologies,  Inc., a  telecommunications  equipment
maker with substantially greater resources and name recognition than the Company
and with  which  the  Company  had  entered  into  several  alliance  agreements
purchased Kenan Systems Corp., a customer care and billing  software  competitor
of the  Company.  In  addition,  Amdocs  Limited,  a customer  care and  billing
software competitor of the Company with substantially greater resources than the
Company  announced an  agreement to purchase  Architel  Systems  Corporation,  a
service  provisioning  software company,  in order to enhance Amdocs' ability to
provide end-to-end billing solutions for its telecommunications customers. There
can be no assurance that the Company will be able to compete  successfully  with
its existing competitors or with new competitors.

The market for the Company's  products is characterized  by rapid  technological
change,  frequent new product  introductions,  evolving  industry  standards and
changing  customer needs. The Company  currently offers both  DB2/400-based  and
UNIX-based CBP products and is devoting significant resources to develop, refine
and enhance these CBP products,  as well as its other  customer care and billing
technology.  The Company  believes that its future  success will depend in large
part on its  ability to maintain  and  enhance  its current  product and service
offerings  and to  continually  develop and  introduce new products and services
that will keep pace with  technological  advances and satisfy evolving  customer
requirements. If the Company is unable to develop and introduce new products and
services in a timely manner, or if the Company's new products,  developments and
enhancements do not perform or gain market  acceptance,  or if there should be a
rapid shift from the telecommunications industry's use of either DB2/400 or UNIX
as a standard platform for billing, the Company's business,  financial condition
and results of operations would be materially adversely affected.

The Company's international business is subject to risks such as fluctuations in
exchange rates,  difficulties or delays in developing and supporting non-English
language versions of the Company's  products,  political and economic conditions
in various jurisdictions, unexpected changes in regulatory requirements, tariffs
and  other  trade  barriers,  difficulties  in  staffing  and  managing  foreign
operations and longer  accounts  receivable  payment cycles.  Specifically,  the
Latin America and Asia Pacific  regions have  experienced a downturn in economic
conditions,  the  continuation  of which could  adversely  affect the  Company's
ability to expand into this  region.  Additionally,  credit  markets for smaller
telecommunications  companies in the U.S. have weakened,  while  competition has
increased,  all of which could adversely  affect the Company's  ongoing projects
for such  customers,  as well as the  Company's  ability to attract and maintain
relationships with such companies.

Recently,  the Company has expanded  its  operations  rapidly,  which has placed
significant demands on the Company's  administrative,  operational and financial
personnel and systems.  Additional  expansion by the Company may further  strain
the  Company's  management,  financial  and  other  resources.  There  can be no
assurance that the Company's  systems,  procedures,  controls and existing space
will be adequate to support expansion of the Company's operations. The Company's
future  operating  results  will  substantially  depend  on the  ability  of its
officers  and key  employees  to  manage  changing  business  conditions  and to
implement and improve its operational,  financial control and reporting systems,
as well as to attract and retain qualified  personnel,  including  highly-sought
UNIX software development personnel.  If the Company is unable to respond to and
manage changing business conditions,  the quality of the Company's services, its
ability  to  retain  key  personnel  and its  results  of  operations  could  be
materially adversely affected.

The Company's  strategy  includes the acquisition of businesses and technologies
that  complement or augment the  Company's  existing  business and products.  On
April 3, 1998,  the Company  completed its  acquisition of the net assets of BHA
Pty  Ltd,  an   Australian   telecommunications   software   company,   and  its
majority-owned subsidiary, BHA Computer Pty Ltd. In addition, in early 1998, the
Company  purchased an interconnect  telecommunications  software  product from a
Swedish company.  Promising  acquisitions are difficult to identify and complete
for a number of reasons,  including competition among prospective buyers and the
need to obtain regulatory approvals, including antitrust approvals. There can be
no assurance that the Company will be able to complete  future  acquisitions  or
that the Company will be able to successfully integrate any acquired businesses.
In order to finance such  acquisitions,  it may be necessary  for the Company to
raise additional funds through public or private  financing.  Any equity or debt
financing,  if available  at all, may be on terms that are not  favorable to the
Company,  and in the case of equity  offerings,  may result in  dilution  to the
Company's shareholders.

Fluctuations  in  exchange  rates  may have a  material  adverse  effect  on the
Company's  results of operations,  particularly its operating  margins and could
also result in exchange losses.  The impact of future exchange rate fluctuations
on the Company's results of operations cannot be accurately predicted.  To date,
the Company has not sought to hedge the risks  associated  with  fluctuations in
exchange rates, but may undertake such transactions in the future.  There can be
no  assurance  that any hedging  techniques  implemented  by the Company will be
successful  or that the Company's  results of operations  will not be materially
adversely affected by exchange rate fluctuations.

The Company regards its software products as proprietary and relies primarily on
a combination of statutory and common law copyright,  trademark and trade secret
laws,  customer  licensing  agreements,  employee and third-party  nondisclosure
agreements and other methods to protect its proprietary  rights.  These laws and
contractual   provisions  provide  only  limited  protection  of  the  Company's
proprietary rights. Despite the Company's precautions,  it may be possible for a
third party to copy or otherwise obtain and use the Company's technology without
authorization.  Furthermore,  the laws of certain countries in which the Company
sells its  products do not  protect  the  Company's  software  and  intellectual
property  rights to the same  extent,  as do the laws of the United  States.  If
unauthorized  copying or misuse of the  Company's  products  was to occur to any
substantial degree, the Company's business,  results or operations and financial
condition could be materially adversely affected.

The Company has  significant  operations and generates a substantial  portion of
its taxable  income in the  Republic of Ireland,  and,  under an  incentive  tax
program due to terminate in 2010,  is taxed on its  "manufacturing  income" at a
rate that is  substantially  lower than U.S. tax rates.  If the Company could no
longer  qualify  for this  lower tax rate or if the tax laws were  rescinded  or
changed,  the Company's net income could be materially  adversely  affected.  In
addition,  if U.S.,  Canadian,  Australian,  United Kingdom or other foreign tax
authorities  were to  challenge  successfully  the manner in which  profits  are
recognized among the Company and its subsidiaries,  the Company's  effective tax
rate  could  increase  and its cash  flow and  results  of  operations  could be
materially adversely affected.


<PAGE>



                                                              
                                                                      Appendix C


                               SAVILLE SYSTEMS PLC

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS




   Report of Independent Accountants

   Consolidated Balance Sheets as of December 31, 1998 and 1997

   Consolidated Statements of Income for the years ended December 31, 1998, 1997
     and 1996

   Consolidated  Statements  of  Changes in  Shareholders'  Equity for the years
     ended December 31, 1998, 1997 and 1996

   Consolidated Statements of Cash Flows for the years ended December 31, 1998,
     1997 and 1996

   Notes to Consolidated Financial Statements




<PAGE>




                        REPORT OF INDEPENDENT ACCOUNTANTS





To the Board of Directors and Shareholders of
Saville Systems PLC

         In our  opinion,  the  accompanying  consolidated  balance  sheet as of
December 31, 1998 and the related consolidated  statements of income, of changes
in  shareholders'  equity  and of cash flows  present  fairly,  in all  material
respects,  the financial  position of Saville  Systems PLC and its  subsidiaries
(the  "Company") at December 31, 1998,  and the results of their  operations and
their cash flows for the year then ended, in conformity with generally  accepted
accounting  principles in the United States.  In addition,  in our opinion,  the
financial  statement  schedule listed in the index appearing under item 14(a)(2)
presents  fairly,  in all material  respects,  the information set forth therein
when read in conjunction  with the related  consolidated  financial  statements.
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 of these  statements  in  accordance  with
generally accepted auditing standards in the United States which 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,   assessing  the  accounting  principles  used  and
significant  estimates made by management,  and evaluating the overall financial
statement  presentation.  We believe that our audit provides a reasonable  basis
for the opinion  expressed above. The financial  statements of the Company as of
December  31,  1997 and for each of the two years in the period  then ended were
audited by other  independent  accountants  whose report dated  January 22, 1998
(except for  Comprehensive  Income and Note 15 as to which the date is March 12,
1999) expressed an unqualified opinion on those statements.




