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

                                    FORM 20-F

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

                   For the fiscal year ended December 31, 2006

                        Commission file number: 000 30827

                         ClickSoftware Technologies Ltd.
             (Exact name of Registrant as specified in its charter)

                                 State of Israel
                 (Jurisdiction of incorporation or organization)

                              11 Ben Gurion Street
                           Givat Shmuel, 54017 Israel
                    (Address of principal executive offices)

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

Title of each class                            Name of each exchange
                                               on which registered
-------------------                            ---------------------
Ordinary Shares, par value of NIS 0.02         Nasdaq Stock Market

Securities registered or to be registered pursuant to Section 12(g) of the Act:
None


Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act: None.

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

          27,994,626 Ordinary Shares, par value NIS 0.02 per share

Indicate by check mark whether the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act.

         |  |  Yes       |X|  No


If this report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.

         |  |  Yes       |X|  No

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for 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.

         |X|   Yes       |  | No


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20-F ClickSoftware Technologies Ltd.                                    Page 1
<PAGE>

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the
Act).

  | | Large Accelerated Filer  | | Accelerated Filer  |X| Non-Accelerated Filer


Indicate by check mark which financial statement item the registrant has elected
to follow.

  |_| Item 17    |X| Item 18


If this is an annual report, indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act).

  |_| Yes       |X|  No


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20-F ClickSoftware Technologies Ltd.                                    Page 2
<PAGE>



                                TABLE OF CONTENTS
                                -----------------


Item Number       Title                                                     Page
-----------       -----                                                     ----

PART ONE

Item 1.          Identity of Directors, Senior Management and Advisers.....    4
Item 2.          Offer Statistics and Expected Timetable...................    4
Item 3.          Key Information...........................................    4
Item 4.          Information on the Company................................   16
Item 4A.         Unresolved Staff Comments ................................   22
Item 5.          Operating and Financial Review and Prospects .............   22
Item 6.          Directors, Senior Management and Employees ...............   33
Item 7.          Major Shareholders and Related Party Transactions ........   38
Item 8.          Financial Information.....................................   40
Item 9.          The Offer and Listing.....................................   40
Item 10.         Additional Information....................................   41
Item 11.         Quantitative and Qualitative Disclosures
                 About Market Risk.........................................   52
Item 12.         Description of Securities Other than Equity Securities ...   52


PART TWO

Item 13.          Defaults, Dividend Arrearages and Delinquencies .........   53
Item 14.          Material Modifications to the Rights of Security Holders
                  and Use of Proceeds .....................................   53
Item 15.          Controls and Procedures..................................   53
Item 16A.         Audit Committee Financial Expert ........................   53
Item 16B.         Code of Ethics...........................................   53
Item 16C.         Principal Accountant Fees and Services...................   53
Item 16D.         Exemptions from the Listing Standards for
                  Audit Committees ........................................   54
Item 16E.         Purchases of Equity Securities by the Issuer
                  and Affiliated Purchasers ...............................   54


PART THREE

Item 17.          Financial Statements.....................................   55
Item 18.          Financial Statements.....................................   55
Item 19.          Exhibits.................................................   73

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20-F ClickSoftware Technologies Ltd.                                    Page 3
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                                     PART I
                                     ------



ITEM 1.           IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.


ITEM 2.           OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.


ITEM 3.           KEY INFORMATION

3A.      Selected financial data

Our historical consolidated financial statements are prepared in accordance with
generally accepted accounting principles in the United States ("GAAP") and are
presented in U.S. dollars. The selected historical consolidated financial
information as of December 31, 2005 and 2006 and for each of the three years
ended December 31, 2004, 2005 and 2006 have been derived from, and should be
read in conjunction with, the consolidated financial statements of ClickSoftware
Technologies Ltd. and notes thereto appearing elsewhere in this annual report.
The selected financial data as of December 31, 2002, 2003 and 2004 and for each
of the years ended December 31, 2002 and 2003 have been derived from the audited
financial statements of ClickSoftware Technologies Ltd. not included in this
annual report.

The information presented below is qualified by the more detailed historical
consolidated financial statements set forth in this annual report, and should be
read in conjunction with those consolidated financial statements, the notes
thereto and the discussion under Item 5 - Operating and Financial Review and
Prospects - included elsewhere in this annual report.



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20-F ClickSoftware Technologies Ltd.                                    Page 4
<PAGE>

<PAGE>



<TABLE>
<CAPTION>


       Consolidated Statement of Operations Data - Year Ended December 31
              (in thousands of U.S. dollars, except per share data)

                                         2006         2005         2004         2003          2002
                                         ----         ----         ----         ----          ----
<S>                                      <C>           <C>         <C>         <C>            <C>

Revenues                                 $ 32,431     $ 24,067     $ 22,705     $ 22,410      $ 15,753
Cost of revenues                           12,561        9,792        7,504        7,593         6,773
                                     ------------- ------------ ------------ ------------ -------------
Gross profit                               19,870       14,275       15,201       14,817         8,980
                                     ------------- ------------ ------------ ------------ -------------
Research and Development expenses,          4,113        3,128        2,710        1,926         2,850
net
Selling and Marketing expenses             10,337       10,124        8,939        7,840        10,485
General and Administrative expenses         3,671        3,138        2,818        3,569         3,330
Restructuring and assets impairment             -            -            -            -         2,665
                                     ------------- ------------ ------------ ------------ -------------
Total operating expenses                   18,121       16,390       14,467       13,335        19,330
                                     ------------- ------------ ------------ ------------ -------------
Operating income (loss)                     1,749      (2,115)          734        1,482       (10,350)
Interest and other income, net                484          122          179          259           252
                                     ------------- ------------ ------------ ------------ -------------
Net income (loss) before taxes              2,233      (1,993)          913        1,741       (10,098)
Taxes on income                                95            -            -            -             -
                                     ------------- ------------ ------------ ------------ -------------
Net income (loss)                         $ 2,138     $(1,993)         $ 913       $1,741     $(10,098)
                                     ------------- ------------ ------------ ------------ -------------
Basic net income (loss) per share          $ 0.08     $ (0.07)       $ 0.03       $ 0.07      $  (0.40)
Diluted net income (loss) per share        $ 0.08     $ (0.07)       $ 0.03       $ 0.06      $  (0.40)
Shares used in computing basic
net income (loss) per share            27,767,748   27,514,262   27,202,804   25,847,758    25,553,891
                                     ------------- ------------ ------------ ------------ -------------
Shares used in computing diluted
net income (loss) per share            28,442,887   27,514,262   28,336,450   26,874,351    25,553,891
                                     ------------- ------------ ------------ ------------ -------------
</TABLE>

<TABLE>
<CAPTION>


                          Consolidated Balance Sheet Data - Year Ended December 31
             (in thousands of U.S. dollars, except for shares data)

                                             2006         2005         2004         2003         2002
                                             ----         ----         ----         ----         ----
<S>                                          <C>         <C>           <C>          <C>          <C>

Working capital                               $14,811      $ 8,824     $ 10,328      $ 8,821      $ 5,849
Total assets                                   28,972       21,004       20,249       17,455       13,957
Long-term liabilities                           4,521        1,786        1,677        1,490        1,476
Shareholders' equity                           12,541        9,263       10,872        9,613        6,684
Number of shares outstanding               27,994,626   27,634,707   27,403,159   27,080,955   26,373,249

</TABLE>


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20-F ClickSoftware Technologies Ltd.                                    Page 5
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3B.      Capitalization and indebtedness

Not applicable.


3C.      Reasons for the offer and use of proceeds

Not applicable.


3D.      Risk factors

In conducting our business, we face many risks that may interfere with our
business objectives. Some of these risks could materially and adversely affect
our business, financial condition and results of operations. We are subject to
various risks resulting from changing economic, political, industry, business
and financial conditions. The risks and uncertainties described below are not
the only ones we face.

You should carefully consider the following factors and other information in
this annual report before you decide to invest in our ordinary shares. If any of
the negative events referred to below occur, our business, financial condition
and results of operations could suffer. In any such case, the trading price of
our ordinary shares could decline, and you may lose all or part of your
investment.

We may not be able to maintain profitability.

We expect to continue to incur significant sales and marketing and research and
development expenses. Some of our expenses, such as administrative and
management payroll and rent and utilities, are fixed in the short term and
cannot be quickly reduced if we experience revenue declines. As a result, we
must generate and maintain growing revenues to maintain profitability, which we
may not be able to do.

Our quarterly operating results are subject to fluctuations and if we fail to
meet the expectations of securities analysts or investors, our share price may
decrease.

Our quarterly operating results are difficult to predict and are not a good
measure for comparison. Our operating history shows that a significant
percentage of our quarterly revenues is derived from orders placed towards the
end of a given quarter. Frequently, we are reliant upon a sale of significant
size to a single customer. A delay in the completion of any such sale past the
end of a particular quarter could negatively impact results for that quarter,
and such negative impact could be significant. In addition, a portion of our
revenues is recognized based on contract accounting, and it is difficult to
predict the rate of completion in a given quarter. Because our expenses, such as
administrative and management payroll and rent and utilities, are fixed in the
short term and cannot be quickly reduced to respond to decreases in revenues, if
revenue levels fall below expectations, net income may be disproportionately
affected.

Even without the delay of a significant sale, our future quarterly operating
results may fluctuate significantly and may not meet the expectations of
securities analysts or investors. If this occurs, the price of our ordinary
shares may decrease. The factors that may cause fluctuations in our quarterly
operating results include, but are not limited to, the following:

          o  the volume and timing of customer orders, including a trend toward
             larger customers generating larger transactions; o internal budget
             constraints and approval processes of our current and prospective
             clients;

          o  the length and unpredictability of our sales cycle;

          o  the recognition of a portion of our revenues on a contract
             accounting basis;

          o  the indirect nature of our sales efforts through our channel and
             strategic partners;

          o  the mix of revenue generated by product licenses and professional
             services;

          o  the geographic mix of revenue;

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20-F ClickSoftware Technologies Ltd.                                    Page 6
<PAGE>


          o  announcements or introductions of new products or product
             enhancements by us or our competitors;

          o  price and product competition;

          o  consolidation among our customers;

          o  changes in prices of and the adoption of different pricing
             strategies for our products and those of our competitors;

          o  timing and amount of sales and marketing expenses;

          o  changes in the composition and success of our business and partner
             relationships;

          o  technical difficulties or "bugs" affecting the operation of our
             software;

          o  foreign currency exchange rate fluctuations; and

          o  general economic conditions.

Because of the numerous factors that may cause fluctuations in our quarterly
operating results, we believe that period-to-period comparisons of our results
of operations are not necessarily meaningful and that such comparisons should
not be relied upon as an indication of future performance.

Our stock price could be volatile and could decline substantially.

The stock market has experienced significant price and volume fluctuations, and
the market prices of technology companies have been and continue to be
particularly highly volatile. The price at which our ordinary shares trade is
likely to be volatile and may fluctuate substantially due to factors such as:

          o  announcements of technological innovations;

          o  announcements relating to strategic relationships;

          o  conditions affecting the software industry;

          o  trends related to the fluctuations of stock prices of companies
             such as ours;

          o  our historical and anticipated quarterly and annual operating
             results;

          o  our inability to meet guidance or forward looking
             information, if provided;

          o  sales of our ordinary shares by existing shareholders;

          o  variations between our actual results and the expectations of
             investors or published reports or analyses regarding our business;

          o  announcements by us or others affecting our business, systems or
             expansion plans; and

          o  general conditions and trends in technology industries.


Our sales cycle is variable, often long, dependent on factors outside our
control and involves investment of significant resources on our part, but may
never result in actual sales and we may therefore suffer additional losses.


Our sales cycle from our initial contact with a potential customer to the
signing of a license and related agreements has historically been lengthy and
variable, typically three to nine months. We generally must educate our
potential customers about the use and benefit of our products and services,
which can require the investment of significant time and resources, causing us
to incur most of our product development and selling and marketing expenses in
advance of a potential sale. In addition, a number of companies decide which
products to buy through a request for proposal process. In those situations, we
also run the risk of investing significant resources in a proposal that results
in a competitor obtaining the desired contract from the customer or in a
decision by a customer not to proceed. Sales of licenses are subject to a number
of risks outside our control, including budgeting, approval and competitive
evaluation processes that typically accompany significant capital expenditures.
Historically, a significant portion of our sales in any given quarter occur
towards the end of the quarter; if sales forecasted from a specific client for a
particular quarter are not realized


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20-F ClickSoftware Technologies Ltd.                                    Page 7
<PAGE>


in that quarter, we are unlikely to be able to generate revenues from
alternate sources in time to compensate for the shortfall. The uncertain
outcome of our sales efforts and the length of our sales cycles could result
in substantial fluctuations in license revenues. If our sales cycle lengthens,
our quarterly operating results may become less predictable and may fluctuate
more widely than in the past. Due to the relatively large size of some orders,
a lost or delayed sale could have a material adverse effect on our quarterly
revenue and operating results. Moreover, to the extent that significant sales
occur earlier than expected, revenue and operating results for subsequent
quarters could be adversely affected.


Our implementation cycle depends on factors outside our control.

Depending on the nature and specific needs of a client, the implementation of
our products typically takes six to twelve months. During the implementation
cycle, there are a number of factors beyond our control that may affect the
implementation timeline, including clients' budgetary constraints, clients'
internal acceptance reviews, the success and continued internal support of
clients' own development efforts, the nature, size and specific needs of a
client and the possibility that a client cancels an order. Delays in the
implementation timeline may adversely affect our services revenues. In addition,
when project accounting is applied, license revenues may be adversely affected
by delays in the progress of the implementation.

The general economic outlook may adversely affect the demand for our products.

Predictions regarding general economic conditions remain uncertain. Unless the
economic outlook continues to improve, the rate of growth of information
technology spending may stagnate. Consequently, the demand for our products may
not grow or may decrease, which would adversely affect our business, financial
condition and results of operations. In addition, we may not accurately gauge
the effect of general economic conditions on our business. As a result, we may
not react to such changing conditions in a timely manner and this may result in
an adverse impact on our business, financial condition and results of
operations. Any such adverse impacts caused by changing economic conditions may
cause the price of our ordinary shares to decline.

Failure of the market to accept our products would adversely affect our
profitability.

Historically, all of our operating revenue has come from sales of, and services
related to, our Service Optimization Suite, which enables efficient provisioning
of services in enterprise environments. Our Service Optimization Suite includes
ClickSchedule, ClickFix, ClickAnalyze, ClickPlan, ClickMobile, ClickRoster,
ClickForecast and ClickLocate. We continually improve and enhance our Service
Optimization Suite to meet market requirements. Our growth depends on the
development of market acceptance of these products. Sales of our products may
not continue to develop as we anticipate, or at all. Lack of long-term demand
for our products would have a material adverse effect on our business, financial
condition and results of operations.

We operate in a highly competitive market that is undergoing consolidation. Any
reduction in demand for, or prices of, our products could negatively impact our
revenues, reduce our gross margins and cause our share price to decline.

The market for our products is competitive and rapidly changing. Competition may
increase in the future as current competitors expand their product offerings and
new companies attempt to enter the market. In addition, smaller competitors have
been acquired by large organizations with broader product offerings. Because the
market for service and delivery optimization software is evolving, it is
difficult to determine what portion of the market each competitor currently
controls. However, competition could result in price reductions, fewer customer
orders, reduced gross margin and loss of market share, any of which could cause
our business, financial condition and results of operations to suffer. We may
not be able to compete successfully, and competitive pressures may harm our
business. Some of our current and potential competitors have significant
competitive advantages over us, which may include greater name recognition,
longer operating histories, larger customer bases and significantly greater
financial, technical, marketing, public relations, sales, distribution and other
resources than us. In addition, some of our potential competitors are among the
largest and most well capitalized software companies in the world.


If we fail to expand our relationships with third parties that provide
implementation and professional services to our clients, we may be unable to
increase our revenues.

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20-F ClickSoftware Technologies Ltd.                                    Page 8
<PAGE>


In order for us to focus more effectively on our core business of developing and
licensing software solutions, we must continue to establish relationships with
third parties that provide implementation and professional services to our
clients. Third-party implementation and consulting firms can also be influential
in the choice of resource optimization applications by new clients. If we are
unable to establish and maintain effective, long-term relationships with
implementation and professional services providers, or if these providers do not
meet the needs or expectations of our clients, we may be unable to increase our
revenues, which would harm our business, financial condition and results of
operations. Even if we establish relationships with these third parties, we may
be unable to attain sufficient focus and resources from the third-party
providers to meet all of our clients' needs as a result of the limited resources
and capacities of many third-party implementation providers. If sufficient
resources are unavailable, we will be required to provide these services
internally, which could limit our ability to meet other demands. Even if we are
successful in developing relationships with third-party implementation and
professional services providers, we cannot control the level and quality of
service provided by third-party implementation and professional services
partners.

If we are unable to maintain our relationships with our distributors,
value-added resellers or if our distributors' businesses are adversely affected
by developments unrelated to us, our sales could be harmed.

Our marketing strategy includes selling through distributors and value-added
resellers, as well as direct selling by our own sales force. We may not be
successful extending the terms of our various agreements or establishing similar
relationships with other distributors or value-added resellers if our current
agreements are not extended. Changes in our relationships with our distributors,
value-added resellers and agents, or other changes to their respective
businesses could have a material adverse effect on our business, financial
condition or results of operations.

Our need for additional financing is uncertain, as is our ability to obtain
further financing if required.

Our ability to maintain profitability using our currently available balance of
cash, cash equivalents and available credit will depend on our ability to
maintain or increase our revenues while continuing to control our expenses. If
we are not successful in doing so, particularly given the uncertainties
regarding future information technology spending by our current and prospective
customers, we will need to raise additional capital to finance our operations
and may not be able to sell additional equity or debt securities. If we are able
to issue equity or debt securities, these securities could have rights,
preferences and privileges senior to those of holders of our ordinary shares,
and the terms of these securities could impose restrictions on our operations.
The sale of additional equity or convertible debt securities would result in
additional dilution to the stock holdings of our shareholders. Additionally,
prior to the issuance of additional equity or convertible debt securities to
entities outside of Israel, we will need to obtain approval from the Office of
the Chief Scientist of the Ministry of Industry and Trade (the "Chief
Scientist") and we may not be able to obtain this consent in the future.

Alternatively, we may seek other forms of financing, such as credit from banks
or institutional lenders. Additional financing may not be available in amounts
or on terms acceptable to us, if at all. If we are unable to obtain additional
financing, we may be required to reduce the scope of our planned product
development and marketing efforts, which could harm our business, financial
condition or operating results.

Failure to fully develop or maintain key business relationships could limit our
ability to sell additional licenses, thereby decreasing our revenues and
increasing our sales and marketing costs.

We believe that our success in penetrating our target markets depends in part on
our ability to develop and maintain business relationships with software
vendors, resellers, systems integrators, distribution partners and customers. We
are dependent on certain suppliers for the development, supply and support of
third-party software components that are integrated into our solutions. If we
fail to continue developing these relationships, our growth could be limited. We
do not have long-term contracts with some of these suppliers, and they are not
obligated to provide us with products or services for any specified period of
time. We have entered into agreements with third parties relating to the
integration of our products with their product offerings, distribution,
reselling and consulting. We currently derive revenues from these agreements but
we may not be able to derive significant revenues in the future from these
agreements. In addition, if any of our software vendors cease production, cease
operations or fail to make timely delivery of orders, we may not be able to meet
our delivery obligations to our customers, and may lose revenues and suffer
damage to our customer relationships. Furthermore, our growth may be limited if
prospective clients do not accept the solutions offered by our strategic
partners.


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We depend on key personnel, and the loss of any key personnel could affect our
ability to compete and impair our ability to attract additional key personnel.

We believe our future success will depend on the continued service of our
executive officers and other key sales and marketing, product development and
professional services personnel. The services of our senior management team and
key personnel would be very difficult to replace and the loss of any of these
employees could harm our business significantly. We have employment agreements
with our executive officers. Although these agreements generally require sixty
to ninety days notification prior to departure, relationships with these
officers and key employees are at will and can be terminated by either party
without cause. The loss of any of our key personnel could harm our ability to
execute our business strategy and remain competitive.

If we fail to expand our professional services organization, we may not be able
to service current or additional clients.

We cannot be certain that we can attract or retain a sufficient number of highly
qualified professional services personnel to meet our business needs.
Competition for these employees can be intense, especially in a number of our
key markets and locations, including Israel. Clients that license our software
typically engage our professional services organization to assist with the
installation and operation of our software applications. Our professional
services organization also provides assistance to our clients related to the
maintenance, management and expansion of their software systems. Future growth
in licenses of our software will depend in part on our ability to provide
clients with these services. In addition, we will be required to expand our
professional services organization to enable us to continue to support our
existing installed base of customers. The market for the qualified personnel we
require is very competitive because of the limited number of people available
with the necessary technical skills and understanding of our products and
technology. This is particularly true in Israel where competition for qualified
personnel is intense. If we are unable to maintain our professional services
organization, our ability to support our service business would be limited. In
addition, a lack of professional services resources on implementations of
current customers would result in delays in the recognition of revenues under
contract accounting.

Any future mergers with or acquisitions of companies, products or technologies
and the resultant integration process may distract our management and disrupt
our business.

Our industry has witnessed a substantial amount of merger and acquisition
activity over the past few years, a trend which intensified during 2006. The
trend of consolidation in our industry may affect our ability to remain
competitive. One of our possible business strategies is to consider strategic
partnerships, alliances, mergers and/or acquisitions of complementary
businesses, products and technologies. Pursuit of such strategies requires
significant investments of management time and attention. Mergers with or
acquisitions of companies involve a number of risks including the difficulty of
assimilating the operations and personnel of the merged or acquired companies
and of maintaining uniform standards, controls and policies. There can be no
assurance that technology or rights acquired by us will be incorporated
successfully into products we introduce or market, that such products will
achieve market acceptance or that we will not encounter other problems in
connection with such acquisitions. If we consummate one or more significant
acquisitions in which the consideration consists of ordinary shares,
shareholders would suffer significant dilution of their interests in us.

Our market may experience rapid technological changes that could cause our
products to fail or require us to redesign our products, which would result in
increased research and development expenses.

Our market is characterized by rapid technological change, dynamic client needs
and frequent introductions of new products and product enhancements. If we fail
to anticipate or respond adequately to technology developments and client
requirements, or if our product development or introduction is delayed, we may
generate decreased revenues. Client product requirements can change rapidly as a
result of computer hardware and software innovations or changes in and the
emergence, evolution and adoption of new industry standards. The actual or
anticipated introduction of new products has resulted and will continue to
result in some reformulation of our product offerings. Technology and industry
standards can make existing products obsolete or unmarketable or result in
delays in the purchase of such products. As a result, the life cycles of our
products are difficult to estimate. We must respond to developments rapidly and
continue to make substantial product development investments. As is customary in
the software industry, we have previously experienced delays in introducing new
products and features, and we may experience such delays in the future that
could impair our revenue and operating results. Our business, financial
condition and results of operations will be


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20-F ClickSoftware Technologies Ltd.                                    Page 10
<PAGE>


materially and adversely affected if we fail to enhance our product
functionality to meet our current and future customer needs.

Our products could be susceptible to errors or defects that could result in lost
revenues, liability or delayed or limited market acceptance.

Complex software products, such as ours, often contain errors or defects,
particularly when first introduced or when new versions or enhancements are
released. In the past, some of our products have contained errors and defects
that have delayed implementation or required us to expend additional resources
to correct the problems. Despite internal testing, testing by current and
potential clients and the history of use by our installed base of customers, our
current and future products may contain as yet undetected serious defects or
errors. Any such defects or errors could result in lost revenues, liability or a
delay in market acceptance of these products, any of which would have a material
adverse effect on our business, financial condition and operating results. The
introduction of products with quality or compatibility problems could result in
reduced revenues and orders, delays in collecting accounts receivable and
additional costs. Despite testing by us or by our customers, errors or defects
may be found in our products after commencement of commercial deployment. Errors
or defects could result in product redevelopment costs and loss of market
demand, delay in market acceptance, loss of market share, and loss of potential
new customers.

The performance of our products also depends, in part, upon the accuracy and
continued availability of third-party data. We rely on third parties that
provide information such as street and address locations and mapping functions
that we incorporate into our products. If these parties do not provide accurate
information, or if we are unable to maintain our relationships with them, our
reputation and competitive position in our industry could suffer and we could be
unable to develop or enhance our products as required.

Our intellectual property could be used by third parties without our consent
because protection of our intellectual property is limited.

Our success and ability to compete substantially depend upon our internally
developed technology, which we protect through a combination of copyright, trade
secret and trademark law. However, we may not be able to adequately protect our
intellectual property rights, which may significantly harm our business.
Specifically, we may not be able to protect our trademarks for our company name
and our product names, and unauthorized parties may attempt to copy or otherwise
obtain and use our products or technology. Policing unauthorized use of our
products and technology is difficult, particularly in countries outside the
United States, and the steps we have taken may not prevent infringement or
misappropriation of our intellectual property rights.

Our end-user licenses are designed to prohibit unauthorized use, copying or
disclosure of our software and technology in the United States, Israel and other
foreign countries. However, these provisions may be unenforceable under the laws
of some jurisdictions and foreign countries. Unauthorized third parties may be
able to copy some portions of our products, reverse engineer or obtain and use
information and technology that we regard as proprietary. Third parties could
also independently develop competing technology or design around our technology.
If we are unable to successfully detect infringement and/or to enforce our
rights to our technology, we may lose competitive position in the market. Our
means of protecting our intellectual property rights in the United States,
Israel or elsewhere may not be adequate and competing companies may
independently develop similar technology. In addition, some of our licensed
users may allow additional unauthorized users to use our software, and if we do
not detect such use, we could lose potential license fees.

Our channel and strategic partner strategy may expose us to additional risks
relating to intellectual property infringement.

Our increased reliance on our channel and strategic partners may increase the
likelihood of the infringement of our intellectual property. As we deepen our
ties with our channel and strategic partners, the number of people who are
exposed to and interact with our software and other intellectual property will
increase. Despite our best efforts to protect our intellectual property, our
channel or strategic partners, or their employees or customers, may copy some
portions of our products or otherwise obtain and use information and technology
that we regard as proprietary. Our channel or strategic partners might also
improperly incorporate portions of our technology into their own products or
otherwise exceed the authorized scope of their licenses to our technology. If we
are unable to successfully detect and prevent infringement and/or to enforce our
rights to our technology, our revenues may be negatively impacted and we may
lose competitive position in the market.


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Our technology and other intellectual property may be subject to infringement
claims.

Substantial litigation regarding technology rights and other intellectual
property rights exists in the software industry both in terms of infringement
and ownership issues. A successful claim of patent, copyright or trademark
infringement or conflicting ownership rights against us could cause us to make
changes in our business or significantly harm our business, financial condition
and results of operations. We believe our products do not infringe the
intellectual property rights of third parties. However, we may not prevail in
all future intellectual property disputes.

We expect that software products may be increasingly subject to third-party
infringement or ownership claims as the number of competitors in our industry
segment grows and the functionality of products in different industry segments
overlaps. Third parties may make a claim of infringement or conflicting
ownership rights against us with respect to our products and technology. Any
claims, with or without merit, could:

          o  be time-consuming to defend;

          o  result in costly litigation;

          o  divert management's attention and resources; or

          o  cause product shipment delays.

Further, if an infringement or ownership claim is successfully brought against
us, we may have to pay significant damages or royalties, enter into a licensing
agreement, and/or stop selling the product or using the technology at issue. Any
such royalty or licensing agreements may not be available on commercially
reasonable terms, if at all.

From time to time, we may encounter disputes over rights and obligations
concerning intellectual property. We also indemnify some of our customers
against claims that our products infringe the intellectual property rights of
others. We have only conducted a partial search for existing patents and other
intellectual property registrations, and our products may infringe issued
patents. In addition, because patent applications in the United States and
Israel are not publicly disclosed until the patent is issued, applications may
have been filed that relate to our products.

If our relationships with our key customers are terminated, our revenues will
decline and our business will be adversely affected.