PricewaterhouseCoopers LLP (signed)
Dublin, Ireland
March 2, 1999





<PAGE>




Saville Systems PLC

CONSOLIDATED BALANCE SHEETS

(In thousands of U.S. dollars, except share data)

<TABLE>

                                                             As of December 31
                                                         ----------------------
                                                              1998     1997
-------------------------------------------------------- ----------- ----------
<S>                                                      <C>         <C>  
ASSETS

Current Assets:
  Cash and cash equivalents [note 3]                       $ 40,330   $ 55,785
  Short-term investments [note 3]                            47,492     13,015
  Accounts receivable, less allowance for doubtful 
     accounts of $1,943 and  $1,687, respectively            43,729     22,373
  Prepaid expenses and other assets                           4,471      3,581
-------------------------------------------------------- ----------- ----------
  Total current assets                                      136,022     94,754
  Property and equipment, net [note 4]                       12,277     10,621
  Other assets, net [note 6]                                 13,346          -
-------------------------------------------------------- ----------- ----------
Total assets                                               $161,645   $105,375
-------------------------------------------------------- ----------- ----------

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
  Accounts payable                                            5,377      5,336
  Accrued compensation and related benefits                   7,128      5,248
  Accrued expenses and other liabilities                      4,644      3,084
  Income taxes payable                                        8,804      7,167
  Deferred revenue                                              947      3,402
  Current portion of long-term liabilities                    1,116        134
-------------------------------------------------------- ----------- ----------
  Total current liabilities                                  28,016     24,371
  Long-term liabilities  [note 7]                             1,178        336
  Minority interest  [note 9]                                   361        366
-------------------------------------------------------- ----------- ----------
Total liabilities                                            29,555     25,073
-------------------------------------------------------- ----------- ----------

Commitments and Contingencies [note 8]

Shareholders' Equity:  [note 9]
Ordinary Shares, nominal value $0.0025 per share
  Authorized:  75,000,000
  Issued and outstanding:  38,938,488 and 37,504,596             97         94
                                                              
Deferred Ordinary Shares, nominal value 
  IR(pound)1.00 per share
  Authorized, issued and outstanding:  30,000                    48         48
Additional paid-in capital  [note 9]                         63,766     37,734
Retained earnings                                            69,802     42,750
Accumulated other comprehensive income                      (1,623)      (324)
-------------------------------------------------------- ----------- ----------
Total shareholders' equity                                  132,090     80,302
-------------------------------------------------------- ----------- ----------
Total liabilities and shareholders' equity                 $161,645   $105,375
-------------------------------------------------------- ----------- ----------

</TABLE>

See accompanying notes


<PAGE>




Saville Systems PLC


CONSOLIDATED STATEMENTS OF INCOME

(In thousands of U.S. dollars, except share and per share data)

<TABLE>

                                                     Years ended December 31
                                            ------------------------------------
                                                  1998        1997         1996
------------------------------------------------------- ------------ -----------

<S>                                          <C>         <C>          <C>   
REVENUE
Services                                      $124,730     $ 84,856     $44,478
License fees                                    42,975       22,189       9,442
------------------------------------------------------- ------------ -----------
Total revenue                                  167,705      107,045      53,920
------------------------------------------------------- ------------ -----------

EXPENSES
Cost of services                                61,588       39,603      22,058
Cost of license fees                             1,269          579         337
Sales and marketing                              8,668        6,266       3,379
Research and development                        21,389       10,146       4,171
General and administrative                      32,194       20,444      10,705
Charge for purchased in-process research
   and development                               9,168         -            -
------------------------------------------------------- ------------ -----------
Total expenses                                 134,276       77,038      40,650
------------------------------------------------------- ------------ -----------

Income from operations                          33,429       30,007      13,270
Other income, net [note 12]                      3,364        2,154       1,491
------------------------------------------------------- ------------ -----------
Income before income taxes                      36,793       32,161      14,761
Provision for income taxes [note 13]             9,741        7,989       3,052
------------------------------------------------------- ------------ -----------
Income before minority interest                 27,052       24,172      11,709
Minority interest share in subsidiaries'           
  net income                                        -           235         140
------------------------------------------------------- ------------ -----------
Net income                                    $ 27,052      $23,937     $11,569
------------------------------------------------------- ------------ -----------

Basic earnings per share [note 14]               $0.70        $0.65       $0.32
Diluted earnings per share [note 14]             $0.67        $0.61       $0.31
------------------------------------------------------- ------------ -----------

(in thousands)
Ordinary shares                                 38,471       36,745      35,458
Ordinary shares assuming dilution               40,545       39,323      37,897
------------------------------------------------------- ------------ -----------
</TABLE>

See accompanying notes


<PAGE>


Saville Systems PLC


CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(In thousands of U.S. dollars, except number of shares)

<TABLE>

                                          
                                              Share Capital       Additional   Retained     Accumulated      Total
                                                                  paid-in      earnings        other      shareholders'
                                            Shares      Amounts    capital                 comprehensive     equity
                                                                                              income
<S>                                       <C>          <C>        <C>          <C>         <C>            <C>      
----------------------------------------- ------------ ---------- ----------- ------------ -------------- -------------
Balance at December 31, 1995               35,182,812       $136     $23,592      $ 7,244         $ (48)      $ 30,924
----------------------------------------- ------------ ---------- ----------- ------------ -------------- -------------
Ordinary Shares issued                      1,010,330          2       4,739                                     4,741
Reduction in minority interest                                            37                                        37
Repayment of note receivable                                             100                                       100
Public offering costs                                                  (735)                                     (735)
Comprehensive income
   Net income                                                                      11,569                       11,569
   Foreign currency translation
    adjustments,net of tax                                                                          (25)          (25)
                                                                                                          -------------          
Total comprehensive income                                                                                      11,544
----------------------------------------- ------------ ---------- ----------- ------------ -------------- -------------
Balance at December 31, 1996               36,193,142        138      27,733       18,813           (73)        46,611
----------------------------------------- ------------ ---------- ----------- ------------ -------------- -------------
Ordinary Shares issued                      1,311,454          4       9,069                                     9,073
Reduction in minority interest                                           189                                       189
Share issue costs                                                      (277)                                     (277)
Tax benefit of employee stock                                            
    transactions                                                         873                                       873
Restricted share issuance and
    related compensation                       30,000                  1,031                                     1,031
Unearned compensation on restricted
    share issuance                                                     (945)                                     (945)
Compensation related to stock options                                     61                                        61
Comprehensive income
   Net income                                                                      23,937                       23,937
   Foreign currency translation
     adjustments, net of tax                                                                       (251)         (251)
                                                                                                          -------------
Total comprehensive income                                                                                      23,686
----------------------------------------- ------------ ---------- ----------- ------------ -------------- -------------
Balance at December 31, 1997               37,534,596        142      37,734       42,750          (324)        80,302
----------------------------------------- ------------ ---------- ----------- ------------ -------------- -------------
Ordinary Shares issued                      1,403,892          3      25,538                                    25,541
Reduction in minority interest                                             5                                         5
Share issue costs                                                      (522)                                     (522)
Tax benefit of employee stock                                            
    transactions                                                         805                                       805
Recognition of compensation on
    restricted share issuance                                            206                                       206
Comprehensive income
   Net income                                                                      27,052                       27,052
   Foreign currency translation
    adjustments, net of tax                                                                      (1,299)       (1,299)
                                                                                                          -------------
Total comprehensive income                                                                                      25,753
----------------------------------------- ------------ ---------- ----------- ------------ -------------- -------------
Balance at December 31, 1998               38,938,488       $145     $63,766      $69,802       $(1,623)      $132,090
----------------------------------------- ------------ ---------- ----------- ------------ -------------- -------------
</TABLE>

See accompanying notes



<PAGE>


Saville Systems PLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

 (In thousands of U.S. dollars)

<TABLE>
                                                     Years ended December 31
                                                    --------------------------
                                                   1998         1997     1996
------------------------------------------------- ---------- --------- ---------
<S>                                               <C>        <C>       <C>   
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                          $27,052   $23,937   $11,569
Adjustments to reconcile net income to net 
cash provided by operating activities:
  Depreciation of property and equipment              2,939     1,487       782
  Amortization of other assets                        2,228       -          -
  Allowance for doubtful accounts                     3,160     1,010       386
  Minority interest in net income                       -         235       140
  (Gain) Loss on sale of property and equipment        (90)        90        -
  Compensation related to stock transactions            206       147        -
  Deferred taxes                                    (1,114)        -         -     
  Charge for purchased in-process research              
     and development                                  9,168        -         -                               
Changes in operating assets and liabilities:
  Accounts receivable                              (24,514)   (8,072)   (7,521)
  Prepaid expenses and other assets                   (702)   (2,075)     (461)
  Long term receivable                                  -          -        741
  Accounts payable                                    (109)     3,349       632
  Accrued compensation and related benefits           1,880     2,544     1,177
  Accrued royalties                                     -          -       (663)
  Income taxes payable                                1,637     4,257     1,682
  Deferred revenue                                  (2,455)     1,982     1,420
  Accrued expenses and other liabilities              1,560     1,897       474
------------------------------------------------- ---------- --------- ---------
Net cash provided by operating activities            20,846    30,788    10,358
------------------------------------------------- ---------- --------- ---------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment                  (5,763)   (7,537)   (2,723)
Proceeds on sale of property and equipment            1,146       136       -
Purchase of other assets                            (1,973)       -         -   
Net purchase of short-term investments             (34,477)  (12,015)   (1,000)
Payment for acquired assets                        (21,012)       -         -  
------------------------------------------------- ---------- --------- ---------
Net cash used in investing activities              (62,079)  (19,416)   (3,723)
------------------------------------------------- ---------- --------- ---------

CASH FLOWS FROM FINANCING ACTIVITIES
Increase in long-term liabilities                        -        470       -
Principal payments on capital lease obligations       (129)      (43)      (54)
Advances on operating line of credit                 22,296        -        -
Repayments on operating line of credit             (22,296)        -        -
Proceeds from share issuance                         25,541     9,073     4,841
Share issue costs                                     (522)     (277)     (735)
Tax benefit on employee stock transactions              805       873       -
------------------------------------------------- ---------- --------- ---------
Net cash provided by financing activities            25,695    10,096     4,052
------------------------------------------------- ---------- --------- ---------
Effect of exchange rate changes on cash                  83      (78)      (14)
------------------------------------------------- ---------- --------- ---------
Net (decrease) increase in cash and cash           
  equivalents                                      (15,455)    21,390    10,673
Cash and cash equivalents, beginning of year        $55,785    34,395    23,722
------------------------------------------------- ---------- --------- ---------
Cash and cash equivalents, end of year               40,330   $55,785   $34,395
------------------------------------------------- ---------- --------- ---------
Short-term investments                               47,492    13,015     1,000
------------------------------------------------- ---------- --------- ---------
Cash and short-term investments                     $87,822   $68,800   $35,395
------------------------------------------------- ---------- --------- ---------
</TABLE>
See accompanying notes


<PAGE>


                               SAVILLE SYSTEMS PLC
          Consolidated Notes to Financial Statements, December 31, 1998


1. ORGANIZATION

      Saville   Systems  PLC  (the   "Company")  is  a  public  limited  company
incorporated  under  the  laws  of  the  Republic  of  Ireland  in  1993.  These
consolidated  financial  statements  include  the results of the Company and its
subsidiaries since their inception.  These subsidiaries  include Saville Systems
Canada,  Ltd. and Saville  Systems Inc.  which are majority owned by the Company
with the  exception  of a minority  interest  holding as of December 31, 1998 of
approximately  2% (4% and 7% as of  December  31,  1997 and 1996  respectively).
These  statements  also  include  the  results  of the  Company's  wholly  owned
subsidiaries  Saville C.I. Limited and Saville Systems (UK) Limited incorporated
in 1997 and Saville Systems Aust. Pty Ltd incorporated in 1998.

      The  Company's  principal  line of business is the provision of convergent
customer   care  and  billing   solutions   to  its   customers  in  the  global
telecommunications and energy industries. The Company either licenses the use of
its  software to  customers  throughout  the world or operates  its software for
certain customers under a service bureau  arrangement.  The Company's  principal
markets are currently located in the United States, Europe, Canada, Asia Pacific
and Latin America.


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting Principles
     The consolidated  financial  statements have been prepared by management in
accordance with accounting principles generally accepted in the United States.

Principles of Consolidation
     These consolidated financial statements include the accounts of the Company
and its  subsidiaries.  All  intercompany  accounts and  transactions  have been
eliminated in consolidation.

Estimates and Assumptions
     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that affect the reported  assets and  liabilities and disclosure of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenue and  expenses  during the  reporting  periods.
Actual results could differ from those estimates.

Cash and short-term investments
     Cash equivalents  include those investments that are readily convertible to
known amounts of cash,  with maturities at the date purchased of three months or
less.

     Short-term  investments  held  by the  Company  and  its  subsidiaries  are
classified as held-to-maturity as the Company has the intent and ability to hold
those  investments  to  maturity.  They are  stated at cost  with  corresponding
premiums or discounts amortized over the life of the investment.

Property and equipment
     Property  and  equipment  are  recorded  at cost.  Costs  incurred  for the
purchase and  development of internal use software have been recorded at cost in
accordance  with  Statement  of  Position  98-1 (SOP 98-1)  which has been early
adopted by the Company. Depreciation is computed on a declining balance basis of
20% for furniture and  equipment,  on a  straight-line  basis over three to four
years for computer equipment and software, and over the remaining lease term for
leasehold improvements.

     When  assets  are  sold or  retired,  the  related  costs  and  accumulated
depreciation  are removed from the accounts  and any  resulting  gain or loss is
reflected in operations. Maintenance and repairs are expensed as incurred.


<PAGE>



2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Leases
     Leases are  recorded  as  capital  or  operating  leases.  Any lease  where
substantially  all of the  benefits  and risks  related to the  ownership of the
leased asset are transferred to the lessee, as defined by Statement of Financial
Accounting Standards (SFAS) No.13 "Accounting for Leases" is accounted for as if
the asset were acquired and as if the obligation  were assumed as of the date of
lease.  All other leases are recorded as  operating  leases  whereby the related
costs are charged to income on a straight-line basis over the term of the lease.

Intangible Assets
     Intangible  assets  are  recorded  at cost less  accumulated  amortization.
Amortization  is computed  using the  straight-line  method  over the  estimated
useful life of the assets of three to seven years.

Revenue recognition
     In 1998, the Company adopted SOP 97-2 "Software  Revenue  Recognition"  and
SOP 98-4 "Deferral of the Effective Date of a Provision of SOP 97-2",  which did
not significantly affect existing revenue recognition policies.

     Revenue from services consists of fees for systems requirements definition,
system design and analysis,  customization  and installation  services,  ongoing
system management,  system enhancements,  service bureau processing,  facilities
management and maintenance fees.  Services revenue is recognized as the services
are performed, primarily on a time and materials basis and to a lesser extent on
a  fixed  fee  basis  over  the  term of the  services  provided.  Revenue  from
maintenance  contracts is  recognized  ratably  over the term of the  agreement,
generally one year.

     Revenue from the licensing of software  rights is recognized at the time of
delivery  of the  product to the  customer,  provided  that the  Company  has no
remaining service  obligations,  collectibility  is considered  probable and the
fees are fixed and  determinable.  Where there are service  obligations that are
essential  to the  functionality  of the  software  installed,  license fees are
recorded over the expected term of the initial customization period.

       Deferred  revenue  relates  primarily  to  license  fee  and  maintenance
revenue,  which  has been  paid by the  customers  prior to the  recognition  of
revenue.