During 2006, our two largest customers accounted for approximately 12% and 11%,
respectively, of our sales. If for any reason, our relationship with either of
these customers is terminated, or if any of our key customers reduces purchases
of our products, then our business, financial condition and results of
operations would be materially and adversely affected. The impact of the
termination or reduction of our key customer relationships would be intensified
if we were unable to increase sales to other customers in order to offset this
termination or reduction. For more information related to our dependence upon
key customers, see Note 13 to our consolidated financial statements included
elsewhere in this annual report.

Our business may become increasingly susceptible to numerous risks associated
with international operations.

Significant portions of our operations occur outside the United States. Our
facilities are located in North America, Israel, the European continent, the
United Kingdom and Australia, and our executive officers and other key employees
are dispersed throughout the world. This geographic dispersion requires
significant management resources that may place us at a disadvantage compared to
our locally-based competitors. In addition, our international operations are
generally subject to a number of risks, including:

     o    foreign currency exchange rate fluctuations;

     o    longer sales cycles;

     o    multiple, conflicting and changing governmental laws and
          regulations;

     o    expenses associated with customizing products for foreign countries;

     o    protectionist laws and business practices that favor local
          competition;

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     o    difficulties in collecting accounts receivable; and

     o    political and economic instability.

We expect international revenues to continue to account for a significant
percentage of total revenues and we believe we must continue to expand our
international sales and professional services activities to be successful. Our
international sales growth will be limited if we are unable to expand our
international sales management and professional services organizations, hire
additional personnel, customize our products for local markets and establish
relationships with additional international distributors, consultants and other
third parties. If we fail to manage our geographically dispersed organization,
we may fail to meet or exceed our business plan and our revenues may decline.

We are incorporated in Israel and have important facilities and resources
located in Israel, which could be negatively affected due to military or
political tensions.

We are incorporated under the laws of the State of Israel and our research and
development facilities, as well as significant executive offices, are located in
Israel. Although substantially all of our sales are to customers located outside
of Israel, political, economic and military conditions in Israel could
nevertheless adversely affect our business, financial condition and results of
operations. Since the establishment of the State of Israel in 1948, a number of
armed conflicts have taken place between Israel and its Arab neighbors and a
state of hostility, varying in degree and intensity, has led to security and
economic problems for Israel. Historically, Arab states have boycotted any
direct trade with Israel and to varying degrees have imposed a secondary boycott
on any company carrying on trade with, or doing business in, Israel. Although
Israel has entered into certain agreements with Egypt, Jordan and Palestinian
representatives, there have been continued and increasing difficulties in the
relationship with the Palestinians and no prediction can be made as to whether a
resolution of past problems will be achieved or as to the nature of any such
resolution. Beginning in September 2000, the overall relationship and security
situation between Israel and the Palestinians deteriorated significantly and has
been marked by frequent and continuing violence. In addition, during 2006 there
occurred an outbreak of open hostilities along Israel's northern border with
Lebanon, and there have recently been hostilities, although to a lesser extent,
in the Gaza Strip. To date, these matters have not had any material effect on
our business and results of operations, but there can be no assurance that they
will not do so in the future.

Certain of our officers and employees are required to serve in the Israel
Defense Forces and this could force them to be absent from our business for
extended periods.

Certain of our officers and employees are currently obligated to perform up to
36-45 days of annual reserve duty in the Israel Defense Forces and are subject
to being called for active military duty at any time. The loss or extended
absence of any of our officers and key personnel due to these requirements could
harm our business.

We are an international company with expanding international operations. Our
risk exposure to foreign currency fluctuations is increasing, and we may not be
able to fully mitigate the risk.

Our revenue in Europe has grown in absolute dollar terms. We are expanding
operations in Europe, and income recognized in British pound and Euro are
increasing. In 2006, 18% of our costs were incurred in British pound and 6% in
Euro. We incur a portion of our expenses, principally salaries and related
personnel expenses in Israel, in NIS. In 2006, 32% of our costs were incurred in
NIS, and we incurred 6% of our costs in Australian dollars. Currency
fluctuations in any of the currencies in which we operate could materially and
adversely affect our business, financial condition and results of operations. In
addition, we have balance sheet exposure related to foreign net assets. We may
be unable to adequately protect ourselves against such risks.

We are incurring additional costs and devoting more management resources to
comply with increasing regulation of corporate governance and disclosure.

We spend an increased amount of management time and external resources to
understand and comply with changing laws, regulations and standards relating to
corporate governance and public disclosure, including the Sarbanes-Oxley Act of
2002, new SEC regulations and NASDAQ Stock Market rules. Devoting the necessary
resources to comply with evolving corporate governance and public disclosure
standards may result in increased general and administrative expenses and a
diversion of management time and attention to compliance activities.



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The government programs in which we currently participate and tax benefits we
currently receive require us to satisfy prescribed conditions and may be
delayed, terminated or reduced in the future.

We receive grants from the Government of Israel through the Chief Scientist for
the financing of a significant portion of our research and development
expenditures in Israel, and we may apply for additional grants in the future. We
may not continue to receive grants at the same rate or at all. The Chief
Scientist's budget has been subject to reductions that may affect the
availability of funds for Chief Scientist grants in the future. The percentage
of our research and development expenditures financed using grants from the
Chief Scientist may decline in the future, and the terms of such grants may
become less favorable. In connection with research and development grants
received from the Chief Scientist, we must make royalty payments to the Chief
Scientist on the revenues derived from the sale of products, technologies and
services developed with the grants from the Chief Scientist. From time to time,
the Government of Israel changes the rate of royalties we must pay, so we are
unable to accurately predict this rate. In addition, our ability to manufacture
products or transfer technology outside Israel without the approval of the Chief
Scientist is restricted under law. Any manufacture of products or transfer of
technology outside Israel will also require us to pay increased royalties to the
Chief Scientist up to 300%. We currently conduct all of our manufacturing
activities in Israel and intend to continue doing so in the foreseeable future
and therefore do not believe there will be any increase in the amount of
royalties we pay to the Chief Scientist. Currently, the office of the Chief
Scientist does not consider the licensing of our software in the ordinary course
of business a transfer of technology and we do not intend to transfer any
technology outside of Israel. Consequently, we do not anticipate having to pay
increased royalties to the Chief Scientist for the foreseeable future. In
connection with our grant applications, we have made representations and
covenants to the Chief Scientist regarding our research and development
activities in Israel. The funding from the Chief Scientist is subject to the
accuracy of these representations and covenants. If we fail to comply with any
of these conditions, we could be required to refund payments previously received
together with interest and penalties and would likely be denied receipt of these
grants thereafter.

We anticipate receiving tax benefits from the Government of Israel; however
these benefits may be delayed, reduced or terminated in the future.

Pursuant to the Law for the Encouragement of Capital Investments, the Government
of Israel through the Investment Center has granted "Approved Enterprise" status
to two of our existing capital investment programs. Consequently, we are
eligible for certain tax benefits for the first several years in which we
generate taxable income. We have not, however, begun to generate taxable income
for purposes of this law and we do not expect to utilize these tax benefits in
the near future. Once we begin to generate taxable income, our financial
condition could suffer if our tax benefits were significantly reduced. The
benefits available to an approved enterprise are dependent upon the fulfillment
of certain conditions and criteria. If we fail to comply with these conditions
and criteria, the tax benefits we receive could be partially or fully canceled
and we could be forced to refund the amount of the benefits we received,
adjusted for inflation and interest. From time to time, the Government of Israel
has discussed reducing or limiting the benefits. We cannot assess whether these
benefits will be available in the future at their current levels, or at all.

It may be difficult to enforce a U.S. judgment against us, our officers and
directors and the Israeli accountants named as experts in this annual report or
to assert U.S. securities laws claims in Israel or serve process on
substantially all of our officers and directors and these accountants.

We are incorporated and maintain significant operations in Israel. Some of our
executive officers and directors and the Israeli accountants named as experts in
this annual report reside outside the United States and a significant portion of
our assets and the assets of these persons are located outside the United
States. Therefore, it may be difficult for an investor, or any other person or
entity, to effect service of process on us or any of those persons or to enforce
a U.S. court judgment based upon the civil liability provisions of the U.S.
federal securities laws, against us or any of those persons, in an Israeli
court. Additionally, it may be difficult for an investor or any other person or
entity to enforce civil liabilities under U.S. federal securities laws in
original actions instituted in Israel. We have appointed ClickSoftware Inc., our
U.S. subsidiary, as our agent to receive service of process in any action
against us arising out of our original June 22, 2000 initial public offering. We
have not given our consent for our agent to accept service of process in
connection with any other claim. Furthermore, if a foreign judgment is enforced
by an Israeli court, it will be payable in NIS.


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


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We currently have non-competition agreements with our employees. These
agreements prohibit our employees, if they cease working for us, from directly
competing with us or working for our competitors. Recently, Israeli courts have
required employers seeking to enforce non-compete undertakings of a former
employee to demonstrate that the competitive activities of the former employee
will harm one of a limited number of material interests of the employer which
have been recognized by the courts, such as the secrecy of a company's
confidential commercial information or its intellectual property. If we cannot
demonstrate that harm would be caused to us, we may be unable to prevent our
competitors from benefiting from the expertise of our former employees.

A significant portion of our workforce is subject to Israeli labor laws, which
may lead to claims for additional overtime pay.

Israeli law provides that employment arrangements with employees not in senior
managerial positions, or whose working conditions and circumstances do not
facilitate employer supervision of their hours of work, must provide for
compensation which differentiates between compensation paid to employees for a
43-hour work week or for maximum daily work hours and compensation for overtime
work. Israeli law also limits the maximum number of hours of overtime. Certain
of our employment compensation arrangements are fixed and do not differentiate
between compensation for regular hours and overtime work. Therefore, we may face
potential claims from these employees asserting that the fixed salaries do not
compensate for overtime work. While there is no certainty that such claims will
prevail, even if they do, we do not believe that these claims would have a
material adverse effect on our business, financial condition and results of
operations.

Our Chief Executive Officer owns a large percentage of our ordinary shares and
could significantly influence the outcome of actions.

As of March 31, 2007, our Chief Executive Officer and Chairman of the Board, Dr.
Moshe BenBassat beneficially owned approximately 18.7% of our outstanding
ordinary shares. Dr. BenBassat may be able to influence certain matters
requiring approval by our shareholders, including the election of directors or a
change of control of our company, which could have a material adverse effect on
our stock price. These actions may be taken even if our other investors oppose
them.

We are subject to anti-takeover provisions that could delay or prevent an
acquisition of us, even if an acquisition would be beneficial to our
shareholders.

Provisions of Israeli corporate and tax law and of our articles of association
may have the effect of delaying, preventing or making more difficult any merger
or acquisition of us, even if doing so would be beneficial to our shareholders.
In addition, any merger or acquisition of us will require the prior consent of
the Chief Scientist. Israeli law regulates mergers, votes required to approve a
merger, acquisition of shares through tender offers and transactions involving
significant shareholders. In addition, our articles of association provide for a
staggered board of directors and for restrictions on business combinations with
interested shareholders. Any of these provisions may make it more difficult to
acquire us. Accordingly, an acquisition of us could be delayed or prevented even
if it would be beneficial to our shareholders.

Other ordinary shares may be sold in the future. This could depress the market
price for our ordinary shares.

As of December 31, 2006, we had 27,994,626 ordinary shares outstanding (net of
39,000 shares held in treasury). In addition, as of December 31, 2006, we had
4,286,018 ordinary shares issuable upon exercise of outstanding options and
warrants, and 445,169 additional ordinary shares reserved for issuance pursuant
to our stock option plans and employee share purchase plan. If we or our
existing shareholders sell a large number of our ordinary shares, the price of
our ordinary shares could fall dramatically. Restrictions under the securities
laws limit the number of ordinary shares available for sale by our shareholders
in the public market. We have filed Registration Statements on Form S-8 to
register for resale the ordinary shares reserved for issuance under our stock
option plans.

If we are characterized as a passive foreign investment company, our U.S.
shareholders will be subject to adverse tax consequences.

If, for any taxable year, either, (1) 75% or more of our gross income is passive
income or (2) 50% or more of the fair market value of our assets, including cash
(even if held as working capital), produce or are held to


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produce passive income, we may be characterized as a "passive foreign
investment company" ("PFIC") for United States federal income tax purposes.
Passive income includes dividends, interest, royalties, rents annuities and
the excess of gains over losses from the disposition of assets, which produce
passive income. For purposes of the asset test, cash is considered to be an
asset that produces passive income. As a result of our cash position and the
decline in the value of our assets, we may be deemed to be a PFIC for U.S.
federal income tax purposes.

If we are characterized as a PFIC, our shareholders who are residents of the
United States will be subject to adverse U.S. tax consequences. Our treatment as
a PFIC could result in a reduction in the after-tax return to shareholders
resident in the United States and may cause a reduction in the value of such
shares. If we were to be treated as a PFIC, our shareholders will be required,
in certain circumstances, to pay an interest charge together with tax calculated
at maximum rates on certain "excess distributions" including any gain on the
sale of ordinary shares. In order to avoid this tax consequence, they (1) may be
permitted to make a "qualified electing fund" election (however we do not
currently intend to take the action necessary for our shareholders to make a
"qualified electing fund" election, in which case, in lieu of such treatment
they would be required to include in their taxable income certain undistributed
amounts of our income) or (2) may elect to mark-to-market the ordinary shares
and recognize ordinary income (or possible ordinary loss) each year with respect
to such investment and on the sale or other disposition of the ordinary shares.
Prospective investors should consult with their own tax advisors with respect to
the tax consequences applicable to them of investing in our ordinary shares.


ITEM 4.           INFORMATION ON THE COMPANY

4A.      History and development

Our corporate name is ClickSoftware Technologies Ltd. for both legal and
commercial purposes. We were incorporated as a company under the laws of the
State of Israel in 1979 and are subject to the Israeli Companies Law - 1999
(Companies Law). From inception until about 1996, we operated as a consulting
company in the area of optimization and intelligent decision support systems.
Thereafter, we transformed our business model to provide workforce and service
management products and solutions. Our principal executive offices are located
at 11 Ben Gurion Street, Givat Shmuel 54017, Israel, and the telephone number at
that location is +972-3-765-9400. Our website is located at
http://www.clicksoftware.com. Our wholly owned U.S. subsidiary, ClickSoftware,
Inc., is located at 35 Corporate Drive, Suite 140, Burlington, MA.

Our capital expenditures for fiscal years 2006, 2005, and 2004 amounted to $0.7
million, $0.4 million, and $0.6 million, respectively. These expenditures were
primarily for hardware and software in our Israel and worldwide offices. Our
current capital expenditures are also primarily for hardware and software, and
we expect to finance these expenditures primarily from cash on hand.

4B.      Business overview

We are a leading provider of workforce and service management products and
solutions. Our products and solutions incorporate best-of-breed business
practices, key business functions of field service operations, and sophisticated
decision-making algorithms that enable our clients to more efficiently manage
their field service operations in a scalable, integrated manner.

Our end-to-end service chain optimization is designed to increase service
revenue and customer responsiveness while reducing costs. Our Service
Optimization suite includes strategic and tactical workforce planning, optimized
service scheduling, intelligent problem resolution, mobile workforce management,
and business analytics, connecting various organizational levels and all
functions, from executive strategy to operational execution.

We have developed our service chain optimization solutions through years of
experience in a variety of service operations. The result is a highly advanced
technology with the flexibility to model and accommodate varying business types
and processes. The ease with which it can be integrated with leading customer
relationship management (CRM) and enterprise resource planning (ERP) solutions,
often with standard interface adaptors, enables our customers to accelerate the
deployment of the solution.

A service operation is ultimately measured by its performance at the day of
service. Our products are mission critical applications that manage all incoming
jobs from the moment a job is opened until it is successfully


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closed. Our products are able to generate the appointment time for a customer,
assign the job to the right technician, design the optimal route for the
technician to minimize travel, and monitor progress during the day.

A typical day starts with the morning schedule that contains the assignments for
all the work orders of the day. As the day develops, emergencies may arise, jobs
may take longer or shorter than expected, and traffic problems may cause
unexpected delays. These contingencies present significant challenges, primarily
minimizing the disruptions to the existing work orders while accommodating the
new emergency orders that must be delivered on the same day. Integrating
real-time updates from the technician's mobile devices and/or GPS-based location
reporting devices with our decision-making algorithms, our solutions offer
comprehensive coverage to address these challenges and help ensure that the
work-plan is continually optimized.

The maturity of mobile devices and GPS technology offer unique opportunities to
continually optimize service delivery execution. We believe that handheld data
communication devices and GPS location reports should be used far beyond their
traditional role of data transmission to and from the field. These tools can be
used for real-time decision-making in order to increase productivity and
customer responsiveness. For instance, our products and solutions enable a new
concept known as "drip feed" management by which, initially, every technician
receives only the first two tasks of the day. Upon completing the first task,
the technician confirms task completion and a new task is assigned. This
technique contributes to improved priority management, travel minimization and
customer responsiveness. Similarly, with a GPS reporting system, the dispatcher
need not ask technicians where they are located since he or she knows at all
times where every technician is located, generating additional efficiencies by
improved customer-technician assignments.

Our solutions constantly monitor the incoming list of new tasks at all levels of
frequency in full synchronization with the delivery status of the existing tasks
and the availability of technicians and spare parts in order to maximize
productivity and output while complying with promised delivery dates and other
business rules.

While other service management applications, such as CRM, Asset Management, or
Inventory Management, manage primarily data processing aspects, we believe our
products drive decision-making processes. We believe our solutions have become
the backbone of daily operations management in many leading organizations
worldwide by addressing the fundamental question of job fulfillment: Who does
What, for Whom, With what, Where and When.

The decision-making support our products offer does not start on the day of
service. By the time we reach the day of service, the workforce's size and skill
mix have already been decided down to the name of the individuals and the shift
each one of them will be staffing on that day. This capacity is the result of a
sequence of decisions, some of which may have been made as long as a year or
more in advance. Prior to staffing the shifts for a given week or month, we
first ensure that people will be available to work on particular days, taking
into account parameters such as vacation and training. Hiring options at this
stage are fairly limited. This stage is for "master" planning, also known as
tactical resource planning.

Long before that, up to a year or more in advance, capacity planning takes
place, i.e. determining the size and the skill mix in each territory as a
function of the company's strategic plan, e.g. expanding/shrinking business
lines or territories, new product introduction, etc. At this stage, sufficient
time is available for hiring and training new employees or relocating or
re-training existing employees.

For each of the above stages, a key input is demand forecasting by job type and
territories at the time granularity that is required for that stage. The above
sequence, together with the daily service delivery decisions, establishes the
essence of the service chain decision making, a concept pioneered by our staff
in the 1990's, and for which a patent was awarded (see "Intellectual Property"
below).

Service Optimization Solutions Suite:

Our Service Optimization solutions suite includes:

ClickSchedule optimizes service scheduling and routing for improving workforce
productivity by balancing customer, service and asset resources, and
organizational preferences, including contractual commitments, priority, drive
time, skills, and service and asset resources availability. Configuration
capabilities, a high degree of scalability and use of standard eXtensible Markup
Language (XML) interfaces are designed to improve integration with enterprise
systems and deployment according to organizational business policies and


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processes. ClickSchedule is our main software platform and accounted for a
majority of our license revenues in 2006.

ClickAnalyze provides service business analytics for workforce performance
measurement and strategic decision support. ClickAnalyze enables drill-down
analysis of key performance indicators, including resource productivity,
operational costs, and responsiveness to customers. Integrated within the
Service Optimization suite, ClickAnalyze provides executive level summaries as
well as detailed analysis by territory, job type, time frame and other criteria.

ClickPlan provides interactive and automated workforce planning for staffing and
deployment of the field workforce based on forecasted workload. ClickPlan is
designed to enable service organizations to resolve workforce shortages and
surpluses weeks and months in advance. Comparing available resources to
forecasted workloads, ClickPlan helps determine the best strategy to ensure the
right people are in the right place, at the right time.

ClickForecast provides field service workload forecasting to help companies
project workforce capacity. ClickForecast can combine historical service
workload with future business events to create a forecast for each territory,
job type, or business unit. ClickForecast enables service managers, marketing,
and sales to collaboratively determine the demand levels of their customers, and
create multiple forecast scenarios, each with different business assumptions.

ClickFix provides intelligent diagnostics and problem resolution for reducing
service costs. ClickFix enables faster resolution of customer issues at multiple
levels of service contact, from the call center to the field. Based on an
intelligent engine that utilizes specific knowledge about our customers'
equipment, ClickFix diagnoses and resolves problems independent of the user's
skills, experience and knowledge. Accessibility via the internet empowers
customers to resolve problems themselves at any time of day, and often without a
service resource, requiring fewer onsite visits.

ClickMobile provides wireless workforce management for monitoring field
workforce activities and reducing the labor of dispatching personnel.
ClickMobile enables job detail notification from the field and allows for field
updates even when service resources are out of wireless coverage. Assignments
created in ClickSchedule are dispatched to field devices based on configurable
workflows while enabling real-time visibility into workforce activity including
job status, start and end time.

ClickLocate (LBS), released in 2006, captures the location information of a
field service engineer and/or his or her vehicle and integrates it with
ClickSchedule for use in optimized scheduling. LBS then enables service
organizations to improve their service operations by allowing them to make
decisions and take actions based on location information including, near
real-time engineer locations. In effect, LBS enables service managers to "see"
the current location of the entire mobile workforce at one time. ClickRoster
provides interactive and automated workforce shift planning based on forecasted
workload, planning decisions, working contracts, rules and regulations and
engineer preferences.

Service Optimization Suite, released in 2005, version 7.5 of our Service
Optimization Suite that expands on previous versions of the product suite with
feature and user interface enhancements, including a more configurable schedule
optimizer, real time key performance indicator monitor, and enhanced support for
multi-lingual implementations.

Vertical Offerings, released in 2006, ClickSoftware for Water Utilities was the
first in a series of vertical offerings. The ClickSoftware for Water Utilities
solution draws on our depth of experience in serving water utility customers
around the world. The result is an "out-of-the-box" solution, preconfigured with
industry practices, designed to minimize the time, cost and risk associated with
optimization technology implementations. We are working on a release plan of
additional Vertical Packages, all in line with our aim to reduce total cost of
ownership for prospects in these verticals.


Customers

We sell our products to a broad base of customers representing a variety of
industries with unique needs, including telecommunications, utilities and energy
and high-technology service providers, as well as the markets listed below.
During 2006, our two largest customers accounted for approximately 12% and 11%,
respectively, of our sales. See Item 3D - Risk factors "If our relationship with
our key customers are terminated, our revenues will decline and our business
will be adversely affected."


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Principal Markets

Our service optimization solutions are utilized by leading organizations in a
number of service industry segments, including: telecommunications, utilities
and energy, insurance, high-technology, computer and office equipment,
industrial equipment, medical equipment, building automation, aerospace &
defense, and home services. Our solutions are designed to deliver improvements
in:


     o    field workforce productivity

     o    responsiveness to customers

     o    quality of service delivered

     o    profitability of the service operation

     o    reduction in missed customer commitments.

See Item 5 - Operating and Financial Review and Prospects - for a breakdown of
revenues by geographic market.

Sales and Marketing Channels

We market and sell our products mostly through our direct sales force located in
North America, Europe and the Asia Pacific region, as well as through reseller
agreements with partners. We continue to create and strengthen partner
relations. Our multidisciplinary sales teams consist of field sales executives,
sales support engineers and internal sales staff. The internal sales staff is
responsible for generating leads and qualifying prospective clients. Sales
support engineers assist the sales executives in the technical aspects of the
sales process, including preparing demonstrations and technical proposals. Our
sales executives are responsible for completing the sales process and managing
the post-sale client relationship, which consists of ongoing relationship
management and the sale of additional licenses and products, as clients require
additional resources. Our management also takes an active role in our sales
efforts. The knowledge gained by our sales and marketing force is also
communicated to our product marketing group, which guides our development team.
This enables our organization to align the functionality of our products with
customer needs.

We typically direct our sales and marketing efforts to the client's executive
officers, including the vice president of customer service, the chief
information officer, the chief financial officer and other senior executives
responsible for improving customer service at our clients' organizations. In
order to effectively promote product awareness, we engage in marketing
activities in a wide variety of areas, including public relations and analyst
relations, email campaigns, web seminars with our customers and industry
analysts, newsletters and advertising creation and placement, direct mailings
and trade shows.

Our business development organization supports joint marketing activities with
our business partners. Our business relationships with large ERP and CRM
vendors, such as SAP A.G., enable us to use our partners' market presence and
sales channels to create additional revenue opportunities. Our strategy is based
on having approved certified adaptors that enable rapid integration and
implementation of our products into certain ERP and CRM systems.

We also market our products and services through resellers. Our reseller
agreements generally provide the parties with the right to use each other's name
in marketing and advertising materials, and to conduct joint marketing programs.
We provide sales materials and training to resellers on the marketing, selling
and implementation of our software solutions. We believe these relationships
will extend our presence and brand name in new and existing markets.

We have also established relationships with large System Integrator (SI)
organizations such as Accenture Ltd. and International Business Machines
Corporation (IBM). These partners have committed various levels of resources to
integrate, customize and implement our solutions. Depending on the strength of
the relationship, we have co-invested in jointly developing industry-specific
solutions, training and certifying their professional services teams, developing
co-marketing programs, and incorporating our products into their
marketing/referral strategies.

At the end of the second quarter of 2004, we formalized a strategic alliance
with IBM pursuant to which we teamed with IBM to resell our workforce
optimization solutions. In connection with this strategic alliance, we
established a Project Office with IBM to manage the day-to-day affairs in
connection with the relationship. In 2006 we continued our cooperation with IBM
and are currently negotiating with IBM on the fee structure and scope of the
Project Office for 2007. For more information concerning our relationship with
IBM, see exhibits 4.18, 4.19, 4.20, 4.21, 4.22 and 4.23 to this annual report.


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20-F ClickSoftware Technologies Ltd.                                    Page 19
<PAGE>


We continue to value our relationships with our other channel partners, and
believe that these channel relationships will be key contributors to our future
growth.


Competition

The market for our products is competitive and rapidly changing. Competition may
increase in the future as the service optimization market gains size and
increased business focus, current competitors expand their product offerings,
and new companies enter the market. Recent acquisitions and consolidations in
our field may also increase competitive pressures. Smaller competitors have been
acquired by large organizations with broader product offerings. For example, two
of our competitors, Indus International Inc. and MDSI Mobile Data Solutions
Inc., completed their merger in January 2007.

The principal competitive factors in the service optimization industry are:

     o  the technological capabilities and performance of the solution;
     o  installed base, domain expertise and experience with large-scale
        implementations; and
     o  the acceptance and adaptability of the service optimization solution to
        the solution offerings of large SIs and CRM/ERP vendors, and the ability
        to form marketing alliances with the foregoing.

We believe our solutions compare favorably based on these competitive factors
and that key competitive factors include a broad base of users, strategic
alliances, key reference customers, interoperability, integration of
complementary products and services, technological leadership, product
performance, price, customer support, name recognition, relationships with
partners and distribution channels and the ability to respond quickly to
emerging opportunities.

Our current and potential competitors include:

     o  Vendors specializing in service optimization, including, but not limited
        to, ServicePower Technologies plc.

     o  Software application vendors that offer field force management solutions
        with certain optimization modules as part of their overall offerings,
        including, but not limited to, Viryanet Ltd., Indus/MDSI, Inc. and
        Trimble Navigation Ltd.

     o  Traditional ERP and CRM software application vendors, such as Oracle;
        and

     o  Systems integrators and internal information technology departments that
        may elect to develop a solution in-house.

Some of our current and potential competitors have greater name recognition,
longer operating histories, larger customer bases and significantly greater
financial, technical, marketing, public relations, sales, distribution and other
resources than we do.

Competition could result in price reductions, fewer customer orders, reduced
gross margin and loss of market share, any of which could cause our business,
financial condition and results of operations to suffer. We may not be able to
compete successfully, and competitive pressures may harm our business. In
addition, our market is characterized by rapid technological change, dynamic
client needs, mergers and acquisitions, and frequent introductions of new
products and product enhancements, which can make existing products, including
ours, obsolete or unmarketable.

Intellectual Property

We believe that the improvement of our existing products and technologies and
the development of new products are important in establishing and maintaining a
competitive advantage. We rely on a combination of trade secrets, copyrights,
trademarks, patents and intellectual property law, together with non-disclosure
and invention assignment agreements, to establish and protect the technology
used in our products.