Software development costs
     Software  development  costs,  principally  the design and  development  of
customer care and billing software, are expensed as incurred unless they qualify
for  capitalization,  as  defined by SFAS No.  86,  "Accounting  for the Cost of
Computer Software to be Sold, Leased or Otherwise  Marketed".  Capitalized costs
are  amortized  over  the  economic  life  of  the  software  release.  Software
development costs have not been capitalized by the Company with the exception of
specific purchased  research and development,  as the development costs incurred
subsequent to  establishing  technological  feasibility of the related  software
have not been material.

     Purchased  research and development  costs that have reached  technological
feasibility  and have an alternative  future use are  capitalized  and amortized
over the  expected  useful life of the  technology.  Any costs which do not meet
these criteria are recorded as a charge to current period earnings.

Stock options
     The  Company  records   compensation   expense   relating  to  stock  based
compensation to employees in accordance with Accounting Principles Board Opinion
(APB)  No.  25   "Accounting   for  Stock  Issued  to  Employees"   and  related
interpretations.  Pro forma footnote disclosures, which comply with the SFAS No.
123 "Accounting for Stock Based Compensation", are provided in note 9.


<PAGE>



2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Foreign currency translation
     The Company uses the United States dollar as the unit of measurement of its
financial  statements,  as a significant  portion of the Company's operating and
financing  activities  are transacted in United States  dollars.  The functional
currencies of the Company's subsidiaries are their local currencies. The effects
of  fluctuations  in currency  exchange  rates have not been  significant to the
Company's consolidated results.

     The balance sheets of the Company's foreign  subsidiaries are translated at
year-end  rates of exchange and results of operations are translated at weighted
average  rates  of  exchange  for  the  fiscal  period   reported.   Translation
adjustments  resulting from this process are recorded in shareholders' equity as
an adjustment to accumulated other comprehensive income.

Earnings per share
     Basic and diluted  earnings per share are computed in accordance  with SFAS
No. 128  "Earnings  per Share."  Basic  earnings per share  exclude any dilutive
effects of stock  options.  In the  calculation  of diluted  earnings per share,
Ordinary  Shares  assuming  dilution  includes  the  effect  of  dilutive  share
equivalents from stock options using the average market price for the period.

Comprehensive income
     Other comprehensive  income refers to revenue,  expenses,  gains and losses
that  under   generally   accepted   accounting   principles   are  included  in
comprehensive  income,  but are  excluded  from net income as these  amounts are
recorded directly as an adjustment to shareholders'  equity. The Company's other
comprehensive  income is  primarily  comprised of foreign  currency  translation
adjustments  which arise from the earnings of the  Company's  non-Irish  foreign
subsidiaries.  These earnings are reinvested with no plan for  repatriation  and
therefore,  there is no tax  effect  on this  component  of other  comprehensive
income.

Segment Information
     During 1998, the Company adopted SFAS No. 131,  "Disclosures about Segments
of an Enterprise  and Related  Information".  SFAS 131  supercedes  SFAS No. 14,
"Financial  Reporting  for  Segments of a Business  Enterprise",  replacing  the
"industry  segment"  approach with the  "management"  approach.  The  management
approach designates the internal reporting that is used by management for making
operating  decisions  and assessing  performance  as the source of the Company's
reportable  segments.  SFAS 131 also  requires  disclosures  about  products and
services, geographic areas and major customers. The adoption of SFAS 131 did not
affect results of operations or the financial position of the Company [note 15].

Reclassifications
     Certain  reclassifications  have  been  made to  amounts  in the  financial
statements of 1997 in order to conform to current presentation.

3. CASH AND SHORT-TERM INVESTMENTS

     Total cash and cash  equivalents were $40.3 million and $55.8 million as of
December 31, 1998 and 1997,  respectively,  which included  approximately  $23.0
million and $41.9 million, respectively, of money market funds, commercial paper
investments, and corporate and U.S. government agency notes held by the Company.

     Short-term investments of approximately $47.5 million, and $13.0 million as
of December 31, 1998 and 1997,  respectively,  are  composed of corporate  notes
(1998 - $14.5 million;  1997 - $11.0 million) and U.S.  government  agency notes
(1998 - $33.0  million;  1997 - $2.0 million ). Interest rates on these deposits
range from 5% to 6% and total  accrued  interest  of  $664,000  and  $287,000 at
December  31, 1998 and 1997  respectively,  is included in prepaid  expenses and
other assets.


<PAGE>


3. CASH AND SHORT-TERM INVESTMENTS (CONTINUED)

     All cash  equivalents  and  investments  held by the Company are carried at
amortized cost,  which  approximates  fair value, and mature within three months
and one year, respectively.


Supplemental Cash Flow Information

<TABLE>

                                                   Years Ended December 31
------------------------------------------------ -------- --------- ---------
                                                    1998      1997      1996
------------------------------------------------ -------- --------- ---------
<S>                                              <C>      <C>       <C>
Cash Transactions:
  Cash paid for interest                             228        48        15
                                                                         
  Cash paid for income taxes                       7,996     2,889     1,504
                                                                      
Non-Cash Transactions:
  Technology acquired by long-term liabilities     1,982       -         -

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

</TABLE>

4. PROPERTY AND EQUIPMENT

<TABLE>

                                                   As of December 31
---------------------------------------- ------------------------------

                                                  1998           1997
---------------------------------------- --------------- --------------
<S>                                      <C>             <C>    
Furniture and equipment                         $ 6,425         $5,168
Computer equipment and software                   5,261          3,920
Leasehold improvements                            5,897          4,279
---------------------------------------- --------------- --------------
Total cost                                       17,583         13,367
Less accumulated depreciation                     5,306          2,746
---------------------------------------- --------------- --------------
Net book value                                  $12,277        $10,621
---------------------------------------- --------------- --------------

</TABLE>


      Computer equipment and software includes $804,000 (1997 - $1.8 million) of
assets under  development to be depreciated  when put in use. Of this,  $324,000
(1997 - $470,000) is computer  software under capital lease.  As of December 31,
1998, total computer  software under capital lease in use and being  depreciated
was $162,000 (1997 - Nil) with accumulated amortization of $29,000 (1997 Nil).

5. ACQUISITION

     On April 3,  1998,  the  Company  acquired  the net  assets  of  Australian
telecommunications  software company BHA Pty Ltd. ("BHA") and its majority-owned
subsidiary  BHA Computer Pty Ltd.  ("BHAC") for  approximately  $15.8 million in
cash and the settlement of  approximately  $3.3 million in related bank debt, as
well as $906,000 in acquisition related costs and expenses including  applicable
duties and taxes. The Company funded the acquisition,  in part, by the borrowing
of  approximately  $15.1  million  from the  Company's  working  capital line of
credit. The entire amount borrowed was repaid during the year, in part, from the
proceeds resulting from the issuance of 283,698 of the Company's Ordinary Shares
to BHA for aggregate consideration of approximately $14.0 million.



<PAGE>


5. ACQUISITION (CONTINUED)

     This asset  acquisition  was  accounted  for using the  purchase  method of
accounting  and results have been included  since the date of  acquisition.  Pro
forma results have not been provided as the impact on revenue and net income are
not  considered  material  to the  current  and  preceding  periods.  The assets
purchased  consist  of  those  assets  used by BHA and  BHAC in  developing  and
marketing  customer  care  and  billing  software  for  the   telecommunications
industry,  including  property and equipment and completed  technology and other
intangibles.  The purchase  price was allocated  among  tangible and  intangible
assets based on estimated fair values at the date of acquisition.  The aggregate
cost of the  acquisition  on the  acquisition  date exceeded the estimated  fair
value of the acquired net assets by $8.9  million,  which is being  amortized as
goodwill on a straight-line  basis over the estimated useful life of such assets
of seven  years.  The balance  remaining  in goodwill as of December 31, 1998 is
included in Other Assets (see Note 6). This balance is subject to translation to
the reporting  currency of the Company as required by SFAS 52 "Foreign  Currency
Translation".  Any changes in the balance due to foreign  exchange  fluctuations
are recorded as part of accumulated other comprehensive income.

      Also, during 1998, the Company purchased  telecommunications  interconnect
billing software  technology from a Swedish company for a total of $4.1 million,
including  acquisition costs. This was paid for by a cash outlay of $2.0 million
with a  commitment  of at least $2.0 million in minimum  royalty  payments to be
paid in 1999 and 2000.  Minimum royalty payments  outstanding as of December 31,
1998 are included in Long-Term Liabilities (see note 7).

         The value  assigned to the intangible  assets  purchased as part of the
BHA acquisition and to the interconnect  billing software  technology  purchased
was determined  with the assistance of an  independent  appraiser  based on fair
market  value  using  a  risk  adjusted  discounted  cash  flow  approach.   The
significant assumptions that affected the valuations included potential revenues
and cost of  completion,  as well as the  timing  of the  product  releases.  In
addition,  the selection of an  appropriate  discount rate was a major factor in
the valuation  analysis.  The valuation  utilized a discount rate of 30% for the
BHA  acquisition  and  31%  for  the  acquisition  of the  interconnect  billing
technology, each reflecting the difficulties and uncertainties in completing the
development  effort,  risks related to the  viability  and potential  changes to
target  markets and the inherent  uncertainty  of  predicting  cash flows in the
telecommunications billing industry.

      Acquired  incomplete  technology  from the BHA  acquisition,  specifically
billing technology  (SavilleExpress) and customer care technology  (SavilleCare)
were  evaluated  using a stage of  completion  approach.  The  Company,  through
extensive interviews and analysis of data concerning the state of the technology
and required development work, estimated the  stage-of-completion at the date of
acquiring the products to be approximately  53% for  SavilleExpress  and 55% for
SavilleCare.   Each  of  the   purchased   technologies   required   significant
modifications  in  order  to  reach  technological  feasibility.  At the time of
acquisition,  additional development of SavilleExpress  included,  among others,
additional core functionality including tariffing, language support, data fields
to support different currencies, credit limit notification and automatic service
shut-off,  as well as revision of all existing  software  code to be  compatible
with different hardware platforms.  SavilleCare  required  substantial effort to
complete   the   technology   and  ensure  that  it  was  more  focused  on  the
telecommunications  industry than the original  product  design.  This included,
among others,  ensuring scalability existed as well as full functionality in the
areas  of  provisioning,   call  reporting  and  billing.   SavilleExpress   and
SavilleCare were completed in August 1998 and January 1999, respectively. Actual
revenue received and costs incurred to complete  SavilleCare were not materially
different than estimates made. Also, for SavilleExpress, costs of completion did
not differ  significantly from estimates.  However,  actual revenue received was
less than expected due to a change in market conditions.


<PAGE>



5. ACQUISITION (CONTINUED)

     Saville  IBP had  significant  functionality  deficiencies  at the  date of
acquisition that had to be corrected as part of further  development so that the
product could be commercialized.  Specifically,  these  modifications  included,
among others, the addition of a critical application program interface, improved
detailed reporting capability,  datawarehousing  capability without slowing down
overall   information    technology   systems   and   scalability   for   larger
telecommunications operations. Saville IBP was completed in October 1998. Actual
costs to complete and revenue  received were not  significantly  different  from
estimates.

      Based  on  this   evaluation,   the  Company   assigned   fair  values  to
SavilleExpress  of $2.1 million,  to  SavilleCare of $3.0 million and to Saville
IBP of $4.1 million. These in-process technologies had not reached technological
feasibility  at the time of  acquisition  and had no  alternative  future use in
other research and development projects or otherwise.  Accordingly, the acquired
technology  was  expensed as  in-process  research and  development  for a total
charge of $9.2 million to the Company's consolidated results in 1998.

6. OTHER ASSETS

<TABLE>

                                                 As of December 31
-------------------------------------- -------------------------------
                                                           
                                                1998       1997
-------------------------------------- --------------- ---------------
<S>                                    <C>             <C>  
Goodwill                                      $ 8,479        -
Completed technology                            5,984        -
-------------------------------------- --------------- ---------------
Total cost                                     14,463        -
Less accumulated amortization                   2,214        -
-------------------------------------- --------------- ---------------
Net book value                                 12,249        -
Deferred tax assets                             1,097        -
-------------------------------------- --------------- ---------------
Total other assets                            $13,346        -
-------------------------------------- --------------- ---------------

</TABLE>

7. LONG-TERM LIABILITIES

Line of Credit
     During 1997, the Company obtained a multi-currency operating line of credit
of $15.0 million from a financial institution. This line of credit was available
to the Company and its  subsidiaries  for a two-year  period  ending  August 31,
1999.  Subsequent to December 31, 1998, the company extended the availability of
this line of credit to August 31,  2000.  Interest  is charged at rates  varying
from 0.25% to 1% above the base rate.  This base rate depends on the currency of
the funds drawn on the facility and includes the Canadian U.S. Dollar Base rate,
the Canadian Bank Prime rate, the bank's London Interbank Offer Rate (LIBOR) and
the bank's Dublin Interbank Offer Rate (DIBOR).

     A standby fee of 0.25% per annum is payable on the daily unused  portion of
the facility.  This fee totaled $50,000 and $13,000 for the years ended December
31, 1998 and 1997, respectively.

     The credit arrangement contains financial covenants relating to minimum net
worth and leverage  ratios.  The line of credit is  unsecured.  However,  if the
Company  does  not  maintain  compliance  with  the  covenants,   the  financial
institution has the right to register  security over any  outstanding  balances.
The Company was in  compliance  with these  covenants  at December  31, 1998 and
1997. No advances were  outstanding on this facility as of December 31, 1998 and
1997.


<PAGE>


7. LONG-TERM LIABILITIES (CONTINUED)

Letters of Credit
                                                                              
     During  1998,  irrevocable  standby  letters  of  credit  were  issued to a
customer to serve as a performance  bond  associated  with the completion of the
Company's  contract.  As  of  December  31,  1998  letters  of  credit  totaling
approximately  $854,000 and $493,000 were  outstanding and expire on January 31,
1999 and July 30,  1999  respectively.  Before  the  customer  can draw on these
letters,  the Company must be provided with sixty days prior written notice.  No
such notice had been received by the Company as of December 31, 1998. Subsequent
to December 31, 1998 a letter of credit was also issued to one of the  Company's
lessors in the amount of approximately $162,000 which is due to expire September
30,  2000.  Funds  available  under the line of credit are reduced by letters of
credit outstanding.

Capital Lease
     The Company has  obligations  under a capital  lease for  $312,000  (1997 -
$470,000)  payable in nine  quarterly  payments  of  principal  and  interest of
$37,000.  The lease is  denominated  in Canadian  dollars and bears  interest at
5.4%. Principal payments of $134,000, $141,000, and $37,000 are due in the years
1999, 2000 and 2001, respectively.

 Minimum Royalty Payments
      As  part  of  the  purchase  of  telecommunications  interconnect  billing
software technology,  the Company incurred a commitment of at least $2.0 million
in  royalties  to be paid in 1999 and  2000.  The  balance  of  minimum  royalty
payments  as of  December  31,  1998 was  approximately  $2.0  million  of which
$982,000  is due in 1999 and is included  in the  current  portion of  long-term
liabilities.

8. COMMITMENTS AND CONTINGENCIES

The Company is committed to make operating lease payments on premises,  computer
hardware and software,  and equipment  under  agreements,  which expire over the
next ten years as follows:

<TABLE>

---------------------------------------------------------------------------
<S>                        <C>                                   <C> 
                           1999                                  $11,299
                           2000                                    7,897
                           2001                                    3,223
                           2002                                    2,054
                           2003                                    1,532
                           Thereafter                              2,899
---------------------------------------------------------------------------
                                           Total                 $28,904
---------------------------------------------------------------------------
</TABLE>

      Subsequent  to December 31, 1998,  the Company has committed to additional
lease payments totaling $15.7 million until 2010.

     Total rental expense was  approximately  $10.5 million,  $6.0 million,  and
$3.6  million,   for  the  years  ended  December  31,  1998,   1997  and  1996,
respectively.

9. SHAREHOLDERS' EQUITY

Authorized share capital
     Upon  incorporation,  the  Company's  authorized  share  capital  comprised
100,000  Ordinary  Shares.  In connection with a restructuring of the Company in
1995, authorized share capital was increased to 40,000,000 Ordinary Shares.