We own US patent 6,985,872, titled "A METHOD AND SYSTEM FOR ASSIGNING HUMAN
RESOURCES TO PROVIDE SERVICES". The patent describes a system that unifies the
analysis, forecasting, planning, scheduling and execution of service operations,
leading to optimized performance across long and short time scales, and enabling
agile and effective collaboration of different roles and stake-holders in the
service management world. We also own a similar Israeli patent.

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20-F ClickSoftware Technologies Ltd.                                    Page 20
<PAGE>


We have two issued patents (referred to above) and three patent applications
pending. As we continue to develop new applications of our products, we will
consider additional patent applications. Patents may not issue from any of these
pending applications and, even if patents do issue, the claims allowed may not
be sufficiently broad to protect our technology. In addition, patents issued to
us may be challenged, invalidated or circumvented, and the rights granted
thereunder may not adequately protect us.

We own U.S. trademark registrations for the marks AITEST, CLICKSCHEDULE,
CLICKANALYZE, CLICKFIX, CLICKFORECAST, CLICKMOBILE and CLICKPLAN, and have filed
applications for registration of the marks CLICKSOFTWARE, W6 and W-6. In the
European Community, we own trademark registrations for CLICKFIX, CLICKSCHEDULE,
CLICKANALYZE, CLICKFORECAST, and CLICKPLAN, and a U.K. trademark for
CLICKSOFTWARE. In Israel, we have filed applications for registration of the
marks CLICKMOBILE, CLICKSOFTWARE and W6.

Although we rely on copyright, trade secret and trademark law to protect our
technology, we believe that factors such as the technological and creative
skills of our personnel, new product developments, frequent product enhancements
and reliable product maintenance are more essential to establishing and
maintaining a technology leadership position. Others may develop technologies
that are similar or superior to our technology. See Item 3D - Risk factors -
"Our intellectual property could be used by third parties without our consent
because protection of our intellectual property is limited" and "Competition".

We generally enter into nondisclosure agreements with our customers, partners,
employees and consultants and generally control access to and distribution of
our software, documentation and other proprietary information.

Our end-user licenses are designed to prohibit unauthorized use, copying and
disclosure of our software and technology in the United States, Israel and
other foreign countries. However, these provisions may be unenforceable under
the laws of some jurisdictions and foreign countries. Unauthorized third
parties may be able to copy some portions of our products or reverse engineer
or obtain and use information and technology that we regard as proprietary.
Third parties could also independently develop competing technology or design
around our technology. If we are unable to successfully detect infringement
and/or to enforce our rights to our technology, we may lose competitive
position in the market. Our means of protecting our intellectual property
rights in the United States, Israel or elsewhere may not be adequate and that
competing companies may independently develop similar technology. In addition,
some of our licensed users may allow additional unauthorized users to use our
software, and if we do not detect such use, we could lose potential license
fees.

From time to time, we may encounter disputes over rights and obligations
concerning intellectual property. We also indemnify most of our customers
against any future claim that our products infringe the intellectual property
rights of others. We believe our products do not infringe upon the intellectual
property rights of third parties. However, we cannot assure you that we may not
prevail in all future intellectual property disputes. We have not conducted an
exhaustive search for existing patents and other intellectual property
registrations, and our products may infringe issued patents. In addition,
because patent applications in the United States and Israel are not publicly
disclosed until the patent is issued, applications may have been filed that
relate to our products.

Substantial litigation regarding technology rights exists in the software
industry, and we expect that software products may be increasingly subject to
third-party infringement and ownership claims as the number of competitors in
our industry segment grows and the functionality of products in different
industry segments overlap. In addition, our competitors may file or have filed
patent applications that cover aspects of their technology that they may claim
our technology infringes. Third parties may assert infringement or competing
ownership claims with respect to our products and technology. Any such claims,
with or without merit, could be time-consuming to defend, result in costly
litigation, and divert management's attention and resources or cause product
shipment delays. In the event of an adverse ruling in any such litigation, we
might be required to pay substantial damages, discontinue the use and sale of
infringing products, expand significant resources to develop non-infringing
technology or obtain licenses to or pay royalties to use a third party's
technology. Such royalty or licensing agreements may not be available on terms
acceptable to us, if at all. A successful claim of patent or copyright
infringement against us could significantly harm our business. See Item 3D -
Risk factors - "Our technology and other intellectual property may be subject to
infringement claims".

Regulation

Our business is also effected by government regulations. We receive grants from
the Government of Israel through the Chief Scientist, for the financing of a
significant portion of our research and development


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20-F ClickSoftware Technologies Ltd.                                    Page 21
<PAGE>


expenditures in Israel, and we may apply for additional grants in the future.
We may not continue to receive grants at the same rate or at all. The Chief
Scientist's budget has been subject to reductions that may affect the
availability of funds for Chief Scientist grants in the future. The percentage
of our research and development expenditures financed using grants from the
Chief Scientist may decline in the future, and the terms of such grants may
become less favorable. For further information related to the effect of
government regulations on our business, see Item 3D - Risk factors - "The
government programs in which we currently participate and tax benefits we
currently receive require us to satisfy prescribed conditions and may be
delayed, terminated or reduced in the future."


4C.      Organizational structure

Our directly and indirectly held principal operating wholly-owned subsidiaries
and their countries of incorporation are:

o ClickSoftware, Inc. (United States)
o ClickSoftware Central Europe GmbH (Germany)
o ClickSoftware Europe Limited (United Kingdom)
o ClickSoftware Belgium N.V. (Belgium)
o ClickSoftware Australia Pty Limited (Australia).


4D.      Property, plants and equipment

We have a lease for approximately 8,800 square feet of office space in
Burlington, Massachusetts that expires in September 2009 and is used for sales,
marketing and implementation activities for the North American market. In
September 2006, our offices in Tel Aviv, Israel were damaged by a fire. See Item
5B "Liquidity and Capital Resources" for information concerning our insurance
coverage for this event. We have since moved to new offices in Givat Shmuel,
Israel which are used for management, marketing, sales, research and
development. Our new lease is for approximately 27,000 square feet of office
space and expires in January 2009, with an option for us to extend the lease
until January 2011.

Our U.K. subsidiary currently operates from a leased facility of approximately
3,800 square feet in Slough, near London, which is used for sales, marketing and
implementation activities for the European market. We also lease additional
smaller offices in various sites throughout Europe and Asia. We consider that
our current office space is sufficient to meet our anticipated needs for the
foreseeable future and is suitable for the conduct of our business.


ITEM 4A.          UNRESOLVED STAFF COMMENTS

Not applicable.


ITEM 5.           OPERATING AND FINANCIAL REVIEW AND PROSPECTS


Overview

We are specialists in the area of service optimization solutions and derive
revenues from the licensing of our software products and the provision of
consulting and support services.

Software license revenues are comprised of perpetual software license fees
primarily derived from contracts with our direct sales clients and our indirect
distribution channels. We recognize revenues in accordance with the AICPA
Statement of Position 97-2, "Software Revenue Recognition," or SOP 97-2, as
amended. (See note 2 of the notes to our consolidated financial statements
attached hereto).

Service revenues are comprised of revenues from consulting, training, and
post-contract customer support. Consulting services are billed at an agreed-upon
rate plus incurred expenses. Clients licensing our products generally purchase
consulting agreements from us. Post-contract customer support arrangements
provide technical support and the right to software updates. Post-contract
customer support revenues are charged as a


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20-F ClickSoftware Technologies Ltd.                                    Page 22
<PAGE>


percentage of license fees depending upon the level of support coverage
requested by the customer. Our support contracts typically renew automatically
for successive 12-month periods unless the customer informs us of its desire
not to renew annual support.

Our revenues grew by 35% in 2006 representing growth across all territories and
in all line items. Our growth resulted from our ability to attract large
customers and our further expansion into new vertical markets.

In the second quarter of 2006, we became profitable and we improved quarterly
profitability thereafter. Our improved profitability was achieved due to higher
revenues together with moderate growth in our expenses compared to top-line
growth. During 2006, we also generated $5.7 million in positive cash-flow from
operations.

As in previous years, we believe that our performance in 2007 will primarily
depend on our ability to continue attracting customers and implementing service
optimization solutions.

As of December 31, 2006, our cash and cash-equivalents, and short and long-term
investments increased to $19.8 million from $13.8 million as of December 31,
2005.

With more transactions involving larger customers and generating larger
transactions, and with the greater involvement of our channel partners in many
of the transactions, the results of any quarter will be more difficult to
predict and will not necessarily be indicative of full-year performance. Because
a significant portion of our expenses, such as administrative and management,
payroll and rent and utilities, are fixed in the short term and cannot be
quickly reduced to respond to decreases in revenues, if revenue levels fall
below expectations, net income may be disproportionately affected.

Our reporting currency is the U.S. dollar. A significant portion of our research
and development expenses and other expenses are incurred in NIS, and a portion
of our revenues and expenses are incurred in British pounds, Euro and Australian
dollars. The results of our operations are subject to fluctuations in these
exchange rates, which are influenced by various global economic factors.

Critical Accounting Policies

In preparing our consolidated financial statements, we are required to make
estimates, judgments and assumptions that affect the reported amounts of
revenues and expenses, assets and liabilities and contingent assets and
liabilities at the date of the financial statements.

On an ongoing basis, we evaluate our estimates, judgments and assumptions,
including those related to revenue recognition, and bad debt provisions. We base
our estimates, judgments and assumptions on historical experience and forecasts,
and on various other factors that are believed to be reasonable under the
circumstances. Actual results may differ from these estimates under different
assumptions or conditions. We believe that the following critical accounting
policies affect our more significant estimates, judgments and assumptions used
in the preparation of our consolidated financial statements.

Revenue Recognition

Revenue results are difficult to predict, and any shortfall in revenues or delay
in recognizing revenues could cause our operating results to vary significantly
from quarter to quarter and could result in future operating losses. In
addition, the timing of our revenue recognition influences the timing of certain
expenses, such as commissions and royalties. We follow very specific and
detailed guidelines in measuring revenues; however, certain judgments affect the
application of our revenue policy.

Our revenues are principally derived from the licensing the rights to use our
software and sales of professional services, including consulting,
implementation and training. We recognize revenues in accordance with SOP
97-2. Revenues from software license fees are recognized when persuasive
evidence of an arrangement exists, either by written agreement or a purchase
order signed by the customer, the software product has been delivered, the
license fees are fixed and determinable, and collection of the license fees is
considered probable. License fees from software arrangements which involve
multiple elements, such as post-contract customer support, consulting and
training, are allocated to each element of the arrangement based on the
relative fair values of the elements. We determine the fair value of each
element in multiple-element arrangements based on vendor specific objective
evidence, or VSOE. We determine the VSOE for each element according to the


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20-F ClickSoftware Technologies Ltd.                                    Page 23
<PAGE>


price charged when the element is sold separately. In judging the probability
of collection of software license fees we continuously monitor collection and
payments from our customers and maintain a provision for estimated credit
losses based upon our historical experience and any specific customer
collection issues that we have identified. In connection with customers with
whom we have no previous experience, we may utilize independent resources to
evaluate the creditworthiness of those customers. For some customers,
typically those with whom we have long-term relationships, we may grant
extended payment terms. We perform on-going credit evaluations of our
customers. If the financial situation of any of our customers were to
deteriorate, resulting in an impairment of their ability to pay the
indebtedness they incur with us, additional allowances may be required.

We generally do not grant a right-of-return to our customers and generally
provide a warranty period for three months at no extra charge. As of December
31, 2006 and 2005, the provision for warranty cost is immaterial.

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

Revenue from software licenses that require significant customization,
integration and implementation are recognized based on SOP 81-1 "Accounting for
Performance of Construction-Type and Certain Production-Type Contracts," using
contract accounting on the percentage-of-completion method, based on the
relationship of actual working hours incurred, to total working hours estimated
to be incurred over the duration of the contract. In recognizing revenues based
on the percentage-of-completion method, we estimate time to completion with
revisions to estimates reflected in the period in which changes become known. If
we do not accurately estimate the resources required or the scope of work to be
performed, or do not manage our services properly within the planned periods of
time or satisfy our obligations under the contracts, then future services
margins may be significantly and negatively affected or losses on existing
contracts may need to be recognized. Provisions for estimated losses on
uncompleted contracts are made in the period in which such losses are first
determined, in the amount of the estimated loss on the entire contract.

Service revenues include post-contract customer support, consulting and
training. Post-contract customer support arrangements provide for technical
support and the right to unspecified updates on an if-and-when-available basis.
Revenues from those arrangements are recognized ratably over the term of the
arrangement, usually one year. Consulting services are recognized on a time and
material basis, or in a fixed price contract, on a percentage of completion
basis. Revenues from training are recognized as the services are provided.

Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts using estimates that we make
based on factors we believe appropriate, such as the composition of the accounts
receivable aging, historical bad debts, changes in payment patterns, customer
creditworthiness and current economic trends. If we used different assumptions,
or if the financial condition of customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional provisions for doubtful
accounts would be required and would increase our bad debt expense.

Recent Accounting Pronouncements

In June 2006, the FASB issued FASB Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes--an interpretation of FASB Statement No. 109" (FIN
48). The interpretation contains a two-step approach to recognizing and
measuring uncertain tax positions accounted for in accordance with SFAS No. 109,
"Accounting for Income Taxes." The first step is to evaluate the tax position
for recognition by determining if the weight of available evidence indicates
that it is more likely than not that the position will be sustained on audit,
including resolution of related appeals or litigation processes, if any. The
second step is to measure the tax benefit as the largest amount which is more
than 50% likely of being realized upon ultimate settlement. We are still
assessing the impacts of the adoption of FIN 48.

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" (SFAS
No. 157). The purpose of SFAS No. 157 is to define fair value, establish a
framework for measuring fair value, and enhance disclosures about fair value
measurements. The measurement and disclosure requirements are effective for the



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20-F ClickSoftware Technologies Ltd.                                    Page 24
<PAGE>


company beginning in the first quarter of fiscal year 2008. We are currently
evaluating the impact that SFAS No. 157 will have on our financial statements.

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities" (SFAS No. 159). SFAS No. 159 permits
companies to choose to measure certain financial instruments and certain other
items at fair value. The standard requires that unrealized gains and losses on
items for which the fair value option has been elected be reported in earnings.
SFAS No. 159 is effective for the company beginning in the first quarter of
fiscal year 2008, although earlier adoption is permitted. We are currently
evaluating the impact that SFAS No. 159 will have on our financial statements.


5A.      Results of operations

Our operating results for each of the five years ended December 31, 2006, 2005,
2004, 2003 and 2002 expressed as a percentage of revenues are as follows:

<TABLE>
<CAPTION>


                                                                   YEAR ENDED DECEMBER 31,
                                                     ---------- ---------- --------- ---------- ----------
                                                       2006       2005       2004      2003       2002
<S>                                                   <C>         <C>        <C>       <C>        <C>

Revenues:
  Software license                                         37%        34%       47%        47%        45%
  Services                                                 63%        66%       53%        53%        55%
                                                     ---------- ---------- --------- ---------- ----------
    Total Revenues                                         100        100       100        100        100
                                                     ---------- ---------- --------- ---------- ----------
Cost of Revenues:
  Software license                                           6          6         5          4          6
  Services                                                  33         34        28         30         37
                                                     ---------- ---------- --------- ---------- ----------
    Total cost of revenues                                  39         40        33         34         43
                                                     ---------- ---------- --------- ---------- ----------
Gross Profit                                                61         60        67         66         57
                                                     ---------- ---------- --------- ---------- ----------
Operating Expenses:
  Research and Development
        expenses, net                                       13         13        12          8         18
  Selling and Marketing expenses                            32         42        39         35         67
  General and Administrative
        expenses                                            11         13        13         16         21
  Restructuring and assets impairment                        -          -         -          -         17
                                                     ---------- ---------- --------- ---------- ----------
Total Operating Expenses                                    56         68        64         59        123
                                                     ---------- ---------- --------- ---------- ----------
Operating  Income  (Loss)                                    5         (8)        3          7        (66)

Interest and other income, net                               2          0         1          1          2
                                                     ---------- ---------- --------- ---------- ----------
Net  Income (Loss) before taxes                              7         (8)        4          8        (64)
Taxes on Income                                              0          -         -          -          -
                                                     ---------- ---------- --------- ---------- ----------
Net Income (Loss)                                           7%        (8%)        4%         8%       (64%)
                                                     ---------- ---------- --------- ---------- ----------
</TABLE>


<TABLE>
<CAPTION>

Revenues

                                                              Revenue Breakdown
                                                              -----------------

                                --------------- --------------- --------------- --------------- ---------------
                                     2006           % Change           2005          % Change          2004
                                     ----           ---------          ----          --------          ----

                                                                (In thousands)
<S>                                  <C>             <C>                <C>            <C>              <C>

Revenues:
   Software license                   $ 12,145             47%          $8,235           (22%)         $10,603
  Percentage of total revenues             37%                             34%                             47%
  Services                              20,286             28%          15,832             31%          12,102
  Percentage of total revenues             63%                             66%                             53%
                                ---------------                 ---------------                 ---------------
Total Revenues                        $ 32,431             35%        $ 24,067              6%        $ 22,705
                                ---------------                 ---------------                 ---------------
</TABLE>


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20-F ClickSoftware Technologies Ltd.                                    Page 25
<PAGE>



Revenues increased 35% to $32.4 million in 2006, compared with $24.1 million in
2005, and $22.7 million in 2004. The growth rates we achieved in 2006 were due
to strong revenues in North America and our expansion into new industry vertical
markets. The moderate growth rate we achieved in 2005 was due to the fact that
our channel sales did not grow as quickly as anticipated and weak sales in North
America due to longer sales cycles.

<TABLE>
<CAPTION>

                                                     Revenues By Territory
                                                     ---------------------
                    -------------- --------------- ------------- --------------- -------------- ---------------
                        2006         % Revenues        2005        % Revenues        2004         % Revenues
                        ----         ----------        ----        ----------        ----         ----------

                                                           (In thousands)
<S>                     <C>           <C>              <C>          <C>              <C>          <C>

Revenues:
North America             $12,155         37%        $6,477              27%         $6,998             31%
Europe                     14,606         45%        12,706              53%         12,056             53%
Israel                        305          1%           107               0%             12              0%
Asia Pacific                5,365         17%         4,777              20%          3,639             16%
                    --------------             -------------                  --------------
Total Revenues            $32,431        100%       $24,067             100%        $22,705            100%
                    --------------             -------------                  --------------
</TABLE>


In 2006, 45% of our revenues were generated in Europe (with 19% in the United
Kingdom, 13% in Germany), 37% in North America (with 34% in the United States),
and 18% in Asia Pacific. Revenues in North America nearly doubled compared to
2005. The increase in revenues in North America were attributed to the following
factors: (a) a recovery in the overall economic climate in the United States,
(b) the deregulation of, and a stronger emphasis on efficiency and profitability
in, the utilities market, and (c) our emphasis on new vertical markets,
including the retail sector. Specifically, at the end of 2005 and during 2006,
we signed significant contracts with utilities in North America.

In 2005, 53% of our revenues were generated in Europe (with 30% in the United
Kingdom, 14% in Germany), 27% in North America (with 23% in the United States),
and 20% in Asia Pacific. The slight increase in the percentage of revenues from
the Asia Pacific in 2005 was due to increased sales of our products to new and
existing customers.

In 2004, 53% of our revenues were generated in Europe (with 22% in the United
Kingdom, 20% in Germany), 31% in North America (with 23% in the United States),
and 16% in Asia Pacific.

Software Licenses

As reflected in the table entitled "Revenue Breakdown" above, software license
revenues were $12.1 million or 37% of revenues in 2006, compared with $8.2
million or 34% of revenues in 2005, and $10.6 million or 47% of revenues in
2004. The increase in software license revenues from 2005 to 2006 by $3.9
million or 47% was primarily due to our ability to attract and implement
large-scale projects, particularly in North America. The decrease in software
license revenues from 2004 to 2005 by $2.4 million or 22% was primarily due to
the fact that a larger portion of our business involves significant
implementation services that are recognized under contract accounting methods,
resulting in slower recognition.

Services

Service revenues in 2006 were $20.3 million or 63% of revenues, compared with
$15.8 million or 66% of revenues in 2005, and $12.1 million or 53% of revenues
in 2004. The increase in service revenues from 2005 to 2006 is primarily due to
increased implementation services and an increase in post-contract support
agreements. The increase in service revenues from 2004 to 2005 is primarily due
to increased implementation services and an increase in post-contract support
agreements.

Cost of Revenues

Cost of revenues consists of cost of software license revenues and cost of
services. Cost of software license revenues consists of expenses related to
costs of software purchased or licensed for resale, royalties payments


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20-F ClickSoftware Technologies Ltd.                                    Page 26
<PAGE>


to the Chief Scientist and media duplication and packaging of our products.
Cost of services consists of expenses related to salaries and expenses of our
professional services organizations, costs related to third-party consultants,
equipment costs and royalties payments to the Chief Scientist.

Cost of revenues was $12.6 million or 39% of gross revenues in 2006, compared
with $9.8 million or 40% of revenues in 2005, and $7.5 million or 33% of
revenues in 2004. The increase in the cost of revenues from 2005 to 2006 is
primarily due to higher costs associated with meeting increased demand for our
software and services. The increase in the cost of revenues from 2004 to 2005 is
primarily due to higher costs associated with meeting increased demand for our
software and services. We expect our cost of revenues on an absolute basis to
continue to increase in 2007 as a natural consequence of the projected growth of
our revenues.

Cost of Software Licenses

Cost of software license revenues were $2.0 million or 6% of revenues in 2006,
compared with $1.5 million or 6% of revenues in 2005, and $1.1 million or 5% of
revenues in 2004. The increase in cost of software license revenues from 2005 to
2006 was primarily due to an increase in revenues from third-party licenses and
adaptors to other ERP and CRM systems sold during these years, resulting in
higher third-party costs, and an increase in royalties paid to the Chief
Scientist with respect to all license revenues. The increase in cost of software
license revenues from 2004 to 2005 despite the decrease in software license
revenues was primarily due to an increase in revenues from third party licenses
and adaptors to other ERP and CRM systems sold during these years, resulting in
higher third party costs.

Cost of Services

Cost of service revenues were $10.6 million or 33% of revenues in 2006, compared
with $8.3 million or 34% of revenues in 2005, and $6.4 million or 28% of
revenues in 2004. The increase in the cost of services from 2005 to 2006 by $2.3
million or 28% was primarily due to increased demand for our services. As a
result, we increased our related payroll expenses by $1.8 million, and increased
our use of third-party contractors by $0.2 million. In addition, there was an
increase in royalties paid to the Chief Scientist. The increase in the cost of
services from 2004 to 2005 by $1.9 million or 29% was primarily due to increased
demand for our services. As a result, we increased our related payroll expenses
by $0.6 million, and increased our use of third party contractors by $1.0
million. In addition, there was an increase in royalties paid to the Chief
Scientist.

Gross Profit

Gross profit was $19.9 million or 61% of revenues in 2006, compared with $14.3
million, or 60% of revenues, in 2005, and $15.2 million, or 67% of revenues, in
2004. The increase in gross margins from 2005 to 2006 by $5.6 million or 39% was
primarily due to higher margins generated from software license revenues and a
change in the revenue mix in favor of higher-margin software license revenues.
The decrease in gross profit from 2004 to 2005 by $0.9 million or 6% was
primarily due to a change in the revenue mix in favor of lower-margin services
revenues.

Operating Expenses

Operating expenses are categorized into research and development expenses,
selling and marketing expenses, general and administrative expenses, and share
based compensation.

Total operating expenses were $18.1 million or 56% of revenues in 2006, compared
with $16.4 million or 68% of revenues in 2005, and $14.5 million or 64% of
revenues in 2004.

The increase in operating expenses from 2005 to 2006 by $1.7 million or 11%
reflects an increase in our research and development activities and an increase
in general and administrative expenses. The main cost increases were payroll
costs and adoption of SFAS No. 123-R, which added $0.4 million to 2006 operating
expenses. The increase in operating expenses from 2004 to 2005 by $1.9 million
or 13% mainly reflects an increase in our selling and marketing expenses
activities as we expanded our activities and personnel to support these efforts
and an increase in research and development activities. The reduction in
operating expenses as a percentage of revenues is a result of our achievement of
efficiencies and economies of scale in our selling and marketing organization.

Research and Development Expenses, Net

Research and development expenses consist primarily of personnel costs to
support product development, net of grants received from the Chief Scientist. In
return for some of these grants, we are obligated to pay the

_______________________________________________________________________________
20-F ClickSoftware Technologies Ltd.                                    Page 27
<PAGE>


Israeli government royalties as described below which are included in cost of
revenues. Software research and development costs incurred prior to the
establishment of technology feasibility are included in research and
development expenses as incurred. Software development costs incurred
subsequent to the establishment of technological feasibility through the
period of general market availability of the products are capitalized, if
material, after consideration of various factors, including net realizable
value. To date, software development costs that are eligible for
capitalization have not been material and have been expensed.

Research and development expenses, net of related grants, were $4.1 million or
13% of revenues in 2006, compared with $3.1 million or 13% of revenues in 2005,
and $2.7 million or 12% of revenues in 2004. Research and development expenses,
prior to participation grants from the Chief Scientist, totaled $4.5 million for
the year ended December 31, 2006, compared with $3.6 million for the year ended
December 31, 2005, and $3.1 million for the year ended December 31, 2004. We
received or accrued grants from the Chief Scientist in the amount of $0.4
million in 2006, compared with $0.5 million in 2005, and $0.4 million in 2004.
The increase in research and development expenses from 2005 to 2006 by $1.0
million, or 31%, was primarily due to an increase in the number of our research
and development personnel and related payroll costs, which resulted in an
increase of $0.7 million in payroll, a decrease of $0.1 million in grants
received from the Office of the Chief Scientist and an increase of $0.2 million
in other costs. The increase in research and development expenses from 2004 to
2005 by $0.4 million, or 15%, was primarily due to an increase in the number of
our research and development personnel and related payroll costs, which resulted
in an increase of $0.6 million in payroll, an increase of $0.1 million in grants
received from the Office of the Chief Scientist and a decrease of $0.1 million
in other costs.

Selling and Marketing Expenses

Selling and marketing expenses consist primarily of personnel and related costs
for marketing and sales functions, including related travel, direct advertising
costs, expenditures on trade shows, market research and promotional printing.

Selling and marketing expenses were $10.3 million or 32% of revenues in 2006,
compared with $10.1 million or 42% of revenues in 2005, and $8.9 million or 39%
of revenues in 2004. The increase in the selling and marketing expenses from
2005 to 2006 by $0.2 million or 2% was due to an increase in payroll expenses.
The increase in selling and marketing expenses from 2004 to 2005 by $1.2 million
or 13% was due to an increase in the number of employees that resulted in an
increase of $0.8 in related payroll expenses and an increase in our selling and
marketing expenses activities by $0.4 million. The reduction in selling and
marketing expenses as a percentage of revenues from 2005 to 2006 is a result of
our achievement of efficiencies and economies of scale.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel and related
costs for corporate functions, including information services, finance, legal,
accounting, human resources, facilities, provision for doubtful accounts and
costs related to our status as a public company.

General and administrative expenses were $3.7 million or 11% of revenues in
2006, compared with $3.1 million or 13% of revenues in 2005, and $2.8 million or
13% of revenues in 2004. General and administrative expenses included $48,000 as
an increase in provision in bad debt charges in 2006, the amount of $3,000 as a
reduction in provision in bad debt charges in 2005, and $180,000 as a reduction
in bad debt charges in 2004. General and administrative expenses without bad
debt charges were $3.6 million in 2006, $3.1 million in 2005, and $3 million in
2004. The increase of $0.5 million in general and administrative expenses from
2005 to 2006, excluding bad debt charges, was primarily due to an increase in
payroll expenses of $0.4 million, a decrease of $0.2 million in other general
and administrative expenses and an increase in amortization of stock-based
compensation by $0.3 million. The increase of $0.1 million in general and
administrative expenses from 2004 to 2005, excluding bad debt charges, was
primarily due to an increase in payroll expenses of $0.2 million and a decrease
of $0.1 million in other general and administrative expenses.