     During 1997 the  shareholders  authorized  an  amendment  to the  Company's
Memorandum  and Articles of  Association  to increase  the number of  authorized
Ordinary Shares from 40,000,000 to 75,000,000.

Issued share capital
     An  analysis  of the  number of shares  issued  and  outstanding,  adjusted
retroactively for each share dividend,  for the three-year period ended December
31, 1998 is as follows:

o    During the year ended December 31, 1996,  the Company  issued  810,330  
     Ordinary Shares to officers and employees for cash  consideration of  
     approximately  $2.1 million and conducted a second public offering  issuing
     200,000  Ordinary Shares for total gross proceeds to the Company of 
     $2.6 million.

o    On November 17, 1997 the Company  issued a two-for-one  share  dividend for
     each share  outstanding to all  shareholders of record on November 7, 1997.
     The  dividend was approved by a vote of  shareholders  at an  Extraordinary
     General Meeting held on October 23, 1997.

o    During the year ended  December  31,  1997,  the Company  issued  1,311,454
     Ordinary  Shares  to  officers  and  employees  for cash  consideration  of
     approximately  $9.1  million and 30,000  restricted  Ordinary  Shares to an
     officer at par value.

o    During the year ended  December  31,  1998,  the Company  issued  1,120,194
     Ordinary  Shares  to  officers  and  employees  for cash  consideration  of
     approximately  $11.5 million and issued 283,698  ordinary shares to BHA Pty
     Ltd. for aggregate consideration of approximately $14.0 million in order to
     fund, in part, an asset acquisition (see Note 5).

Additional paid-in capital
     During 1996, a note  receivable  of $100,000 was repaid in full.  This note
was  issued  in 1995 to an  officer  of the  Company  as  consideration  for the
issuance of shares. Upon repayment, this amount has been reflected as additional
paid-in capital.
                                                                            
     During 1997 and 1998,  the Company  recorded  the effect of tax  deductions
available  to its  subsidiary  Saville  Systems  Inc.  (Saville  U.S.) for stock
options  exercised  by  employees  in the United  States.  The  benefits of this
deduction  for tax of  $873,000  and  $805,000,  respectively,  are  recorded as
additional paid-in capital in Saville U.S.

     During 1997, the Company  issued 30,000  restricted  Ordinary  Shares to an
officer  of the  Company  at par  value.  These  shares  are  subject to vesting
provisions,  which  restrict  the  holder's  ability to sell such  shares over a
five-year  period.  In  connection  with this  issuance,  the  Company  recorded
approximately  $1.0  million  as  additional  paid-in  capital,   based  on  the
difference between the par value and fair value of the shares at the measurement
date. Of this amount, the Company recorded  compensation expense of $206,000 and
$86,000 in 1998 and 1997,  respectively.  The remaining unearned compensation of
$739,000 is recorded as an offset to additional  paid-in  capital as of December
31, 1998  ($945,000  as of December 31,  1997) and will be  recognized  over the
remaining vesting period of the shares.

Dividends
     Shareholders are entitled to receive dividends as may be recommended by the
Board of Directors of the Company and approved by the  shareholders,  which will
be  declared  and paid in  United  States  dollars.  Under  Irish  Company  law,
dividends  are payable only out of profits  available  for  distribution,  where
profits are  determined  in  accordance  with  accounting  principles  generally
accepted in the Republic of Ireland.  The amount  available for  distribution to
shareholders includes only the retained earnings of the Company, and not that of
its subsidiaries,  calculated in accordance with accounting principles generally
accepted  in the  Republic of Ireland  which  amounted  to  approximately  $46.5
million,  as of December 31, 1998 ($35.3  million as of December 31,  1997).  No
cash dividends were declared  during the years ended December 31, 1998, 1997 and
1996.


<PAGE>



9. SHAREHOLDERS' EQUITY (CONTINUED)

Minority interest
     The minority  interest  shareholder  entered into a share  restriction  and
contribution   agreement   which   prohibits  the  minority   shareholder   from
transferring  any securities of the Company,  unless a  proportionate  number of
subsidiary shares are contributed to the Company.  The minority shareholder must
contribute  all of its shares in the  Subsidiaries  no later than  September  1,
2005.


10.  STOCK BASED COMPENSATION

      The 1995 Share  Option  Plan  provides  for the grant of stock  options to
employees,  officers, directors,  consultants and advisors of the Company. These
options  generally expire ten years from the date of grant and vest over periods
of one to five years. The shareholders  authorized an amendment to the Company's
1995 Share Option Plan during 1997 to increase  the number of shares  authorized
to be granted under the plan from 5,960,000 to 10,000,000.

     The 1996 Employee Share  Purchase Plan,  approved by the Board of Directors
during 1996, provides for the grant of stock upon exercise of options to certain
officers and employees of the Company.  The total number of shares authorized to
be granted was 614,000.  The options are  exercisable six months after grant, at
the  lower of 85% of  market  value  at the  beginning  or end of the  six-month
period,  through  accumulations  of  payroll  deductions  of up to 10%  of  each
participant's  regular  base pay.  No  participant  may be  granted an option to
purchase  shares that are valued in excess of $12,500 as determined on the first
day of the applicable offering period.

       The following  table  summarizes  the activity in options to December 31,
1998:

<TABLE>

                                            Number of Ordinary Shares
---------------------------------- ----------------- --------------- ----------
                                    Available for  Outstanding  Weighted average
                                        grant                    exercise price
                                                                   per share
---------------------------------- -------------- ------------- -----------
<S>                                <C>            <C>           <C>  
Balance at December 31, 1995           3,592,348     3,604,278       $3.22
---------------------------------- -------------- ------------- -----------

Options granted                        (182,176)       182,176       13.50
Options exercised                           -        (810,330)        2.65
Options cancelled                         49,290      (49,290)        4.33
---------------------------------- -------------- ------------- -----------
Balance at December 31, 1996           3,459,462     2,926,834       $3.99
---------------------------------- -------------- ------------- -----------
Ordinary Shares authorized             4,040,000          -            -
                                        
Options granted                      (2,756,500)     2,756,500       20.74
Options exercised                           -      (1,263,371)        6.77                                        
Options cancelled                        228,948     (228,948)       15.17
---------------------------------- -------------- ------------- -----------
Balance at December 31, 1997           4,971,910     4,191,015      $13.56
---------------------------------- -------------- ------------- -----------

Options granted                      (2,629,005)     2,629,005       36.27
Options exercised                          -       (1,020,700)        9.10
Options cancelled                        240,571     (240,571)       36.30
---------------------------------- -------------- ------------- -----------
Balance at December 31, 1998           2,583,476     5,558,749      $24.14
---------------------------------- -------------- ------------- -----------
</TABLE>


       Compensation  expense of $73,000 was  recorded  in 1996 which  related to
options  granted in 1994 and 1995 at exercise prices below estimated fair market
value at the date of grant.


<PAGE>



10.  STOCK BASED COMPENSATION (CONTINUED)

         During 1997,  20,000  options  having an exercise  price of $17.22 were
granted below  estimated  fair market value at the date of grant.  These options
were vested upon grant and compensation  expense of $61,000 was recorded in that
year.