Amortization of Stock-Based Compensation

Compensation cost related to stock options is recognized in operating results
(included in cost of revenues, research and development, selling and marketing,
general and administrative expenses) under SFAS No. 123R.

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20-F ClickSoftware Technologies Ltd.                                    Page 28
<PAGE>


Interest and Other Income, Net

Interest and other income includes interest income earned on our cash, cash
equivalents and short and long-term investments, offset by interest expense, and
also include the effects of foreign currency fluctuations.

Interest income net of interest expenses, was $484,000 or 2% of revenues in
2006, compared with $122,000 in 2005, and $179,000 or 1% of revenues in 2004.
The increase in interest income from 2005 to 2006 is attributable to a
combination of an increase in our cash and investments and improved returns on
our investments. The decrease in interest income from 2004 to 2005 is
attributable to losses from currency fluctuations in 2005 compared to 2004,
which was partially mitigated by an increase in interest income in 2005.

Income Taxes

Our tax rate will mainly reflect a mix of the U.S. statutory tax rate on our
U.S. income, the U.K statutory tax rate on our U.K. income, the Belgium
statutory tax rate on our Belgian income, the German statutory tax rate on our
German income, the Australian tax rate on our Australian income and the Israeli
tax rate discussed elsewhere in this annual report.

As of December 31, 2006, net operating loss carry forwards in Israel amounted to
approximately $22.5 million compared with $22.4 million in 2005. Additional tax
loss carry forwards of approximately $23.5 million and $7.5 million remain
attributable to our U.S. subsidiary and the European subsidiaries, respectively.
The Israeli and the European net operating loss carry forwards have no
expiration date. The U.S. net operating loss carry forwards will expire
gradually from 2009 through 2024.

Net Income (Loss)

Net income for 2006 was $2.1 million or 7% of revenues, compared with a net loss
of $2.0 million or 8% of revenues in 2005, and net income of $0.9 million or 4%
of revenues in 2004.


5B.      Liquidity and capital resources


Our cash and investments increased by $6.0 million or 43% to $19.8 million as of
December 31, 2006, compared with $13.8 million as of December 31, 2005, which
was an increase of $1.8 million or 15%, compared with $12.0 million as of
December 31, 2004. Our primary sources of cash and investments, net, during 2006
were cash flows of $5.7 million generated from operations and $0.5 million from
exercises of employee stock options. Our primary sources of cash and
investments, net, during 2005 were cash flows of $2.0 million generated from
operations and $0.2 million from exercises of employee stock options.

As of December 31, 2006, we had cash and cash equivalents of approximately $13.4
million, short-term investments of approximately $5.9 million and long-term
investments of approximately $0.5 million. As of December 31, 2006,
approximately $0.5 million in long-term investments had been deposited with
banks to secure letters of credit totaling approximately $0.5 million, which are
described below. Our cash, short-term investments and long-term investments are
invested or deposited in low-risk and predominantly U.S-dollar denominated
investments and bank deposits.

<TABLE>
<CAPTION>

                                                                   Cash and Investments
                                                                      December 31,
                                                                      ------------
                                          ------------- -------------- ------------- ------------- --------------
                                              2006        % Change         2005        % Change        2004
                                              ----        --------         ----        --------        ----

                                                                      (In thousands)
<S>                                           <C>         <C>              <C>          <C>           <C>

        Cash and cash equivalents              $13,385                      $10,467                      $ 4,196
        Short-term investments                   5,918                        3,111                        7,533
        Long-term investments                      451                          264                          264
                                          -------------                -------------               --------------
        Total Cash and investments             $19,754            43%       $13,842           15%        $11,993
                                          -------------                -------------               --------------

</TABLE>


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20-F ClickSoftware Technologies Ltd.                                    Page 29
<PAGE>


For the year ended December 31, 2006, net cash provided by operations was $5.7
million, comprised of net income of $2.1 million, an increase in trade
receivables of $2.3 million, a decrease in other receivables of $0.1 million, an
increase in accounts payable of $ 1.0 million, and an increase in deferred
revenues of $3.4 million, which was partially offset by non-cash charges of $1.4
million. Cash-flows generated from operations in 2006 were positively influenced
by the prepayment of long-term support fees by one of our customers in the
amount of $2.5 million.

For the year ended December 31, 2005, net cash provided by operations was $2.0
million, comprised of net loss of $2.0 million, a decrease in trade receivables
of $1.2 million, an increase in other receivables of $0.1 million, an increase
in accounts payable of $ 0.2 million, and an increase in deferred revenues of
$2.1 million, which was partially offset by non-cash charges of $0.6 million.

For the year ended December 31, 2004, net cash provided by operations was $0.7
million, comprised of net income of $0.9 million, an increase in trade
receivables of $2.0 million, an increase in other receivables of $0.3 million,
an increase in accounts payable of $0.7 million, and an increase in deferred
revenues of $0.7 million, which was partially offset by non-cash charges of $0.7
million.

In September 2006, our Tel Aviv office was damaged by fire. In October 2006, we
moved to our new location in Givat Shmuel, Israel. The majority of losses we
suffered in the fire are covered by our insurance policies and we believe that
there was no material impact on our operations or financial performance. We have
yet to finalize our claim with our insurance company but expect to do so by the
middle of 2007. As of December 31, 2006, we had received $0.8 million from our
insurance policy as advance payments out of which $0.4 million was booked as
proceeds from disposal of equipment and the remaining as an offset of extra
expenses incurred by us.

Net cash used in investment activities was $3.2 million in 2006, consisting of
$3.0 million invested primarily in deposits, $0.5 million provided by disposal
of equipment and $0.7 million used for purchases of equipment and systems,
including computer equipment and fixtures and furniture and for leasehold
improvements. Net cash provided by investment activities was $4 million in 2005,
consisting of $4.4 million generated primarily from bank deposits and $0.4
million used for leasehold improvements and purchases of equipment and systems,
including computer equipment and fixtures and furniture. Net cash used in
investment activities was $4.5 million in 2004, of which $3.9 million was
primarily invested in bank deposits and $0.6 million invested in leasehold
improvements and purchases of equipment and systems, including computer
equipment and fixtures and furniture.

Net cash provided by financing activities was $0.5 million in 2006, as a result
of the employee options exercises. Net cash provided by financing activities was
$0.2 million in 2005, as a result of the employee options exercises. Net cash
provided by financing activities was $0.3 million in 2004, as a result of the
employee options exercises and ESPP purchases.

As of December 31, 2006, we had outstanding trade receivables of approximately
$6.5 million, which represented approximately 20% of 2006 total revenues. As of
December 31, 2005, we had outstanding trade receivables of approximately $4.1
million, which represented approximately 17% of 2005 total revenues. As of
December 31, 2004, we had outstanding trade receivables of approximately $5.3
million, which represented approximately 23% of 2004 total revenues. Our trade
receivables are typically between 30 and 60 days, although we also negotiate
longer payment plans with some of our clients. Days sales outstanding ("DSO"),
calculated based on revenues for the most recent quarter and accounts receivable
at the balance sheet date, decreased to 62 DSO as of December 31, 2006, compared
with 63 DSO as of December 31, 2005, and 70 DSO as of December 31, 2004.

As of December 31, 2006, we had $0.6 million in purchasing commitments for
capital expenditures, mainly for computer equipment, replacing equipment lost in
the fire. We expect this amount to be covered by our insurance policies.

Since inception, we have received aggregate payments from the Government of
Israel through the Office of the Chief Scientist of the Ministry of Industry and
Trade in the amount of $8.5 million related to research and development. In
return for the Government of Israel participation, we are committed to pay
royalties at a rate of 3% to 5% of sales of the developed product, up to
100%-150% of the amount of grants received with annual interest of LIBOR as of
the date of approval for programs approved from 1999 and thereafter. As of
December 31, 2006, we had paid or accrued royalties related to the results of
research and development in the amount of $5.9 million. The estimated current
net commitment is approximately $2.6 million. The refund of


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20-F ClickSoftware Technologies Ltd.                                    Page 30
<PAGE>


the grant is contingent on future sales, and we have no obligation to refund
these grants, if sufficient sales are not generated.

Our capital requirements depend on numerous factors, including market demand and
acceptance of our products, the resources we devote to developing, marketing,
selling and supporting our products, the timing and extent of establishing
additional international operations and investments in computers and office
equipment. We intend to continue investing significant resources in our selling
and marketing, research and development operations in the future and investments
in computers and office equipment. In 2005, we generated a net loss while in
2006 we returned to profitability. We may not be able to maintain profitability,
as our ability to maintain our profitability on a quarterly basis is largely
dependent on the receipt of large orders in each quarter and our ability to
control our expenses. If we are not successful in doing so, we will be required
to seek new, external sources of financing, which may not be available to us on
favorable terms, or at all. If additional funds are raised through the issuance
of equity or debt securities, these securities could have rights, preferences
and privileges senior to those of holders of ordinary shares, and the terms of
these securities could impose restrictions on our operations. The sale of
additional equity or convertible debt securities could result in additional
dilution to out shareholders.

We believe that we will have sufficient cash to fund our operations for at least
the next 12 months.


5C.        Research and development

We have invested significant time and resources in creating a structured process
for undertaking all product development projects. These include documenting
product requirements, specifying product features and workflow, developing the
software, performing quality assurance and creating documentation and packaging.
Our research and development center in Israel is ISO 9001 compliant and
continuously updates its software development procedures to maintain an ongoing
improvement process and high quality products.

Our future research and development strategies will concentrate on strengthening
our product offerings in decision support, forecasting, capacity and shift
planning and monitoring and schedule optimization; continuing to enhance the
technology and scalability of our products; continuing to improve our mobile and
location-based capabilities; and continuing the development of offerings for
specific vertical industries. The company invested $4.1 million in 2006, $3.1
million in 2005 and $2.7 million in 2004 for research and development.


5D.      Trend information

We are operating in a market that we believe is mostly untapped. We are seeing
increasing demand for cost-effective solutions in the service workforce
optimization markets, based on recently issued requests for proposals. Our
customers are seeking turnkey end-to-end solutions. With our service
optimization suite and our mobile and location-based services, we believe we are
well-positioned to cover these needs.

Large system integrators are building practices around the service optimization
market, another positive indication of the traction in this market. Our strategy
is to continue to increase marketing efforts through our channels and large
system integrators. We intend to expand our marketing and implementation
capacity through these third parties, and expect to enhance sales by taking
advantage of the market presence of these third parties.

Our quarterly results of operations may be subject to significant fluctuations
due to several factors, primarily the timing of large orders, which represent a
significant percentage of our revenues, customer budget cycles and impact on the
timing for buying decisions, competitive pressures, the ability of our partners
to become effective in selling and marketing our products, and other factors.

The portion of services revenues decreased last year, while the portion of
license revenues increased. The increase in license revenues is attributable to
our ability to sign license deals with new and repeat customers. We believe we
will continue to win contracts involving large implementation efforts due to our
attractive product offering and positioning in the market. We expect license and
professional services revenues to continue to grow in absolute terms in 2007,
while maintaining license and professional services ratios comparable to 2006 or
a slight change in favor of license revenue.


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20-F ClickSoftware Technologies Ltd.                                    Page 31
<PAGE>


We believe that the interest in service optimization solutions has increased
over the last few years. Large service organizations are looking for
sophisticated solutions to improve their planning and utilization capabilities.
We believe this trend will continue in 2007 and beyond.


Our largest vertical market has traditionally been the telecommunications
market. However, in the last two years, we have seen strong demand in the
utility market as a result of deregulation and modernization trends. Our other
vertical markets show healthy growth as well. We believe that this trend will
continue. We see positive trends in our North American and European markets. In
addition, we see potential in developing countries, such as China and India, and
we will approach those markets mainly through partnering channels.


5E.        Off-balance sheet arrangements

Except for the arrangements with the Chief Scientist and the performance bonds
to certain customers as discussed in Item 5B above and Item 5F below, we do not
have any off-balance sheet arrangements.


5F.      Contractual obligations

We have various commitments primarily related to guarantees, letters of credit
and capital lease obligations. The following table provides details regarding
our contractual cash obligations and other commercial commitments as of December
31, 2006:

<TABLE>
<CAPTION>

------------------------------ ------------------- -------------------------------------------------------------
                                                                 Amount of Commitment Expiration
Commercial Commitments         Total Amounts                        Per Period (in thousands)
                               Committed (in       -------------------------------------------------------------
                               thousands)                      2007                           2009
------------------------------ ------------------- -------------------------------------------------------------

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

Guarantees/Letters of
Credit                                $451                     $219                           $232
------------------------------ ------------------- ------------------------------ ------------------------------

</TABLE>

<TABLE>
<CAPTION>

----------------------- ----------------------------------------------------------------------
Contractual                             Payments Due By Period (in thousands)
Obligations                             ------------------------------------
----------------------- ----------------------------------------------------------------------
<S>                           <C>                  <C>            <C>           <C>

                              Total         Less than 1 year     2-3 years       4-5 years
----------------------- ------------------ ------------------- --------------- ---------------
  Lease Obligations          $1,625               $695              $862            $68
----------------------- ------------------ ------------------- --------------- ---------------
</TABLE>

We have entered into standby letter of credit agreements with banks and
financial institutions primarily relating to the guarantee of rental agreements
and future performance on certain contracts. As of December 31, 2006, contingent
liabilities on outstanding letter of credit agreements aggregated approximately
$0.5 million. We do expect to renew most of these letters of credit. The letters
of credit are secured by $0.5 million in deposits to cover potential payments
under the guarantees.

As permitted under Israeli law, we have agreements whereby we indemnify our
officers and directors for certain events or occurrences while the officer or
director is, or was serving, at our request in such capacity. The
indemnification period covers all pertinent events and occurrences during the
officer's or director's lifetime. We have director and officer insurance
coverage that may limit our exposure and may enable us to recover a portion of
any future amounts paid. In addition to the insurance coverage, we have agreed
to indemnify our directors in an amount not to exceed $20 million, for all
persons and all events to be indemnified, for certain events and occurrences
while the director is, or was serving, at our request in such capacity in
accordance with the Indemnification Agreements entered into with the directors,
which are substantially in the form of the Amended Form of Indemnification
Agreement filed as Exhibit 4.12 to this annual report.



_______________________________________________________________________________
20-F ClickSoftware Technologies Ltd.                                    Page 32
<PAGE>



5G.         Safe Harbor

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This annual report contains certain forward-looking statements (as such term is
defined in Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934) and information relating to us that are based
on the beliefs of our management as well as assumptions made by and information
currently available to our management, including statements related to products,
markets, and future results of operations and profitability, and may include
implied statements concerning market acceptance of our products, and our growing
leadership role in the marketplace. In addition, when used in this annual
report, the words "likely," "will," "suggests," "may," "would," "could,"
"anticipate," "believe," "estimate," "expect," "intend," "plan, "predict" and
similar expressions and their variants, as they relate to us or our management,
may identify forward-looking statements. Such statements reflect our judgment as
of the date of this annual report with respect to future events, the outcome of
which are subject to certain risks that may have a significant impact on our
business, operating results or financial condition, including the risk factors
described in Item 3D - Risk factors. Investors are cautioned that our
forward-looking statements are inherently uncertain. Should one or more of the
risks that we describe in this annual report or other uncertainties materialize,
or should underlying assumptions prove incorrect, actual results or outcomes may
vary materially from those described herein. We undertake no obligation to
update forward-looking statements, whether as a result of new information,
future events or otherwise.


ITEM 6.           DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


6A.      Directors and senior management

Senior Management

The members of our executive management are as follows:

<TABLE>
<CAPTION>

Name                         Age    Position
----                         ---    --------
<S>                          <C>    <C>
Dr. Moshe BenBassat          59     Chief Executive Officer and Chairman of the Board
Shmuel Arvatz                44     Executive Vice President and Chief Financial Officer
Hannan Carmeli               48     Chief Operating Officer

</TABLE>



DR. MOSHE BENBASSAT co-founded ClickSoftware and has served as our Chairman and
Chief Executive Officer since inception. From 1987 to 1999, Dr. BenBassat served
as a Professor of Information Systems at the Faculty of Management at Tel-Aviv
University. Dr. BenBassat has also held academic positions at the University of
Southern California and the University of California in Los Angeles. From 1996
to January 1999, Dr. BenBassat also served as a board member of Tadiran
Telecommunications Inc., a telecommunications company. From 1990 to 1996, Dr.
BenBassat served as a board member of Tadiran Electronic Systems Ltd., a defense
electronics company. Dr. BenBassat holds Bachelor of Science, Master of Science
and PhD. degrees in Mathematics and Statistics from Tel-Aviv University.

SHMUEL ARVATZ has served as our Executive Vice President and Chief Financial
Officer since October 2002. Prior to joining ClickSoftware, Mr. Arvatz served as
the Chief Financial Officer at Shrem, Fudim, Kelner Technologies Ltd., a leading
investment house in Israel. From June 1999 to February 2001, Mr. Arvatz served
as Executive Vice President and Chief Financial Officer of Tecnomatix
Technologies Ltd., a provider of software e-manufacturing solutions. From 1990
to 1999, Mr. Arvatz served as Vice President and Chief Financial Officer at ADC
Israel Ltd. (previously Teledata Communications Ltd., a telecommunications
equipment provider which was acquired by ADC Telecom Inc. in 1998). Mr. Arvatz
holds a B.A. in Accounting and Economics from Bar-Ilan University in Tel Aviv,
Israel and is a Certified Public Accountant in Israel.

HANNAN CARMELI has served as our COO since March 2006. Previously, he served as
our Executive Vice President of Sales & Professional Services since August 2004.
Prior to this position, he managed our Professional Services organizations
worldwide since the beginning of 2001. From August 1996 to December 2000, Mr.
Carmeli held various executive roles including General Manager of the ClickFix
Division as well as


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20-F ClickSoftware Technologies Ltd.                                    Page 33
<PAGE>


Manager of Product Services and Operations. Prior to joining us, Mr. Carmeli
held R&D and field positions with various software vendors ranging from
software development through product management and sales management. Mr.
Carmeli holds a Bachelor of Science degree from the Technion Institute of
Technology in Haifa, Israel and a Master of Science degree in Computer Science
from Boston University.

Executive officers serve at the discretion of the Board. The employment of each
of our executive officers is at will and may be terminated at any time, with or
without cause, subject to contractual notice provisions. There are no family
relationships between any of our directors or executive officers.

Directors

Our Articles of Association currently provide for a board of directors of not
less than two members nor more than eleven members. We have a classified board
of directors as set forth below:


 NAME OF DIRECTOR AND CLASS               TERM EXPIRES            AGE
----------------------------             --------------          -----

James W. Thanos, Class I                     2007                  58
Roni A. Einav, Class II                      2008                  62
Gil Weiser, Class II                         2008                  65
Moshe BenBassat, Class III                   2009                  59
Israel Borovich, external director           2007                  65
Naomi Atsmon, external director              2009                  54
Dan Falk, external director                  2009                  62


JAMES THANOS has served as a director since May 2000. Mr. Thanos has served as
Executive Vice President, Worldwide Field Operations of BroadVision, Inc., an
ecommerce software company from October 1999 to June 2002. From March 1998 to
October 1999, Mr. Thanos served as BroadVision's Vice President and General
Manager, Americas. Prior to working for BroadVision, Mr. Thanos served as Senior
Vice President of Worldwide sales at Aurum Software, a sales force automation
company. Mr. Thanos is a member of the board of directors of SupportSoft,
Covigna, and Corticon. Mr. Thanos holds a Bachelor of Arts degree in
International Relations and a Bachelor of Arts degree in Behavioral Sciences
from Johns Hopkins University.

RONI EINAV has served as a director since April 2000. Mr. Einav is the General
Manager of Einav High-Tec Assets Ltd., an investment company focused on
technology ventures, founded by him in 1995. From 1983 to April 1999, Mr. Einav
served as Chairman of the Board of Directors of New Dimension Software, Ltd., a
systems software company he had founded, which was subsequently acquired by BMC
Software for over $650 million. Mr. Einav serves on the board of directors of
Advantec, XciTel, Eurekify, Xenia, Impactia, M-Photo and Ivivo. Mr. Einav has
also played a key role in founding approximately a dozen other software
companies, including Liraz Computers, Jacada Ltd., M-Photo, Ivivo, Impactia,
Axxana, Eurekify, XciTel, CeDimension, ComDa, Computer Systems and Einav
Systems. Mr. Einav was a Major in the Israeli Defense Forces and served as a
systems analyst in a research and development division. Mr. Einav holds a
Bachelor of Science degree in Management and Industrial Engineering as well as a
Master of Science degree in Operations Research from the Technion Institute,
Haifa, Israel.

GIL WEISER has served as a director since May 2003. Mr. Weiser has been active
in the high tech environment for the past thirty years, with experience ranging
from design engineering to management of international companies, as well as
community and public activities, from serving the Shevach/Mofet High School to
chairing the Haifa University Executive Board. Mr. Weiser is currently the CEO
of Orsus Solutions Ltd., an Israeli high-tech company, and is chairman or a
member of the board of directors of the following companies: Fundtech, a
software company; BBP, a subsidiary of Fundtech; Carmel, a company connected
with Haifa University; and Optibase, a video communication company. Mr. Weiser
was also a member of the board of directors of the Tel Aviv Stock Exchange
(2002-2004). From January to December 2002, Mr. Weiser was the Acting Vice
Chairman for ORAMA, an international investment banking group. From 1995 to
2000, Mr. Weiser served as Chief Executive Officer of Hewlett-Packard Israel, a
technology company. From 1993 to 1995, Mr. Weiser served as Chief Executive
Officer of Fibronics Corporation, a communication company. From 1976 to 1993,
Mr. Weiser served as Chief Executive Officer of Digital Israel, a computing


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20-F ClickSoftware Technologies Ltd.                                    Page 34
<PAGE>


company. Mr. Weiser is Chairman of the Executive Committee of Haifa University.
Mr. Weiser was the Vice Chairman of the Israel Management Center, heading the
multi-national forum, and is a member of the Israel High-Tech Association
Executive Committee. Mr. Weiser holds a Bachelor of Science degree in Electrical
Engineering from the Technion Institute and a Master of Science degree in
Electronics/Computers from the University of Minnesota in Minneapolis.

DR. ISRAEL BOROVICH has served as a director since July 1997 and as an external
director according to the Israeli Companies Law since July 2001. Dr. Borovich
currently serves as Chairman of El Al Israel Airlines Ltd. From 1988 until 2004,
Dr. Borovich served as President and CEO of Arkia Israeli Airlines Ltd. and
Knafaim-Arkia Holdings Ltd., an investment management company. Dr. Borovich
serves as Chairman of Ayalon Highways (Israel) Ltd. Dr. Borovich also serves as
a director and Deputy Chairman of Knafaim Holdings, Ltd., an investment
management company. Dr. Borovich served as a Professor on the Faculty of
Management of Tel Aviv University where he is currently a Professor Emeritus.
Dr. Borovich holds Bachelor of Science and Master of Science degrees in
Industrial Engineering and a Ph.D. degree in Operations Research from the
Polytechnic Institute in Brooklyn.

NAOMI ATSMON has served as a director since May 2003. Ms. Atsmon was employed by
Amdocs Ltd., a customer care and billing software company, from 1986 until the
end of 2002. From 1997 until 2002, Ms. Atsmon served as a Division President at
Amdocs Ltd., managing large scale billing projects for telephone companies in
North America and Europe, with overall responsibility for the profit and loss
statement of the division. From 1994 until 1997, Ms. Atsmon served as a Vice
President at Amdocs Ltd. From 1991 until 1994, she was a director for Amdocs
Ltd. in charge of software development and customer relations with one of the
largest telephone companies in the United States. Prior to joining Amdocs Ltd.,
Ms. Atsmon was a project manager at Bank Hapoalim, in charge of a large
financial project for the bank controller. From 1976 to 1981, Ms.Atsmon was a
system analyst with Agrexco Ltd. Ms. Atsmon also currently serves as a board
member of Jacada Ltd., a software provider. Ms. Atsmon holds a Bachelor of
Science degree in Management & Industrial Engineering from the Technion
Institute, and studied business administration at Tel-Aviv University.

DAN FALK has served as a director since May 2003. Mr. Falk served as the
Chairman of the Board of Directors of Atara Technology Ventures Ltd., an Israeli
company engaged in investment in advanced technology enterprises from 2000 to
May 2003. He is also a member of the Boards of Directors of Orbotech Ltd., Nice
Systems Ltd., Orad Ltd., Netafim Ltd., Plastopil Ltd., Dmatek Ltd., Nova
Measuring Systems Ltd., Attunity Ltd., Jacada Ltd., Ormat Technology Inc.
(publicly traded on NYSE), and Poalim Ventures I. From July 1999 to November
2000, Mr. Falk served as President and Chief Operating Officer of Sapiens
International Corporation N.V., a company engaged in the development of software
solutions for large-scale, cross-platform systems. Mr. Falk was Executive Vice
President of Orbotech Ltd., a high technology company, from August 1995 to July
1999, and between June 1994 and August 1995 served as its Executive Vice
President and Chief Financial Officer. From October 1992 until June 1994, Mr.
Falk was Vice President and Chief Financial Officer of Orbotech Ltd. Mr. Falk
was Director of Finance and Chief Financial Officer of Orbot Systems,
predecessor of Orbotech Ltd., from 1985 until 1992. Mr. Falk received a Master
of Business Administration degree in 1973 from the Hebrew University School of
Business and had 15 years experience in finance and banking, including senior
positions at Israel Discount Bank Ltd., prior to joining Orbot.


6B.      Compensation

The aggregate compensation paid to all our directors and officers during 2006
was approximately $1.5 million in salaries, directors' fees, and bonuses. In
addition, we granted 333,000 options to our officers and directors at an average
exercise price of $1.78 per share. Options expire seven to ten years after the
date of the grant.

The employment agreements of the executive officers provide that the employment
relationship is "at-will" and may be terminated at any time by either the
Company or the executive. The agreements provide that in the event the executive
resigns his employment from the company or the executive is terminated by the
Company without cause, the executive will be entitled to severance payments in
amounts equal to twelve months of annual base salary as of the date of
termination for Dr. BenBassat and three months of base salary as of the date of
termination for Mr. Arvatz and Mr. Carmeli (plus, in the case of Mr. Arvatz and
Mr. Carmeli, a severance amount due in accordance with applicable law). Our
executive officers participate in a bonus plan in which they will receive
bonuses based on achieving company goals on revenues and operating profit, and
based on achieving personal goals. CEO goals are determined on a yearly basis by
the Compensation Committee, and goals of the executive officers are set by the
CEO.


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<PAGE>


6C.        Board practices

We are subject to the provisions of the Companies Law, which requires, in part,
that at least two External Directors (as such term is defined in the Companies
Law) serve on our Board of Directors. A person may not qualify as an External
Director if he/she, or his/her relative, partner, employer or any entity under
his/her control has or had at any time during the previous two years, any
"affiliation" with the company, any entity controlling the company or any entity
controlled by the company or by this controlling entity. In addition, no
individual may serve as an External Director if the individual's position or
other activities create or may create a conflict of interest with his/her role
as an External Director. For a period of two years from termination of office, a
former External Director may not serve as a member of the Board of Directors or
employee of the company or provide professional services to the company for
compensation.

External Directors must be elected by the shareholders. The term of an External
Director is three years and may generally be extended, subject to shareholder
approval, for additional terms of three years. All External Directors must serve
on the company's Audit Committee and at least one External Director must serve
on any other committee maintained by the company's Board of Directors.

There are no service contracts between us or any of our subsidiaries and our
directors in their capacity as directors providing for benefits upon termination
of employment, except for the termination provisions included in the employment
agreement of officers that also act as directors and that concern solely their
termination from their positions as employees.

We have entered into indemnification agreements with our directors and senior
management in an attempt to ensure continued service in an effective manner. The
indemnification agreements provide protection against personal liability due to
an act performed or failure to act in the capacity as a director or officer. For
further details, see Section 5F, above.

Audit Committee

The audit committee consists of Ms. Atsmon, Dr. Borovich, Mr. Falk and Mr.
Weiser, each of whom is "independent," as such term is defined under Rule
4200(a)(15) of the listing standards of the National Association of Securities
Dealers. Our board of directors has determined that Mr. Falk also qualifies as a
"financial expert" within the meaning of SEC and Nasdaq rules. The audit
committee provides assistance to the board of directors in fulfilling its legal
and fiduciary obligations with respect to matters involving the accounting,
auditing, financial reporting and internal control functions of our company and
our subsidiaries as well as complying with the legal requirements under Israeli
law and the Sarbanes-Oxley Act of 2002. Functions of the audit committee
include:

     o  To assist our board of directors to oversee our accounting and financial
        policies, internal controls, and financial reporting practices.

     o  To maintain and facilitate communication between our board of directors
        and our financial management and our auditors.

     o  Through, among other things, consultation with our internal and external
        auditors, to detect irregularities in the management of our business and
        our internal controls procedures.

     o  To communicate on a regular basis with our outside auditors and review
        their operation and remuneration.

     o  To decide whether to approve acts or related-party transactions
        involving directors, executive officers, controlling shareholders and
        third parties.

Our audit committee convenes at least once per quarter to review our quarterly
financial results and to address other matters within the committee's
responsibilities.


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<PAGE>


Compensation Committee

Our compensation committee is comprised of James Thanos, Gil Weiser, and Israel
Borovich, and meets as necessary several times per year regarding employee
compensation matters. Functions of the compensation committee include:

     o  To discharge the responsibilities of the board of directors relating to
        compensation of executive officers.

     o  To establish a compensation structure which allows us to attract and
        retain executive officers.


6D.        Employees

At December 31, 2006, we employed 194 full time employees. Of these employees,
109 were based in our facilities in Israel, 29 in the United States, 16 in Asia
Pacific and 40 in Europe. The following is a detailed breakdown of persons
employed by main category of activity:

                                              YEAR ENDED DECEMBER 31,

Department                            2006            2005             2004

Services                                79              70               55
Research & Development                  45              46               34
Sales and Marketing                     41              40               43
General and Administrative              29              24               22
                               ---------------------------------------------
Total                                  194             180              154
                               ---------------------------------------------

We believe that our relations with our employees are good. Neither our employees
nor we are party to any collective bargaining agreements, except for provisions
of such agreements that are applicable to the industry by virtue of extension
orders issued under applicable Israeli laws.

Israeli law and certain provisions of the nationwide collective bargaining
agreements between the Histadrut (General Federation of Labor in Israel) and the
Coordinating Bureau of Economic Organizations (the Israeli federation of
employers' organizations) apply to our Israeli employees. These provisions
principally concern the maximum length of the work day and the work week,
minimum wages, paid annual vacation, contributions to a pension fund, insurance
for work-related accidents, procedures for dismissing employees, determination
of severance pay and other conditions of employment. We provide our employees
with benefits and working conditions above the required minimums. Furthermore,
pursuant to such provisions, the wages of most of our employees are subject to
cost of living adjustments, based on changes in the Israeli CPI. The amounts and
frequency of such adjustments are modified from time to time. Israeli law
generally requires the payment of severance pay upon the retirement or death of
an employee or upon termination of employment by the employer or, in certain
circumstances, by the employee. We currently fund our ongoing severance
obligations for our Israeli employees by making monthly payments for insurance
policies and severance funds. Severance payment expenses amounted to $603,000 in
2006, $352,000 in 2005, and $336,000 in 2004.

Israeli law also provides that employment arrangements with employees not in
senior managerial positions, or whose working conditions and circumstances do
not facilitate employer supervision of their hours of work, must provide for
compensation that differentiates between compensation paid to employees for a 43
hour work week or for maximum daily work hours and compensation for overtime
work. The vast majority of our employment compensation arrangements are fixed
and do not differentiate between compensation for regular hours and overtime
work. Therefore, we may face potential claims from these employees asserting
that the fixed salaries do not compensate for overtime work.


6E.        Share ownership

As of March 31, 2007, each of the individuals listed in Item 6A beneficially
owned less than 1% of our ordinary shares, with the exception of Dr. Moshe
BenBassat, who owned 4,334,022 shares and 1,140,392 options.

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20-F ClickSoftware Technologies Ltd.                                    Page 37
<PAGE>



We have established a number of employee option plans containing terms and
conditions for the vesting and exercising of options granted to employees for
the purchase of our ordinary shares.

Our umbrella stock option plan was adopted in 2000. In April 2003, we commenced
a voluntary stock option exchange program for our employees. Under the program
participating employees were given the opportunity to have unexercised stock
options previously granted to them cancelled, and to receive replacement options
at a future date. Replacement options were granted at a ratio of between 50% and
5% for each option cancelled, at an exercise price equal to the fair market
value of our ordinary shares on the date of the re-grant. Pursuant to the terms
of the offer, 279,118 options were cancelled at May 2003. We granted 39,840
replacement options in December 2003 at an exercise price of $4.39. During 2003,
the board of directors increased the reserve for grants under the umbrella
option plan, the Amended and Restated 2000 Share Option Plan (the "ESOP"), by
400,000 options effective January 1, 2004. During 2005, the board of directors
increased the reserve for grants under ESOP, by 450,000 options effective
January 1, 2006. During 2006, the board of directors ratified an automatic
increase of the reserve for grants under the ESOP by 1,250,000 effective January
1, 2007. In 2001 we adopted the 2000 Approved U.K. Share Scheme for our
employees in the United Kingdom and in 2003 we adopted the 2003 Israeli Share
Option Plan for our employees in Israel, both of which are pursuant to the ESOP.
We adopted an Employee Stock Purchase Plan (ESPP) in 2000, details of which are
set forth in Note 12(C) of the financial statements.

Options generally have a term of between seven and ten years. Earlier
termination may occur if the employee's employment with us is terminated or if
certain corporate changes or transactions occur. Our board of directors
determines the grant and the exercise price at the time the options are granted.

The exercise price per share is usually granted at the approximate fair market
value of the shares on the date of grant, as determined by the closing price for
our ordinary shares as reported by Nasdaq on the date prior to the date of grant
for incentive stock options.

Each stock option agreement specifies the date and period over which the option
becomes exercisable. Options granted by us generally vest over a period of four
years. Vesting is conditional upon employee remaining continuously employed by
the company or its subsidiaries.

On December 5, 2005, the board of directors approved the accelerated vesting of
unvested employee stock options granted to employees and officers with exercise
prices of $1.75 or above. Options to purchase approximately 0.8 million shares
became exercisable immediately. The accelerated options, which are considered
vested as of December 5, 2005, have exercise prices ranging from $1.75 to $4.25
per share. The number and exercise prices of the shares involved are unchanged.
The vesting acceleration enables us to avoid recognizing in our income statement
compensation expense associated with these options in future periods, upon
adoption of FASB Statement NO. 123R (Share-Based Payment) in January 2006. As a
result of this change, we expect to reduce the after tax stock option expense we
otherwise would have been required to record by approximately $2 million over a
4-year period. This estimate is subject to change and is based on estimated
value calculations using the Black-Scholes methodology.


ITEM 7.           MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

7A.      Major shareholders

The following table sets forth, as of March 31, 2007, the total number of
ordinary shares beneficially owned by (i) all shareholders known to us to own
more than 5% of our outstanding ordinary shares, and (ii) all of our directors
and executive officers as a group.

                                             Ordinary Shares Beneficially Owned
                                             ----------------------------------

Name and Address                               Number           Percent
------------------                             ------           -------

Dr. Moshe BenBassat (1)                        5,474,414        18.7%
Austin W. Marxe and David M. Greenhouse (2)    4,142,481        14.8%
G.  Nicholas Farwell (3)                       3,008,100        10.7%
Officers and directors as a group (4)          6,354,061        21.8%
(10 persons)

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<PAGE>



(1)      Includes, in addition to the ordinary shares held by Dr. BenBassat (i)
         1,140,392 options for ordinary shares held by Dr. BenBassat that are
         exercisable within 60 days of the date stated above and (ii) 2,246,887
         ordinary shares held by Idit BenBassat, which may be deemed to be
         beneficially owned by Dr. BenBassat.

(2)      As reported on Amendment No. 3 to the Schedule 13G filed with the SEC
         on February 14, 2007 in a joint filing by Austin W. Marxe and David M.
         Greenhouse. Messrs. Marxe and Greenhouse own the ordinary shares
         through various investment vehicles.

(3)      As reported on schedule 13G filed with the SEC on January 27, 2005 by
         G. Nicholas Farwell.

(4)      Includes (i) 1,996,667 ordinary shares for which options granted to
         officers and directors are exercisable within 60 days of the date
         stated above, and (ii) 2,246,887 ordinary shares held by Idit
         BenBassat, which may be deemed to be beneficially owned by Dr.
         BenBassat. Does not include 272,625 ordinary shares for which options
         granted to officers and directors are outstanding but are not currently
         or within 60 days exercisable.


Changes in the percentage of ownership of major shareholders during the past
three years were as follows:

<TABLE>
<CAPTION>

                                                 31-Dec                       31-Dec
                                                  2003                         2006
                                                                %                              %
                                                             ---------                     ----------
<S>                                               <C>         <C>               <C>          <C>

Total shares                                     27,080,955                    27,994,626

G. Nicholas Farwell                               2,745,000     10.1%           3,008,100      10.7%
R.S Investment Management Co.                     1,716,937      6.3%                   -          -
Columbia Wagner                                   1,660,000      6.1%                   -          -
Austin W. Marxe and David M. Greenhouse                   -         -           4,142,481      14.8%

</TABLE>


Our major shareholders do not have different voting rights from each other or
other shareholders.


7B.      Related party transactions

     During the past three years, we have engaged in no material commercial
     transactions with related parties, nor are there any outstanding loans to
     related parties concerning this period of time.

     The following table sets forth information with respect to transactions
     between the Company and Nester Ltd., a company controlled by Dr. Moshe
     BenBassat:

<TABLE>
<CAPTION>

                                                                          YEAR ENDED DECEMBER 31,
                                                                        2006        2005       2004
                                                                        ----        ----       ----
                                                                              (in thousands)
<S>                                                                     <C>         <C>        <C>

     Amounts received by the Company from Nester for general and
     administrative expenses:                                                $25       $74          $86
     Amounts received by Nester from the Company for the purchase
     of office equipment:                                                      -       $10            -

</TABLE>



7C.      Interests of experts and counsel

Not applicable.


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20-F ClickSoftware Technologies Ltd.                                    Page 39
<PAGE>


ITEM 8.           FINANCIAL INFORMATION


8A.      Consolidated statements and other financial information

See Item 18 - Financial Statements.

Export Sales

Export sales in 2006 were $32.1 million or 99.1% of revenues, compared with
$24.0 million or 99.6% of revenues in 2005, and $22.7 million, or 100 % of
revenues in 2004.

Dividends

We currently intend to retain earnings, if any, for use in our business. We have
never declared or paid cash dividends and have no intention to pay any cash
dividends on our capital stock in the foreseeable future.

Legal Proceedings

From time to time, we are involved in various routine legal proceedings
incidental to the ordinary course of our business. We do not believe that the
outcome of these pending legal proceeding will have a material adverse effect on
our business or consolidated financial condition


8B.      Significant changes

Except as disclosed elsewhere in this annual report, there have been no other
significant changes since December 31, 2006.


ITEM 9.           THE OFFER AND LISTING


9A.      Offer and listing details

Our ordinary shares are listed for trading on Nasdaq. The following table sets
forth for the periods listed the high and low closing prices of our ordinary
shares on Nasdaq. These prices are over-the-counter market quotations which
reflect inter-dealer prices, without retail mark-up, mark-down or commission and
may not necessarily represent actual transactions.


                                              High             Low
                                              ----             ---

Annual Information
2002                                         2.25              0.08
2003                                         4.95              0.12
2004                                         5.28              1.20
2005                                         2.89              1.28
2006                                         3.56              1.40

Quarterly Information
First quarter 2005                           2.89              2.05
Second quarter 2005                          2.41              1.67
Third quarter 2005                           1.99              1.61
Fourth quarter 2005                          1.95              1.28
First quarter 2006                           2.00              1.40
Second quarter 2006                          1.79              1.54
Third quarter 2006                           2.51              1.64
Fourth quarter 2006                          3.56              2.31


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<PAGE>



Monthly Information
October 2006                                 2.94              2.31
November 2006                                3.44              2.74
December 2006                                3.56              2.90
January 2007                                 4.00              3.07
February 2007                                4.07              3.36
March 2007                                   3.46              3.13


9B.      Plan of distribution

Not applicable.


9C.      Market for ordinary shares

Our ordinary shares have been quoted on the NASDAQ Capital Market under the
symbol CKSW since August 29, 2002 (except between November 6, 2002 and March 6,
2003, when they were quoted under the symbol CKSWE).


9D.      Selling shareholders

Not applicable.


9E.      Dilution

Not applicable.


9F.      Expenses of the issue

Not applicable.


ITEM 10.          ADDITIONAL INFORMATION

10A.     Share capital

Not applicable


10B. Memorandum and articles of association

The information required by Item 10B was previously reported in our Form 20-F
filing for the year ending December 31, 2005 (file number 000-30827) and is
incorporated herein by reference.


10C. Material contracts not in the ordinary course of business

We have entered into an employment agreement with Moshe BenBassat, our Chief
Executive Officer. The agreement provides that the employment relationship is
"at-will" and may be terminated at any time by either us or Dr. BenBassat with
or without cause. The agreement provides that in the event Dr. BenBassat's
employment is terminated other than for cause, he will be entitled to severance
payments in amounts equal to twelve months of annual base salary as of the date
of termination. Dr. BenBassat is entitled to full acceleration of option vesting
in the event of a change in control. The right to receive the contractual


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severance benefits set forth above will immediately terminate if Dr. BenBassat
is terminated for cause, as defined in the employment agreements.


10D.     Exchange controls

There are currently no Israeli currency control restrictions on payments of
dividends or other distributions with respect to our ordinary shares or the
proceeds from the sale of shares, except for the obligation of Israeli residents
to file reports with the Bank of Israel regarding certain transactions. However,
legislation remains in effect pursuant to which currency controls can be imposed
by administrative action at any time.

Non-residents of Israel who purchase our securities with non-Israeli currency
will be able to repatriate dividends (if any), liquidation distributions and the
proceeds of any sale of such securities, into non-Israeli currencies at the rate
of exchange prevailing at the time of repatriation, provided that any applicable
Israeli taxes have been paid (or withheld) on such amounts.

Neither our Articles of Association nor the laws of the State of Israel restrict
in any way the ownership or voting of ordinary shares by non-residents of
Israel, except with respect to citizens of countries that are in a state of war
with Israel.


10E.     Taxation

The following is a summary of the current tax structure, which is applicable to
companies in Israel, with special reference to its effect on us. The following
also contains a discussion of material Israeli and U.S. tax consequences to
persons purchasing our ordinary shares and government programs from which we and
some of our group companies benefit. To the extent that the discussion is based
on new tax legislation, which has yet to be subject to judicial or
administrative interpretation, there can be no assurance that the views
expressed in the discussion will accord with any such interpretation in the
future. The discussion is not intended and should not be construed as legal or
professional tax advice and is not exhaustive of all possible tax
considerations. In July 2002, the Israeli Parliament approved a law enacting
extensive changes to Israel's tax law (the "Tax Reform Legislation") generally
effective January 1, 2003. Among the key provisions of the Tax Reform
Legislation are (i) changes which may result in the imposition of taxes on
dividends received by an Israeli company from its foreign subsidiaries; and (ii)
the introduction of the "controlled foreign corporation" concept according to
which an Israeli company may become subject to Israeli taxes on certain income
of a non-Israeli subsidiary if the subsidiary's primary source of income is
passive income (such as interest, dividends, royalties, rental income or capital
gains). An Israeli company that is subject to Israeli taxes on the income of its
non-Israeli subsidiaries will receive a credit for income taxes paid/withheld or
that will be paid/withheld by the subsidiary in its country of residence,
according to the terms and conditions determined in the Israeli Tax Ordinance.

The following summary is included herein as general information only and is not
intended as a substitute for careful tax planning. Accordingly, each investor
should consult his or her own tax advisor as to the particular tax consequences
to such investor of the purchase, ownership or sale of an ordinary share,
including the effect of applicable state, local, foreign or other tax laws and
possible changes in tax laws.

Israel Corporate Tax Considerations
-----------------------------------

General Corporate Tax Structure

Income not eligible for "Approved enterprise" benefits is taxed in 2006 at a
regular corporate tax rate of 31%. The tax rate will be reduced in subsequent
tax years as follows: in 2007 29%, in 2008 27%, in 2009 26% and thereafter 25%.
This change does not have a material effect on the Company's financial
statements. However, the effective rate of tax payable by a company which
derives income from an "Approved Enterprise" may be considerably lower - see
discussion below.


Law for the Encouragement of Capital Investments, 1959

General. Certain of our production and development facilities have been granted
approved enterprise status pursuant to the Law for the Encouragement of Capital
Investments, 1959 (the "Investment Law"). The


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Investment Law provides that a capital investment in eligible facilities may,
upon application to the Investment Center of the Ministry of Industry and
Trade of the State of Israel, or the Investment Center, be designated as an
Approved Enterprise. Each certificate of approval for an Approved Enterprise
relates to a specific investment program delineated both by its financial
scope, including its capital sources, and by its physical characteristics,
e.g., the equipment to be purchased and utilized pursuant to the program. The
tax benefits derived from any such certificate of approval relate only to
taxable income attributable to the specific Approved Enterprise.

Subject to certain provisions concerning income and subject to the Alternative
Benefits (see below), any distributed dividends are deemed attributable to the
entire enterprise, and the effective tax rate and the effective withholding tax
rates represent the weighted combination of the various applicable tax rates.

Tax Benefits. Taxable income of a company derived from an Approved Enterprise is
subject to company tax at the rate of up to 25%, instead of the tax rates under
the "General Corporate Tax Structure" above, for a certain period of time. The
benefit period is a period of seven years commencing in the year in which the
Approved Enterprise first generates taxable income. The benefits may be shorter
as it is limited to 12 years from the commencement of production of the Approved
Enterprise or 14 years from the date of approval, whichever is earlier. Under
certain circumstances (as further detailed below), the benefit period may extend
to a maximum of ten years or fifteen years (see the 2005 Amendment below) from
the commencement of the benefit period. A company which operates under more than
one approval or that has capital investments which are only partly approved
(such a company being designated as a Mixed Enterprise), may have an effective
company tax rate that is the result of a weighted combination of the various
applicable rates.

A company owning an approved enterprise which was approved after April 1, 1986
may elect to forego the entitlement to grants or state guarantees and apply for
an alternative package of tax benefits. These benefits provide that
undistributed income from the approved enterprise is fully tax exempt from
corporate tax for a defined period, which ranges between two and ten years from
the first year of taxable income, subject to the limitations described above,
depending principally upon the geographic location within Israel and the type of
the approved enterprise. Upon expiration of such period, the approved enterprise
is eligible for a beneficial tax rate (25% or lower in the case of an FIC, as
described below), for the remainder of the otherwise applicable period of
benefits, as described above.

Should the percentage of share capital of the companies having Approved
Enterprises held by foreign shareholders exceed 25%, future Approved Enterprises
of such companies would qualify for reduced tax rates for an additional three
years, after the seven years mentioned above. The company tax rate applicable to
income earned from Approved Enterprise programs (currently, for programs on
which an application for an approved enterprise status was submitted before
December 31, 2004) in the benefit period by a company meeting these
qualifications is as follows:

 % of Foreign Ownership                                 Tax Rate
----------------------                                  --------

Over 25% but less than 49%                              25%
 49% or more but less than 74%                          20%
 74% or more but less than 90%                          15%
 90% or more                                            10%

Entitlement to these tax benefits for enterprises to which Investment Center
granted an Approved Enterprise status prior to December 31, 2004 (see the 2005
Amendment below) is subject to the final ratification of the Investment Center,
and is conditioned upon fulfillment of all terms of the approved program.
However, there can be no assurance that we will obtain approval for additional
Approved Enterprises, or that the provisions of the Investment Law will not
change with respect to future approvals, or that the above-mentioned
shareholding portion will be reached for each subsequent year. In the event of
our failure to comply with these conditions, the tax and other benefits could be
canceled, in whole or in part, and we might be required to refund the amount of
the canceled benefits, together with the addition of CPI linkage difference and
interest. We believe that our Approved Enterprise substantially complies with
all such conditions at present, but there can be no assurance that it will
continue to do so. The undistributed income derived from each of our approved
enterprise programs is tax-exempt for a two year period beginning with the first
year in which it generates otherwise taxable income and is subject to a reduced
tax rate for the remainder of the benefit period.

A company that pays a dividend out of income derived from the Approved
Enterprise(s) during the tax exemption period will be subject to deferred
company tax in respect of the amount distributed (including the


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<PAGE>



recipient's tax thereon) at the rate which would have been applicable had such
company not elected the Alternative Package. This rate is generally 10% to
25%, depending on the extent to which non-Israeli shareholders hold such
company's shares.

The dividend recipient is taxed at the reduced rate applicable to dividends from
Approved Enterprises (generally 15% as compared to 25% for individuals or an
exemption for companies), if the dividend is distributed during the tax benefit
period or within 12 years after this period. However, the limitation does not
apply if the company qualifies as a foreign investors' company. This tax must be
withheld by such company at source, regardless of whether the dividend is
converted into foreign currency.

Subject to certain provisions concerning income subject to Mixed Enterprises,
all dividends are considered to be attributable to the entire enterprise and the
effective tax rate on the dividend is the result of a weighted combination of
the various applicable tax rates. However, such company is not obliged to
distribute exempt retained profits under the Alternative Package, and such
company may generally decide from which year's profits to declare dividends.

Each application to the Investment Center is reviewed separately, and a decision
as to whether or not to approve such application is based, among other things,
on the then prevailing criteria set forth in the Investment Law, on the specific
objectives of the applicant company set forth in such application and on certain
financial criteria of the applicant company. Accordingly, there can be no
assurance that any such application by any of our group companies will be
approved. In addition, the benefits available to an Approved Enterprise are
conditional upon the fulfillment of certain conditions stipulated in the
Investment Law and its regulations and the criteria set forth in the certificate
of approval, as described above. In the event that these conditions are
violated, in whole or in part, a company with an Approved Enterprise would be
required to refund the amount of tax benefits, with the addition of the Israeli
consumer price index linkage differences and interest.

A company which qualifies as a foreign investment company (FIC) is a company,
like us, in which more than 25% of the share capital (in terms of shares, rights
to profit, voting rights and appointment of directors) and of the combined share
and loan capital is owned, directly or indirectly, by non-residents of Israel
and is therefore entitled to further tax benefits relating to its approved
enterprises. Such a company will be eligible for an extension of the period of
tax benefits for its approved enterprises (up to ten years) and further tax
benefits, should the level of foreign ownership in it increase above 49%.

Notwithstanding the foregoing, proceeds received from the sale of our products
may be deemed to be royalties under the domestic law of the country of residence
of the purchaser/licensee or under an applicable tax treaty and as such subject
to withholding tax in such country.

Where withholding tax is paid by our company to the country of residence of the
purchaser/licensee, such tax would generally be creditable by our company for
Israeli income tax purposes, pursuant to any relevant income tax treaty and
under Israeli law against income derived from the same source. However, where we
do not have taxable income for Israeli tax purposes because of the application
of a tax exemption available to an Approved Enterprise or because of losses for
tax purposes, we would have no Israeli tax liability against which to credit the
foreign tax withheld and paid by us. Furthermore, under Israeli law, if certain
conditions are not met we may not carry forward such unused credit to utilize in
future tax years.

From time to time, the Government of Israel has discussed reducing the benefits
available to companies under the Investment Law and currently such proposal is
pending. The termination or substantial reduction of any of the benefits
available under the Investment Law could have a material adverse effect on
future investments by our company in Israel.

Notwithstanding the foregoing, on March 29, 2005, the Israeli Parliament passed
an amendment to the Investment Law, which revamps the Israeli tax incentives for
future industrial and hotel investments (the "2005 Amendment"). A tax "holiday"
package can now be elected for up to 15 years for a "Privileged Enterprise" as
defined in the 2005 Amendment, if certain conditions are met, without needing to
obtain approval. The extent of the tax benefits available depends upon the level
of foreign investment.

The 2005 Amendment became effective on April 1, 2005. Taxpayers may, under
certain conditions, claim Privileged Enterprise status for new and expanded
enterprises with respect to 2004 or subsequent years, unless the Investment
Center granted such taxpayer Approved Enterprise status prior to December 31,
2004.

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Subject to certain conditions, various alternative tax-only benefit packages can
now be elected with respect to investments in a "Privileged Enterprise", without
prior approval. Companies in industry or tourism in Israel may elect between:

* Tax "holiday" package - for a "Privileged Enterprise": a tax exemption
applies to undistributed profits for 2 to 15 years depending on geographical
location of the "Privileged Enterprise" and the level of foreign ownership.
Company tax rates of between 10% and 25% apply to distributed exempt profits or
profits derived subsequent to the exempt period. The total period of tax
benefits is 7 to 15 years, or

* Grant / Reduced tax package - for an "Approved Enterprise": Fixed asset
grants of between 20% and 32% for enterprises in a development area and reduced
company tax rates between 0% and 25% for a period of 7 to 15 years.

Dividend withholding tax also applies at a rate of 4% or 15% depending on the
package selected and the residency of the shareholder.

Grants under the Law for the Encouragement of Industrial Research and
Development, 1984.

Israeli tax laws have allowed, under certain conditions, a tax deduction for
expenditures (including capital expenditures) in scientific research and
development projects, if the expenditures are approved or funded by the
Government of Israel and the research and development is for the promotion of
the enterprise and is carried out by or on behalf of the company seeking such
deduction. Expenditures not approved as above or funded are deductible in equal
portions over a three-year period.

Under the law for the Encouragement of Industrial Research and Development, 1984
(the "Research Law"), research and development programs that meet specified
criteria and are approved by a committee of the Chief Scientist, are eligible
for grants of up to 50% of the program's expenses. Under the provisions of
Israeli law in effect until 1996, royalties of 2%-3% of the revenues derived in
connection with products developed according to, or as a result of, a research
and development program funded by the Chief Scientist had to be paid to the
State of Israel. Pursuant to an amendment effected in 1996 effective with
respect to Chief Scientist programs funded in or after 1994, royalties at the
rate of 3% during the first three years, 4% over the following three years and
5% in or after the seventh year of the revenues derived in connection with
products developed according to such programs are payable to the State of
Israel. The maximum aggregate royalties will not exceed 100% (or, for funding
prior to 1994, 100%-150%) of the dollar-linked value of the total grants
received. Pursuant to an amendment effected in 2000, effective with respect to
Chief Scientist programs funded in or after 2000, the royalty rates described
above were updated to 3% during the first three years and 3.5% in or after the
fourth year, of the revenues derived in connection with products developed under
such programs. Pursuant to an amendment effected on January 1, 1999, effective
with respect to Chief Scientist programs approved in or after 1999, funds
received from the Chief Scientist shall bear annual interest at a rate equal to
LIBOR for twelve months.

Generally, the Research Law requires that the manufacturing of any product
developed through research and development funded by the Government of Israel
shall be in Israel. It also provides that know-how from the research and
development that is used to produce the product may not be transferred to third
parties without the approval of a research committee of the Chief Scientist.
Such approval is not required for the export of any products resulting from such
research and development.

However, under the Regulations, in the event that any portion of the
manufacturing is not performed in Israel, if approved by the Chief Scientist, we
would be required to pay an increased royalty at the rates of 120%, 150% or 300%
of the grant if the manufacturing portion that is performed outside of Israel is
less than 50%, between 50% and 90% and more than 90%, respectively.

In 2002, the Research Law was amended to, among other things, enable companies
applying for grants from the Chief Scientist to seek prior approval for
conducting manufacturing activities outside of Israel without being subject to
increased royalties. However, this amendment will not apply to any of our
existing grants. In addition, the amendment provides that one of the factors to
be taken into consideration by the Chief Scientist in deciding whether to
approve a grant application is the percentage of the manufacturing of the
relevant product that will be conducted outside of Israel. Accordingly, should
we seek additional grants from the Chief Scientist in connection with which we
also seek prior approval for manufacturing products outside of Israel, we may
not receive such grant or may receive a grant in an amount that is less than the
amount we sought.