A summary of options outstanding as of December 31, 1998 is as follows:

<TABLE>

------------------ ----------------- ----------------- ----------------- ----------------- -----------------
Total outstanding      Range of          Weighted          Weighted       Exercisable as       Weighted
                   exercise prices       average           average       of December 31,       average
                                      exercise price      remaining            1998         exercise price
                                                         contractual                        of exercisable
                                                       life (in years)                         options
------------------ ----------------- ----------------- ----------------- ----------------- -----------------
<S>                <C>               <C>               <C>               <C>               <C>
          214,716       $ 1.20                  $1.20        1.1                  214,716            $ 1.20
          910,223     4.33-5.00                  4.47        6.5                  910,223              4.47
           78,090     7.50-13.69                10.33        8.4                   29,256              8.62
        1,858,312    14.06-21.50                18.15        7.9                  662,306             18.78
          283,166    21.75-32.56                30.47        8.8                   67,664             29.66
        2,079,442    33.50-50.25                38.24        8.6                   65,998             34.84
          134,800    50.75-55.00                53.05        9.2                     -                  -
                                                                                          
        5,558,749    $ 1.20-55.00              $24.14        7.7                1,950,163            $10.93
------------------ ----------------- ----------------- ----------------- ----------------- -----------------
</TABLE>


       Pro forma  information  regarding  net income and  earnings  per share is
required by SFAS 123, and has been  determined  as if the Company had  accounted
for its employee  share options  under the fair value method of that  Statement.
The fair value for employee  options  granted  during this year was estimated at
the date of grant using a Black-Scholes  option pricing model with the following
assumptions:

<TABLE>

                                                Years Ended December 31
                                           1998         1997            1996
------------------------------------ ------------- -------------- -------------
<S>                                 <C>            <C>            <C> 
Risk free interest rate                   5.14%         6.10%          5.98%
Volatility                                57.2%         57.5%          68.9%
Dividend yield                            0.00%         0.00%          0.00%
Expected life in years                     4.8           5.2            4.0
------------------------------------ ------------- -------------- -------------
</TABLE>

         For purposes of pro forma disclosures,  the estimated fair value of the
options is amortized to expense over the options' vesting period, which includes
actual accelerated  vesting  entitlements  during the year. The weighted average
fair value of options  granted  during  1998 was $18.78  (1997 - $11.64,  1996 -
$6.66).

     The  Company's  pro forma  information  follows  (in  thousands  except for
earnings per share information):

<TABLE>

                                                   Years ended December 31
                                               1998       1997          1996
----------------------------------------- ------------ ----------- ------------
<S>                                       <C>          <C>         <C> 
Pro forma net income                          $2,710     $9,623       $10,028
----------------------------------------- ------------ ----------- ------------

Pro forma basic earnings per share            $ 0.07     $ 0.26        $ 0.28
----------------------------------------- ------------ ----------- ------------

Pro forma diluted earnings per share          $ 0.07     $ 0.25        $ 0.27
----------------------------------------- ------------ ----------- ------------
</TABLE>


     The effect on net income and  earnings per share may not be  indicative  of
the effects in future years as options  vest over several  years and the Company
continues to grant stock options to new employees.


11.  DEFINED CONTRIBUTION PLANS

        During 1998, the Company  initiated defined  contribution  plans for its
employees at two of its subsidiaries.  These plans allow employees to contribute
3% of  their  salary,  while  Company  contributions  are  2%  of  participants'
salaries.  Total  contributions  by the Company for the year were  approximately
$113,000, which were included in operating expenses.


12. OTHER INCOME

<TABLE>
                                                  Years ended December 31
------------------------------------------ ------------------------------------
                                                1998       1997      1996
------------------------------------------ ------------ ---------- ------------
<S>                                        <C>          <C>        <C> 
Interest income                                $3,975     $2,541    $1,563
Interest on long-term liabilities                 (44)       -         (5)
Other interest expense                           (184)      (61)      (10)
Foreign currency exchange losses, net            (412)     (206)     (107)
Other                                              29      (120)        50
------------------------------------------ ------------ ---------- ------------
                                               $3,364     $2,154    $1,491
------------------------------------------ ------------ ---------- ------------
</TABLE>


13.  INCOME TAXES

       The provision for income taxes consists of the following:

<TABLE>

                                           Years ended December 31
----------------------------------- --------------------------------------
                                        1998         1997         1996
----------------------------------- ------------- ------------ -----------
<S>                                <C>            <C>          <C>  
Current:
    Ireland                               $4,714       $3,579      $1,628
    Foreign                                5,800        4,410       1,424
Deferred:
      Ireland                              (773)           -           -
----------------------------------- ------------- ------------ -----------
                                          $9,741       $7,989      $3,052
----------------------------------- ------------- ------------ -----------

</TABLE>

           Pretax income from foreign operations amounted to approximately $12.1
million,  $8.7 million, and $3.1 million, for the years ended December 31, 1998,
1997 and 1996,  respectively.  Deferred  taxes result  primarily  from completed
technology which is not currently  deductible for tax purposes.  These costs are
capitalized for tax purposes and amortized in the future.


<PAGE>


13.  INCOME TAXES (CONTINUED)

       The effective income tax rate differed from the statutory  federal income
tax rate due to:

<TABLE>

                                                    Years ended December 31
--------------------------------------------- ----------------------------------
                                               1998        1997        1996
--------------------------------------------- ----------- ----------- ----------
<S>                                          <C>          <C>         <C> 
Statutory Irish federal income tax rate          32.0%        36.5%       38.0%
Computed tax provision                        $11,774      $11,739     $ 5,609
Tax relief on Irish manufacturing operations   (4,403)      (4,830)    (2,833)
Foreign tax rate differences                    1,514          983         240
Change in valuation allowance in                  -            -           120
  respect of subsidiary losses
Purchased in-process research and development     742          -           -   
Other                                             114           97        (84)
--------------------------------------------- ----------- ----------- ----------
                                               $9,741     $ 7,989     $ 3,052
--------------------------------------------- ----------- ----------- ----------

Per share effect of the tax relief on Irish               
manufacturing operations on a diluted basis    $ 0.11      $ 0.12      $ 0.07
--------------------------------------------- ----------- ----------- ----------
</TABLE>


The Company has  significant  operations and generates a substantial  portion of
its  taxable  income in the  Republic  of Ireland,  and under an  incentive  tax
program due to terminate in 2010,  is taxed on its  "manufacturing  income" at a
10% rate. The Irish standard rate was reduced from 38% to 36% effective April 1,
1997 and was further  reduced to 32% effective  January 1, 1998.  This rate will
continue to decrease over the period January 1, 1999 to January 1, 2003 at which
time the rate will be 12.5%.

      Undistributed  earnings of the Company's foreign subsidiaries  amounted to
approximately  $15.1  million at December 31, 1998 ($6.7 million at December 31,
1997).  Those  earnings  are  considered  to  be  indefinitely  reinvested  and,
accordingly,  no provision for withholding taxes has been provided thereon. Upon
distribution  of those  earnings  in the form of  dividends  or  otherwise,  the
Company  would be subject to  withholding  taxes payable of  approximately  $1.6
million ($802,000 at December 31, 1997) to various foreign governments.

14.      EARNINGS PER SHARE

<TABLE>

                                                Years Ended December 31
-------------------------------------------- --------- -------- ---------
                                                1998      1997    1996
-------------------------------------------- --------- -------- ---------
<S>                                          <C>       <C>       <C>
Numerator:
Net income                                    $27,052  $23,937   $11,569
Denominator:
Denominator for basic earnings per share -
  Weighted average shares outstanding          38,471   36,745    35,458
-------------------------------------------- --------- -------- ---------
Effect of dilutive securities:
Stock options                                   2,074    2,578     2,439
-------------------------------------------- --------- -------- ---------
Denominator for diluted earnings per share     40,545   39,323    37,897
Basic earnings per share                        $0.70    $0.65     $0.32
Diluted earnings per share                      $0.67    $0.61     $0.31
-------------------------------------------- --------- -------- ---------

</TABLE>


<PAGE>


14.  EARNINGS PER SHARE (CONTINUED)

     Options to purchase  4,059,261,  205,500 and 20,000 shares were outstanding
as of December 31, 1998, 1997 and 1996,  respectively,  but were not included in
the computation of diluted  earnings per share because the exercise price of the
options  was  greater  than the average  market  price of the common  shares and
therefore would be anti-dilutive.

15.  SEGMENT INFORMATION

     The Company  operates in a single  business  segment  which offers  similar
products and services.  The Company's products are similar in nature,  providing
customer  care and  billing  solutions  software  for service  providers  in the
telecommunications  and energy industries.  The Company distributes its products
throughout the world through a direct sales force.

      The following is a summary of operations by geographic area.  Revenue from
external  customers is based on selling location and long-lived assets are based
on physical location.