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Law for the Encouragement of Industry (Taxes), 1969

Pursuant to the Law for the Encouragement of Industry (Taxes), 1969, a company
qualifies as an "Industrial Company" if it is a resident of Israel and at least
90% of its gross income in any tax year (exclusive of income from certain
defense loans, capital gains, interest and dividends) is derived from an
"industrial enterprise" it owns. An "industrial enterprise" is defined as an
enterprise whose major activity, in a given tax year, is industrial
manufacturing.

We believe that we currently qualify as an Industrial Company. Accordingly, we
are entitled to certain tax benefits, including a deduction of 12.5% per annum
on the purchase of patents or certain other intangible property rights (other
than goodwill) used for the development or promotion of the industrial
enterprise over a period of eight years beginning with the year in which such
rights were first used.

The tax laws and regulations dealing with the adjustment of taxable income for
local inflation provide that an industrial enterprise is eligible for special
rates of depreciation deductions. These rates vary in the case of plant and
machinery according to the number of shifts in which the equipment is being
operated and range from 20% to 40% on a straight-line basis, or 30% to 50% on a
declining balance basis (instead of the regular rates which are applied on a
straight-line basis).

Moreover, industrial enterprises which are Approved Enterprises (see above) can
choose between (a) the special rates referred to above and (b) accelerated
regular rates of depreciation applied on a straight-line basis with respect to
property and equipment, generally ranging from 200% (with respect to equipment)
to 400% (with respect to buildings) of the ordinary depreciation rates during
the first five years of service of these assets, provided that the depreciation
on a building may not exceed 20% per annum. In no event may the total
depreciation exceed 100% of the cost of the asset.

In addition, Industrial Companies may (i) elect to file consolidated tax returns
with additional related Israeli Industrial Companies and (ii) deduct expenses
related to public offerings in equal amounts over a period of three years.

Eligibility for benefits under the Encouragement of Industry Law is not
contingent upon the approval of any governmental authority. No assurance can be
given that we will continue to qualify as an Industrial Company, or will avail
ourselves of any benefits under this law in the future or that Industrial
Companies will continue to enjoy such tax benefits in the future.

Employee Stock Options

Effective from January 1, 2003, the Tax Reform Legislation enables a company to
grant options through one of three tax tracks:

(a) the earned income track through a trustee pursuant to which the optionee
pays income tax rate as earned income (according to the marginal tax rate of the
optionee- up to 49% tax in 2006) plus payments to the National Insurance
Institute and health tax on the profit gained upon the earlier to occur of the
transfer of the options or the underlying shares from the trustee to the
optionee or the sale of the options or the underlying shares by the trustee, and
the company may recognize expenses pertaining to the options for tax purposes.
The options (or upon their exercise, the underlying shares), must be held by a
trustee for a period of 12 months commencing from the date the stock options
were granted and deposited with a trustee; or

(b) the capital gains tax track through a trustee pursuant to which the optionee
pays capital gains tax at a rate of 25% on the profit upon, the earlier to occur
of the transfer of the options or the underlying shares from the trustee to the
optionee or the sale of the options or the underlying shares by the trustee.
However, if the underlying shares are listed in a stock exchange or will be
listed within 90 days after the date of grant, then the difference (if any)
between the average value of the underlying shares within 30 days prior to date
of grant or 30 days subsequent to the date of the listing of the shares, as
appropriate, and the exercise price is taxed as earned income rather than
capital gain. The optionee is not required to make payments to the National
Insurance Institute and health tax in respect of the portion of the income
classified as capital gain. The Company may not recognize expenses relating to
the options for tax purposes except in respect of the portion of income
recognized as earned income. The options (or upon their exercise, the underlying
shares), must be held by a trustee for a period of 24 months from the date the
stock options were granted and deposited with a trustee ; or

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(c) the track without a trustee pursuant to which the optionee pays income tax
rate as earned income (according to the marginal tax rate of the optionee up to
49% tax in 2006) plus payments to the National Insurance Institute and health
tax on the profit upon the sale of the underlying shares, and the company may
not recognize expenses pertaining to the options for tax purposes.

In accordance with the provisions of the Tax Reform Legislation, if a company
has selected the capital gains track, the company must continue granting options
under the selected capital gains track until the end of the year following the
year in which the first grant of options under that trustee track will be made.
Notwithstanding the above, the company may at any time also grant options under
the provisions of the earned income track without a trustee.

The above rules apply only to employees, including officer holders but excluding
controlling shareholders.

Taxation under Inflationary Conditions

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

Under the Inflationary Adjustments Law, results for tax purposes are measured in
real terms, in accordance with the changes in the consumer price index. In
addition, subject to certain limitations, depreciation of fixed assets and
losses carried forward are adjusted for inflation on the basis of changes in the
consumer price index.

The salient features of the Inflationary Adjustments Law can be described
generally as follows:

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

Subject to certain limitations, depreciation deductions on fixed assets and
losses carried forward are adjusted for inflation based on the increase in the
consumer price index (from the beginning of the 1982 fiscal year, and as of the
1985 fiscal year, with respect to equipment); and gains on the sale of certain
traded securities are taxable. However, dealers in securities are subject to the
regular tax rules applicable to business income in Israel.

Results for tax purposes are measured in real terms, in accordance with the
changes in the CPI. We are taxed under this law. The discrepancy between the
change in (i) the CPI and (ii) the exchange rate of the Israeli currency to the
dollar, each year and cumulatively, may result in a significant difference
between taxable income and other items as denominated in dollars as reflected in
our financial statements (which are reported in dollars). In addition, subject
to certain limitations, depreciation of fixed assets and losses carried forward
are adjusted for inflation on the basis of changes in the Israeli CPI.

Taxation of our Shareholders

Capital Gain

Capital gain tax is imposed on the disposal of capital assets by an Israeli
resident, and on the disposal of such assets by a non- Israel resident if those
assets are either (i) located in Israel; (ii) are shares or a right to a share
in an Israeli resident corporation (iii) represent, directly or indirectly,
rights to assets located in Israel. The Israeli Tax Ordinance distinguishes
between "Real Gain" and the "Inflationary Surplus". Real Gain is the excess of
the total capital gain over Inflationary Surplus computed generally on the basis
of the increase in the Israeli CPI between the date of purchase and the date of
disposal.

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The capital gain accrued by individuals on the sale of an asset purchased on or
after January 1, 2003 will be taxed at the rate of 20%. However, if the
individual shareholder is a "Controlling Shareholder" (i.e., a person who holds,
directly or indirectly, alone or together with other, 10% or more of one of the
Israeli resident company's means of control at the time of distribution or at
any time during the preceding 12 months period) such gain will be taxed at the
rate of 25%. In addition, capital gain derived by an individual claiming
deduction of financing expenses in respect of such gain will be taxed at the
rate of 25%. The real capital gain derived by a corporation will be generally
subject to tax at the rate of 25%. However, the real capital gain derived from
sale of securities, as defined in Section 6 of the Inflationary Adjustment Law,
by a corporation, which was subject upon December 31, 2005 to the provisions of
Section 6 of the Inflationary Adjustment Law, will be taxed at the corporate tax
rate (31% in 2006). The capital gain accrued at the sale of an asset purchased
prior to January 1, 2003 will be subject to tax at a blended rate. The marginal
tax rate for individuals (up to 49% in 2006) and the regular corporate tax rate
for corporations (31% in 2006) will be applied to the gain amount which bears
the same ratio to the total gain realized as the ratio which the holding period
commencing at the acquisition date and terminating on January 1, 2003 bears to
the total holding period. The remainder of the gain realized will be subject to
capital gains tax at the rates applicable to an asset purchased after January 1,
2003 (see aforementioned).

Individual and corporate shareholder dealing in securities in Israel are taxed
at the tax rates applicable to business income (in 2006 - 31% tax rate for a
corporation and a marginal tax rate of up to 49% for individual).
Notwithstanding the foregoing, if the shareholder is a non-Israeli resident,
then such taxation is subject to the provision of any applicable double tax
treaty. Moreover, capital gain derived from the sale of the shares by a
non-Israeli shareholder may be exempt under the Israeli income tax ordinance
from Israeli taxation provided the following cumulative conditions are met: (i)
the shares were purchased upon or after the registration of the shares at the
stock exchange, (ii) the seller doesn't have a permanent establishment in Israel
to which the derived capital gain is attributed, and (iii) if the seller is a
corporation, less than 25% of its means of control are held by Israeli resident
shareholders. In addition, the sale of the shares may be exempt from Israeli
capital gain tax under an applicable tax treaty. Thus, the U.S.-Israel Double
Tax Treaty exempts U.S. resident from Israeli capital gain tax in connection
with such sale, provided (i) the U.S. resident owned, directly or indirectly,
less than 10% of an Israeli resident company's voting power at any time within
the 12 - month period preceding such sale; (ii) the seller, being an individual,
is present in Israel for a period or periods of less than 183 days at the
taxable year; and (iii) the capital gain from the sale was not derived through a
permanent establishment of the U.S. resident in Israel.

Either the seller, the Israeli stockbroker or financial institution through
which the sold securities are held are obliged, subject to the above mentioned
exemptions, to withhold tax upon the sale of securities from the real capital
gain at the rate of 25% in respect of a corporation and 20% in respect of an
individual

Generally, within 30 days of a transaction a detailed return, including a
computation of the tax due, should be submitted to the Israeli Tax Authority,
and an advanced payment amounting to the tax liability arising from the capital
gain is payable. At the sale of traded securities, the aforementioned detailed
return may not be submitted and the advanced payment should not be paid if all
tax due was withheld at source according to applicable provisions of the Israeli
income tax ordinance and regulations promulgated thereunder. Capital gain is
also reportable on the annual income tax return.


Dividends


A distribution of dividend from income attributed to an "Approved Enterprise"
will be subject to tax in Israel at the rate of 15%, subject to a reduced rate
under any applicable double tax treaty. A distribution of dividend from income,
which is not attributed to an "Approved Enterprise" to an Israeli resident
individual will generally be subject to income tax at a rate of 20%. However, a
25% tax rate will apply if the dividend recipient is a "Controlling Shareholder"
(i.e., a person who holds, directly or indirectly, alone or together with other,
10% or more of one of the Israeli resident company's means of control at the
time of distribution or at any time during the preceding 12 months period). If
the recipient of the dividend is an Israeli resident corporation, such dividend
will be exempt from income tax provided the income from which such dividend is
distributed was derived or accrued within Israel.

Under the Israeli income tax ordinance, a non-Israeli resident (either
individual or corporation) is generally subject to an Israeli income tax on the
receipt of dividends at the rate of 20% (25% if the dividends recipient is a
"Controlling Shareholder" (as defined above)); those rates are subject to a
reduced tax rate under an applicable double tax treaty. Thus, under the Double
Tax Treaty concluded between the State of Israel and the U.S. the following
rates will apply in respect of dividends distributed by an Israeli resident
company to a U.S.

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resident: (i) if the U.S. resident is a corporation which holds during that
portion of the taxable year which precedes the date of payment of the dividend
and during the whole of its prior taxable year (if any), at least 10% of the
outstanding shares of the voting stock of the Israeli resident paying
corporation and not more then 25% of the gross income of the Israeli resident
paying corporation for such prior taxable year (if any) consists of certain
type of interest or dividends - the tax rate is 12.5%, (ii) if both the
conditions mentioned in section (i) above are met and the dividend is paid
from an Israeli resident company's income which was entitled to a reduced tax
rate applicable to an "approved enterprise" under the Israeli Law for the
Encouragement of Capital Investments of 1959- the tax rate is 15%, and (iii)
in all other cases, the tax rate is 25%. The aforementioned rates under the
Israel U.S. Double Tax Treaty will not apply if the dividend income was
derived through a permanent establishment of the U.S. resident in Israel.

An Israeli resident company whose shares are listed in a stock exchange is
obligated to withhold tax, upon the distribution of a dividend attributed to an
Approved Enterprise's income, from the amount distributed, at the following
rates: (i) Israeli resident corporation - 15%, (ii) Israeli resident individual
- 15%, and (iii) non-Israeli resident - 15%, subject to a reduced tax rate under
an applicable double tax treaty. If the dividend is distributed from an income
not attributed to the Approved Enterprise, the following withholding tax rates
will apply: (i) Israeli resident corporation - 0%, (ii) Israeli resident
individual - 20% (iii) non-Israeli resident - 20%, subject to a reduced tax rate
under an applicable double tax treaty.

Estate and Gift Tax

Israel law presently does not impose estate or gift tax.


United States Federal Tax Income Considerations
-----------------------------------------------

The following discussion is a summary of the material United States federal
income tax consequences of purchasing, holding and disposing of our ordinary
shares. This section is based on the United States Internal Revenue Code of
1986, as amended (the "Code"), Treasury regulations, judicial decisions and
published positions of the United States Internal Revenue Service (the "IRS"),
all as in effect on the date hereof. This discussion does not address all
aspects of United States federal income taxation (including potential
application of the alternative minimum tax) that may be relevant to a particular
shareholder based on such shareholder's particular circumstances. In particular,
the following discussion does not address the United States federal income tax
consequences of purchasing, holding or disposing of our ordinary shares to
shareholders who own (directly, indirectly or through attribution) 10% or more
of our outstanding voting stock or who are broker-dealers, insurance companies,
tax-exempt organizations, banks and other financial institutions, a person who
holds our ordinary shares as part of a straddle, constructive sale, hedge or
conversion transaction, a United States expatriate, a partnership or other pass
through entity or U.S. Holders (as defined below) whose functional currency is
not the U.S. dollar. The following discussion also does not address any aspect
of state, local or non-United States tax laws. Further, this summary generally
considers only a U.S. Holder that will own our ordinary shares as capital assets
(generally, assets held for investment). Each prospective investor should
consult its tax advisor with respect to the specific United States federal,
state and local tax consequences of purchasing, holding or disposing of our
ordinary shares.

Taxation of U.S. Holders

For purposes of this discussion, a "U.S. Holder" means any beneficial owner of
our ordinary shares that is not a partnership and that is for United States
federal income tax purposes, is: (i) a citizen or resident of the United States;
(ii) a corporation (or other entity or arrangement treated as a corporation or
partnership)organized in or under the laws of the United States or any state
thereof or the District of Columbia; (iii) an estate the income of which is
subject to United States federal income taxation regardless of source; or (iv) a
trust, if a United States court is able to exercise primary supervision over its
administration and one or more United States persons have the authority to
control all of its substantial decisions or a trust that was in existence on
August 10, 1996 and validly elected to continue to be treated as a domestic
trust. A "Non-U.S. Holder" is any beneficial owner other than a U.S. Holder. If
a partnership or any other entity or arrangement treated as a partnership holds
our ordinary shares, the United States federal income tax treatment of a partner
generally will depend upon the status of the partner and the activities of the
partnership. If you are a partner in a partnership holding our ordinary shares,
you should consult your tax advisor.

Distributions. We do not anticipate that we will make dividend distributions to
shareholders in the foreseeable future. If we do make any such distributions,
the gross amount of such distributions (before


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reduction for any Israeli withholding tax) will be included in the gross
income of U.S. Holders as dividend income to the extent of our earnings and
profits, as calculated under United States federal income tax principles. Such
dividends will not qualify for the dividends received deduction available in
certain circumstances to corporate holders. "Qualified dividend income"
received by individual U.S. Holders (as well as certain trusts and estates)
for taxable years beginning on or before December 31, 2010 generally will be
taxed at a preferential U.S. federal income tax rate (a maximum rate of 15 per
cent.) provided certain conditions are met, including a minimum holding
period. For this purpose, dividends paid by the Company will be "qualified
dividend income" provided that the Company is eligible with respect to
substantially all of its income for the benefits of the U.S.-Israel Tax Treaty
and the Company is not considered during the year the dividend is paid, or in
the preceding year, a "passive foreign investment company". U.S. Holders are
urged to consult their tax advisers regarding the availability of the
preferential rate in their particular circumstances. Subject to the PFIC
discussion below, to the extent that any such distribution exceeds our
earnings and profits, such distribution will be treated as a non-taxable
return of capital to the extent of the U.S. Holder's adjusted basis in our
ordinary shares and thereafter as taxable capital gain. For United States
federal income tax purposes, the amount of any dividend that we pay in NIS to
a U.S. Holder will equal the U.S. dollar value of such NIS at the exchange
rate in effect on the date the dividend is considered to be received by the
U.S. Holder, regardless of whether the NIS are actually converted into U.S.
dollars at that time. A U.S. Holder who receives a foreign currency
distribution and converts the foreign currency into U.S. dollars subsequent to
receipt will have foreign exchange gain or loss, based on any appreciation or
depreciation in the value of the foreign currency against the U.S. dollar,
which will generally be United States source ordinary income or loss.

Credit for Israeli Taxes Withheld. Any dividends that we pay to a U.S. Holder
with respect to our ordinary shares generally will be treated for United States
federal income tax purposes as foreign-source income. Subject to certain
conditions and limitations, any Israeli taxes withheld or paid with respect to
dividends on our ordinary shares generally will be eligible for credit against
the U.S. Holder's United States federal income tax liability. Such limitations
include extensive separate computation rules under which foreign tax credits
allowable with respect to specific classes of foreign-source income cannot
exceed the United States federal income taxes otherwise payable with respect to
such classes of income. Subject to the particular circumstances of a U.S.
Holder, any dividends with respect to our ordinary shares generally will be
classified as "passive category income," but could, in the case of certain U.S.
Holders, constitute "general category income". The rules relating to computing
foreign tax credit or deducting foreign taxes are extremely complex, and U.S.
Holders are urged to consult their own tax advisors regarding the availability
of foreign tax credits with respect to any Israeli tax withheld from payment.

Alternatively, a U.S. Holder may elect to claim a United States tax deduction
for any such Israeli tax, but only for a tax year in which the U.S. Holder
elects to do so with respect to all foreign income tax as paid. In addition, a
non-corporate U.S. Holder cannot elect to deduct Israeli taxes if such U.S.
Holder does not itemize deductions.

Dispositions. If you are a U.S. Holder and you sell, exchange or otherwise
dispose of our ordinary shares, you will recognize capital gain or loss for U.S.
Federal income tax purposes equal to the difference between the dollar value of
the amount that you realize and your adjusted tax basis, determined in dollars,
in those ordinary shares. Capital gain or loss will be short-term or long-term
depending on whether you hold the Shares for more than one year. Long-term
capital gains of individuals are eligible for reduced rates of taxation, with
respect to taxable years beginning on or before December 31, 2010. The
deductibility of capital losses is subject to limitations. In general, any gain
or loss recognized by a U.S. Holder on the sale or other disposition of our
ordinary shares will be United States-source income or loss for purposes of the
United States federal foreign tax credit limitation. However, a U.S. Holder who
is also a Treaty U.S. Resident and who sells our ordinary shares in Israel may
elect to treat gain from the sale or other disposition of our ordinary shares as
foreign-source income for purposes of the United States federal foreign tax
credit limitations. U.S. Holders should consult their tax advisors regarding the
application of the United States federal foreign tax credit limitation to gain
or loss recognized on the disposition of our ordinary shares and the treatment
of any foreign currency gain or loss on any NIS received in respect of the sale
or other disposition of our ordinary shares.

Passive Foreign Investment Company Status.

The Code provides special antideferral rules regarding certain distributions
received by U.S. persons with respect to, and sales and other dispositions
(including pledges) of, stock of a passive foreign investment company ("PFIC").
Generally a non-United States corporation is treated as a PFIC for United States
federal income tax purposes in any taxable year in which either (i) 75% or more
of its gross income (including the pro rata gross income of any company
(domestic or foreign) in which such corporation is considered to own 25% or more



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of the stock by value) for the taxable year is passive income, generally
referred to as the "income test," or (ii) 50% or more of the average value of
its assets (including the pro rata value of the assets of any company in which
such corporation is considered to own 25% or more of the stock by value) during
the taxable year, measured at the end of each quarter, produce or are held for
the production of passive income in the taxable year, generally referred to as
the "asset test".

There is no assurance that we are not a PFIC, and U.S. Holders of our ordinary
shares should consult their tax advisors about the PFIC rules, including the
possibility, and advisability of, and the procedure and timing for making
certain elections that may alleviate some of the tax consequences of the PFIC
rules in connection with their holding of ordinary shares, including options to
acquire our ordinary shares.

Taxation of Non-U.S. Holders

Subject to the discussion below with respect to the United States backup
withholding tax, a Non-U.S. Holder (i.e., any person other than a U.S. Holder)
generally will not be subject to United States federal income tax on dividends
from us, if any, or gain from the sale or other disposition of ordinary shares,
unless (i) such income is effectively connected with the conduct by the Non-U.S.
Holder of a United States trade or business, and in the case of a resident of a
country which has an income tax treaty with the United States, such income is
attributable to a permanent establishment (or in the case of an individual, a
fixed place of business) in the United States; or (ii) with respect to any gain
on the sale or other disposition of ordinary shares realized by an individual
Non-U.S. Holder, such individual Non-U.S. Holder is present in the United States
for 183 days or more in the taxable year of the sale or other disposition and
meets certain other conditions.

Backup Withholding and Information Reporting

Under the Code, United States tax information reporting and "backup withholding"
at the appropriate rate (currently 28%) may generally apply to payments of
dividends on, and the proceeds of dispositions of, our ordinary shares made
within the United States, by a United States payor or through certain United
States-related financial intermediaries to both U.S. Holders and Non-U.S.
Holders, other than exempt recipients. Backup withholding will not apply,
however, to a holder who furnishes a correct taxpayer identification number or
certificate of foreign status and makes any other required certification or who
is otherwise exempt from backup withholding. Generally, a U.S. Holder will
provide such certification on IRS Form W-9, and a non-U.S. Holder will provide
such certification on IRS Form W-8. Backup withholding is not an additional tax.
Any amounts withheld under the United States backup withholding rules will be
allowed as a refund or credit against the U.S. Holder's or the non-U.S. Holder's
United States federal income tax liability, provided the required information is
furnished to the IRS.


10F. Dividends and paying agents

Not applicable.


10G.     Statement by experts

Not applicable.


10H.     Documents on display

We are subject to certain of the information reporting requirements of the
Exchange Act, as amended. As a foreign private issuer, we are exempt from the
rules and regulations under the Exchange Act prescribing the furnishing and
content of proxy statements, and our officers, directors and principal
shareholders are exempt from the reporting and "short-swing" profit recovery
provisions contained in Section 16 of the Exchange Act, with respect to their
purchase and sale of our shares. In addition, we are not required to file
reports and financial statements with the SEC as frequently or as promptly as
U.S. companies whose securities are registered under the Securities Exchange
Act. However, we are required to file with the SEC, within six months after the
end of each fiscal year, an annual report on Form 20-F containing financial
statements audited by an independent accounting firm. We publish unaudited
interim financial information after the end of each quarter. We furnish this
quarterly financial information to the SEC under cover of a Form 6-K.


_______________________________________________________________________________
20-F ClickSoftware Technologies Ltd.                                    Page 51
<PAGE>


You may read and copy any document we file with the SEC at its public reference
facilities at, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the SEC's
regional offices at 500 West Madison Street, Suite 1400, Chicago, IL 60661-2511.
You may also obtain copies of the documents at prescribed rates by writing to
the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington,
D.C. 20549. The SEC also maintains a web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the SEC. The address of this web site is http://www.sec.gov.
Please call the SEC at 1-800-SEC-0330 for further information on the operation
of the public reference facilities.

10I.     Subsidiary information

Not applicable.


ITEM 11.          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the ordinary course of our operations, we are exposed to certain market
risks, primarily changes in foreign currency exchange rates and interest rates.

Foreign Currency Exchange Rate Risk. We develop products in Israel and sell them
primarily in North America, Europe, and the Asia Pacific regions. As a result,
our financial results could be affected by factors such as changes in foreign
currency exchange rates or weak economic conditions in foreign markets. In 2006,
55% of our revenues and 38% of our expenses were denominated in US dollars.
Since our financial results are reported in U.S. dollars, fluctuations in the
rates of exchange between the dollar and non-dollar currencies may have a
material adverse effect on our business, financial conditions and results of
operations. The exposure to currency exchange rate changes is diversified due to
the number of different countries and currencies in which we conduct business.
The main currencies are US$, NIS, GBP and EURO.

In addition, we have balance sheet exposure arising from assets and liabilities
denominated in currencies other than US dollars, mainly in Euro, British pounds,
NIS and Australian dollars. Any change between the conversion rates between the
U.S. dollar and these currencies may create financial gain or loss. We enter
from time to time into forward contracts related to foreign currencies in order
to protect against monetary balances denominated in foreign currencies, and
certain forecasted transactions. We do not participate in any speculative
investments. The net value of the forwards as of December 31, 2006 was not
material.

Interest Rate Risk. As of December 31, 2006, we had cash, cash equivalents and
short-term investments of $19.3 million, which consist of cash and highly liquid
short-term investments. Of this, a total of $2.2 million is denominated in
non-dollar currencies. We believe a substantial decrease in market interest
rates would have an immaterial impact on our business, financial condition and
results of operations.

The following table provides information about our investment portfolio, cash,
and investments as of December 31, 2006 and presents principal cash flows and
related weighted averages interest rates by expected maturity dates.


      YEAR OF MATURITY                                                     2007
                                                     (in thousands of dollars)

      A)  Cash, cash equivalents and investments portfolio:
      -----------------------------------------------------
          Cash and cash equivalents                                    $13,385
          Average interest rate                                           4.5%
          Bank deposits                                                 $5,918
          Average interest rate                                           5.0%

      B)  Long-term debts:
      --------------------
          None.


ITEM 12.          DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

_______________________________________________________________________________
20-F ClickSoftware Technologies Ltd.                                    Page 52
<PAGE>


                                    PART TWO
                                    --------


ITEM 13.          DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.


ITEM 14.          MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
                  HOLDERS AND USE OF PROCEEDS
None.


ITEM 15.          CONTROLS AND PROCEDURES

(a)  Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief
Financial Officer have evaluated the effectiveness of our disclosure controls
and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under
the Exchange Act) as of December 31, 2006 (the Evaluation Date). Based on such
evaluation, those officers have concluded that, as of the Evaluation Date, our
disclosure controls and procedures are effective in recording, processing,
summarizing and reporting, on a timely basis, information required to be
included in periodic filings under the Exchange Act.

(b)  Management's Annual Report on Internal Control Over Financial Reporting

Not applicable.

(c)  Attestation Report of the Registered Public Accounting Firm

Not applicable.

(d)  Changes in Internal Control Over Financial Reporting.

During the year ended December 31, 2006, there were no changes in our internal
control over financial reporting that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.


ITEM 16A.         Audit Committee Financial Expert.

Our audit committee is comprised of Dan Falk, Naomi Atsmon, Israel Borovich and
Gil Weiser. Our board of directors has determined that Mr. Falk qualifies both
as an independent member of the audit committee and as an audit committee
financial expert, as such terms are defined under Exchange Act rules. Mr. Falk
also qualifies as an independent directors as required by the Nasdaq rules.


ITEM 16B.         Code of Ethics.

We have adopted a written code of ethics that applies to our principal executive
officer, principal financial officer, principal controller, and to persons
performing similar functions. Our Code of Business Conduct and Ethics is posted
on our website www.clicksoftware.com.


ITEM 16C.         Principal Accountant Fees and Services.

Brightman Almagor & Co., a member of Deloitte Touche Tohmatsu, has served as our
independent public accountants for each of the three years ended December 31,
2006.

_______________________________________________________________________________
20-F ClickSoftware Technologies Ltd.                                    Page 53
<PAGE>


Audit Fees.

Audit fees in 2006 amounted to approximately $75,000 and primarily related to
professional services rendered in connection with the audit of our financial
statements for the fiscal year ended December 31, 2006 and the review of our
financial statements during fiscal year 2006. Audit fees in 2005 amounted to
approximately $75,000 for professional services rendered in connection with the
audit of our financial statements for the fiscal year ended December 31, 2005
and the review of our financial statements during fiscal year 2005.

Audit-Related Fees.

None.

Tax  Fees.

Tax fees billed to us by Brightman Almagor in 2006 amounted to approximately
$7,500 and primarily related to tax services. In addition, Deloitte Touche of
Boston billed us approximately $10,000 for tax advice and tax planning services
in 2006. Tax fees billed to us by Brightman Almagor in 2005 amounted to
approximately $4,000 and primarily related to tax services. In addition,
Deloitte Touche of Boston billed us approximately $52,000 for tax advice and tax
planning services in 2005.

All Other Fees.

All other fees amounted to approximately $12,000 in 2006 and primarily related
to Sarbanes-Oxley implementation and consulting relating to Chief Scientist
requests. All other fees amounted to an aggregate of approximately $17,000 in
2005 and primarily related to Sarbanes Oxley implementation and consulting
relating to Chief Scientist requests.

Pre-Approval of Auditors' Compensation.

Our audit committee is responsible for pre-approving audit and non-audit
services provided to us by our independent auditors and, if requested by the
board of directors, is also responsible for pre-approving services provided by
other public accounting firms (or subsequently approving non-audit services in
those circumstances where a subsequent approval is necessary and permissible).
Absent such a request from the board of directors, our management approves the
non-audit services provided to the Company by accountants other than the
auditors. 100% of the non-audit services provided to us by the independent
auditors in 2006 and 2005 were either pre-approved by the full audit committee,
or by Dan Falk, who was delegated by the Audit Committee to approve the
non-audit services provided by independent auditors.


ITEM 16D.         Exemptions from the Listing Standards for Audit Committees

Not applicable.


ITEM 16E.         Purchase of Equity Securities by the Issuer and
                  Affiliated Purchasers

Not applicable.


_______________________________________________________________________________
20-F ClickSoftware Technologies Ltd.                                    Page 54
<PAGE>



                                   PART THREE
                                   ----------


ITEM 17.          FINANCIAL STATEMENTS

Not applicable.


ITEM 18.          FINANCIAL STATEMENTS

The following consolidated financial statements, and the related notes thereto,
and the Report of Independent Public Accountants are filed as a part of this
annual report.

    Report of Independent Registered Public Accounting Firm...................56

    Consolidated Balance Sheets...............................................57

    Consolidated Statements of Operations.....................................58

    Consolidated Statements of Changes in Shareholders' Equity................59

    Consolidated Statements of Cash Flows.....................................60

    Notes to Consolidated Financial Statements................................61


_______________________________________________________________________________
20-F ClickSoftware Technologies Ltd.                                    Page 55
<PAGE>




             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Shareholders of
ClickSoftware Technologies Ltd.


We have audited the accompanying consolidated balance sheets of ClickSoftware
Technologies Ltd. ("the Company") and its subsidiaries as of December 31, 2006
and 2005 and the related statements of operations, changes in shareholders'
equity and cash flows for each of the three years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also 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, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.



In our opinion, the consolidated financial statements present fairly, in all
material respects, the consolidated financial position of the Company and its
subsidiaries as of December 31, 2006 and 2005 and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2006, in conformity with U.S. generally accepted accounting
principles.



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



Tel Aviv, Israel
February 15, 2007


_______________________________________________________________________________
20-F ClickSoftware Technologies Ltd.                                    Page 56
<PAGE>



<TABLE>
<CAPTION>

                                          CLICKSOFTWARE TECHNOLOGIES LTD.
                                            CONSOLIDATED BALANCE SHEETS
                                         (in thousands, except share data)

                                                                                                DECEMBER 31,
                                                                                             2006          2005
                                                                                             ----          ----

<S>                                                                                           <C>          <C>

ASSETS
CURRENT ASSETS:
  Cash and cash equivalents (note 3)                                                         $ 13,385       $ 10,467
  Short-term investments (note 4 & note 11b)                                                    5,918          3,111
  Trade receivables, net of allowance for doubtful accounts of $254 and $225 as of
  December 31, 2006 and 2005, respectively (note 5)                                             6,465          4,118
  Other receivables and prepaid expenses (note 6)                                                 953          1,083
                                                                                         ------------- --------------
     Total current assets                                                                      26,721         18,779

 LONG-TERM INVESTMENTS (NOTE 7 & NOTE 11B)                                                        451            264

 SEVERANCE PAY DEPOSITS (NOTE 8)                                                                  996            960

 PROPERTY AND EQUIPMENT, NET (NOTE 9)                                                             804          1,001
                                                                                         ============= ==============
     Total assets                                                                             $28,972        $21,004
                                                                                         ============= ==============

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable and accrued expenses (note 10)                                             $ 5,945        $ 4,924
  Deferred revenues                                                                             5,965          5,031
                                                                                         ------------- --------------
     Total current liabilities                                                                 11,910          9,955
                                                                                         ------------- --------------

LONG-TERM LIABILITIES
     Accrued severance pay (note 8)                                                             2,031          1,786
     Deferred revenues                                                                          2,490              -
                                                                                         ------------- --------------
     Total long-term liabilities                                                                4,521          1,786
                                                                                         ------------- --------------
                                                                                         ------------- --------------
     Total liabilities                                                                         16,431         11,741
                                                                                         ------------- --------------

COMMITMENTS AND CONTINGENCIES (NOTE 11)

SHAREHOLDERS' EQUITY: (NOTE 12)
 Special preferred shares NIS 0.02 par value
    Authorized - 5,000,000 as of December 31, 2006 and 2005; no issued and
    outstanding shares as of December 31, 2006 and 2005;
Ordinary shares of NIS 0.02 par value:
    Authorized -- 100,000,000 as of December 31, 2006 and 2005;
    Issued - 28,033,626 shares as of December 31, 2006 and
    27,673,707 as of December 31, 2005;
    Outstanding - 27,994,626 shares as of December 31, 2006 and
    27,634,707 shares as of December 31, 2005;                                                    113            111
Additional paid-in capital                                                                     72,205         71,220
Deferred stock compensation                                                                      (63)          (216)
Accumulated deficit                                                                          (59,671)       (61,809)
                                                                                         ------------- --------------
                                                                                               12,584          9,306
Treasury shares, at cost: 39,000 shares                                                          (43)           (43)
                                                                                         ------------- --------------
     Total shareholders' equity                                                                12,541          9,263
                                                                                         ------------- --------------
     Total liabilities and shareholders' equity                                               $28,972        $21,004
                                                                                         ============= ==============

</TABLE>


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


_______________________________________________________________________________
20-F ClickSoftware Technologies Ltd.                                    Page 57
<PAGE>



<TABLE>
<CAPTION>


                                         CLICKSOFTWARE TECHNOLOGIES LTD.
                                      CONSOLIDATED STATEMENTS OF OPERATIONS
                               (in thousands, except share and per share amounts)

                                                                           YEAR ENDED DECEMBER 31,
                                                                   2006               2005             2004
                                                                   -----              ----             ----
<S>                                                               <C>                <C>               <C>

Revenues (note 13):
  Software license                                                     $12,145            $8,235          $10,603
  Services                                                              20,286            15,832           12,102
                                                             ------------------ ----------------- ----------------
      Total revenues                                                    32,431            24,067           22,705
                                                             ------------------ ----------------- ----------------

Cost of revenues:
  Software license                                                       1,979             1,541            1,109
  Services                                                              10,582             8,251            6,395
                                                             ------------------ ----------------- ----------------
       Total cost of revenues                                           12,561             9,792            7,504
                                                             ------------------ ----------------- ----------------

                                                             ------------------ ----------------- ----------------
       Gross profit                                                     19,870            14,275           15,201
                                                             ------------------ ----------------- ----------------

Operating expenses:
  Research and development expenses                                      4,498             3,635            3,069
         Less - participation by the Chief Scientist of
        the Government of Israel  (note 11a)                               385               507              359
                                                             ------------------ ----------------- ----------------
  Research and development expenses, net                                 4,113             3,128            2,710
  Selling and marketing expenses                                        10,337            10,124            8,939
  General and administrative expenses                                    3,671             3,138            2,818
                                                             ------------------ ----------------- ----------------
     Total operating expenses                                           18,121            16,390           14,467
                                                             ------------------ ----------------- ----------------
Operating  income (loss)                                                 1,749           (2,115)              734
Interest and other income, net                                             484               122              179
                                                             ------------------ ----------------- ----------------
Net income (loss) before taxes                                           2,233           (1,993)              913
Taxes on income (note 14)                                                   95                 -                -
                                                             ------------------ ----------------- ----------------
Net income (loss)                                                      $ 2,138         $ (1,993)            $ 913
                                                             ------------------ ----------------- ----------------

                                                             ------------------ ----------------- ----------------
Basic net income (loss) per share                                      $  0.08          $ (0.07)           $ 0.03
                                                             ------------------ ----------------- ----------------
Diluted net income (loss) per share                                    $  0.08          $ (0.07)           $ 0.03
                                                             ------------------ ----------------- ----------------
Shares used in computing basic net income (loss) per share          27,767,748        27,514,262       27,202,804
                                                              ------------------ ----------------- ----------------
Shares used in computing diluted net income (loss)  per
share                                                               28,442,887        27,514,262       28,336,450
                                                             ------------------ ----------------- ----------------

</TABLE>

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



_______________________________________________________________________________
20-F ClickSoftware Technologies Ltd.                                    Page 58
<PAGE>


<TABLE>
<CAPTION>


                         CLICKSOFTWARE TECHNOLOGIES LTD.
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                        (in thousands, except share data)

                               NUMBER OF                  ADDITIONAL
                                ORDINARY      SHARE        PAID-IN         DEFERRED        ACCUMULATED     TREASURY
                                 SHARES       CAPITAL      CAPITAL       COMPENSATION        DEFICIT        SHARES       TOTAL
                             --------------- ---------- --------------- ---------------- ----------------------------- -----------
<S>                              <C>         <C>          <C>            <C>                <C>             <C>           <C>

Balance as of December 31,
2003                             27,080,955     $ 109         $70,276             $  -          (60,729)       $(43)     $ 9,613

Employee options exercised          164,023         -             173                -                 -           -         173
Employee Stock purchase
plan                                 58,181         1             107                -                 -           -         108
Shares issued to IBM                100,000         -               -                -                 -           -           -
Deferred stock
compensation related to
stock option grants to
consultants                               -         -             374            (374)                 -           -           -
Amortization of deferred
compensation(1)                           -         -               -               65                 -           -          65
Net Income                                -         -               -                -               913           -         913
                             --------------- --------- --------------- ---------------- ----------------------------- -----------
Balance as of December 31,
2004                             27,403,159     $ 110         $70,930          $ (309)        $ (59,816)       $(43)    $ 10,872

Employee options exercised          231,548         1             248                -                 -           -         249
Deferred stock
compensation related to
stock option grants to
consultants                               -         -              42             (42)                 -           -           -
Amortization of deferred
compensation(1)                           -         -               -              135                 -           -         135
Net Loss                                  -         -               -                -           (1,993)           -     (1,993)
                             --------------- --------- --------------- ---------------- ----------------------------- -----------
Balance as of December 31,
2005                             27,634,707     $ 111         $71,220          $ (216)        $ (61,809)       $(43)     $ 9,263

Employee options exercised          359,919         2             472                -                 -           -         474
Deferred stock
compensation related to
stock option grants to
consultants                               -         -             513            (513)                 -           -           -
Amortization of deferred
compensation(1)                           -         -               -              666                 -           -         666
Net Income                                -         -               -                -             2,138           -       2,138
                             --------------- --------- --------------- ---------------- ----------------------------- -----------
Balance as of December 31,
2006                             27,994,626     $ 113         $72,205           $ (63)        $ (59,671)       $(43)    $ 12,541
                             --------------- --------- --------------- ---------------- ----------------------------- -----------
<FN>

(1)      $142,000, $116,000 and $ 56,000 were amortized during 2006 ,2005 and 2004 as deduction from Revenues
</FN>
</TABLE>


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


_______________________________________________________________________________
20-F ClickSoftware Technologies Ltd.                                    Page 59
<PAGE>


<TABLE>
<CAPTION>


                                         CLICKSOFTWARE TECHNOLOGIES LTD.
                                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                  (in thousands)
                                                                               YEAR ENDED DECEMBER 31,
                                                                        2006            2005            2004
                                                                        ----            ----            ----

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

CASH FLOWS FROM OPERATING ACTIVITIES:

Adjustments to reconcile net income (loss) to net cash provided by operating
activities:

Net income (loss)                                                         $ 2,138       $ (1,993)            $ 913
  Depreciation                                                                438             425              406
  Amortization of deferred compensation                                       666             135               65
  Unrealized loss from investments                                              -               -               58
  Severance pay, net                                                          209              39               76
  Other                                                                       (8)              35               37
  Trade receivables                                                       (2,347)           1,199          (1,955)
  Other receivables                                                           130           (101)            (260)
  Accounts payable and accrued expenses                                     1,021             193              654
  Deferred revenues                                                         3,424           2,062              694
                                                                   --------------- --------------- ----------------
Net cash provided by  operating activities                                  5,671           1,994              688
                                                                   --------------- --------------- ----------------

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from realization of (purchase) of investments                    (2,994)           4,422          (3,881)
Proceeds from disposal of equipment                                           452               -                -
Purchases of equipment                                                      (683)           (394)            (587)
                                                                    --------------- --------------- ----------------
Net cash (used in)  provided by investing activities                      (3,225)           4,028          (4,468)
                                                                   --------------- --------------- ----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Employee and ESPP options exercised                                           472             249              281
                                                                   --------------- --------------- ----------------
  Net cash provided by financing activities                                   472             249              281
                                                                   --------------- --------------- ----------------
Increase (decrease) in cash and cash equivalents                            2,918           6,271          (3,499)
Cash and cash equivalents at beginning of year                             10,467           4,196            7,695
                                                                   --------------- --------------- ----------------
 Cash and cash equivalents at end of year                                 $ 13,385        $ 10,467          $ 4,196
                                                                   --------------- --------------- ----------------


Supplemental cash flow information:
Cash paid for interest                                                         $6              $1               $2
                                                                   --------------- --------------- ----------------

</TABLE>

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



_______________________________________________________________________________
20-F ClickSoftware Technologies Ltd.                                    Page 60
<PAGE>



                         CLICKSOFTWARE TECHNOLOGIES LTD.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      (AS OF DECEMBER 31, 2006 AND 2005 AND
              FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004)
                            (IN THOUSANDS OF DOLLARS)



NOTE 1 -- GENERAL

ClickSoftware Technologies Ltd. (the "Company" or "ClickSoftware") was
incorporated in Israel and is a leading provider of end-to-end service
optimization software. The ClickSoftware Service Optimization suite consists of
ClickSchedule, which enables companies to automate and optimize their service
resources; ClickAnalyze, ClickPlan ClickForecast and ClickRoster, which enable
corporate decision makers to intelligently analyze past performance, monitor
current performance, and effectively plan for future service needs; ClickFix, a
diagnostic and trouble-shooting tool; ClickMobile, which empower service
personnel by providing real-time information and solutions for service related
issues; and ClickLocate (LBS), which enables companies to capture the location
information of a field service engineer and/or his or her vehicle and integrate
it with ClickSchedule for use in optimized scheduling. ClickSoftware products
are used by a wide array of companies, including customers in the
telecommunications, utilities, financial services, aerospace, defense,
semi-conductor, and home service industries.

In June 2000, the Company completed an initial public offering of its ordinary
shares (the "IPO").

The consolidated financial statements include the financial statements of the
Company and its wholly owned subsidiaries in the United States (ClickSoftware,
Inc.), in the United Kingdom (ClickSoftware Europe Limited), in Germany
(ClickSoftware Central Europe, GmbH), in Belgium (ClickSoftware Belgium, N.V.)
and in Australia (ClickSoftware Australia PTY, Ltd, a wholly owned subsidiary of
ClickSoftware, Inc.). The subsidiaries are primarily engaged in the sale and
marketing of the Company's products in North America, Europe and the rest of the
world.


NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The financial statements have been prepared in conformity with accounting
principles generally accepted in the United States.

Principles of consolidation

The financial statements include the accounts of the Company and its wholly
owned subsidiaries. All significant material intercompany balances and
transactions have been eliminated.

Financial statements in U.S. dollars

The reporting currency of the Company is the U.S. dollar ("dollar"). The dollar
is the functional currency of the Company and its subsidiaries. Transactions and
balances originally denominated in dollars are presented at their original
amounts. Non-dollar transactions and balances are remeasured into dollars in
accordance with the principles set forth in Statement of Financial Accounting
Standards ("SFAS") No. 52. All exchange gains and losses from translation of
monetary balance sheet items resulting from transactions in non-dollar
currencies are recorded in the statement of operations as they arise.

Use of estimates

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

Cash and cash equivalents

Cash equivalents consist of short-term, highly liquid investments that are
readily convertible into cash with original maturities of three months or less.
Bank deposits with maturities of more than three months but less than one year
are included in short-term investments.

_______________________________________________________________________________
20-F ClickSoftware Technologies Ltd.                                    Page 61
<PAGE>


Concentration of credit risk

Financial instruments, which potentially subject the Company to credit risk,
consist principally of cash instruments and accounts receivable. The Company
maintains cash and cash equivalents and investments with major financial
institutions and limits the amount of credit exposure with any institution. The
accounts receivable are derived from sales to a large number of customers,
mainly large industrial corporations and their suppliers located mainly in
Europe and the United States. The Company generally does not require collateral.
The Company performs ongoing credit evaluations of its customers and maintains
an allowance for doubtful accounts which management believes adequately covers
all anticipated losses in respect of trade receivables.

Property and equipment

Property and equipment is stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets, ranging from
three to 16 years. Leasehold improvements are amortized using the straight-line
method, over the shorter of the lease term, including renewal options, or the
useful lives of the improvements.

The Company complies with provisions of SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. This statement requires that
long-lived assets and certain identifiable intangible assets be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to undiscounted future net cash flows expected to be generated by the asset. If
such assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less cost to sell.

Software research and development costs

Software research and development costs incurred prior to the establishment of
technological feasibility are included in research and development expenses. The
Company defines establishment of technological feasibility as the completion of
a working model. Software development costs incurred subsequent to the
establishment of technological feasibility through the period of general market
availability of the products are capitalized, if material, after consideration
of various factors, including net realizable value. To date, software
development costs that are eligible for capitalization have not been material
and have been expensed.

Revenue recognition

The Company recognizes revenues in accordance with the American Institute of
Certified Public Accountants ("AICPA") Statement of Position 97-2, Software
Revenue Recognition, as amended.

In accordance with SOP 97-2, revenues from software license fees are recognized
when persuasive evidence of an arrangement exists, the software product covered
by written agreement or a purchase order signed by the customer has been
delivered, the license fees are fixed and determinable and collection of the
license fees is considered probable.

Revenue from software licenses that require significant customization,
integration and installation are recognized based on SOP 81-1 "Accounting for
Performance of Construction - Type and Certain Production - Type Contracts",
using contract accounting on the percentage of completion method, based on the
relationship of actual working hours incurred, to total working hours estimated
to be incurred over the duration of the contract. Provisions for estimated
losses on uncompleted contracts are made in the period in which such losses are
first determined, in the amount of the estimated loss on the entire contract.

When software arrangements involve multiple elements the Company allocates
revenue to each element based on the relative fair values of the elements. The
Company's determination of fair value of each element in multiple element
arrangements is based on vendor-specific objective evidence (VSOE). The
Company limits its assessment of VSOE for each element to the price charged
when the same element is sold separately. If vendor specific objective
evidence of fair value does not exist for all elements to support the
allocation of the total fee among all delivered and undelivered elements of
the arrangement, revenue is deferred until such evidence exist for the
undelivered elements, or until all elements are delivered, whichever is
earlier. If the fee due from the customer is not fixed or determinable,
revenue is recognized as payments become due from the customer, assuming all
other revenue recognition criteria have been met. Generally, the Company


_______________________________________________________________________________
20-F ClickSoftware Technologies Ltd.                                    Page 62
<PAGE>


considers all arrangements with extended payment terms greater than nine
months not to be fixed or determinable. The Company also enters into license
arrangements with resellers whereby revenues are recognized upon sale through
to the end user by the reseller.

Service revenues include consulting services, post-contract customer support
and training. Consulting revenues are generally recognized on a time and
material basis. However, revenues from certain fixed-price contracts are
recognized on the percentage of completion basis. Post-contract customer
support agreements provide technical support and the right to unspecified
updates on an if-and-when-available basis. Post-contract customer support
revenues are recognized ratably over the term of the support period (generally
one year) and training and other service revenues are recognized as the
related services are provided.

Basic and diluted net income (loss) per share

Basic and diluted net income (loss) per share are presented in conformity with
SFAS No. 128 "Earnings per Share" for all years presented. Basic and diluted net
income (loss) per share have been computed using the weighted-average number of
ordinary shares outstanding during the year. (See note 12).

Outstanding share options and shares issued and reserved for outstanding share
options have been excluded from the calculation of basic and diluted net income
(loss) per share to the extent such securities are anti-dilutive. The total
number of shares excluded from the calculations of diluted net income (loss) per
share were 3,610,879, 3,251,562 and 2,917,216 for the years ended December 31,
2006, 2005 and 2004, respectively.

Fair value of financial instruments

The financial instruments of the Company consist mainly of cash and cash
equivalents, short-term and long-term investments, current and non-current
accounts receivable, accounts payable. In view of their nature, the fair value
of the financial instruments included in working capital of the Company is
usually identical or close to their carrying amounts.

Stock-based compensation

Stock-Based Compensation Plans--Effective January 1, 2006, the Company adopted
SFAS No. 123 (revised 2004), "Share-Based Payment" (SFAS No. 123R) requiring
that compensation cost relating to share-based payment awards made to employees
and directors be recognized in the financial statements. The principal awards
issued under Company stock-based compensation plans, which are described in Note
12, "Stock-Based Compensation Plans" include stock options. The cost for such
awards is measured at the grant date based on the calculated fair value of the
award. The value of the portion of the award that is ultimately expected to vest
is recognized as expense over the requisite service periods (generally the
vesting period of the equity award) in the Company Consolidated Statement of
Operations. The following table summarizes the effects of stock-based
compensation resulting from the application of SFAS No. 123 (revised 2004)
included in Statement of Operations as follows:


<TABLE>
<CAPTION>

                                                              YEAR ENDED DECEMBER 31,
                                                                  (in thousands)
                                                          2006              2005               2004
                                                          ----              ----               ----
<S>                                                  <C>              <C>                 <C>

Cost of revenues                                            $ 68              $ -               $ -
Research and development expenses                             61                -                 -
Selling and marketing expenses                                83                -                 -
General and administrative expenses                          301               19                 9
                                                   -------------- ---------------- -----------------
Total                                                      $ 513             $ 19               $ 9
                                                   -------------- ---------------- -----------------
</TABLE>


Prior to January 1, 2006, the Company accounted for share-based compensation
cost using the intrinsic value method in accordance with Accounting Principles
Board No. 25, "Accounting for Stock Issued to Employees" (APB No. 25), and
related interpretations. The Company also followed disclosure requirements of
SFAS No. 123, "Accounting for Stock-Based Compensation", as amended by SFAS No.
148, "Accounting for Stock-Based Compensation-Transition and Disclosure". Under
APB No. 25 there was no material compensation cost recognized in the Company
Consolidated Statement of Operations for our stock option awards.

The company adopted SFAS No. 123R using the modified prospective method and,
accordingly, the Consolidated Statement of Operations for prior years has not
been restated to reflect the fair value method of


_______________________________________________________________________________
20-F ClickSoftware Technologies Ltd.                                    Page 63
<PAGE>



recognizing compensation cost relating to stock options. Share-based
compensation cost relating to stock options recognized in 2006 is based on the
value of the portion of the award that is ultimately expected to vest. SFAS No.
123R requires forfeitures to be estimated at the time of grant in order to
estimate the portion of the award that will ultimately vest. The estimate is
based on the Company historical rates of forfeiture.

Compensation cost related to stock options is recognized in operating results
(included in cost of revenues, research and development, selling and marketing,
general and administrative expenses) under SFAS No. 123R in 2006 was $513,000.
Compensation cost related to stock options recognized in our Consolidated
Statement of Operations in 2006 includes (1) compensation cost for stock option
awards granted prior to, but not yet vested as of December 31, 2005, based on
the grant-date fair value estimated in accordance with the pro forma provisions
of SFAS No. 123 and (2) compensation cost for stock option awards granted
subsequent to December 31, 2005, based on the grant-date fair value estimated in
accordance with the provisions of SFAS No. 123R.

The following table illustrates the effect on net income and earnings per share
as if the Company had applied the fair value recognition provisions of SFAS No.
123 in the years prior to the adoption of FAS No. 123R.

<TABLE>
<CAPTION>

                                                                 2005                2004
                                                                 ----                ----
                                                (in thousands, except share and per share amounts)
<S>                                                              <C>                 <C>

Net (loss) income
     As reported                                                $(1,993)                  $913
Add - stock based compensation determined under
APB 25                                                                19                     9
Option Acceleration Expense (note 12D)                           (2,018)                     -
Deduct - stock based compensation determined
under SFAS 123                                                   (1,232)                (1,068)
                                                                 -------               -------
Pro-forma                                                       $(5,224)                 $(146)
                                                                --------                ------

Basic net (loss) income per share

     As reported                                                 $(0.07)                 $0.03
     Pro-forma                                                   $(0.19)               $(0.01)

Diluted net (loss) income per share

     As reported                                                 $(0.07)                 $0.03
     Pro-forma                                                   $(0.19)               $(0.01)
</TABLE>

Under SFAS 123, the fair market value of each option grant is estimated on the
date of grant using the "Black-Scholes option pricing" method with the following
weighted-average assumptions:(1) expected life of 4.5 years (2005 - 5, 2004 -
5); (2) dividend yield of 0% (3) expected volatility of 96% (2005 - 133%, 2004 -
147% ) and (4) risk-free interest rate of 5.1% (2005 - 4.1%, 2004 - 3.1%).

Income taxes

The Company accounts for income taxes, in accordance with the provisions of SFAS
109 "Accounting for Income Taxes," under the liability method of accounting.
Under the liability method, deferred taxes are determined based on the
differences between the financial statement and tax basis of assets and
liabilities at enacted tax rates in effect in the year in which the differences
are expected to reverse. Valuation allowances are established, when necessary,
to reduce deferred tax assets to amounts expected to be realized.

Recent accounting pronouncements

In June 2006, the FASB issued FASB Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes--an interpretation of FASB Statement No. 109" (FIN
48). The interpretation contains a two-step approach to recognizing and
measuring uncertain tax positions accounted for in accordance with SFAS No. 109,
"Accounting for Income Taxes." The first step is to evaluate the tax position
for recognition by determining if the weight of available evidence indicates
that it is more likely than not that the position will be sustained on audit,
including resolution of related appeals or litigation processes, if any. The
second step is to measure the tax benefit as the largest amount which is more
than 50% likely of being realized upon ultimate settlement. The company is still
assessing the impacts of the adoption of FIN 48.


_______________________________________________________________________________
20-F ClickSoftware Technologies Ltd.                                    Page 64
<PAGE>



In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" (SFAS
No. 157). The purpose of SFAS No. 157 is to define fair value, establish a
framework for measuring fair value, and enhance disclosures about fair value
measurements. The measurement and disclosure requirements are effective for the
company beginning in the first quarter of fiscal year 2008. The company is
currently evaluating the impact that SFAS No. 157 will have on its financial
statements.

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities" (SFAS No. 159). SFAS No. 159 permits
companies to choose to measure certain financial instruments and certain other
items at fair value. The standard requires that unrealized gains and losses on
items for which the fair value option has been elected be reported in earnings.
SFAS No. 159 is effective for the company beginning in the first quarter of
fiscal year 2008, although earlier adoption is permitted. The company is
currently evaluating the impact that SFAS No. 159 will have on its financial
statements.


NOTE 3 -- CASH AND CASH EQUIVALENTS

<TABLE>
<CAPTION>

                                                                        DECEMBER 31,
                                                                           2006         2005
                                                                           ----         ----
                                                                        (in thousands)
<S>                                                                     <C>            <C>

In U.S. Dollars                                                         $11,224      $8,184
In British Pounds                                                       170          295
In Australian Dollars                                                   100          425
In Israeli Shekels                                                      383          186
In Euro                                                                 1,508        1,377
                                                                        ------------ ------------
                                                                         $13,385      $10,467
                                                                        ============ ============
</TABLE>

The cash balances bear interest at an average annual rate of 4.5%.