<TABLE>

                                                    United
                                Ireland    Canada   States   Other  Consolidated

------------------------------ ---------- -------- --------- ---------- --------
<S>                           <C>         <C>      <C>       <C>        <C>
Year ended December 31, 1998

Revenue from external
    Customers                    $36,008   $9,956  $109,945   $11,796   $167,705
Long lived assets                  1,615    8,747     1,081       834     12,277
------------------------------ ---------- -------- --------- ---------- --------
Year ended December 31, 1997

Revenue from external
    Customers                    $38,425  $ 6,344   $62,276      -      $107,045
Long lived assets                  2,410    7,097     1,114      -        10,621
------------------------------ ---------- -------- --------- ---------- --------
Year ended December 31, 1996

Revenue from external
    Customers                    $22,313  $ 7,009   $24,598      -       $53,920
Long lived assets                    466    3,505       304      -         4,275
------------------------------ ---------- -------- --------- ---------- --------
</TABLE>


16.  SALES TO MAJOR CUSTOMERS AND CONCENTRATION OF
         CREDIT RISK

      Financial   instruments,   which   potentially   subject  the  Company  to
concentrations of credit risk, consist primarily of trade accounts  receivables,
cash and cash  equivalents and short-term  investments.  Concentration  of trade
accounts  receivables  is decreasing as a result of the  diversification  of the
Company's  revenue  and  product  base.  The  Company  performs  ongoing  credit
evaluations of its customers and ensures any uncollectible customer accounts are
appropriately provided for. The Company normally does not require collateral.

      The Company invests its excess cash in U.S. treasury securities, corporate
debt  securities,  money market funds of major financial  institutions  and high
grade commercial paper that are subject to minimal credit and market risk.


<PAGE>


16.  SALES TO MAJOR CUSTOMERS AND CONCENTRATION OF
         CREDIT RISK (CONTINUED)

     During the year ended  December  31,  1998,  there were no customers of the
Company that individually represented greater than 10% of the total revenue.

      During the year ended  December  31,  1997,  two  customers of the Company
individually  represented  23% and 13% of the total revenue,  respectively.  The
aggregate  accounts  receivable  balance  as of  December  31,  1997  for  these
customers was approximately $5.4 million.

      During the year ended  December 31,  1996,  three  customers  individually
represented 35%, 12% and 11% of the total revenue,  respectively.  The aggregate
accounts  receivable  balance as of December  31, 1996 for these  customers  was
approximately $6.1 million.

17. GOVERNMENT ASSISTANCE

      The Company is eligible for government assistance in certain jurisdictions
for  certain  expenditures  incurred.  The Company  accrues  and  offsets  these
eligible grants against the related costs.  The amounts  included in income were
$952,000,  $1,045,000 and $390,000 for the years ended  December 31, 1998,  1997
and 1996, respectively.

      The  conditions  of these  grants  require  that the  Company  maintain in
shareholders'  equity an amount equal to the amount of the grants received.  The
cumulative   amount  subject  to  this  restriction  at  December  31,  1998  is
approximately  $1.7 million  ($891,000  as of December 31, 1997,  $243,000 as of
December 31, 1996).









<PAGE>


                               SAVILLE SYSTEMS PLC
                                FORM 10-K REPORT
                      FOR THE YEAR ENDED DECEMBER 31, 1998

                                INDEX TO EXHIBITS

Exhibit No.   Description

   *2.1    Stock Restriction and Contribution Agreement between Invoice Systems 
           (Canada),Inc. and the Registrant, dated as of September 27, 1995.

 ***2.2    Amended and Restated Contribution Agreement between the Registrant, 
           2916746 Canada, Inc. and Columbia Saville Ireland Investors, L.P., 
           dated as of November 22, 1995.

   ^3.1    Memorandum of Association of the Registrant

   ^3.2    Articles of Association of the Registrant

   *4.1    Specimen Certificate for Ordinary Shares, $0.0025 par value, of the 
           Registrant.

   *4.2    Deposit Agreement among the Registrant, The Bank of
           New York, as Depositary,  and the holders from time
           to  time  of  American   Depositary  Shares  issued
           thereunder  (including  as an  exhibit  the form of
           American Depositary Receipt).

  *10.1    1995 Share Option Plan

 ++10.2    Amendment to the 1995 Share Option Plan

 **10.3    1996 Employee Share Purchase Plan

  ^10.4    Employment Agreement between the Registrant and John J. Boyle, III, 
           dated as of August 1, 1997.

  ^10.5    Stock Restriction Agreement between the Registrant and John J. Boyle
           III,dated as of December 1, 1997.

  ^10.6    Letter Agreement for credit facilities between The Bank of Nova 
           Scotia and Saville Systems PLC, Saville Systems Canada, Ltd. and 
           Saville Systems, Inc. , dated as of September 4, 1997.

  *10.7    Lease Agreement between Barbican Properties Inc. and Saville Systems 
           Canada, Ltd. made as of May 1, 1995.

  *10.8    Letter Agreement between Barbican Properties Inc. and Saville Systems
           Canada, Ltd. dated July 19, 1995.

  *10.9    Indenture between Orfus Investments and Saville Systems Canada, Ltd. 
           dated November 25, 1995.





<PAGE>



  *10.10     Lease between Clybaun Construction Limited, Saville Systems Ireland
             Limited, Saville Systems Canada, Ltd. and Anglo Irish Bank 
             Corporation PLC, dated April 27, 1994.

  *10.11     Deed between Saville Systems Ireland Limited and Clybaun 
             Construction Limited, dated April 27, 1994.

  *10.12     Agreement between Saville Systems Ireland Limited, Saville Systems
             Canada, Ltd. and Industrial Development Agency (Ireland), dated 
             June 9, 1995.

 *10.13+     Intellectual Property Purchase Agreement between the Registrant and
             Saville Systems Canada, Ltd. made as of July 1, 1993.

  *10.14     Lease Agreement between Saville Systems Canada, Ltd. and Orfus 
             Investments, dated April 25, 1996.

  *10.15     Indemnity Agreement between the Company and Orfus Investments, 
             dated April 25, 1996.

+++10.16     Lease Agreement between Saville Systems PLC and Clybaun 
             Construction Limited dated May 26, 1997.

  ^10.17     Lease Agreement between Mass Mutual and Saville Systems U.S., Inc. 
             dated as of May 15, 1997.

  ^10.18     Lease Agreement between Penreal Property Fund Ltd. and Saville 
             Systems Canada, Ltd., dated as of June 13, 1997.

  ^10.19     Lease Agreement between 715864 Alberta Ltd. and Saville Systems 
             Canada, Ltd., dated as of July 17, 1997.

   10.20     Lease between T A Fisher & Sons Limited, Saville Systems (UK) 
             Limited, Saville Systems PLC and Wellington Park Management 
             Limited, dated as of September 8, 1998.

   10.21     Agreement for Lease between T A Fisher & Sons Limited and Saville 
             Systems (UK) Limited dated as of September 8, 1998.

  ^^16.1     Letter Re: Change in Certifying Accountant.

    21.1     List of Subsidiaries

    23.1     Consent of Independent Accountants.

    23.2     Consent of Ernst & Young

    27.1     Financial Data Schedule for the year ended December 31, 1998.

  ^^99.1     Resignation Letter of Ernst & Young

    99.2     Report of Independent Accountants for years ended December 31, 1997
             and 1996.



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* Incorporated  herein by reference to the Company's  Registration  Statement on
Form S-1, as amended (File No. 33-97576).

** Incorporated  herein by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995.

***  Incorporated by reference to the Company's  Registration  Statement on Form
S-1, as amended (File No. 333-01499)

+ Confidential  treatment granted as to certain portions,  which are omitted and
filed separately with the Commission.

++ Incorporated by reference to the Company's  Quarterly Report on Form 10-Q for
the quarterly period ended March 31, 1997.

+++ Incorporated by reference to the Company's Quarterly Report on Form 10-Q for
the quarterly period ended September 30, 1997.

^ Incorporated by reference to the Company's  Annual Report on Form 10-K for the
year ended December 31, 1997.

^^ Incorporated  by reference to the Company's  Current Report on Form 8-K dated
October 15, 1998.