NOTE 4 -- SHORT-TERM INVESTMENTS
<TABLE>
<CAPTION>
                                                                              DECEMBER 31,
                                                                            2006        2005
                                                                            ----        ----
                                                                             (in thousands)
<S>                                                                       <C>            <C>
Bank Deposits                                                               $ 5,918      $ 3,111
                                                                         ----------- ------------
                                                                            $ 5,918      $ 3,111
                                                                         =========== ============

The bank deposits bear interest at an average annual rate of 5.0%.

</TABLE>

NOTE 5 -- ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<CAPTION>
                                                                              DECEMBER 31,
                                                                           2006         2005
                                                                           ----         ----
                                                                             (in thousands)
<S>                                                                            <C>       <C>

Balance at Beginning of Year                                                   $225         $300
Increase to allowance                                                            48            3
Write-offs                                                                     (19)         (78)
                                                                        ------------ ------------
 Balance at Year end                                                            $254         $225
                                                                        ============ ============

</TABLE>


_______________________________________________________________________________
20-F ClickSoftware Technologies Ltd.                                    Page 65
<PAGE>


NOTE 6 -- OTHER RECEIVABLES AND PREPAID EXPENSES

<TABLE>
<CAPTION>
                                                                             DECEMBER 31,
                                                                           2006        2005
                                                                           ----        ----
                                                                             (in thousands)
<S>                                                                            <C>       <C>
Prepaid expenses                                                              $707         $784
Government participation and other government receivables                       33          200
Employees                                                                       17           12
Other receivables                                                              196           87
                                                                       ----------- ------------
                                                                              $953       $1,083
                                                                       =========== ============
</TABLE>


NOTE 7 -- LONG-TERM INVESTMENTS

<TABLE>
<CAPTION>
                                                                             DECEMBER 31,
                                                                           2006        2005
                                                                           ----        ----
                                                                             (in thousands)
<S>                                                                            <C>       <C>
Bank Deposits (see also note 11b)                                             $451         $264
                                                                        ----------- ------------
                                                                              $451         $264
                                                                        =========== ============
</TABLE>

The bank deposits bear interest at an average annual rate of 5.0%.


NOTE 8 - ACCRUED SEVERANCE PAY


Under Israeli law and labor agreements, the Company is required to make
severance payments to its dismissed employees and employees leaving its
employment in certain other circumstances. The Company's severance pay
obligation to its employees, which is calculated on the basis of the salary of
each employee for the last month of the reported period multiplied by the years
of such employee's employment, is reflected by the accrual presented in the
balance sheet and is partially funded by deposits with insurance companies and
provident funds.

Severance pay expenses amounted to $603, $352 and $336 for the years ended
December 31, 2006, 2005 and 2004, respectively.


NOTE 9 -- PROPERTY AND EQUIPMENT, NET

<TABLE>
<CAPTION>
                                                                             DECEMBER 31,
                                                                           2006        2005
                                                                           ----        ----
                                                                            (in thousands)
<S>                                                                            <C>       <C>
Cost
Computers and office equipment                                              $1,590       $2,766
Leasehold improvements                                                          43          559
Motor vehicles                                                                  59          126
                                                                         ----------- ------------
                                                                            $1,692       $3,451
Accumulated Depreciation                                                       888        2,450
                                                                         ----------- ------------
                                                                              $804       $1,001
                                                                        =========== ============
</TABLE>

Due to a fire at the Company's Tel-Aviv office in September 2006 the Company
disposed of assets at cost of $2.3 million and Accumulated Depreciation of $1.9
million, net amount of $0.4 million which was fully covered by insurance
proceeds.


_______________________________________________________________________________
20-F ClickSoftware Technologies Ltd.                                    Page 66
<PAGE>



NOTE 10 -- ACCOUNTS PAYABLE AND ACCRUED EXPENSES

<TABLE>
<CAPTION>
                                                                             DECEMBER 31,
                                                                           2006        2005
                                                                           ----        ----
                                                                            (in thousands)
<S>                                                                            <C>       <C>
Suppliers                                                                   $2,539       $2,139
Employee and related expenses                                                2,265        1,398
Government commitment                                                          403          350
Accrued royalties                                                              662          838
Accrued restructuring                                                            -           91
Other                                                                           76          108
                                                                        ----------- ------------
                                                                            $5,945       $4,924
                                                                        =========== ============
</TABLE>


NOTE 11 -- COMMITMENTS AND CONTINGENCIES

A: In connection with its research and development, the Company received grants
from the State of Israel in the total amount of $8.5 million. The Company is
committed to pay royalties at a rate of 3% to 5% of sales of the developed
product, up to 100% - 150% of the amount of grants received plus annual interest
of LIBOR as of the date of approval for programs approved from 1999 and
thereafter. The Company so far has paid or accrued royalties through December
31, 2006 of $5.9 million. The total additional contingent liability to pay
royalties is $2.6 million. The payment of such additional royalties is
contingent on future sales and the Company has no obligation to refund these
grants, if sufficient sales are not generated.

B: The Company has entered into standby letters of credit agreements with banks
and financial institutions relating to the guarantee of future performance on
certain contracts. As of December 31, 2006, contingent liabilities on
outstanding letter of credit agreements which expire after December 31, 2007
aggregated approximately $0.5 million. The letters of credit are secured by $0.5
million in deposits to cover any potential payments under the guarantees.

C: The Company operates from leased facilities in Israel, the United States,
United Kingdom, Germany and Australia, for periods expiring in the years 2007
through 2011. Minimum future rental payments, as of December 31, 2006 are as
follows:

                        (in thousands)
                      -------------------
                2007                $695
                2008                 660
           2009-2011                 270
                      -------------------
                                  $1,625
                      ===================


     Rent expense amounted to $685, $579 and $566 for the years ended December
     31, 2006, 2005 and 2004, respectively.


From time to time, we are involved in various routine legal proceedings
incidental to the ordinary course of our business. The Company does not believe
that the outcome of these pending legal proceeding will have a material adverse
effect on the Company's business or consolidated financial condition




_______________________________________________________________________________
20-F ClickSoftware Technologies Ltd.                                    Page 67
<PAGE>



NOTE 12 -- SHAREHOLDERS' EQUITY


A.       PUBLIC OFFERING

On June 2000, the Company completed an IPO with total net proceeds of $28.2
million.

B.       SHARE CAPITAL

Share capital is comprised of issued and outstanding ordinary shares of NIS 0.02
par value.

C.       EMPLOYEE STOCK PURCHASE PLAN

During 2000, the board of directors approved the ESPP, effective August 2000.
Under the ESPP, the maximum number of shares to be made available is 800,000
with an annual increase to be added on the first day of each year commencing
2001 equal to the lesser of 2% shares or 500,000 of the outstanding shares on
such date or a lesser amount determined by the board of directors. During 2003,
the board of directors decided to increase the ESPP pool by 250,000 shares
effective January 1, 2004.

Employees are eligible to participate in the ESPP if they are employed by the
Company or its U.S subsidiary for at least 20 hours per week and more than 5
months in any calendar year. Employee stock purchases are made through payroll
deductions. Under the terms of the ESPP, employees may not deduct an amount
exceeding $25,000 in total value of stock in any one year and may not purchase
more than 5,000 shares during any six-month offering period. The purchase price
of the stock will be 85% of the lower of the fair market value of an ordinary
share on the first day of the offering period and the fair market value on the
last day of the offering period. The offering period was determined to be six
months. The ESPP shall terminate in 2010, unless terminated earlier by the board
of directors.

As of December 31, 2004, 766,691 ordinary shares were issued under the ESPP, and
an additional 283,309 ordinary shares are reserved for issuance. During 2004,
the Company board of directors resolved to temporarily cease the Company's ESPP
program.

D.       EMPLOYEE, DIRECTORS, AND CONSULTANT OPTION PLANS

The Company adopted new option plans in 2000. Under these plans, the Company
granted 848,000, 657,000, 886,100, 1,160,840 (including 39,840 shares pursuant
to an exchange offer) and 513,500 options at an average exercise price of $1.73,
$1.84, $2.47, $2.41 and $1.28 and $1.50 for the years ended December 31, 2006,
2004, 2003 and 2002 respectively.

During the year ended December 31, 2006 the board of directors and Shareholders
at the annual meeting approved the grants of options to directors to purchase
153,000 ordinary shares.

During the year ended December 31, 2005 the board of directors and Shareholders
at the annual meeting approved the grants of options to directors to purchase
153,000 ordinary shares.

During the year ended December 31, 2004 the board of directors and Shareholders
at the annual meeting approved the grants of options to directors to purchase
295,000 ordinary shares.

During the year ended December 31, 2003 the board of directors and Shareholders
at the annual meeting approved the grants of options to purchase 385,000
ordinary shares to directors.

During the year ended December 31, 2001 the board of directors and Shareholders
at the annual meeting approved the grants of options to purchase 144,036
ordinary shares to directors.

In April 2003 the Company commenced a voluntary stock option exchange program
for its employees. Under the program participating employees were given the
opportunity to have unexercised stock options previously granted to them
cancelled, and to receive replacement options at a future date. Replacement
options were granted at a ratio of between 50% and 5% for each option cancelled,
at an exercise price equal to the fair market value of the Company's Ordinary
Shares on the date of the re-grant. Pursuant to the terms of the offer, 279,118
options were cancelled at May 2003. The Company granted 39,840 replacement
options at December 2003 at an exercise price of $4.39.


_______________________________________________________________________________
20-F ClickSoftware Technologies Ltd.                                    Page 68
<PAGE>


During 2003, the board of directors decided to increase the reserve for grants
under its umbrella option plan, the Amended and Restated 2000 Share Option Plan
(the "ESOP"), by 400,000 options effective January 1, 2004.

During 2005, the board of directors decided to increase the reserve for grants
under the ESOP, by 450,000 options effective January 1, 2006.

During 2006, the board of directors decided to increase the reserve for grants
under the ESOP, by 1,250,000 options effective January 1, 2007.

In December 2005, the board of directors decided to accelerate the vesting of
unvested employee stock options granted to employees and officers with exercise
prices of $1.75 or above. Accordingly, options to purchase approximately 0.8
million shares became exercisable immediately. The accelerated options, which
were considered vested as of December 5, 2005, had exercise prices ranging from
$ 1.75 to $ 4.25 per share. The number and exercise prices of the shares
involved were unchanged. The vesting acceleration enables the Company to avoid
recognizing in its income statement compensation expense associated with these
options in future periods, upon adoption of FASB Statement NO. 123R (Share-Based
Payment) in January 2006. As a result of this change, the Company expects to
reduce the after tax stock option expense it otherwise would have been required
to record by approximately $2 million over a 4 year period. This estimate is
subject to change and is based on estimated value calculations using the
Black-Scholes methodology.

A summary of the status of the Company's stock option plans as of December 31,
2006 and 2005 and changes during the years then ended are as follows:

<TABLE>
<CAPTION>

                                                                                     WEIGHTED-
                                                    OPTIONS AND                       AVERAGE       WEIGHTED-
                                                      SHARES                         EXERCISE        AVERAGE
                                                   AVAILABLE FOR     OUTSTANDING     PRICE PER     FAIR VALUE
                                                       GRANT         OPTIONS (*)       SHARE       OF OPTION
                                                  ------------------------------------------------------------
<S>                                                     <C>          <C>               <C>          <C>

Outstanding December 31, 2004                             905,073         3,778,941         2.23
Granted                                                 (657,000)           657,000         1.84     $ 1.60
Forfeited                                                 366,223         (366,223)         3.39
Exercised                                                       -         (230,408)         1.08
                                                   ---------------- ------------------------------
Outstanding December 31, 2005                             614,296         3,839,310         2.12
Increase in option pool                                   450,000                 -            -
Granted                                                 (848,000)           848,000         1.73      $1.30
Forfeited                                                 228,873         (228,873)         3.72
Exercised                                                       -         (359,919)         1.31
                                                  ---------------- ----------------- ------------
Outstanding  December 31, 2006                            445,169         4,098,518         2.02
                                                  ---------------- ----------------- ------------

</TABLE>

The following table summarizes information about options outstanding and
exercisable as of December 31, 2006:

<TABLE>
<CAPTION>

                                          OPTIONS OUTSTANDING                        OPTIONS EXERCISABLE
                          ---------------------------------------------------- ----------------------------------
        RANGE OF               NUMBER        WEIGHTED-AVERAGE                       NUMBER        WEIGHTED-AVERAGE
     EXERCISE PRICE        OUTSTANDING AT       REMAINING      WEIGHTED-AVERAGE  OUTSTANDING AT      EXERCISE
           $              DECEMBER 31, 2006  CONTRACTUAL LIFE  EXERCISE PRICE   DECEMBER 31, 2006      PRICE
------------------------- ------------------ ----------------- --------------- ------------------ ---------------
   <S>                             <C>                    <C>       <C>                  <C>           <C>
      0.21 - 0.85                   228,942               5.8      $ 0.26                228,566     $ 0.26
      1.21 - 1.95                 3,102,743               6.7      $1.67               2,153,200      $1.66
      2.04 - 3.67                   310,700               6.2      $2.72                 268,700      $2.82
      4.15 - 4.39                   392,533               6.3      $4.26                 392,533      $4.26
      8.00 - 10.00                   63,600               1.1      $8.74                  63,600      $8.74
                           ------------------                                   ------------------
                                  4,098,518                                            3,106,599
                          ==================                                   ==================
</TABLE>


_______________________________________________________________________________
20-F ClickSoftware Technologies Ltd.                                    Page 69
<PAGE>


E.       IBM Share and Warrants Grants

At the end of the second quarter of 2004, the Company formalized a strategic
alliance with IBM pursuant to which the Company teamed with IBM to resell its
workforce optimization solutions. In connection with this strategic alliance,
the Company established a Project Office with IBM to manage the day-to-day
affairs in connection with the relationship. In 2006 the Company continued its
cooperation with IBM and is currently negotiating with IBM on the fee structure
and scope of the Project Office for 2007. IBM has received certain warrants that
are exercisable into ordinary shares of the Company in connection with this
arrangement.

The Company accounted for these warrants and options under the fair value method
of FAS No. 123 and EITF 96-18. The fair value was determined using the
Black-Scholes pricing model with the following assumptions: risk-free interest
rate of 5.1%; volatility rate of 96%; dividend yields of 0% and an expected life
of 4.5 years.

Compensation expenses of $666,000 (of which $142,000 were deducted from
Revenues) were recognized for the year ended December 31, 2006. Compensation
expenses of $135,000 (of which $116,000 were deducted from Revenues) were
recognized for the year ended December 31, 2005. Compensation expenses of
$65,000 (of which $56,000 were deducted from revenues) were recognized for the
year ended December 31, 2004.


NOTE 13 -- SEGMENT REPORTING

The Company operates in one segment, the design, development, and marketing of
software solutions. The Company's revenues by geographic area are as follows:

<TABLE>
<CAPTION>

                                                                           YEAR ENDED DECEMBER 31,
                                                                    2006             2005            2004
                                                                    ----             ----            ----
                                                                               (in thousands)
<S>                                                                 <C>               <C>           <C>

Revenue
United States                                                          $11,010         $ 5,452          $ 5,184
Canada                                                                   1,080           1,025            1,806
United Kingdom                                                           6,168           7,176            5,135
Germany                                                                  4,059           3,478            4,503
Other European countries                                                 4,993           2,158            2,420
Australia                                                                4,699           4,455            3,636
Israel                                                                     305             107               12
Rest of the world                                                          117             216                9
                                                              ----------------- --------------- ----------------
                                                                       $32,431         $24,067          $22,705
                                                              ================= =============== ================
</TABLE>

Sales to a single customer exceeding 10% of total sales:

<TABLE>
<CAPTION>
                                                                    2006             2005            2004
                                                                    ----             ----            ----
                                                                     %                %                %
<S>                                                                 <C>               <C>           <C>
Customer A                                                           12               -                -
Customer B                                                           11               13              11
Customer C                                                           -                11              15
Customer D                                                           -                10               -
</TABLE>

Long-lived assets by geographical areas are as follows:

<TABLE>
<CAPTION>
                                                                                     YEAR ENDED DECEMBER 31,
                                                                                   2006            2005
                                                                                   ----            ----
                                                                                     (in thousands)
<S>                                                                                     <C>           <C>
Net Property and Equipment
  North America                                                                         $ 164          $ 205
  Europe                                                                                  137            169
  Australia                                                                                35             26
  Israel                                                                                  468            601
                                                                             ----------------- --------------
                                                                                         $804         $1,001
                                                                             ================= ==============

</TABLE>


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20-F ClickSoftware Technologies Ltd.                                    Page 70
<PAGE>



NOTE 14-- TAXES ON INCOME

The Company is subject to the Israeli Income Tax Law (Inflationary Adjustments),
1985, measuring income on the basis of changes in the Israeli Consumer Price
Index.

Part of the Company's investment in equipment has received approvals in
accordance with the Law for the Encouragement of Capital Investments, 1959
("Approved Enterprise" status). The Company has chosen to receive its benefits
through the "Alternative Benefits" track, and, as such, is eligible for various
benefits. These benefits include accelerated depreciation of fixed assets used
in the investment program, as well as a full tax exemption on undistributed
income in relation to income derived from the first plan for a period of 2 years
and for the second and third plans for a period of 4 years. Thereafter a reduced
tax rate of 25% will be applicable for an additional period of up to 5 years for
the first plan and 3 years for the second and third plans, commencing with the
date on which taxable income is first earned but not later than certain dates.
In the case of foreign investment of more than 25%, the tax benefits are
extended to 10 years, and in the case of foreign investment ranging from 49% to
100% the tax rate is reduced on a sliding scale to 10%. The benefits are subject
to the fulfillment of the conditions of the letter of approval. The first plan
benefit period has already expired. The benefit periods of the second and third
plans have not yet commenced.

On April 1, 2005, an amendment to the Investment Law came into effect ("the
Amendment") and has significantly changed the provisions of the Investment Law.
The Amendment limits the scope of enterprises which may be approved by the
Investment Center by setting criteria for the approval of a facility as a
Privileged Enterprise, such as provisions generally requiring that at least 25%
of the Privileged Enterprise's Income will be derived from export. Additionally,
the Amendment enacted major changes in the manner in which tax benefits are
awarded under the Investment Law so that companies no longer require Investment
Center approval in order to qualify for tax benefits. However, the Investment
Law provides that terms and benefits included in any certificate of approval
already granted will remain subject to the provisions of the law as they were on
the date of such approval. Therefore, the Israeli companies with Approved
Enterprise status will generally not be subject to the provisions of the
Amendment. As a result of the amendment, tax-exempt income generated under the
provisions of the new law, will subject the Company to taxes upon distribution
or liquidation.


The first investment plan (First plan) benefit period has already expired.

The second investment plan (Second plan) benefit period has already expired.


In 1996, the Company received approval for its second expansion program (Third
plan). The commencing year for the third plan is 2000 and the expected
expiration year is 2010. Due to the fire mentioned in note 9, a request for
updating the investment scope of assets was submitted to the Investment Center.

In 2006, the Company received approval by the amendment to the Investment Law
(Fourth plan) as Privileged Enterprise. The commencing year is 2004. The Company
did not generate income subject to the provision of the new law. The expected
expiration year is 2015. Due to the fire mentioned in note 9, a request for
updating the investment scope of assets was submitted to the Israel tax
authorities.

In 2007, based on Company investments in property and equipment in the years
2005 and 2006, the Company submitted a request to approve a new plan (Fifth
plan) as Privileged Enterprise in accordance with the Amendment to the
Investment Law. The requested commencing year is 2006. The expected expiration
year is 2017.

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

Income not eligible for "Approved enterprise" benefits mentioned above is taxed
at a regular rate of 31% (in 2006). On July 25, 2005 an amendment to the Israeli
tax law was approved by the Israeli parliament, which reduces the tax rates
imposed on Israeli companies to 29% for 2007. This amendment states that the


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20-F ClickSoftware Technologies Ltd.                                    Page 71
<PAGE>


corporate tax rate will be further reduced in subsequent tax years as follows:
in 2008 27%, in 2009 26% and thereafter 25%. This change does not have a
material effect on the Company's financial statements.

In the event of distribution by the Company of a cash dividend out of retained
earnings that were tax exempt due to its approved enterprise status, the Company
would have to pay a 25% corporate tax on the income from which the dividend was
distributed. A 15% withholding tax may be deducted from dividends distributed to
the recipients.

The Company has not provided deferred taxes on future distributions of
tax-exempt earnings, as management and the Board of Directors have determined
not to make any distribution that may result in a tax liability for the Company.
Accordingly, such earnings have been considered to be permanently reinvested.

To date, the Company has not had earnings attributable to Approved Enterprise
programs.


Tax assessments
---------------

Final tax assessments in Israel have been received up to and including the 2002
tax year.

Deferred taxes
--------------

As of December 31, 2006, net operating loss carryforwards in Israel amounted to
approximately $22.5 million, approximately $23.5 million attributable to the
U.S. subsidiary, and approximately $7.5 million attributable to the European
subsidiaries. The tax loss carryforwards for Israel and the European companies
have no expiration date. The tax loss carryforwards in the U.S. expire between
2009 and 2024. The company expects that during the period in which these tax
losses are utilized, its income would be substantially tax-exempt. Accordingly
there will be no tax benefit available from such losses and no deferred tax
assets have been included in these financial statements.

Israel and International components of income profit (loss) before taxes are:
<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31,
                                                           2006            2005             2004
                                                           ----            ----             ----
                                                                      (in thousands)
<S>                                                         <C>             <C>           <C>
Israel                                                          $ 665       $(1,559)            $90
International                                                   1,568          (434)            823
                                                     ----------------- -------------- --------------
                                                               $2,233       $(1,993)           $913
                                                     ================= ============== ==============

</TABLE>



NOTE 15 -- TRANSACTIONS WITH RELATED PARTIES

<TABLE>
<CAPTION>
                                                                         YEAR ENDED DECEMBER 31,
                                                                        2006        2005      2004
                                                                        ----        ----      ----
                                                                             (in thousands)
<S>                                                                     <C>          <C>       <C>
      Transactions with Nester Ltd.:

      Participation in General and administrative expenses                   $25       $74        $86
      Purchase of Assets                                                       -       $10          -

</TABLE>

Nester Ltd. is a company controlled by Dr. Moshe BenBassat.



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20-F ClickSoftware Technologies Ltd.                                    Page 72
<PAGE>


ITEM 19.          EXHIBITS


EXHIBIT INDEX


EXHIBIT
NUMBER           DESCRIPTION OF DOCUMENT


1  (1)           Articles of Association of  ClickSoftware  Technologies  Ltd.,
                 amended and restated as of May 28, 2003
4.1 (2)          Fourth Amended and Restated Registration Rights Agreement,
                 dated December 15, 1999
4.2 (3)          Form of 2000 Share Option Plan, as amended
4.3 (2)          Form of 2000 Employee Share Purchase Plan
4.4 (2)          Form of 1996 Option Plan
4.5 (2)          Form of 1997 Option Plan
4.6 (2)          Form of 1998 Option Plan
4.7 (2)          Form of 1999 Option Plan
4.8 (2)          Form of 2000 Israeli Plan
4.9 (2)          Form of 2000 Unapproved U.K. Share Scheme
4.10 (2)         Form of 2000 Approved U.K. Share Scheme
4.11 (4)         Employment Agreement between ClickSoftware Technologies Ltd.
                 and Shmuel Arvatz
4.12 (5)         Amended Form of Indemnification Agreement
4.13 (6)         Amended Employment Agreement between ClickSoftware
                 Technologies Ltd. and Moshe BenBassat
4.14 (5)         2003 Israeli Share Option Plan
4.15 (6)         Form of 2000 Unapproved U.K. Share Scheme, as amended
4.16             Form of 2000 U.K. Share Scheme, as amended
4.17 (8)         Employment Agreement between Clicksoftware Technologies Ltd.
                 and Hannan Carmeli
4.18(7)          Teaming  Agreement  between  Clicksoftware  Technologies  Ltd.
                 and IBM United Kingdom Limited,
                 dated July 1, 2004
4.19(9)          First  Amendment to the Teaming  Agreement  between
                 ClickSoftware  Technologies  Ltd. and IBM
                 United Kingdom Limited, dated December 21, 2005.
4.20 (7)         Share  Purchase  Agreement  between  ClickSoftware
                 Technologies  Ltd. and IBM United  Kingdom
                 Limited, dated June 30, 2004
4.21(9)          First Amendment to the Share Purchase  Agreement between
                 ClickSoftware  Technologies Ltd. and
                 IBM United Kingdom Limited, dated December 21, 2005.
4.22 (7)         Warrant  Agreement  between  ClickSoftware  Technologies  Ltd.
                 and IBM United Kingdom Limited,
                 dated June 30, 2004
4.23(9)          First  Amendment to the Warrant  Agreement  between
                 ClickSoftware  Technologies  Ltd. and IBM
                 United Kingdom Limited, dated December 21, 2005
4.24 (8)         Lease Agreement  between  ClickSoftware  Europe Limited and
                 Polycom (United  Kingdom)  Limited
                 related to premises in Slough, the United Kingdom
4.25 (8)         Gross Lease Agreement between  ClickSoftware  Inc.
                 and Corporate Drive Corporation  related to
                 premises in Burlington, Massachusetts
4.26             Summary of Material  Terms of the Lease  Agreement
                 (in  Hebrew) by and between  ClickSoftware
                 Technologies Ltd. and Multiline Services Limited related to
                 premises in Givat Shmuel, Israel
4.27             Second Amendment to Employment  Agreement  between
                 ClickSoftware  Technologies Ltd. and Moshe
                 BenBassat
8.1 (8)          Subsidiaries of the Registrant
12.1             Certification  of the Chief  Executive  Officer
                 pursuant to Rule  13a-14(a) of the Securities
                 Exchange Act of 1934
12.2             Certification  of the Chief  Financial  Officer
                 pursuant to Rule  13a-14(a) of the Securities
                 Exchange act of 1934
13.1             Certification  of the Chief  Executive  Officer
                 pursuant to Rule 13 a-14(b) of the Securities
                 Exchange Act of 1934 and 18 U.S.C.  Section  1350,
                 as adopted  pursuant to Section 906 of the
                 Sarbanes-Oxley Act of 2002



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20-F ClickSoftware Technologies Ltd.                                    Page 73
<PAGE>



13.2             Certification  of the Chief  Financial  Officer
                 pursuant to Rule 13 a-14(b) of the Securities
                 Exchange Act of 1934 and 18 U.S.C.  Section  1350,
                 as adopted  pursuant to Section 906 of the
                 Sarbanes-Oxley Act of 2002
15.1             Consent of Brightman Almagor & Co., a member of Deloitte
                 Touche Tohmatsu

(1) Incorporated by reference to the Registrant's report on Form 10-Q filed with
the SEC on August 13, 2003.
(2) Incorporated by reference to the Registrant's Registration Statement on Form
S-1/A (file no. 333-30274), as amended.
(3) Incorporated by reference to the Registrant's definitive proxy statement
filed with the SEC on August 6, 2001.
(4) Incorporated by reference to the Registrant's annual report on Form 10-K
filed with the SEC on March 24, 2003.
(5) Incorporated by reference to the Registrants definitive proxy statement
filed with the SEC on April 30, 2003.
(6) Incorporated by reference to the Registrant's annual report on Form 10-K
filed with the SEC on March 22, 2004.
(7) Incorporated by reference to the Registrant's report on Form 10-Q filed with
the SEC on August 11, 2004.
(8) Incorporated by reference to the Registrant's annual report on Form 10-K
filed with the SEC on March 17, 2005.
(9) Incorporated by reference to the Registrant's annual report on Form 20-F
filed with the SEC on April 24, 2006.




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20-F ClickSoftware Technologies Ltd.                                    Page 74
<PAGE>


                                   SIGNATURES



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


                                               CLICKSOFTWARE TECHNOLOGIES LTD.


                                               By: /s/ Shmuel Arvatz
                                               ------------------------------
                                                  Shmuel Arvatz
                                                  Chief Financial Officer

                                               Date: April 10, 2007





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